Managing Director & CEO's Message
I have great pleasure in welcoming you all to the 24th Annual General Meeting of yourBank and present the Annual Report for the year ended 31st March 2018.
Before I present the performance highlights of the bank I would like to place beforeyou the general macroeconomic environment within which your bank has performed in FY17-18.
The GDP Growth of the country in Q1 FY 2017-18 was 5.7% largely because of pre-GSTjitters and lingering affect of demonetization. The economy recovered thereafter with GDPgrowth of 6.5% in Q2 7.2% in Q3 and 7.7% in Q4 FY 2017-18.
The Government has managed to restrict the fiscal deficit for 2017-18 at 3.53% of theGDP broadly in line with the revised target. Gross Value Addition (GVA) for January-Marchquarter has been pegged at 7.6% up from 6% a year ago. Manufacturing sector GVA grew at9.1 per cent in fourth quarter up from 6.1 per cent year ago. Similarly Constructionsector grew at 11.5 per cent in fourth quarter compared to a contraction of 3.9 per centyear ago. The performance has been good more particularly in Service Real EstateConsumer Durables and Allied Agriculture. The digital payment revolution is expected totrigger massive change in the way credit is disbursed. Enhanced spending ofinfrastructure speedy implementation of projects SAMADHAN UDAY Udaymimitra TReDS(Receivables Discounting Platform) and continuous reform are expected to provide furtherimpetus to growth. So Banking Sector is poised for robust growth as the rapidly growingbusiness turn to banks for their credit needs. In Banking Spectrum sector the stress inthe asset portfolio continued during the year and the Gross NPA of Banking sectorincreased from 9.59% in March-17 to 10.41% in Dec-17. However the standard restructuredadvances as percentage of gross advances decreased from 2.45% to 1.49% during this period.During FY 2017-18 a number of Large Corporate NPA accounts were referred to NCLT underInsolvency and Bankruptcy Code.
Further increasing bond yields higher crude prices rising inflation and depreciatingrupee are posing bigger challenges to the present economic scenario. Now I would like topresent before you the business highlights of the Bank for the FY17-18:-
Bank has taken a conscious call to downsize the business and focus on quality growth tooptimize business operation conserve capital maintain regulatory capital and adoption ofPSB reforms agenda.
Business Mix as on March-18 stood at Rs. 3.55 lac Cr as against Rs. 3.85 lac Cras on March-17. Total Deposits and advance stood at Rs. 2.07 lakh Cr and Rs. 1.48 lakh Crrespectively.
Bank advance has declined by (10.95%) on y-o-y basis while the Credit RiskWeighted Assets have declined by (18.13%) due to capital optimized growth and Credit riskweighted assets to gross advance declined to 73% in Mar-18 compared to 79% in March-17reflecting bank's focus on optimizing risk efficiency.
Bank's strategy is now quality credit growth and cost optimization and focusonly Retail lending and CASA deposit and strengthen retail customer base (Part ofdifferentiation strategy). Bank is shredding its poor risk rated corporate and high costdeposits.
During FY 2017-18 Bank's retail portfolio increased by 17% Y-o-Y and Corporate bookdeclined by 8.47% and now our corporate book to total asset reduced to 49.40% in Y-o-YMarch-18 against 52.15% in Mar-17.
The cost of deposit reduced to 5.67% compared to 6.33% in FY 2017. CASApercentage increased from 30.50% in March-17 to 31.68% in March-18.
Customer base of the Bank increased by 3.35% in FY18 to 2.27 Crore.
Digital Banking Transactions increased from 53.45% in FY17 to 63.05% in FY18.
Provision Coverage Ratio of the bank has improved to 64.07% as on 31.03.2018from 53.61% as on 31.03.2017.
A separate fee based income vertical has been created to improve non interestincome.
CAPITAL INFUSION BY GOI
During Q4 FY 2017-18 the Government of India infused equity of Rs. 3571 crores.Accordingly Government of India shareholding has increased from 58.38% to 77.23%. Duringthis period AT-1 bonds of Rs. 3000.00 Cr were redeemed by the bank by exercising theoption of "Regulatory Event". The said bonds were having Coupon Rate of 9.52% to10.50%.
PROMPT ACTION PLAN
The Bank was put under Prompt Corrective Action (PCA) Framework by Reserve Bank ofIndia due to increasing level of Non Performing
Assets. To come out of PCA the bank has planned a well defined road map and is takingdecisive actions to improve its performance. Some of the highlights in this regard are asunder:
1. The bank has been focusing on Retail Agri Business and MSME (RAM) Sectors forcredit growth. During FY 2017-18 the retail portfolio of the bank increased by 17% ony-o-y basis.
2. The bank has been concentrating of Capital Optimized growth by focusing on lowcredit risk weight advances.
3. The bank has been channelizing its effortsfor Resolution and Recovery. Moreover theresolution of many large corporate accounts under Insolvency and Bankruptcy Code isexpected in current FY 2018-19 which will improve NPA ratios and profitability of thebank. The resolution of one such large account i.e. Bhushan Steel Limited has already beencompleted wherein the company has been taken over by Tata Steel Limited. The resolution ofother accounts is under progress and the same are expected during current FY 2018-19.
MAJOR CHANGES IN FY 2017-18
??FY 2017-18 witnessed extensive use of Insolvency and Bankruptcy Act 2016 by thelenders for timely and swift resolution of large corporate NPA accounts. Resolution isunder process in 100 NCLT accounts (including List I & II of RBI and case filed byother banks) having exposure of Rs. 12290 crores.
??Reserve Bank of India has issued guidelines for "Resolution of StressedAssets" on 12.02.2018 and has withdrawn all earlier resolution schemes i.e. Frameworkfor Revitalizing Distressed Assets Corporate Debt Restructuring Scheme FlexibleStructuring of Existing Long Term Project Loans Strategic Debt Restructuring Scheme(SDR) Change in Ownership outside SDR and Scheme for Sustainable Structuring of StressedAssets (S4A).
??During FY 2017-18 there was a large value fraud pertaining to issuance ofLOC/Buyer's Credit in one of the Public Sector
Banks wherein these instruments were issued without making the entry in the corebanking system. In the light of same the bank has taken adequate internal controlmeasures to mitigate the possibility of any such operational risk events.
The bank has state of the art infrastructure for imparting training in its six HRDIswhere the focus is on learning through case studies and presentations. Apart from samethe employees are sent for training to reputed management organizations like ManagementDevelopment Institute (MDI) Gurugram National Institute of Banking and Finance (NIBM)National Institute of Banking Studies and Corporate Management (NIBSCOM) Southern IndiaBanks' Staff Training College Bangalore (SIBSTC). During FY 2017-18 training was given to22501 participants constituting 85248 man days.
FINANCIAL INCLUSION PROGRAMME
The bank takes the Financial Inclusion programs as business opportunity and leveragesthis to increase and diversify its customer base. Since the launch of Pradhan MantriJan-Dhan Yojna on 16.08.2014 the bank has opened 42.44 lakhs such accounts and which haveaggregate deposits of Rs 4405 crores. Under Pradhan Mantri Mudra Yojna the bank hassanctioned 85240 accounts and has disbursed Rs 2341.18 crores in FY 2017-18. The bank hasdone 39.82 lakh enrolments in Pradhan Mantri Suraksha Bima Yojna and Pradhan Mantri JeevanJyoti Bima Yojna. During the year the bank has opened 137744 accounts of Atal PensionYojna.
During current FY 2018-19 the main focus shall be on the Resolution and Recovery ofNon Performing Assets and to contain further slippages. The bank is expecting resolutionsin the accounts where NCLT cases were filed during last FY. The bank has taken a number ofsteps for early resolution and recovery in NPA accounts. A separate Stressed AssetsManagement Vertical has been created at Corporate Office and Six General Managers havebeen posted in the field with exclusive mandate of Resolution and Recovery.
For better customer service the bank is leveraging the Digital Banking Platforms. Withthe increased penetration of Rupay Cards Mobile Banking Internet Banking Oriental BHIMintegration with BBPS the focus is on EASE for customer comfort. The bank has alreadyimplemented Oriental Lend Smart (OLS) for Retail and MSME customers. Through OLS thecustomers gets information about the status of proposal through automated sms facility.During this year the bank has tied up with Receivable Exchange of India to provide billdiscounting facility to MSME customers. Going Forward the focus areas for bank will beincreasing share of RAM Advances arresting fresh slippages Resolution and Recovery inNPA and TWO accounts and optimum use of digitization for improving the efficiency andcustomer delivery.
The bank has started the implementation of Enterprise Data Warehouse which shall beutilized for data analytics and data mining.
I would like to take this opportunity to welcome Sh. Desh Deepak Khetrapal Sh. AshokKumar Sharma and Sh. Madan Mohan Lal Verma who joined as Shareholder Non-ExecutiveDirectors on the Board during the year. I also appreciate the contribution of Sh. AnimeshChauhan (Managing Director & Chief Executive Officer) Sh. Rajkiran Rai G (ExecutiveDirector) and Sh. Dinesh Kumar Agrawal (Shareholder Non-Executive
Director) who laid down office as Directors on the Board of the bank during FY17-18for their valuable contributions to the bank.
On behalf of all the Board of Directors and on my own behalf I convey my sinceregratitude and thanks to the Shareholders of the Bank for reposing their faith in theManagement and Bank. I would like to use this occasion to thank every employee of OBC fortheir sincerity & dedication and our customers for their continuous loyalty andpatronage. My sincere thanks and regards to the Ministry of Finance Govt. of India andReserve Bank of India for their continued guidance and support. I solicit your continuedcooperation and encouragement in future also.
|Mukesh Kumar Jain || |
|Managing Director ||& Chief Executive Officer |