The Board of Directors is pleased to present the 98th Annual Report ofthe Bank for the Financial Year 2016-17 together with the Audited BalanceSheet' Profit & Loss Account' Cash-Flow Statement'and the report on Management Discussion & Analysis'. The CorporateGovernance Report' and Business Responsibility Report' also form part ofthe Annual Report 2016-17.
1.1 Your Bank has emerged as a front runner in the on-going DigitalIndia initiatives with two-third of transactions routing through digital channels. Duringthe year the Bank primarily focused on providing technology driven services to optimizeits customer service and enhance product quality. For this several internal processeswere digitalized during the financial year 2016-17. The Bank consistently focused ondelivering financial services to various sections of the society with greater ease andefficiency. The challenging banking environment intensified with the onset ofdemonetization however your Bank exhibited agility during the entire period and stood upto expectations of the stakeholders.
1.2 The regulatory landscape during the year evolved to impact bankingin multiple ways. These included new framework on benchmark lending rate new monetarypolicy framework insolvency and bankruptcy code phased reduction in statutory liquidityratios etc. There was also positive impetus from various policy announcements by theGovernment. Your Bank showed resilience amidst challenging global & domesticmacroeconomic environment by continuing to invest in organizational capacity building inorder to remain ready to seize future opportunities in emerging India.
2.1 Total global business of the Bank increased to
Rs 680076 crore as on March 31 2017 from Rs 620445 crore as onMarch 31 2016 reflecting an annual growth of 9.6 per cent.
2.2 Total deposits surged to Rs 378392 crore as on March 31 2017from Rs342720 crore as on March 31 2016 noting a growth of 10.4 per cent on Y-o-Ybasis. CASA (current account & savings account) share in total deposit stood at 34.4per cent as on March 31 2017 showing improvement of 210 bps over 32.3 per cent a yearago.
2.3 Gross advances stood at Rs 301684 crore as on March 31 2017compared to Rs 277725 crore as on March 31 2016 recording an annual growth of 8.6 percent. The Bank continued to focus on capital light RAM (Retail Agriculture & MSME)sectors which contributed more than two-third of incremental credit growth during theyear. RAM sector as a whole grew at an annual rate of 15.2 per cent leading to domesticadvances growth rate of 8.2 per cent in comparison to 4.3 per cent a year ago.
2.4 Overseas business of the Bank stood at Rs 36062 crore as on March31 2017 compared to Rs 32706 crore as on March 31 2016. Your Bank has four overseasbranches at Hong Kong DIFC (Dubai) Antwerp (Belgium) & Sydney (Australia).
3 Income and Expenditure
Table 1: Income and Expenditure Statement
|Parameter ||FY ||FY ||Annual Growth |
| ||2016-17 ||2015-16 ||Absolute ||(%) |
|1 Interest Earned ||32660 ||32199 ||461 ||1.4 |
|2 Other Income ||4965 ||3632 ||1333 ||36.7 |
|3 Total Income(1+2) ||37625 ||35831 ||1794 ||5.0 |
|4 Interest Expended ||23757 ||23886 ||-129 ||-0.5 |
Table 1: Income and Expenditure Statement
|Sl. Parameter ||FY ||FY ||Annual Growth |
|No. ||2016-17 ||2015-16 ||Absolute ||(%) |
|5 Net Interest Income(1-4) ||8903 ||8313 ||590 ||7.1 |
|6 Operating Expenses ||6438 ||6224 ||214 ||3.4 |
|w/w Establishment Expenses ||3434 ||3620 ||-186 ||-5.1 |
|7 Total Expenditure(4+6) ||30195 ||30108 ||86 ||0.3 |
|8 Operating Profit (3-7) ||7430 ||5722 ||1708 ||29.8 |
|9 Provisions ||6874 ||4291 ||2583 ||60.2 |
|10 Net Profit ||555.21 ||1352 ||-796 ||-58.9 |
|11 Earnings per Share (Rs) ||8.1 ||20.4 ||-12.3 ||-60.4 |
3.1 In the challenging environment of excess fund flows and lack ofcredit demand Bank's profit margins remained constrained. Net interest income of theBank grew to Rs 8903 crore in FY 2016-17 from Rs 8313 crore in FY 2015-16 with anincrease of 7.1 per cent on Y-o-Y basis. Other Income grew by 36.7 per cent to
Rs 4965 crore in FY 2016-17.
4 Profitability and Efficiency
4.1 Despite the headwinds of demonetization the Bank reportedoperating profit of Rs 7430 crore in FY 2016-17 with an increase of 29.8 per cent over Rs5722 crore in FY 2015-16.
4.2 Net profit of the Bank stood at Rs 555.21 crore in FY 2016-17compared to Rs 1352 crore in FY 2015-16. Owing to various restructuring norms in placeprovisioning during FY 2016-17 was at Rs 6874 crore compared to Rs 4291 crore during FY2015-16 showing increase of 49.3 per cent. 4.3 Cost-to-Income ratio of your Bank improvedto 46.4 per cent in FY 2016-17 compared to 52.1 per cent in FY 2015-16 on account ofincrease in other income of the Bank and containing operating expenditure.
4.4 During FY 2016-17 Return on Average Assets stood at 0.13 per centwhereas Return on Equity stood at 2.91 per cent.
| ||Table 2: Efficiency Ratios |
|Parameter (%) ||FY 2016-17 ||FY 2015-16 |
|Return on Average Assets ||0.13 ||0.35 |
|Return on Equity ||2.91 ||6.84 |
4.5 The following are the key productivity ratios of the Bank for FY2016-17:
| ||Table 3: Productivity Ratios |
|Parameter ||FY 2016-17 ||FY 2015-16 |
|Average Business per || || |
| ||16.4 ||15.5 |
|Employee (Rs crore) || || |
|Average Business per || || |
| ||141.5 ||131.0 |
|Branch (Rs crore) || || |
|Gross Profit per || || |
| ||20.2 ||16.1 |
|Employee (Rs lakh) || || |
|Net Profit per ||1.5 ||3.8 |
|Employee (Rs lakh) || || |
|Net Profit per Branch (Rs lakh) ||13.0 ||32.2 |
Considering need for augmenting capital adequacy ratio in line withtransition arrangement under Basel-III the Board of Directors has decided not to declaredividends during FY 2016-17 and instead plough back entire profit to reserves.
6 Shareholders' Return
6.1 The Bank's net worth stood at Rs 19094 crore as on March 312017 compared to Rs 19764 crore as on March 31 2016. Net worth decreased primarily dueto increase in deferred tax assets (DTA). Book value per share stood at Rs 277.7 for March2017 and the Earnings per share stood at Rs 8.08.
7 Asset Quality
7.1 Gross Non-Performing Assets (GNPA) of the Bank stood at Rs 33712crore as on March 31 2017 compared to Rs 24171 crore as on March 31 2016. GNPA as percent to total advances increased to 11.17 per cent in March 2017 compared to 8.70 per centas on March 31 2016. 7.2 Net NPA of the Bank remained at Rs 18833 crore as on March 312017 compared to Rs 14026 crore as on March 31 2016.
8 Capital Adequacy Ratio
8.1. The Capital Adequacy Ratio as per Basel III norms stood at 11.79per cent as on March 31 2017. Common Equity Tier I (CET I) capital of the Bank stood at7.71 per cent in March 2017 which is about 100 basis points higher than the regulatoryminimum.
Table 4: Capital Adequacy Ratios - Basel III
|Parameters ||RBI Minimum Benchmark March 31 2017 ||March 31 2017 ||March 31 2016 |
|Total Risk Weighted Assets || ||291204 ||273791 |
|Total Capital Funds ||NA ||34334 ||28932 |
|CET1 Capital || ||22463 ||21768 |
|Tier 1 Capital || ||26280 ||22296 |
|CRAR (%) ||10.25 ||11.79 ||10.56 |
|CET 1(%) ||6.75 ||7.71 ||7.95 |
|Tier 1(%) ||8.25 ||9.02 ||8.14 |
|Tier 2(%) ||NA ||2.77 ||2.42 |
Note: RBI minimum benchmarks are including CCB (capital conservationbuffer) of 1.25 per cent in CRAR CET I and Tier I ratios. There is no minimum for Tier IIratio.
8.2 Capital raised during FY 2016-17: During the FY 2016-17 yourBank raised Rs 5250 crore though issuance of Basel III compliant Additional Tier I &Tier II bonds.
Table 5: Bonds raised during FY 2016-17
|Bond Type ||Amount (Rs crore) |
|Additional Tier I (AT 1) ||3500 |
|Tier II ||1750 |
|Total ||5250 |
8.3 Capital infusion by Government of India: Under Indradhanushplan to revitalize capital position of the Bank government of India infused Rs 541 crorein your Bank during the fiscal. These funds are lying with the Bank in the form of shareapplication money.
9 Social Media
Your Bank is gaining momentum in its social media presence. In FY2016-17 your Bank launched twitter facebook and Instagram pages and also YouTube channelin order to connect with its customers and other stakeholders. The Bank has derived manyopportunities to advertise its new products on its social media platforms. Byappropriately channelizing its social media presence the Bank also received appreciablefeedback on its twitter handle. The queries are attended on real-time basis. These type oftechnological outreach makes your Bank a more customer centric one.
10.1 Branch network of your Bank is widely spread across the countrywith 4278 branches as on March 31 2017 The Bank has four full fledged branches and threerepresentative offices in foreign countries.
10.2 Number of ATMs increased to 7518 as on March 31 2017 compared to6883 as on March 31 2016. During the year FY 2016-17 Bank opened 50 new e-lobbies and68 new cashless campuses at various locations in the country.
10.3 As an attempt to maximize its outreach in the country the Bankhas 5407 Business Correspondents to serve unbanked areas. During FY 2016-17 totaltransactions of Rs 4892 crore were initiated through business correspondent model.
11 Awards & Accolades
11.1 During FY 2016-17 your Bank received various awards forcontinuous efforts to enhance its digital deepening HR management and vigilance.
Table 6: Awards & Accolades received by The Bank during FY 2016-17
|Area ||Awards ||Awarded by ||Awarded For |
|Human Resources ||Golden Peacock award ||10th International Conference Of Corporate Social Responsibility ||Excelling in Human Resource Management |
| ||Innovative HR practice ||Times ascent ||Excellent HR practices under top 50 PSU category |
| ||Bank with Best CSR practices ||World CSR Congress ||Contribution for the social upliftment and nation building |
|Corporate Social Responsibility ||CSR Leadership Award ||National Association for Blind. ||promoting Employment for the Physically Challenged |
| ||Advancing Financial inclusion ||CNBC TV 18 ||Channelizing CSR budget into financial aids |
|Financial Inclusion ||Best Financial Inclusion Initiatives ||Indian Banks' Association ||Stepping one more stone in the field of technological excellence |
| ||Skoch award for Financial Inclusion ||Skoch ||Merit in Financial Inclusion |
|MSME ||Top performer in Financial Institution ||FECO ||MSME |
|Vigilance ||Best Corporate Vigilance Excellence Award FY 2016-17 ||Institute of Public Enterprise ||Initiating anti-corruption drive |
| || ||National Payment ||Rupay card Issuance & |
|Technology & Digital ||National Payments Excellence Awards 2016 ||Corporation of India ||e-commerce transactions |
The following changes took place in the Board of Directors of your Bankduring the financial year 2016-17. 12.1 Shri S.K. Misra Part time Non-Official Directorcompleted his term of office on April 10 2016.
12.2 Dr. K. Ramesha was appointed as Part-time Non Official Directorw.e.f. April 252016 vide Govt. of India Notification No.F.No.6/29/2015-BO-I dated April252016.
12.3 Sushri Anusuiya Sharma Part time Non official Director completedher term of office on May 5 2016. 12.4 Shri Rakesh Sethi Executive Director attainedsuperannuation on June 302016.
12.5 Dr. Madnesh Kumar Mishra was appointed as Government NomineeDirector w.e.f. July 222016 vide Govt. of India Notification No.F.No.6/3/2012-BO-I datedJuly 222016 in place of Mihir Kumar. 12.6 Shri Raj Kamal Verma was appointed as ExecutiveDirector of the Bank w.e.f. August 92016 vide Government of India notification no.F.No.4/5(2)2015-BO.I (pt.)/CNo.76820 dated August 9 2016.
12.7 Shri Atul Kumar Goel was appointed as Executive Director of theBank w.e.f. September 15 2016 vide Government of India notification no.F.No.4/5(4)2016-BO.I dated September 15 2016.
12.8 Shri Jag Mohan Sharma Chartered Accountant Director resigned fromthe Board w.e.f. October 5 2016.
12.9 While welcoming all the new Directors the Board placed on recordthe valuable contribution rendered by Shri Rakesh Sethi Shri Mihir Kumar Shri Jag MohanSharma Shri S. K. Misra and Sushri Anusuiya Sharma.
13 Directors' Responsibility Statement
The Directors confirm that in the preparation of the annual accountsfor the year ended March 31 2017: 13.1 The applicable accounting standards have beenfollowed and there are no material departures from prescribed accounting standards.
13.2 The accounting policies framed in accordance with the guidelinesof the Reserve Bank of India were consistently applied.
13.3 Reasonable and prudent judgment and estimates were made so as togive a true and fair view of the state of affairs of the Bank at the end of the financialyear and of the profit of Bank for the year ended on March 31 2017.
13.4 Proper and sufficient care was taken for the maintenance ofadequate accounting records in accordance with the provisions of applicable laws governingBanks in India and 13.5 The accounts have been prepared on going concern basis.
14 Corporate Governance
The Board of the Bank is committed to adopt good Corporate Governancepractices in letter and spirit. A detailed report on Corporate Governance is given in aseparate section of the Annual Report. The Corporate Governance report for financial year2016-17 has no audit qualifications.
15 Corporate Social Responsibility (CSR)
15.1 Your Bank has been making seamless efforts to maximize its socialoutreach. To further its objective of Corporate Social Responsibility the Bankestablished Union Bank Social Foundation Trust (UBSFT) in the year 2006 with majorobjective as social upliftment by way of girl child education health care services skilldevelopment sanitation and aid during the natural calamities. Rural development missionunder UBSFT also undertook a unique village adoption scheme "Union Adarsh Gram".This scheme has adopted 1440 villages and provided assistance for school infrastructuredevelopment and sanitation facilities. 15.2 UBSFT undertook the responsibility ofhealthcare facilities provision through Bank's mobile vans to flood affected hillyand inaccessible areas of Uttarakhand thereby providing relief to 23 villages. 15.3 YourBank approved Rs 5 crore for construction of toilets in 273 schools all over India inprevious years in line with the vision of "Swach Bharat". Your Bank has donatedmore than 700 tricycles and artificial limbs to physically handicapped persons.
The Board places on record its gratitude to the Government of IndiaReserve Bank of India Securities & Exchange Board of India Insurance Regulatory andDevelopment Authority of India Central Vigilance Commission and other institutions forthe valuable guidance and support received from them. The Board also acknowledges theunstinted support of the financial institutions correspondent Banks valuableshareholders esteemed customers and all other stakeholders. The Board also expresses itsdeep appreciation for the dedicated service and contribution made by members of staff inthe overall performance of the Bank.
|For and on behalf of the Board of Directors |
|(Arun Tiwari) |
|Chairman & Managing Director |
|Place: Mumbai |
|Dated: 8th May 2017 |