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Union Bank of India.

BSE: 532477 Sector: Financials
NSE: UNIONBANK ISIN Code: INE692A01016
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VOLUME 543525
52-Week high 66.75
52-Week low 22.60
P/E
Mkt Cap.(Rs cr) 18,900
Buy Price 29.50
Buy Qty 219.00
Sell Price 29.50
Sell Qty 3325.00

Union Bank of India. (UNIONBANK) - Director Report

Company director report

Dear Shareholders

The Board of Directors is pleased to present the 100th Annual Report of theBank for the Financial Year 201819 together with the ‘Audited Balance Sheet'‘Profit & Loss Account' ‘Cash-Flow Statement' and the report on‘Management Discussion & Analysis'. The ‘Corporate Governance Report' and‘Business Responsibility Report' also form part of the Annual Report 2018-19.

1. Highlights:

1.1 Indian economy projected to grow at 7.2 per cent during FY 2018-19. India became 6thlargest economy ofthe world. Growth of the economy was accompanied by measurable changesin financial service industry. Aggregate flow of funds to the commercial sector from banks(Bank credit) grew at an average

11.0 per cent in FY 2018-19 significantly up from average 6.2 per cent growth in FY2017-18. Credit flow to industrial sector reported gradual recovery after initial subduedgrowth.

1.2 Government has remained sanguine in introducing various structural reforms inoverall economy including financial sector following which India climbed up in WorldBank's ease of doing business ranking. Introduction of one-tap loan processing structurefor MSMEs was one such landmark change.

1.3 In-line with its objective of growth facilitation RBI has introduced variousmeasures to overcome the short-term liquidity shortages. RBI also provided timelyintervention for NBFCs to prevent any spillover. To support competitive environment RBIhas taken various steps for supporting new entrants in the financial sector. Despitestrong credit growth and optimal regulatory environment banking sector is yet to cope-upwith the asset quality challenges. Amid on-going challenges and opportunities bankingsector has been driving the way ahead for developing infrastructure to cater the financialneeds of the world's sixth largest economy.

1.4 Considering the business prospect in the coming year your Bank has rolled out newdesign for sourcing of new business through Customer Acquisition Group (CAG) centralizedunderwriting of credit processing across business lines of corporate SME retail andagriculture.

1.5 Further your Bank has leveraged digital technology for monitoring resolution andrecovery. Monitoring has shifted to proactive one which flows through originationunderwriting documentation disbursement and servicing during the life cycle of exposure.

1.6 Established in the year 1919 Union Bank of India has 4292 branches including 4overseas branches 6650 ATMs and 5586 micro ATMs across 29 States and 5 Union Territoriesas on March 31 2019. Your Bank serves over 74 million customers and employs more than37000 people.

2. Way Ahead- "Vision 2020"

During FY 2018-19 your Bank has undertaken various transformation initiatives tore-engineer and streamline its processes. During the year the Bank focused on creation ofthe necessary infrastructure required to achieve the aspirations set by the Bank under"Vision 2020". The structural initiatives can be divided into four categories.

2.1 Centralization of Credit Underwriting: With a view to bring consistency inprocessing to improve credit quality and to create specialized skill-set for quickdelivery your Bank has scaled up a unified credit delivery and processing structure bysetting up Centralized Processing Centers (CPCs) for credit underwriting.

• Union Loan Point (ULP) is for processing all the retail loan products. The ULPsare also developed as acquisition centre to mobilize retail loans. Your Bank has 73 ULPsmapped to 1238 branches across 48 regions.

• Union Sammridhi Kendra (USKs): To cater the rural & semi-urban needs yourBank has implemented new operating model for RuSU (Rural and Semi Urban Areas) byintroducing Hub and Spoke model where "Hub" is a Centralized Processing Cell(USK) and "Spoke" is mapped RuSU branch. The USKs are processing all types ofadvances in RuSU areas. The loan processing at USK is completely digitized with linkedbranch capturing the borrower data through tablet (a hand held electronic device) and thentransferring it directly to USK for processing. Your Bank has 38 USKs mapped with 556branches in 38 regions.

• SARAL: Though the structure was already in existence your Bank has furtherwidened the scope of SARAL to accelerate credit flows to MSME to improve asset qualityand to enhance customer service at small centers SARAL Lite has been established.

2.2 Verticalization of Sourcing: Your Bank has established Customer Acquisition Group(CAG) for verticalization of sourcing of business with an aim to drive sales effort indeveloping new partnerships for sustained business mobilization to develop tie-ups withfin-techs for sourcing leads through digital channel and to develop a vibrant salesculture in the organization for long term growth. The CAG is getting good response andstarted generating positive result.

2.3 Specialization in Monitoring and Recovery: Your Bank has taken many proactive stepsfor monitoring of loans like;

• System based triggers and alerts for classification and identification of actionrequired in the stressed assets.

• Developed in house web portal for monitoring purpose. The web portal isproviding a comprehensive dashboard to the branches/administrative offices containing theconsolidated information along with branch wise position under various parameters likeSMAs CRILIC Review & Renewal etc and daily progress can be monitored on real timebasis.

• Your Bank has also developed in house NPA Recovery App with an aim to aid in NPArecovery by facilitating the staff to have access to the information regarding theborrower like his accounts address navigation visit and follow up report to have betterfollow up and control.

2.4 Cost Optimization: Your Bank is optimizing the utilization of available resourcesfor improving the overall profitability. Your Bank has a complete bouquet of digitalservices to cater various financial and nonfinancial needs of customers like passbook inmobile loan application through internet banking and mobile banking etc

3. EASE (Enhanced Access and Service Excellence):

To enhance the efficiency of Public Sector Banks across all domains viz; creditunderwriting monitoring recovery and to provide best of the service to the customers ofbanks the Government of India introduced Reforms Agenda (also known as EASE) during FY2018-19 which contains 6 themes and 30 Action Points which all the PSBs need to implementin a time bound manner. Based on the implementation of the Action Points PSBs are rated onan index developed by an external agency.

Your Bank was ranked first in one of the themes "Udhaymitra for PSBs" whichshowcased the commitment of Bank in adopting best practices to cater the need of MSMEs inIndia.

Your Bank is further strengthening its processes across all domains building andexpanding the existing infrastructure to become a Bank of next generation providing bestin class services and customer experience.

The Government of India has now come up with new EASE index 2.0 for FY 2019-20 which isto showcase "results" of the infrastructure set up during FY 201819. With thenecessary infrastructure in place your Bank aspire to emerge among the best banks underEASE index 2.0.

4. Business:

4.1 The global business of the Bank Increased to Rs 741307 crore as on March 312019from Rs 722362 crore as March 312018 reflecting an annual growth of 2.6 per cent.

4.2 Total Deposit increased to Rs 415915 crore as on March 312019 from Rs 408502crore as on March 31 2018 noting an annual growth of 1.8 per cent. CASA (current accountand saving account) share in total deposit stood at 36.1 per cent as on March 312019. Thesaving deposit grew by 8.3 per cent in FY 2018-19.

4.3 Gross Advances stood at Rs 325392 crore as on March 312019 compared to Rs313860 crore as on March 31 2018 recording an annual growth of 3.7 per cent. TheDomestic Advances grew by 7.8 per cent in FY 2018-19. The RAM (Retail Agriculture andMSME) sector stood at Rs 173237 crore as on March 312019 compared to Rs 158642 croreas on March 312018. RAM Sector as a whole grew at an annual rate of 9.2 per cent.

4.4 Overseas business of the Bank stood at Rs 17276 crore as on March 31 2019compared to Rs 30829 as on March 312018. Your Bank has four overseas branches at HongKong DIFC (Dubai) Antwerp (Belgium) and Sydney (Australia). Your Bank also operates inthe United Kingdom through its wholly owned subsidiary Union Bank of India (UK) Ltd.

5. Income and Expenditure:

Table 1: Income and Expenditure Statement (Rscrore)

Sl. No. Parameter

FY 2018-19

FY 2017-18

Annual Growth

Absolute (%)
1 Interest Earned 34067 32748 1319 4.03
2 Other Income 4474 4990 -516 -10.34
3 Total Income (1+2) 38541 37738 803 2.13
4 Interest Expended 23852 23443 409 1.74
5 Net Interest Income (1-4) 10215 9305 910 9.78
6 Operating Expenses 7168 6655 513 7.71
w/w Establishment Expenses 3151 3155 -4 -0.13
7 Total Expenditure 31020 30098 922 3.06
8 Operating Profit (3-7) 7521 7640 -119 -1.56
9 Provisions 10469 12887 -2418 -18.76
10 Net Profit/Loss -2948 -5247 - -
11 Earnings per share (Rs) -25.08 -69.45 - -

6. Profitability and Efficiency:

6.1 Your Bank reported an Operating Profit of Rs 7521 crore in FY 2018-19 as comparedto Rs 7640 in FY 2017-18.

6.2 Net loss of the Bank stood at' 2948 crore in FY 201819 compared to loss of Rs5247 crore in FY 2017-18.

6.3 Cost-to-income ratio of your Bank stood at 48.80 per cent in FY 2018-19 compared to46.56 per cent in FY 2017-18.

6.4 During FY 2018-19 Return on Average Assets stood at -0.59 per cent whereas Returnon Equity stood at -15.57 per cent.

Table 2: Efficiency Ratios

Parameter (%) FY 2018-19 FY 2017-18
Return on Average Assets (-) 0.59 (-)1.07
Return on Equity (-) 15.57 (-) 28.53

6.5 The following are the key productivity ratios of the Bank for FY 2018-19

Table 3: Productivity Ratios

Parameter FY 2018-19 FY 2017-18
Average Business per Employee (Rs crore) 18.8 17.8
Average Business per Branch (' crore) 163.2 155.8
Gross Profit per Employee (Rs lakh) 20.2 20.3

7. Dividend:

Due to higher provisions for NPA your Bank has reported loss of Rs 2948 crore in FY2018-19. Accordingly the Board has not declared any dividend.

8. Shareholders' Return:

8.1 The Bank's net worth increased to Rs 18927 crore as on March 312019 compared toRs 18394 crore as on March 312018.

9. Asset Quality:

9.1 Gross Non-Performing Assets (GNPA) of the Bank stood at Rs 48729 crore as on March31 2019 compared to Rs 49370 crore as on March 31 2018. GNPA as per cent to grossadvances decreased to 14.98 per cent as on March 31 2019 compared to 15.73 per cent as onMarch 312018.

9.2 Net NPA of the Bank declined to Rs 20332 crore as on March 312019 compared to Rs24326 crore as on March 312018.

10. Capital Adequacy Ratio:

10.1 The Capital Adequacy Ratio as per BASEL III norms stood at 11.78 per cent as onMarch 31 2019. Common Equity Tier I (CET I) capital of the Bank stood at 8.02 per cent inMarch 2019 which is about 64 basis point higher than the minimum regulatory requirement.

Table 4: Capital Adequacy Ratios - Basel III pcrore)

Parameters RBI Minimum Benchmark March 31 2019 March 31 2019 March 31 2018
Total Risk Weighted Assets 278344 286315
Total Capital Funds NA 32796 32817
CET 1 Capital 22328 21641
Tier 1 Capital 26388 25857
CRAR (%) 10.875 11.78 11.46
CET 1 (%) 7.375 8.02 7.56
Tier 1 (%) 8.875 9.48 9.03
Tier 2 (%) NA 2.30 2.43

Note: RBI minimum benchmarks are including CCB (Capital Conservation buffer) of 1.875per cent in CRAR CET 1 and Tier 1 ratios. There is no minimum for Tier II ratio..

10.2 Capital raised during FY 2018-19: During the FY 2018-19 your Bank raised Rs4680.32 crore through the issuance of Equity Capital.

10.2.1 Capital infusion by Government of India: To

revitalize capital position of the Bank Government of India infused '4112 crore inyour Bank during the FY 2018-19.Your Bank has issued and allotted 52.16 crore shares at anissue price of Rs 78.84 per share including share premium of Rs 68.84 per equity share onMarch 28 2019.

10.2.2 Your Bank has raised Rs 568.32 crore under the Employee Share Purchase Scheme byissuing and allotting 7.29 crore shares at Rs 77.98 per share including share premium ofRs 67.98 per equity share and gave a discount of 25 per cent on calculated price. Theeffective issue price per share was Rs 58.49.

Particulars Details
The details of number of share issued under ESPS The Bank has issued 72880275 shares under Employee Share Purchase Scheme.
The price at which such shares are issued Rs.58.49 per equity share

Employee-wise details of the shares issued to;

(1) Senior Managerial Personnel Name Designation Shares Alloted
Rajkiran Gundyadka Rai MD & CEO 6725
Raj Kamal Verma Executive Director 6725
Gopal Singh Gusain Executive Director 6725
Dinesh Kumar Garg Executive Director 6725
Gajanan Ramakant Padalkar General Manager 6725
Dineshkumar Dahyalal Mistry General Manager 6725
Pankaj Sharma General Manager 5044
Kishore Pundalik Acharya General Manager 6725
Hari Chand Mittal General Manager 6725
Ravinder Kumar Kashyap General Manager 6725
Purna Chandra Panigrahi General Manager 6725
Dharam Chand Chauhan General Manager 6725
Puthenpurayil S Rajan General Manager 6725
Avinash Kumar Singh General Manager 6000
R Kandasamy General Manager 6725
Sanjay Sharma General Manager 6725
Chandrashekhar S S General Manager 6044
Venkatesh Muchal General Manager 6725
Ishraq Ali Khan General Manager 6725
Atul Kumar General Manager 6725
Yogendra Singh General Manager 6725
Satyanarayana Pathuri General Manager 6725
Brajeshwar Sharma General Manager 6725
Sangram Keshari Mohapatra General Manager 6725
Badatala Sreenivasa Rao General Manager 6725
Jagmohan Singh General Manager 6725
Shiv Narain Kaushik General Manager 6725
Lal Singh General Manager 6725
Kalyan Kumar General Manager 6725
P R Rajagopal General Manager 1500
Asheesh Pandey General Manager 6000
Monika Kalia General Manager 6725
Pravin Sharma General Manager 5898
Nitesh Ranjan General Manager 6725
Particulars Details
(ii) any other employee who is issed shares in any one year amounting to 5% or more shares issued during that year Nil
(iii) identified employees who were issued shares during any one year equal to or exceeding 1% of the issued capital of the company at the time of issuances Nil
Consideration recieved against the issuances of shares if scheme is implemented directly bythe company ' 4262767284.75
Loan repaid by the Trust during the year from exercise price recieved Not Applicable

11. Social Media:

11.1 Your Bank has expanded the reach of the followers across all the social mediaplatforms like the Facebook Twitter Instagram and YouTube. Total number offollowersacross all the four platforms has increased to 1405487.

11.2 Your Bank's official Facebook page has been rated as "Most Responsive with100% response rate" by Facebook and Twitter handle has been rated as "Responsive 24/7" as the queries are attended on real time basis.

11.3 Your Bank has achieved 2nd position on Facebook and Twitter in respectto followers among the public sector banks (including SBI).

12. Network:

12.1 Network of your Bank is spread across the country with 4288 branches as on March312019. The Bank also has four full fledged overseas branches.

12.2 The Bank has Network of 6650 ATMs and 5586 micro ATMs as of March 312019. DuringFY 2018-19 your Bank has opened 35 e-lobbies and 78 cashless campuses at various locationsin the country.

12.3 Your bank has total 5439 Business Correspondents (Bank Mitras) to serve theunbanked areas.

13. Secretarial Audit

Pursuant to the provision of Regulation 24A of the SEBI (Listing Obligations &Disclosure Requirements) Regulations 2018 and the SEBI circular no. CIR/CFD/CMD1/27/2019dated February 8 2019 the Bank had appointed M/s Subhash Kulkarni & AssociatesCompany Secretaries Mumbai to act as the Secretarial Auditor of the Bank for thefinancial year 2018-19. The secretarial audit of the Bank was conducted for the full yearin respect of the matters prescribed in the said circular and as set out in theSecretarial Audit Report for the financial year 2018-19 which is provided as an annexureto this report.

The Secretarial Audit firm has not given any qualification in their report but hasgiven some observations / suggestions to improve the Corporate Governance practicesfollowed by the Bank. A gist of the same is given here below:

• RBI has levied three penalties during the FY 2018-19 for delay in reporting offraud delay in exchange of information ofthe borrower and delay in adherence to certainRBI directives.

• As regard to Board proceedings few instances of delay in placement of agendaitems at the meeting was observed and also suggested to adopt procedure ofVideoConferencing as per Secretarial Standard.

• As regards to composition of Board it was suggested that the number ofIndependent Directors on Board should be at least five (1/3 rd of total strength ofDirectors i.e. 15) against existing number of three.

• Suggested to obtain timely disclosure from Directors and Designated employees ofthe Bank in prescribed form pursuant to Clause 7(2) of SEBI (Prohibition of InsiderTrading) regulation 2015 and the Code of Conduct for Prohibition of Trading by Insiders2018-19.

• Suggested to incorporate specific time limit for the resolution of compliant inthe Whistle Blower Policy.

• Suggested to have detailed compliance check list to monitor periodical / eventbased return and to have in-house software for the same. Further suggested that theCompliance Department to sample check the compliances done by the other departments and tosubmit a consolidated confirmation on compliance to MD/ ED.

At the outset the Management is thankful for the comments observations and suggestionsof the Secretarial Audit team. Being a Nationalised Bank incorporated under the BankingCompanies (Acquisition and Transfer of Undertakings) Act 1970 the provisions ofCorporate Governance mentioned under SEBI (LODR) regulations shall apply to the extentthat it does not violate statutes and guidelines or directives applicable to the Bank.Bank will endeavor to adopt and comply with all the suggestions of the Secretarial Auditteam to an extent possible and within the given frame work.

14. Awards & Accolades

During FY 2018-19 your Bank received various awards for its new initiatives taken inDigitization Financial Inclusion HR management Customer Service etc.

Awarded By Awards Awarded For
Govt of India UdyamiMitra for MSMEs Enhanced Access and Service Excellence (EASE) Award under PSB Reforms Agenda
Golden Peacock National Training Award Corporate Leadership & Institutional Excellence- National Training Award
Asia Pacific HRM Congress Asia Pacific HRM Congress Award Organization with Innovative HR practices
World HRD Congress Global Training & Development Leadership Award Best Leadership Development program in Public sector for Top Management
Excellence in Training & Development Award
Best use of Technology for Training
Indian Society for Training & Development Special Commendation Award Innovative Training Practices in Public Sector Enterprises
Best Financial Inclusion Initiatives Award Best Financial Inclusion Initiatives amongst Large Banks
IBA Best Technology Bank Award Best Technology Bank amongst Large Banks
Best IT Risk Management and Cyber Security Award Best initiatives taken in IT Risk Management and Cyber Security amongst Large Bank
Banking Financial Services and Insurance Banking Financial Services and Insurance Award Leading Financial Inclusion Initiatives
PFRDA Best Performing Bank Best Performing Bank - APY Formation day
Best Performing Bank- Quest for Crown
ASSOCHAM ASSOCHAM SMEs Excellence Award "Best SME offering" - Innovative Financial Solution for MSMEs
Central Vigilance Commission GOI Vigilance Excellence Award Outstanding performance in conduct of Vigilance Awareness activities
NPCI NPCI Award Excellent performance in RuPay cards
SKOCH Gold Award Banking & Finance Gold for Technology - Strategic Transformation (Union Samriddhi Kendra Model)
Cyber Security Gold for Governance Risk Management and Compliance tool
Financial Inclusion Initiatives
SKOCH Technology: Strategic Transformation & Financial Inclusion initiatives underTop Banking & Finance Project in India
SKOCH Order of Merit SIEM Tool Governance Risk Management
Compliance tool & Anti DDOS Solution under Top Cyber Security projects in India

15. Director

The following changes took place in the Board of directors of your Bank during thefinancial year 2018-19.

15.1 Shri Vinod Kathuria Executive Director completed his term in the office on July312018.

15.2 Shri Gopal Singh Gusain. has been appointed as Executive Director of the Bankw.e.f. September 20 2018 vide Government of India notification no. F. No. 4/5/2018-BO.Idated September 20 2018.

15.3 Shri Atul Kumar Goel Executive Director was relieved from the office on November012018 as he was elevated as MD and CEO of UCO Bank.

15.4 DrRH Dholakia Shareholder Director completed his term in the office on June 262018.

15.5 Dr. Uttam Kumar Sarkar Shareholder Director completed his term in the office onJune 26 2018.

15.6 Dr Uttam Kumar Sarkar was re-elected as Shareholder Director u/s 9(3)(i) of theBanking Companies (Acquisition and Transfer of Undertakings) Act 1970 for a period of 3years from 28.06.2018to 27.06.2021.

15.7 Shri Gopal Krishan Lath Shareholder Director completed his term in the office onJune 26 2018.

15.8 Shri K Kadiresan was elected as Shareholder Director u/s 9(3)(i) of the BankingCompanies (Acquisition and Transfer of Undertakings) Act 1970 for a period of 3 yearsfrom 28.06.2018to 27.06.2021.

15.9 Shri Jayadev M was elected as Shareholder Director u/s 9(3)(i) of the BankingCompanies (Acquisition and Transfer of Undertakings) Act 1970 for a period of 3 yearsfrom 28.06.2018 to 27.06.2021.

15.10 Shri Dinesh Kumar Garg. has been appointed as Executive Director of the Bankw.e.f. November 02 2018 vide Government of India notification no. F. No. 4/5/2018-BO.Idated September 20 2018.

15.11 Shri Raj Kamal Verma Executive Director completed his term in the office onFebruary 28 2019.

15.12 Shri Manas Ranjan Biswal has been appointed as Executive Director of the Bankw.e.f. March 01 2019 vide Government of India notification no. F. No. 4/5/2018-BO.I datedSeptember 20 2018.

16. Directors' Responsibility Statement

The Directors confirm that in the preparation of the annual accounts for the year endedMarch 312019.

16.1 The applicable accounting standards have been followed and there are no materialdepartures from prescribed accounting standards.

16.2 The accounting policies framed in accordance with the guidelines of the ReserveBank of India were consistently applied.

16.3 Reasonable and prudent judgement and estimates were made so as to give a true andfair view of the state of affairs of the Bank at the end of the financial year and of theprofit of Bank for the year ended on March 312019.

16.4 Proper and sufficient care was taken for the maintenance of adequate accountingrecords in accordance with the provisions of applicable laws governing Banks in India.

16.5 The accounts have been prepared on going concern basis.

17. Corporate Governance

The Board of the Bank is committed to adopt good Corporate Governance practices inletter and spirit. A detailed report on Corporate Governance is given in a separatesection of the Annual Report. The Corporate Governance report for financial year 2018-19has no audit qualifications.

18. Corporate Social Responsibility (CSR):

18.1 Your Bank is committed to its Corporate Social Responsibility by contributing tothe society. In this endeavor Bank has set up the ‘Union Bank Social FoundationTrust (UBSFT)' in the year 2006 for spearheading CSR initiatives. During FY 2018-19 yourBank has contributed Rs 45.43 lacs as donation to UBSFT for CSR activities.

18.2 UBSFT has donated in 10 projects during the year 2018-19 under various sectorslike Education Health care Community Development Sanitation Disability sector etc.

19. Acknowledgement:

The Board places on record its gratitude to the Government of India Reserve Bank ofIndia Securities & Exchange Board of India Insurance Regulatory and DevelopmentAuthority of India Central Vigilance Commission and other institutions for the valuableguidance and support received from them. The Board also acknowledges unstinted support ofthe financial institutions correspondent Banks valuable shareholders esteemed customersand all other stakeholders. The Board also expresses its deep appreciation for thededicated service and contribution made by members of staff in the overall performance ofthe Bank.

For and on behalf of the Board of Directors

(Rajkiran Rai G.)
Managing Director & CEO
Place: Mumbai
Dated: 14th May 2019