MANAGEMENT DISCUSSION AND ANALYSIS REPORT

Economic scenario

Global growth remains subdued in 2015, with the modest growth of 3.1 percent, and is expected to recover at a slower pace than brviously envisioned. According to the International Monetary Fund’s (IMF) World Economic Outlook Report (April 2016), the global growth is expected to be modest at 3.2 per cent in 2016, as the advanced economies are in the recovery mode. The recovery is projected to strengthen in 2017 and beyond, driven primarily by emerging market and developing economies, as conditions in stressed economies start gradually to normalize.

Global commodity prices weakened due to a combination of subdued growth conditions, supply glut in certain cases, and a stronger dollar resulted in the benchmark CRB Commodity Index falling by 23.4% in 2015. The decline was broad based with prices of crude oil (Brent), industrial metals, gold, and agricultural commodities falling by approximately 36%, 24%, 10% and 12%, respectively. The ongoing slowdown and rebalancing in China (with more than 10% share in global trade), declining investments in commodity exporters like Brazil, Russia, etc., and significant exchange rate debrciation in many EMs (primarily triggered by dollar strength and exchange rate adjustment in China) resulted in weakening of global trade activity.

Subdued economic activity amid disinflationary conditions prompted many key central banks to further ease monetary policy through a combination of conventional and unconventional tools. While few major central banks extended their quantitative and credit easing measures, some of them like the European Central Bank and the Bank of Japan also pushed their monetary policy rate into negative territory.

Fortifying India’s pole position as the fastest-growing large economy, the country’s fourth quarter GDP growth stood at a higher than anticipated 7.9%. The country expanded by 7.50%, 7.60% and 7.2% during first, second and third quarter and overall for full year, the economy grew at a five year high of 7.60%. This upswing was supported by growth in industrial as well as agricultural sector. For the entire 2015-16 the agriculture sector grew by 1.20%. As per the advance estimates, food grains production was 252.33 million tonnes in 2015-16 which is higher than expected. The GDP is expected to grow by 8% in 2016-2017. Powered by a strong show in refinery product’s output and electricity generation, the eight core sector industries saw an output growth of 8.50% in April 2016. As expected, agriculture witnessed a revival in the March quarter, registering a 2.30% growth against a contraction by 1.70% in the same quarter last fiscal.

The CPI inflation eased to 4.8% in March year-on-year bolstering the Reserve Bank of India’s recent decision to cut interest rates. The drop in the inflation rate from the revised 5.3% in February shows prices rising at their slowest pace in six months. However the headline inflation rose to 5.4% in April 2016 on a spurt in food prices. The RBI is targeting to bring it down the inflation to 5% by the end of the fiscal 2017, and at brsent base-effect is helping the country. However, tick in Brent crude prices and domestically higher minimum support prices will also push up headline inflation in the future.

The year 2015 witnessed high volatility in equity markets as global headwinds in the form of the Greek Crisis, China currency devaluation, falling commodity prices and US Fed rate hike kept the markets under brssure. Executive actions from the Government across the infrastructure sector, defence, insurance, banking, etc. kept the market hopeful of the Government’s intent of improving the business scenario.

The positive action from the Government and falling energy prices helped the Indian economy to build stability during the year. Though, benchmark indices closed down nearly 4 percent, their midcap and small cap counterparts witnessed resilience. Domestic investors showed confidence in the Indian economy and poured a record Rs.67,000 crores in Indian equities, while FPIs investment stood at Rs.13,000 crore.

Compared with the secondary market, the initial public offering (IPO) market remained upbeat, recording a four year high mobilisation in 2015 with 64 IPOs aggregating to about US$ 2.2 billion (about Rs.139 billion). While the IPO index generated a return of 19 per cent in 2015, the benchmark Sensex yielded a negative return of 5.0 percent in 2015.

Money, bond and credit markets have been largely insulated from global spillovers, while foreign exchange and equity markets have experienced bouts of volatility. Liquidity conditions generally tightened in the second half of the year and proactive liquidity management alleviated brssure on money market rates. Long-term yields exhibited a tightening bias till February and risk sbrads reflected both corporate sector stress and asset quality concerns in banks. Total flow of resources to the corporate sector remained buoyant, with industry receiving a rising proportion of the non-food credit.

Banking scenario:

Total banking sector assets have increased at a CAGR of 11.71 per cent to USD1.96 trillion during FY13 - FY15. The Assets of public sector banks, which account for more than 70 per cent of the total banking assets, grew at a CAGR of 12 per cent and private sector expanded at a CAGR of 13 per cent, while foreign banks posted a growth of 9 per cent. Corporate demand for bank loans have grown due to continued infrastructure investments, and due to other policy decisions such as reducing oil subsidies, issuing of telecom spectrum licenses and the proposed abolition of penalty on loan brpayment.

The Gross NPA to Gross Advances in listed banks grew from Rs.3.00 lakh crore in FY15 to around Rs.5.81 lakh crore in FY16 and the Net NPA has also jumped from Rs.1.67 lakh crore to Rs.3.39 lakh crore during the same period.

Loan-to-Deposit ratio for banks across sectors has increased over the years. Private and foreign banks have posted high return on assets than nationalised and public sector banks.

This has prompted most of the foreign banks to start their operations in India

Indian banks are increasingly focusing on adopting integrated approach to risk management. Banks have already embraced the international banking supervision accord of Basel II; interestingly, according to RBI, majority of the Banks already meet capital requirements of Basel III, which has a deadline of March 31, 2019. Most of the banks have put in place the framework for asset-liability match, credit and derivatives risk management.

Banks are laying emphasis on diversifying the source of revenue stream to protect themselves from interest rate cycle and its impact on interest income. Focusing on increasing fee and fund based income by launching plethora of new asset management, wealth management and treasury products.

Indian banks, including public sector banks are aggressively improving their technology infrastructure to enhance customer experience and gain competitive advantage. Internet and mobile banking is gaining rapid foothold .Customer Relationship Management (CRM) and data warehousing and analytics will drive the next wave of technology in banks. Indian banks are rapidly focusing on SMAC (Social, Mobile, Analytics and Cloud) techniques to reach new customers. Indian banks currently devote around 15 per cent of total spending on technology. Spending on technology is expected to increase at an annual rate of 14.2 per cent. Banks in the country are set to benefit further as they move ahead in implementing additional technological advancements.

Technology has allowed banks to increase their scale rapidly and manage increased business and transactions volume with lesser man power and reduced costs (at the operational level). Digital analytics is providing deeper insights into customer needs and enabling banks to offer highly targeted products and services; this is likely to pick up pace in the coming years. New channel-integration technologies are enabling a more seamless end-to-end experience for banking customers. Offering new opportunities to engage and interact with customers and thereby build relationship and grow revenues; social media has a crucial role to play in this drive.

The wide scope and ease of online banking has led to a paradigm shift from traditional branch banking to net banking. Around 44% people are using Net banking, which remains the most favourite mode of payment among internet users in India. Extensions for facilities such as fund transfer, account maintenance and bill payment at ATM stations have reduced branch banking footfall. The increase would take the number of ATMs per million population from 189 in 2015 to about 300 in 2017.

Economic and Banking Outlook:

The Indian economy currently stands at a strong footing with the interest rate rolling downwards, key macro variables like CAD and Fiscal deficit mostly under control and the Government’s continued push for reforms and ease of doing business. International agencies continue to remain positive on India with an expected growth faster in 2016 -17. India is likely to gain momentum in the year to come as the results of earlier measures are visible. The key factors which are likely to aid growth during the year are the impact of the executive action addressing systemic issues in key sectors like mining, railways, defence, banking, roads and power. Further, the pay commission suggestion for hikes in payouts for Government employees coupled with soft commodity prices are likely to result in consumption driven growth. The continued accommodative stance and look out for emerging room for more rates easing by the Reserve Bank is likely to bring in positive sentiments and scope for expansion of the economy.

A number of factors could impinge upon the growth outlook for 2016-17. First, slow investment recovery amidst balance sheet adjustments of corporate is likely to hinder investment demand. Secondly, with capacity utilization in the organized industrial sector estimated at 72.5 per cent, revival of private investment is expected to be hesitant. Thirdly, global output and trade growth remain tepid, dragging down net exports.

On the positive side, the Government’s “start-up” initiative, strong commitment to fiscal targets, and the thrust on boosting infrastructure could brighten the investment climate.

Household consumption demand is expected to benefit from the Pay Commission award, continued low commodity prices, past interest rate cuts, and measures announced in the Union Budget 2016-17 to transform the rural sector.

India’s macroeconomic fundamentals stand much improved. At the margin, we expect interest rate cuts to be a positive factor for the markets. The market multiple has come off over the past year. We expect it to be underpinned this year by reasonable earnings growth, lower rates and an incremental pick-up in sequential growth momentum.

In sectors such as urban development and railways, evolution of policy to drive large-scale investments is largely over and the flow of orders should start to materialise in CY2016. We also expect state level spending in some of the states like Andhra Pradesh (AP), Telangana, Maharashtra and UP to pick-up significantly.

Even through the slowdown, corporate India has seen rising free cash flows as the capital expenditures come off. Despite the fact that there has been severe stress in some sectors of the economy and the growth has generally slowed down, corporate have started to deleverage their balance sheets as the room created by lower capital spends and stable cash flows has been rising. We believe that any pickup in growth due to additional Government and consumption demand can start to create large benefits for corporate ROEs as the incremental capital deployment is falling. Despite rising free cash flow in corporate India, ROEs have remained debrssed due to poor utilisation of assets which have been commissioned in the last 3-4 years. We expect this to start changing in FY17.

On the monetary policy front, the RBI had reduced repo rate by a cumulative of 75 bps to 6.75% during the course of FY 2015-16. This measure followed earlier reduction of 50 bps in the fiscal 2014-15. With CPI inflation for January 2016 clocking 31 bps lower than RBI’s target of 6.0% and Government maintaining fiscal discipline, the central bank opted for another cut of 25 bps in the repo rate to 6.50% in April 2016.

Money market liquidity conditions improved in the first half of FY 2015-16 (with average liquidity being in surplus between Jul-Sep) largely on the back of front loading of Government expenditure and dollar purchases by the RBI. Thereafter, liquidity conditions started deteriorating sequentially and closed FY 2015-16 with a deficit of Rs.2,145 Billion. Build-up of Government cash balances with the RBI, above trend increase in currency in circulation and dollar sale by RBI contributed towards tightening of liquidity conditions in the second half of FY 2015-16.

Opportunities and threats:

The future of banking in India looks not only exciting but also transformative. Despite the somewhat difficult current operating environment, banks remain the largest financial sector intermediary in India. In future, technology will make the engagement with banks more multi-dimensional even as other entities, markets and instruments for credit and financial services continue to develop and expand. Another facet of digitization will happen as banks will venture into B2B environments. Banks will tie-up with various e-commerce companies. Earlier in 2015, Reserve Bank of India said it was open to form ventures with e-commerce companies and let them act as banking correspondents. This partnership will definitely provide both competition and opportunity. Tying up with e-commerce companies will prove advantageous to banks as it will create new opportunities to sell products. This will also brvent technology companies and non-banking financial companies to poach their customers.

The current weakness in economic activity has muted credit demand from banks. Part of this slowdown is due to excess capacities in many sectors, together with the increase in leverage on corporate balance sheets, impeding their ability to absorb credit. In addition, alternative sources of financing, both domestic and offshore, have also emerged.

Stressed assets in banks’ credit portfolios have also constrained credit delivery, but the situation is gradually improving. While banks have taken measures to clean their portfolios, with write-offs and provisions, the Reserve Bank of India has also facilitated rectification through a number of well-thoughtout initiatives. Restricting incremental non-performing assets through early detection, monitoring, corrective action plans, shared information and disclosures is also likely to keep a future recurrence in check. Proposed mechanisms for asset resolution, including the Bankruptcy Code, will help speedier recovery.

The financial demands of creating infrastructure to support the aspiration of sustained high growth will be enormous. Institutions like the National Infrastructure Investment Fund will catalyze increasing funds flow to infrastructure.

As India’s integration with the global economy increases, and the rupee gets internationalized, Indian banks will facilitate corporate access to offshore markets and capital pools. Bond, currency and derivatives markets will develop and deepen; rather than being a threat to banks, these markets will complement banking services and products, with a diversity of risk management and hedging options, and enable banks to hand off credit risk.

However, as global markets become more competitive and volatile, commercial success will depend on the ability to operate and scale up in an uncertain environment. Managing risk will become increasingly important. Technology and analytics will become the cornerstones of improved risk management in the country.

In the wider banking context, technology is enabling more effective, lower cost delivery of corporate financial services, facilitating rapid and seamless payments, enhancing the retail customer experience, and increasingly, allowing increased access to financial services among the hitherto excluded. The biggest impact of technology will be the ability to personalize delivery of products and services to customers. Data analytics is an integral part of this ability to customize. Increasing use of unstructured data, generated largely from social media, will vastly add to behavioural understanding and brdiction. In an environment where delivery of financial services will become increasingly commoditized, customer experience will become the differentiating norm for a brferred service provider. The ability to tailor financial solutions to customers across multiple platforms will unleash a wave of product innovations and thereby demand for financial services.

The landscape of India’s financial sector is changing. Anytime, anywhere banking, using differentiated channels and technology, will enable a multi-fold increase of reach in rural and remote areas. Coupled with the emergence of a new class of banks—the small and payments banks—one of the biggest impacts of technology adoption will be rapidly accelerating financial inclusion by making last-mile access more cost effective and expanding the reach of banking to the unbanked.

The Pradhan Mantri Jan-DhanYojana has been an outstanding example. Direct transfers to bank accounts coupled with the range of services, envisioned in the Government’s Digital India programme, will drive customer adoption and promote a savings culture. Partnerships between these specialized entities and universal banks will effectively leverage their networks to deliver financial services, including micro-credit.

Customers are increasingly weaving their digital and physical worlds together, with transactions conducted using multiple channels. Competition from unconventional entities will quicken the pace of technology innovation. Collaboration between banks and the retail ecosystem will also deepen to provide customers with a bouquet of products. In general, distinctions between financial and non-financial service providers will blur; an inter-connected and collaborative ecosystem of service providers will emerge. Through partnerships and acquisitions, banks will integrate financial services, wallets, payments, shopping services, etc., to deliver an enhanced customer experience.

Yet, despite the array of financial services on offer, customers in a volatile and uncertain world will increasingly need a sense of permanency and security for their deposits. Banks will be the institutions that can fulfil this need, partly due to stringent regulatory norms, which will enhance systemic safety. In addition, due to the low penetration of formal, organized financial services among households and small and medium enterprises, the opportunities for financial intermediaries, particularly banks, remain very bright.

The sector should start to see the roll-out of differentiated banking models like payments banks and small finance banks. In addition, existing banks are all trying to catch up with changing financial technology trends to stay relevant.

The deposit market in India has seen very little change. Most banks have offered a steady 4% on savings deposits even after these rates were deregulated in 2011. Some think payments banks could force a change while others say that payments banks won’t make enough profits so as to offer higher deposit rates.

Banks have become more aggressive in dealing with companies defaulting on repayments, because of the strategic debt restructuring (SDR) route introduced by the Reserve Bank of India in June 2015. Banks have invoked SDR on at least nine companies so far. Over the next 18 months, banks will have to find suitable buyers for the majority equity converted from debt in all these firms. Sceptics say that won’t be an easy task. With the stressed asset scenario stabilizing and with banks taking the lead in selling stressed assets in the economy, the banking regulator envisages that the problem of nonperforming assets will be tackled by March 2017. The Reserve Bank of India has provided banks with multiple tools such as the joint lender forum mechanism, 5/25 refinancing and strategic debt restructuring, which the regulator will monitor closely to ensure there is no misuse.

Financial Performance Vs Operational Performance

The total gross business of the Bank grew from Rs.89,368.14 crore to Rs.97,191.52 crore. While the deposits grew from Rs.51,912.49 crore to Rs.55,720.73 crore, gross advances grew from Rs. 37,725.65 crore to Rs.41,470.79 crore. Food credit grew from Rs.579.07 crore to Rs.589.67 crore and non-food credit stood at Rs.40,881.12 crore vis-à-vis Rs.37,146.58 crore in the last year, posting an increase of Rs.3,734.54 crore. Operating profit of the Bank had increase by Rs.63.02 crore during the year, i.e. increased from Rs.816.26 crore to Rs.879.28 crore. The Net Profit increased to Rs.333.27 crore as against Rs.307.20 crore reported in last year. The Board has recommended a dividend of 50% i. e. @ Rs.0.50 per equity share of Rs.1/- each, which is subject to approval of the shareholders.

The percentage of Gross NPA to Gross Advances stood at 3.77% and the Net NPA to Net Advances at 2.89% as on March 31, 2016. The Capital Adequacy Ratio of the Bank was 11.82 under Basel III norms as on March 31, 2016 as against the RBI mandated level of 9.625. Book value per share rose from Rs.26.59 to Rs.28.45 during the year 2015-16.

The gross revenue from Treasury Operations segment increased from Rs.1,320.47 crore to Rs.1,362.91 crore, Corporate/ Wholesale Banking segment increased from Rs.2,451.64 crore to Rs.2,737.07 crore and Other Banking Operations segment increased from Rs.116.56 crore to Rs.140.29 crore whereas the gross revenue from Retail Banking segment decreased from Rs.1,894.62 crore to Rs.1,834.35 crore.

Segment results net of allocated / apportioned cost and provisions from Treasury segment increased from Rs.(141.48) crore to Rs.(140.98) crore, Corporate/ Wholesale Banking segment increased from Rs.62.98 crore to Rs.173.16 crore and Other Banking Operations increased from Rs.95.46 crore to Rs.113.78 crore whereas segment results net of allocated / apportioned cost and provisions from the Retail Banking segment decreased from Rs.385.25 crore to Rs.363.70 crore.

RISK MANAGEMENT PRACTICES:

It is imperative to have robust and effective risk management practices not only to manage risks inherent in the banking business but also the risks emanating from financial markets as a whole. The bank has in place a robust risk management structure which proactively identifies the risks faced by the Bank and helps in mitigating the same, while maintaining proper trade-off between risk and return thereby maximizing the shareholder value. The bank has fine-tuned the system of combrhensive risk profiling of the Bank in line with regulatory guidelines that will facilitate integrated risk management through effective assessment of the level and direction of key risks.

The bank has put in place risk management architecture and practices that is overseen by Risk Management Committee of the Board (RMCB). Appropriate policies to manage various types of risks are approved by the Board of Directors after review by Risk Management Committee of the Board (RMCB), which provides strategic guidance while reviewing portfolio behaviour. The senior level executive committees like Credit Risk

Management Committee (CRMC), Market Risk Management Committee (MRMC), Operational Risk Management Committee (ORMC) and Asset Liability Management Committee (ALCO) develop the risk management policies and vet the risk limits to ensure better control. Bank is in the process of implementing Enterprise Wide Risk Management Solution (EWIRMS), as a part of moving over to advanced approaches, which will facilitate suitable alignment of risk and capital to the overall business strategy.

a) Credit Risk Management:

The bank has a combrhensive credit risk management policy, which deals with identification, assessment, measurement and mitigation of credit risk. Bank Rs. credit risk management policy defines credit risk as the possibility of losses associated with the diminution in the credit worthiness of the borrower or the counterparty or the failure on the part of the borrower to meet its obligations in accordance with the agreed terms. To address and manage such credit risk, the Bank has established the Credit Risk Management Committee, which is entrusted with the task of overseeing various risk management measures envisaged under the credit risk management policy. The Credit Risk Management Committee also deals with credit risk management procedures, in addition to reviewing, analyzing, managing and controlling the various credit risks that the Bank faces. Of the strategic measures employed in managing credit risk, risk rating occupies a position of prominence, as it involves the rating of borrowers from a risk perspective for the purpose of credit decision, pricing and supervision. The bank has adopted dual rating system for credit rating of borrowers. For the purpose of credit risk rating, the Bank’s exposure is broadly classified into retail and non-retail. All corporate loans are rated using dual rating models and retail exposures are scored using different scorecards. Bank has eight non default rating grades and one default rating grade. As a part of Advanced Approach under Basel II, bank has a system for validation of the rating models on an annual basis.

Appropriate credit approval processes, risk mitigation, post disbursement monitoring and timely remedial actions are part of the credit risk management. Segment-wise and borrower category-wise exposure limits are fixed and monitored by the Bank to address the risk of concentration. Rating migration studies and default rate analysis based on the credit risk rating of the borrowers are undertaken on a periodic basis to provide input for policy and strategic decisions.

b) Market Risk Management:

The bank has laid down combrhensive policies, framework and procedures to manage market risk in a holistic manner. The Investment Management Policy lays down brliminary checks in proactively managing market risk. The Board supported by the Market Risk Management Committee (MRMC) frames the market risk management policy, which details the methods to identify measure, monitor and control market risks. The bank has dedicated independent mid-offices for forex and domestic treasury at Treasury Department reporting directly to the head of the Risk Management Department. The mid-offices monitor market risk inherent in treasury dealings closely.

The market risk on an overall level is measured by applying techniques, such as VaR and Modified Duration. The stop loss levels for individual securities and limit framework for different categories of investments play a pivotal role in controlling market risk associated with different securities at micro level.

c) Operational Risk Management

The bank has developed an operational risk management framework that is fully integrated into the Bank’s overall risk management processes. The bank has put in place processes, systems and procedures to actively mitigate operational risks and optimize resources not only to protect the Bank but also to provide return commensurate with the risk profile adopted. Risk identification and assessment together with control assessment are keys to the risk management process and for this purpose; the Bank has already put in place risk management processes like Risk and Control Self Assessment (RCSA) framework. It has also revamped the operational risk management framework by introducing Key Risk Indicators (KRI), Loss data collection and modelling methodologies.

d) Liquidity Risk

Liquidity risk refers to the risk that the Bank is unable to meet its obligations as and when they fall due. The Asset Liability Management Policy of the Bank stipulates broad framework for liquidity risk management to ensure that the Bank is in a position to manage its daily liquidity requirements and to withstand stress situations stemming from, bank-specific factors, market-specific factors or a combination of both.

Asset Liability Management Committee (ALCO) of the Bank, comprising of senior executives of the Bank oversee asset liability management (ALM) functions within the framework brscribed under our ALM Policy and other relevant policies and guidelines. The core objective of the ALM policy adopted by ALCO is to ensure planned and profitable growth in business through appropriate management of the liquidity risk and interest rate risk. The ALCO is responsible for (i) recommending pricing of deposits and advances, (ii) brparing forecasts showing the effects of various possible changes in market conditions, (iii) recommending appropriate actions in anticipation of such forecasts, (iv) deciding on the desired maturity profile and mix of assets and liabilities, and (v) conducting funding, capital planning, profit planning and growth projection.

The liquidity profile of the Bank is analysed on a static as well as on a dynamic basis by using the gap analysis technique supplemented by monitoring of key liquidity ratios and periodic liquidity stress tests. The Bank has put in place a liquidity risk management framework adhering to the guidelines issued by RBI on liquidity risk management and the best practices. These include the intraday liquidity management and the Liquidity Coverage Ratio (LCR).

e) Business Continuity Plan

The bank is having a combrhensive Business Continuity Plan (BCP) to ensure continuity of critical business operations of the Bank during disasters. In line with the Business Continuity Plan, bank has constituted a BCP Committee incorporating the heads of all major departments to exercise, maintain and invoke business continuity plan as needed. A core team called Emergency Operation Team is also in place to act immediately upon a crisis and for supervision of recovery under alternative operations arrangements at the disaster and the team ensures that the business functions are back to normalcy with minimum delay. Disaster Recovery drill for the core banking system of the Bank has been conducted at regular intervals to ensure the competence of the same during emergency situations.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

Internal Controls

The Bank is having a full-fledged Inspection and Vigilance Department, which ensures adherence to the set rules and regulations by the Branches/Regional Offices/Departments at the Administrative Office. Internal inspectors conduct inspection at regular intervals and such reports are placed to Audit Committee of Executives (ACE)/Audit Committee of Board (ACB) as the case may be. ACE/ACB reviews the reports and ensures that corrective steps are taken to rectify the lapses/ irregularities pointed out.

Vigil Mechanism/Whistle Blower Policy in the Bank

Vigilance Mechanism of the Bank is functioning as a separate vertical headed by a General Manager and reporting directly to the MD & CEO of the Bank. Vigilance Department of the Bank has twin roles of investigation of frauds and putting in place a dynamic mechanism, in order to have more controls over the incidence of frauds.

The Bank has in place a vibrant Whistle Blower Policy (WBP) and the Protected Disclosure Scheme (PDS), which are reviewed from time to time. Whistle Blower Policy and the Protected Disclosure Scheme of the Bank are published in the website of the Bank and thereby awareness is kindled to Customers as well as to Employees so as to be an effective tool in the reporting and brvention of frauds.

As a part of the brventive mechanism to reduce the instances of frauds, especially on cyber field, customer awareness measures are undertaken by the Bank on a continuous basis through various advertisements in the media, publishing in Bank’s website and SMS messages sent to customers. Staff at branches are regularly updated with the modus operandi adopted by fraudsters at various banks so as to be more vigilant and cautious, while dealing with similar situations. Functioning of the Vigilance Department is reviewed by Audit Committee of the Board on a quarterly basis and is being closely followed up by RBI and guided by its master circular on “Frauds- classification and reporting” issued every year.

HUMAN RESOURCE DEVELOPMENT/INDUSTRIAL RELATIONS

As on March 31, 2016, the Bank had 7,780 personnel on its rolls. Human Resource policies and practices of the Bank focus on attracting, motivating and retaining qualified and skilled manpower. Concurrent with these objectives, steps are taken to improve manpower efficiency. Given the market challenges, there has been considerable focus on optimizing the existing resources - through internal job postings, transfers and skill development initiatives. During the Financial Year, our Personnel Department has been awarded with the ISO 9001:2008 Certification. Training and development have assumed significant importance. The Bank’s Staff Training College identifies the gaps in resource capability of the personnel and trains them for qualitative improvement. During the financial year, Bank has provided training to 4376 of its Officers, 2142 clerks and 121 sub-staffs in different facets of Bank’s operations.

The development of employees is essential to the future strength of our business. We have implemented a systematic approach for identifying, developing and deploying talented employees to ensure an appropriate supply of individuals of high calibre. To motivate the employees further and to inculcate in them a sense of ownership, Employees’ Stock Option Scheme (ESOS) was approved by the shareholders at the Annual General Meeting held on August 18, 2008. The Bank introduced Tranche 1 of the scheme in 2009-10, Tranche 2 of the scheme in 2010-11, Tranche 3 of the scheme in 2011-12, Tranche 4 and Tranche 5 during 2012-13, Tranche 6 during 2013-14 and Tranche 7 during 2014-15 subject to the regulatory guidelines in this regard. An aggregate of 1,57,005 options were exercised by the employees during the current financial year and equal number of shares have been allotted against those exercises. In order to ensure enhanced productivity and efficiency in all areas of operations and cultivate motivation among employees in all cadre, the Bank implemented the Performance Linked Incentive Scheme (PLIS) from the financial year 2007-08 onwards. The Bank follows a scientific method for calculation of the PLIS, which includes, individual performance, branch performance, achievement of the targeted profit of the Bank etc.

Industrial relations in the Bank have been cordial and harmonious. The rebrsentatives of Workmen Union, Officers Association and Management have been working collectively with a sense of ownership for the shared objective of all-round growth and prosperity of the Bank. On account of the cordial industrial relations with both the associations, Bank has achieved considerable growth over the years.

By Order of the Board

(AMITABHA GUHA)  

CHAIRMAN DIN : 02836707

(V. g. MATHEW)

MANAGING DIRECTOR & CEO DIN : 05332797

Place : Hyderabad

Date : June 1, 2016