Macro Economic Scenario and Banking Environment.
-
Growth
-
The global economic activity has been characterised by varying perceptions of downside risks to recovery in some advanced economies (AEs) with weak growth and elevated inflation amidst tighter financial conditions in Emerging Market Economy (EME). Across EMEs, weak domestic fundamentals, lacklustre external demand and country- specific constraints continue to restrain growth. The uneasy calm that prevails in financial markets could be dispelled by return of risk-off investor sentiment on account of data pertaining to China or to US inflation.
On the domestic front, unseasonal
rains and hail have damaged some winter crops though agricultural activities have remained resilient, suggesting that implicit estimate of GVA is likely to be achieved. With improved perceptions on overall economic conditions, manufacturing purchasing managers' index (PMI) suggests business expectations for Q1 of 2016-17 to be positive. Services sector activity expanded steadily turning out to be the main drivers in H2. The services PMI remained in expansion mode during H2 on new business and expectations. The outlook for services in surveys is upbeat for Q1 of 2016-17.
-
Inflation
-
Retail inflation measured by the consumer price index (CPI) dropped due to a larger than anticipated decline in vegetable prices. Inflation in the fuel group moderated across electricity, kerosene, cooking gas and firewood, easing pressures on rural inflation. However, CPI inflation edged up under several sectors suggesting capacity constraints and is unlikely to be helped by the 7th Pay Commission award, one-rank-one-pension (OROP) award and cost-push effect of the increase in the service tax rate.
-
However there will be some offsetting downside pressures from tepid demand in the global economy, Government's effective supply side measure and commendable commitment to fiscal consolidation. The uneven recovery in growth in 2015-16 is likely to strengthen, assuming a normal monsoon, likely boost to consumption, 7th Pay Commission recommendations and OROP. The GVA growth projection for 2016-17 is accordingly retained at 7.6 per cent.
-
Liquidity framework for Monetary Policy Operations
Net inflows in the form were robust in Q4. Foreign portfolio investors (FPIs), became net buyers in March in both equity and debt segments.
-
Monetary and Liquidity Measures
On the basis of an assessment of the current and evolving macroeconomic situation RBI has decided to: reduce the policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points from 6.75 per cent to 6.5 per cent;
continue to provide liquidity as required but progressively lower the average ex ante liquidity to a position closer to neutrality;
narrow the policy rate corridor from +/-100 basis points (bps) to +/- 50 bps by reducing the MSF rate by 75 basis points and increasing the reverse repo rate by 25 basis points, with a view to ensuring finer alignment of the weighted average call rate (WACR) with the repo rate; Consequently, reverse repo rate under the LAF stands adjusted to 6.0 per cent, and the marginal standing facility (MSF) rate to 7.0 per cent.
-
economy of karnataka
-
Karnataka's economy is largely service-oriented, with 64% of the State revenue coming from services sector, 26% from industrial sector and only 8% coming from agricultural sector. The decline of agriculture sector is attributed to the drought or near drought like situation prevailing for the last 3 years causing distress to the farming community besides affecting their produce.
Karnataka is referred to as 'Knowledge & Innovation Capital', 'Silicon Valley', 'R&D Hub' and 'Startup Hub'. It is the state with most peaceful labour relations, boasts of highest number of international schools, most number of industrial training institutes and the 2nd highest engineering & medical colleges in the country. Karnataka's state contribution to the country's GDP has gone up from 5.5% to 7% after incorporating correction in the estimation methodology taking into considering generous contribution by IT sector. Karnataka is the Largest Biotech hub (28% All India's Biotech companies), largest exporter of software 40% Country's software exports, largest number of startups (36% 5 out of 8 Indian Unicorns), largest number of R&D centers (44%), largest producer of Coffee (71% National output). Bengaluru ranked “Best place to live and work for Expats” in India with outstanding social infrastructure and cosmopolitan culture.
* Due to compliance with RBI guidelines on Asset Quality Review, the Bank had to make substantially much higher provision on Standard/Restructured advances, thereby adversely impacting the Asset Quality and profitability parameters.
2.3. Income
Total Income of the Bank increased by 3%, from '7,708 crs as at March 2015 to '7,938 crs in March 2016. Interest Income increased from '6,940 crs to '7,128 crs (2.7%). Average Yield on Advances declined from 11.11% during 2014-15 to 10.49% during 2015-16, while Average Yield on Investments decreased from 7.74% in March 2015 to 7.72% during the same period. Non-Interest Income increased marginally by 5% from '767 crs to '810 crs. The ratio of Non-Interest Income to Total Income, therefore, stood at 10.20% (9.96% last year).
-
The rate of growth of Karnataka's economy has slowed down from 7.8 per cent during 2014-15 to 6.2 per cent during 2015-16, attributed to drought in 137 taluks during kharif and 62 taluks during the rabi crop seasons resulting in fall in foodgrains production by 16 lac tonnes. The service sector is growing at per cent while the industrial sector is expected to register a growth of 4.5 percent.
The business growth of our Bank depends to a large extent on the Karnataka economy, since 82% of branches (850 out of 1,037 branches, as on 31.03.2016) are located in Karnataka. The budget size and State plan 2016- 17 envisages a total expenditure of '1,63,419 crs on various developmental activities and regulatory functions of the Government, which includes Revenue Expenditure of '1,30,236 crs, Capital Expenditure of '26,371 crs. GoK plan to set up 2 industrial township/smart cities at Davanagere and Belgaum besides SEZ already planned at Tumkur, which will provide increased growth opportunities for the economy and more particularly Banking Sector. The commissioning of Mumbai-Bangalore gas pipeline will provide further boost to the effort.
-
REVIEW OF BANKING OPERATIONS
-
Market Share and Business Growth: The business levels of the Bank and the position of market share in recent years are furnished hereunder:-
(' in crores)
Year ended 31st March
|
2011
|
2012
|
2013
|
2014
|
2015
|
2016
|
Aggregate Deposits (Percentage of growth)
|
9)
73
21
4(
|
3)
61
<d
91
4(
|
2)
12
61
5(
|
7
§ R
T-~ t 6
|
65,058
(6.5)
|
70,244
(8)
|
Of which Non-Bulk Deposits (%)
|
29,844
(69.9)
|
35,041
(70.6)
|
42,360
(74.7)
|
50,753
(83.1)
|
53,431
(82.1)
|
62,167
(88.5)
|
Growth in Non-Bulk Deposits (%)
|
(7.7)
|
(17.4)
|
(20.9)
|
(19.8)
|
(5.3)
|
(16.4)
|
Deposits Market share %
|
0.79
|
0.78
|
0.83
|
0.76
|
0.76
|
0.73*
|
Total Advances (% of growth)
|
2) 43 ^ in 41 3(
|
3)
50
® GO 01 4(
|
45,981
(13.1)
|
2) 66 ® o 01 5(
|
53,296
(4.8)
|
55,418
(4.0)
|
Advances Market share %
|
0.87
|
0.85
|
0.85
|
0.79
|
0.78
|
0.74*
|
* ASCB as on 18.03.2016
-
The growth in Deposits have been quite impressive, with aggregate deposits reaching a level of '70,244 crs, a growth of '5,186 crs over the previous year at a rate of 8%. The growth in Non Bulk deposit at 16.4% is in tune with the past trend and in accordance with our conscious policy of shedding high cost/bulk deposits.
However, growth in Advances have been sluggish due to subdued investment climate resulting in lower off take of advances particularly in Corporate Sector. The total advances have reached a level of '55,418 crs, recording a growth of '2,122 crs over the previous year at a growth rate of 4.0%. As on 18.03.2016 the Bank's market share of Deposits declined to 0.73% along with Bank's market share of Advances which has decreased to 0.74% from 0.78%.
-
Key Performance Indicators
Sl. No.
|
Key Indicators
|
2012-13
|
2013-14
|
2014-15
|
2015-16
|
1.
|
Net Profit ('. in crs)
|
416.10
|
274.25
|
409
|
358
|
2.
|
Return on Assets (%)
|
0.66
|
0.40
|
0.54
|
0.44
|
3.
|
Return on Equity (%)
|
11.05
|
6.84
|
9.40
|
7.68
|
4.
|
Expenses - Income Ratio (%)*
|
46.26
|
53.40
|
53.34
|
57.22
|
5.
|
Earnings per Share (in '.)*
|
88.91
|
57.39
|
85
|
75
|
6.
|
Gross NPA to Gross Advances (%)*
|
4.53
|
5.54
|
4.00
|
6.56
|
7.
|
Net NPA to Net Advance (%)*
|
2.69
|
3.29
|
2.16
|
4.18
|
8.
|
Cost of Deposit (%)*
|
7.32
|
7.21
|
7.25
|
6.87
|
9.
|
Yield on Advances (%)*
|
11.62
|
10.93
|
11.11
|
10.49
|
10.
|
NIM (%)*
|
3.22
|
3.02
|
2.98
|
2.84
|
2.6. Dividend
ML) DES0± AT TOTAL INCOME
Interest from Adv.
Interest from Others
Treasury Income
Commission (incl. Govt. Comm)
Others
-
Expenses
The Total Expenditure (before provisions and contingencies) increased by '310 crs, from '6,376 crs in 2014-15 to '6,686 crs in 2015-16. While Interest Expenses increased by '159 crs (3.3%), the Operating Expenses increased by '150 crs (9.9%) during the current year. The Average Cost of Deposits however declined from 7.25% in March,2015 to 6.87% in March,2016 owing to cut in Policy/Bank rate and its transmission to customer, increase in CASA share from 33.73% (31.03.15) to 34.6% (31.03.16) beside decrease in higher cost bulk deposits.
-
Profit
The Operating Profit declined from '1,331 crs in 2014-15 to '1,252 crs in 2015-16 , the Net Profit declined from '409 crs to '358 crs .The decline in Operating Profit has been moderate @ 6% with Interest expenses increasing by only 3%, despite increase in deposit base and consequently rise in cost of servicing in the form of Staff and Overheads. However decline in Net Profit has been steeper by 12% over previous year, consequent upon additional provisioning warranted by AQR.
Keeping in mind the need to strengthen Tier I capital of the Bank in the current economicscenario,the BoardofDirectors has declared a dividend of 60% ('6 per Equity share of '10/-) for the year 2015- 16. This involved a pay-out of '28.80 crs, excluding the tax component. The pay-out ratio for dividend works out to 8.05%, as against 7.05% for
2014-15.
-
BUSINESS REVIEW
-
Deposits :
Total Deposits of the Bank grew by '4,505 crs, to reach the level of '70,569 crs. Aggregate Deposits (total deposits excl. inter Bank deposits) stood at '70,244 crs as at March 2016, recording a growth of '5,186 crs (8%) during the year. The share of CASA deposits to Aggregate Deposits increased from 33.73% in March 2015 to 34.6% in March 2016.
-
Personal Segment Deposits
Personal segment deposits grew by '5,164 crs, registering a growth of 13.5% to reach a level of '43,507 crs as on 31st March 2016 and now account for 62% of total deposit. NRE deposit registered a growth of 17%, SB by 16% and Term Deposit by 13%. The number of deposit accounts under Personal segment have increased by 8,92,123 during the year.
-
To further boost deposits growth under Personal segment, two new deposit products were introduced viz. "Vidyarthi Sanchay”
-
DEPOSITORS EDUCATION AND AWARENESS FUND (DEAF) SCHEME 2014
“Pursuant to the amendment of the Banking Regulation Act, 1949, and under the provision of section 26A inserted, the amount to the credit of any account in India with any Bank, which has not been operated upon for a period of 10 years and more shall be credited to the Fund within a period of three months from the expiry of said period of ten years. The amount due under the Scheme is to be transferred to DEAF account with Reserve Bank of India before closing of the banking hours of the last working day of every month”.
'The Bank has so far transferred a sum of '57.95 crs to DEAF account from June
ML TOTAL ADVANCES
-
to December 2015 and submitted claims to the extent of '28.75 lac in respect of 75 accounts.’
-
Credit Expansion
-
The total advances of the Bank increased from '53,296 crs to '55,418 crs, thus registering a growth of '2,122 crs (4.0%) during the year. Net advances (i.e. net of NPA related/floating Provisions, and outstanding under Staff Festival Advance) of the Bank increased from '52,025 crs in March 2015 to '53,954 crs. Credit Deposit Ratio of the Bank decreased from 81.9% in March
-
to 79.67% in March 2016 due to our highly selective approach in taking further exposure in the Corporate sector which has registered a decline of 3%.However other retail Segments have registered overall 11.3% growth.
-
Corporate Network:
Our Bank has a Corporate Network consisting of 11 large branches spread over Metro and other big centers of the country, for catering to the needs of large Corporates.
The Corporate Network of the Bank has achieved a business level of '29,949.96 crs, comprising '3,156.72 crs of deposits & '26,793.24 crs of advances, as on 31.03.2016. The credit by CNW branches account for 48% of the total advance and 89% of
|
60000
|
|
50000
|
E
|
40000
|
o
O
|
30000
|
.s
|
|
it^
|
20000
|
|
10000
|
|
0
|
the C&I advance of our Bank.
The prolonged sluggishness in the economy has impacted growth of Corporate advances portfolio. To counter the growth of impaired assets, the Bank has been consciously moving its portfolio to investment grade and above [BBB or above], which accounts for 64% of total advances. This strategy has started yielding desired results.
The present high incidence of NPAs particularly in the Corporate sector can be attributed to RBI guidelines on Asset Quality Review, necessitating reclassification of restructured advances as NPA. The guidelines has impacted the bottom line of all the Banks with varying degree of severity.
Bank has undertaken a slew of measures like recoveries & rectifications under JLF, sale of assets and prudential write offs to offset the rising NPA due to market / industry/ economic scenario.
-
The growth in AAA to A grade of advances [ECR] is 41%.
-
Credit Committees :
of FY16 stood at '5,973 crs as against '5,100 crs during the year ended March, 2015 registering Y-o- growth of 17%.
Personal & Services Banking (P&SB): The Bank's advance to the P&SB segment under priority sector stood at '3,901 CRS as on 31.03.2016 as against '3,491 crs during the year ended March, 2015 registering Y-o-Y growth of 12.9%.
3.5. Agriculture Finance:
Total agricultural advances went up from '9124 crs to '9463 crs during FY 2015- 16 registering a growth of 3.7% over the previous year. Bank has surpassed the benchmark of 18% stipulated for agriculture advances by reaching a level 22% of the Adjusted Net Bank Credit (ANBC), besides 7.61% for small & marginal farmers against the benchmark of 7%.
-
The Bank adopted a credit saturation approach so as to cover all eligible uncovered farmers for financing their agricultural needs. The Bank in consultation with NABARD collated the data relating to emerging trends under agriculture segment in all the 30 districts of Karnataka State and accordingly, district wise potential available for financing under various activities were made available to the branches. The Bank also actively participated in various Agri Expo/ Mela to spread the message. Publicity materials like banners and pamphlets with special focus on revised KCC schemes & Greenhouse/Polyhouse/Nethouse were displayed/provided to the farmers.
-
Special Agricultural Credit Plan. (SACP):
The position of disbursements under SACP vis-a-vis targets is furnished as
the PMAY, a Govt. Sponsored Scheme which is a Priority Sector Loan.
A new Gold Loan Product "My Bank Flexi Gold Loan Scheme” an all purpose overdraft scheme for individual customers • was introduced beside “Combo Car Loan” for the existing Housing loan borrowers with concession in interest rate.
“Rajiv Gandhi Scholarship scheme” to provide education loans to the students belonging to economically backward sections to pursue Higher Studies (other than Technical courses) promoted by Government of Karnataka, was also introduced.
3.4. Priority Sector Lending and Social Banking:
Total Priority Sector Lending of our Bank stood at '22,388 crs as at March, 2016, including Inter Bank Participation Certificate (IBPC) of '525 crs. issued by Kaveri Grameena Bank, as against '19,401 crs,( including IBPC of '485 Crs) during the previous year ended March 2015 thereby registering a YoY growth of 15.4%. This works out to 40% of the Adjusted Net Bank Credit (ANBC of '55,796 crs).
Segment-wise status of these advances is as under:
• Agriculture: The Total Agricultural advances increased by 14.8% from '10,643 crs (including IBP of '485 crs and RIDF investments of '2,263 crs) to '12,216 crs (including IBP of '525 crs and RIDF investments of '2,228 crs) during the year. Fresh agricultural advances to the tune of '3,040 crs were sanctioned to 1.82 lakh farmers during FY 15-16.
Micro, Small and Medium Enterprises (MSME): The Bank's
advances to Micro, Small and
Credit Committees were first established in May 2002, in order to facilitate taking decisions through committee approach to provide more professional touch to credit appraisal, by thread-bare discussion on the risk factors. Two committees have been constituted at Head office viz. HOCC-I chaired by Managing Director and HOCC-II chaired by Chief General Manager (CB) with CGM/GMs as members of the committee.
The Bank has held 48 HOCC-I and 43 HOCC-II Meetings, respectively, during 2015-16, to facilitate growth in advances.
Besides the above HOCCs, in order to provide speedier credit and consequence to devolution of wider powers to the Networks, 4 Network Credit Committees with Network General Managers as Chairmen were constituted and 191 meetings were held in aggregate.
Similar Committees are also constituted at Zonal & Regional office levels viz. ZOCC & ROCC respectively.
-
Personal Segment Advances:
Personal segment advances registered a record growth of '1,675 crs (15.95%) to reach a level of '12,175 crs with Housing loans alone recording a growth of '1,078 crs (20.07%) to reach a level of '6,450 crs beside increase in Car loans by '143 crs (17.31%) and Personal loans by '249 crs (17.56%). Share of Personal segment advances to total advances has increased from 19.69% as at Mar'15 to 21.95% as at Mar'16 and contributed 78% of total advance growth during the year.
A new Housing Loan Scheme, "Namma • Mane” was introduced to cater to Economically Weaker Sections (EWS)
and Lower Income Groups (LIG) under Medium Enterprises as at the end under.
(' in crores)
2014-15
|
Target
|
Disbursal
|
Achievement
|
4676
|
4988
|
107%
|
The following initiatives were taken to increase the flow of credit to the Agriculture Segment.
-
During the FY 2015-16, Government of Karnataka declared 136 talukas as drought hit. All branches in Karnataka considered rephasement /restructuring of dues from farmers who were in distress. Additional financing by way of production and investment credit was also extended to such farmers.
-
The Bank has sanctioned Gold Loans amounting to '628 crores under Multipurpose Gold Loans to cater to the immediate & diverse needs of the farmers.
Interest Subvention of 2% upfront aggregating to '22.72 crs & 3% additional subvention for prompt repaying farmers aggregating to '23.29 crs has been passed on to farmers during the FY 2015-16.
In order to provide succour to the distressed farmers reeling under drought, OTS scheme was launched with sizeable benefits to the farmers for squaring off their dues beside provision of fresh advance. 1,819 accounts amounting to '26 crs were settled.
-
ADDITIONAL VALUE BASED SERVICES PROVIDED TO FARMERS:
Under Corporate Social Responsibility, we have setup an Agricultural Knowledge Dissemination Centre (AKDC) at our ADB, Mandya, which imparts knowledge about the latest trends in Agricultural sector.
As a part of compliance to the directives of the Government of India, the Bank has issued around 11,026 Rupay Kisan ATM cards to eligible KCC account holders during the year & has achieved 57.53% coverage.
-
Micro, Small and Medium Enterprises (Manufacturing) :
The total credit to Micro, Small and Medium Enterprises (Manufacturing) of our Bank stood at '2,511 crs as for the year ended March, 2016 as against '2,781 crs as on March 2015, registering a decline of '270 crs (YoY 9.7%) due to re classification and shifting of Food & Agro based industries amounting to '966 crs to Agri. Sector
-
Micro, Small and Medium Enterprises (Services) :
Total credit to Micro, Small and Medium Enterprises (Services) of our Bank as on March 2016 stood at '3,362 crs as against '2,468 crs as on March 2015, registering an increase of '576 crs (YoY 35%) during the year.
-
During the year ended March 2016, the Bank has undertaken various initiatives to increase the flow of credit to MSME sector. The major products under the MSME segment have been reviewed and made more attractive to the customers. The interest rates have also been revised downwards and the substantial benefit of the reduction in the Base Rate has been passed on to the borrowers Customer Relations Programmes and Customer Meets to strengthen the relationship with MSME clients were arranged at various centres like Bengaluru, Mysuru, Hosur, Tirupur etc. A One-day 'SME Knowledge Series' workshop was organised at Bengaluru on 22nd December, 2015, in association with Dun & Bradstreet, for the MSME entrepreneurs to explain to them the various products offered by us besides making a sincere attempt towards better appreciation of their needs and difficulties faced by them in general.
The Bank has participated in various exhibitions organised by Industries Associations like ASSOCHAM, FKCCI etc, to increase our visibility and also to market our MSME products beside organizing Udyog Mitra MSME loans campaign resulting in in fresh sanctions to the tune of '657.51 crs spread over 5,473 MSME beneficiaries.
-
During FY16, the Bank has entered into an MOU with Industrial Finance Corporation of India Limited (IFCI) and rolled out the new “Credit Enhancement Guarantee Scheme for Schedule Caste” (CEGSSC) scheme extending guarantee cover for loans exclusively provided to entrepreneurs belonging to the Schedule Castes to the extent of '5 crores.
-
Lendings under MUDRA Scheme:
The Government of India has launched Pradhan Mantri MUDRA Yojana (PMMY) to fund the unfunded and financial exclusion group belonging to weaker section of the society and to assist Non-farm enterprises in manufacturing, trading and services with credit needs upto '10.00 lacs.
The Bank has been pro- active in dispensing credit under the scheme and as against the target of '415 crores, our Bank has disbursed '813 crs. (196% of the target) covering 37,680 beneficiaries. On account of the good performance in MUDRA loan disbursement, our Bank has been conferred the "Best Bank Award under MUDRA Yojna for Emerging Bank- Runner Up" by CIMMSE, New Delhi.
-
CGTMSE Credit Guarantee Scheme:
We are continuously offering collateral free financial assistance to all eligible MSME sector. All loans to eligible MSME units upto '100.00 lacs are being sanctioned without any collateral security by covering them under the guarantee scheme of CGTMSE. The Bank is presently absorbing the guarantee fee and annual service fee in respect of all loan limits upto '10 lacs. We have covered 11,041 accounts amounting to '734.15 crs.under the CGTMSE guarantee as on March, 2016.
-
Assistance to Weaker Sections of the Society:
The Bank continued to extend financial
assistance to Weaker Sections of the Society comprising of small & marginal farmers with land holdings of 5 acres or less, landless labourers, tenant farmers etc., village & cottage industries whose individual limits does not exceed '50,000/-, SJSRY, SLRS, DRI, Self- Help Groups and advances to SC/ST beneficiaries. The outstanding amount under lendings to Weaker Sections stood at '6,417 crores as at the end of March 2016, which constitutes 11.5% of ANBC, as against stipulated benchmark of 10%.
-
Assistance to Women Entrepreneurs:
We have been continuously laying emphasis on extending hassle-free credit facilities to MSME units being exclusively run by women entrepreneurs. The Bank's total credit to women entrepreneurs as at the end of March 2016 stood at '4,481 crores, covering 2,43,119 beneficiaries, which works out to 8%
-
Measures to improve the economic conditions of SCs/ STs:
Bank has been extending all support for the development of SCs/STs to ensure that adequate credit is made available to members of the SCs/STs engaged in various professions. Credit is made available to this section of the society in tie-up with the State level development departments of SCs/STs. The Bank's assistance to the SCs/STs under various schemes as at the end of March 2016 stood at '884 crores covering 1,10,327 beneficiaries, which forms 4% of Priority Sector Advances.
-
Finance to Minority Communities:
For promoting economic activities amongst the eligible beneficiaries belonging to the minority communities, Bank has been actively participating in this national priority for promoting self-employment activities. The Bank's assistance to the notified minorities under various schemes as at the end of March
-
stood at '2,117 crores covering 42,011beneficiaries, which forms 9.5% of Priority Sector Advances.
-
Government Sponsored Schemes:
The position of assistance rendered under various Government sponsored schemes by our Bank as at the end of March 2016 is as detailed below:
-
Prime Minister's Employment Generation Programme (PMEGP) :
The Government of India had launched the scheme “Prime Minister's Employment Generation Programme (PMEGP)” by merging the earlier Prime Minister's Rozgar Yojana (PMRY) and Khadi & Village Industries Commission's Rural Employment Generation Programme (REGP) to empower first generation entrepreneurs to set up micro enterprises across the country. The Bank's total credit under PMEGP Scheme as at the end of March '16 stood at '68.6 crores covering
-
752 beneficiaries..
-
National Urban Livelihood Mission (NULM) Scheme
The Bank has extended financial assistance of '16.1 crores under NULM scheme (previously known a SJSRY scheme) during the year to 798 beneficiaries. Total amount outstanding under NULM scheme as at the end of March 2016 is '36.1 crores covering 4,458 beneficiaries.
-
Differential Rate of Interest (DRI) Scheme
The Loans under DRI scheme of our Bank stood at '12.4 crores as at the end of March 2016 covering 11,125 beneficiaries with a share of advances to SC/ST beneficiaries amounting to '5.3 crores @ 44%.
-
Investments
-
The total investments of the Bank in Government securities, other approved securities and Non-SLR securities increased from '18,166 crs as at March 2015 to '20,229 crs as at March 2016.
-
Profit on sale of investments increased from '125.33 crs in 2014-
-
to '131.18 crs in 2015-16. During the year, interest and dividend income from investments, net of amortization charges, registered a growth of '169.38 crs (13%) over March, 2015 level of '1,302.89 crs and stands at '1,472.27 crs.
-
Yield on investments including profit on sale of securities, decreased from 8.00% (2014-15) to 7.91% (2015- 16), due to 125 bps reduction in Repo rate by RBI between Jan 2015 and Sep
-
Yield on investments, excluding profit, decreased from 7.73% to 7.72% during the same period.
-
Foreign Exchange Turnover of the Bank in 2015-16 increased to a level of '582,755 crs (Merchant Turnover- '65,555 crs and Trading Turnover- '517,200 crs) against previous year's level of '403,102 crs (Merchant Turnover- '51,904 crs and Trading Turnover- '351,198 crs) generating a profit of '59.27 crs.
-
International Banking
-
The level of Export Credit as on 31st March 2016 stood at '1,569 crs ('1,617 crs as on 31st March 2015) constituting 3% of ANBC. With a view to encouraging export business, seminars of exporters/ importers were conducted in Tirupur and Mysuru during the financial year 2015-16 besides offering Exporters Gold Cards to eligible export units. The Bank has entered into an arrangement with two foreign banks for availing Buyer's credit for our customers at affordable rates.
-
NRI Deposits as on 31.03.2016 stood at '1,785 crs as against '1,526 crs, as on 31.03.2015 comprising of FCNR (B)/RFC deposits of '309.66 crs and NRE/NRO deposits of '1,475 crs.
-
As per Bank's BPR objectives, the Bank had set up five TFCPCs at Bangalore, Chennai, Hyderabad, Mumbai and New Delhi. During FY 2013-14, 19 more branches, including CAB branches have been linked to TFCPCs, in order to
-
consolidate the front-line processing and extending quality service to Exporters.
-
The Bank has also been offering Foreign Currency Demand/Term Loans (FCNR loans) to its customers which showed marginal growth and stood at $46.65 mio as at Mar'16 against $44.37 mio in the previous year.
-
Cross Selling
During the year over 23,474 lives were insured through various products of SBI Life Insurance Company Ltd with a premium collection of '89 crs. The Bank has collected a premium of '24 crs while marketing General Insurance Products. In the area of Investment, the Bank is also offering SBI Mutual Funds products with Assets Under Management aggregating to '112 crs. Bank also sources applications for issue of SBI Credit Cards. The Bank has earned a income of '14.18 crs from Cross Selling Business during FY 2015-16.
3.17 Government Business:
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State Government Transactions:
The bank has been handling a major share of Government of Karnataka transactions for past six decades. Around 88% of our total Government business comes from State Govt. transactions and the turnover is directly linked to the budget of the State Government. A turnover of '78,266 crs has been achieved during the year 2015-16 as against '69,569 crs in 2014-15 with a net accretion of '66.52 crs Commission representing 92% of income from Government business.
SBM, being the premier banker of the Government of Karnataka are also proud to be associated with Khajane II, an ambitious project of the Government of Karnataka aimed at integrating all stake holders viz. GoK, RBI, Accountant General and Agency Bank thereby facilitating transaction on real time basis.
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Central Government Transactions:
During the year 2015-16, business from Central Government Departments like Postal, Defence, CBDT, CBEC and business from various Central Government Schemes like Public Provident Fund, Senior Citizen Savings Scheme, Sukhanya Samridhi Accounts, New Pension Scheme etc constitutes approximately 12.46% of the Bank's total Government Business Turnover. Our business turnover from Central Government Departments during the year 2015-16 is placed at '11,133 crs with a commission earning of '5.78 crs. During the year all our branches have been authorized to open PPF and Sukhanya Samridhi accounts. During 2015-16, our Bank has earned a commission of '72.30 cr as against '67.98 cr for the year 2014-15.
3.18. NPA Management
Pressure on asset quality of banks under the sustained economic downturn, was a major concern during the FY15-16 for
the Banking Industry as a whole. The process of cleaning up of bank balance sheets by the Regulator is underway and all the Banks in the country underwent a thorough asset quality review during the last two quarters of the FY 16. It had had severe impact on the profitability of the banks. The major sectors like iron and steel, infrastructure, aviation, mining, etc., continued to be major contributors towards increasing NPA portfolio of the banks. Added to this, the continued problem of drought in many parts of the State of Karnataka, where our majority of the branches are located, further added to the NPA portfolio of Bank.
However, Bank has been taking steps to recognize the weaknesses in the loan accounts at the incipient stage so that corrective measures can be initiated before an account turns NPA. Bank has well defined system to monitor all such accounts. Even after an account turns NPA, recovery process is initiated immediately. The provisions of SARFAESI Act have been enforced in all the eligible collateralized advances to ensure early recoveries. During the second half, Bank held three Bank level Mega e-auctions of properties and also participated in SBI Mega e-auction, in which 442 properties properties valued at '348.95 Crs were put on sale through e-auction. Of this, 69 accounts amounting to '5.13 Crs were upgraded, 24 accounts with balance outstanding '3.17 accounts were closed and 15 properties were sold in e-auctions resulting in a recovery of '8.44 Crs.
Bank has taken other steps also to recover the dues by way of strategic sale of assets to ARCs, vigorous follow- up of DRT cases, OTS Schemes for eligible MSME and AGRI borrowers and compromise settlements wherever warranted.
Under the RBI's Framework for Revitalising Distressed Assets in the Economy, our Bank has been participating actively in the meetings of JLFs and implementing the decisions taken thereat within prescribed timelines. In respect of those corporates, where performance is
not as per laid down benchmarks, steps are taken for change of Management by invoking RBI Guidelines on Strategic Debt Restructuring. Our Bank has already taken action in 6 accounts under these guidelines.
All these measures have helped the Bank to keep the increasing trend under control. Accordingly, the GNPA and NNPA levels stood at '3635.56 Crs (6.56%) and '2257.18 Crs (4.18%) respectively as on 31st March 2016 compared to the levels of GNPA and NNPA as on 31st March 2015 at '2136.425 Crs (4%) and '1121.58 Crs (2.16%) respectively. However, the position of GNPA and NNPA as on
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without considering the AQR accounts amounting to '1213.37 Crs (Provision added '384.10 Crs) works out to '2422.19 (4.37%) and '1427.92 Crs (2.63%) respectively.
3.20 LEAD BANK SCHEME:
The Bank has been discharging lead Bank responsibilities in 3 districts viz. Mysore, Charmarajnagar and Tumkur. The Annual Credit Plan for 2016-17 has been launched with the combined annual credit plan target for all Banks in 3 districts going up from '11,600 crs to '14,624 crs, at a growth rate of 26%.
The Block Level Bankers' Committee (BLBC), District Consultative Committee (DCC), District Level Review Committee (DLRC), Standing Committee (SC) meetings are regularly conducted as per Reserve Bank guidelines in all the three Lead Districts.
All our Lead District Managers are actively monitoring implementation of Annual Action Plan in close liaison with all the Banks in districts. They are also coordinating for implementation of drought relief measures as per latest RBI guidelines in close coordination with SLBC and branches.
3.20.1Rural Self Employment Training Institute (RSETI)/
Rural Development and Self Employment Training Institute (RUDSETI ):
The Bank has established RUDSETI type of training centres viz. MyBank Institute for Promotion of Self Employment and Development (MIPSED) at Tumkur. Similar Institute called JSS RUDSETI is established at Chamarajnagar in association with JSS Mahavidyapeetha. These Institutes have been established to impart entrepreneurial skill development and guidance to unemployed rural youth, to become gainfully self employed.
We have also constructed our own building at MIPSED, Tumkur with financial grant from National institute of Rural Development (NIRD).Total number of 1,851 participants have been trained during 2015-16 with 67% settlement rate through financial assistance from Bank loans and their own resources. The participants have been trained under various Government sponsored schemes such as PMEGP, RGCY, DTP, Mobile servicing, Tailoring, Beautician courses, etc. Our RSETI has been awarded "AA” as per the latest rating released by Mo RD.
3.20.2Regional Rural Bank - Kaveri Grameena Bank
Our Bank has sponsored Kaveri Grameena Bank (KGB) which is headquartered at Mysore. The Bank is operating in 10 districts of Karnataka viz. Mysore, Hassan, Chamrajanagar, Tumkur, Bangalore-Urban, Bangalore- Rural, Ramangar, Chikmagalore, Kodagu and Mandya and crossed a land mark figure of 480 branches. Bank has opened 37 branches during 2015-16. All the branches are on CBS mode. The total business (deposits and advances) of KGB as at Mar'16 stood at '12,973 crs as compared to '10,556 crs as at Mar'15 registering a growth of '2,417 crs (22.9%).
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SELF HELP GROUP (SHG) LENDING
The Bank has credit linked 18936 groups with an advance of '501.67 cr during the current year. Taking the cumulative total of such credit linkage programme to
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83,552 groups with a financial outlay of '3,122.04 cr up to 31.03.2016. As on
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there are 35,279 SHGs with an outstanding balance of '810.81 cr.
The Ministry of Rural Development, Government of India has launched National Rural Livelihood Mission by replacing SGSY scheme with effect from 01.04.2013. We have financed 17,042 women SHGs under National Rural Livelihood Mission (NRLM) with an advance amount of '451.50 crs during FY 2015-16 and as on 31.03.2016, there are around 31,751 women SHGs with an outstanding balance of '729.72 cr. Necessary benefits have been passed on to all eligible women SHGs and claims for interest subvention have been lodged with NRLM Department of Ministry of Rural Development, Government of India.
The Bank has credit linked 916 Joint Liability Groups with an advance amount of '11.97 crs during FY 2015-16 and as on 31.03.2016, there are 2,650 JLGs with an outstanding balance of '33.69 crs
3.21. Financial Inclusion
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Coverage Sub-Service Areas / Providing Banking outlet:
Bank has drawn Comprehensive Financial Inclusion Plan for 2013-16 covering 745 Sub-Service Areas (SSAs), spread over 3,740 villages for providing banking outlets. Of the allotted 745 SSA's, the Bank has already covered 216 SSA's by Brick & Mortar branches and 529 SSA's through Business Correspondent Agents. BCAs are extending the banking services to these villages and working as an extended arm of the Bank.
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Implementation of Pradhan Mantri Jan Dhan Yojana:
The Bank has opened 9,38,000 BSBD accounts under PMJDY up to Mar'16 with a balance outstanding of '82.22 crs. The total number of accounts opened since the inception of FI programme stood at 16.22 lacs with balance of '128.77 crs. The Bank has successfully seeded 59.13% Aadhaar numbers in PMJDY accounts besides issuing 8,67,919 Rupay Cards to the PMJDY account holders..
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Other Financial Inclusion initiatives :
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The Bank is actively participating in Modified Direct Benefit Transfer Scheme for LPG (MDBTL) wherein the LPG subsidy is directly being credited to the Savings Bank account of the customers.
The Bank is the sponsoring Bank for credit of MGNREG wages to the accounts of beneficiaries in Karnataka State.
Bank is distributing Social Security Pensions to more than 62,000 beneficiaries under Electronic Benefit Transfer Programme of Govt.of Karnataka, with 'One District-One Bank' Model in Chamarajanagara district and 'One District-Many Banks' Model in the districts of Bellalry and Chitradurga. An amount of '46.36 crs was disbursed to SSP beneficiaries through BC Agents during the FY 16.
Bank has also actively participated in all 3 Social Security Schemes viz., PMSBY, PMJJBY and APY launched by Govt.of India, aimed at providing micro insurance coverage and pension to unorganized/ rural sectors through bank accounts. Bank has opened 3.64 lac accounts under PMSBY, 1.99 lac accounts under PMJJBY besides large number of accounts under APY.
3.21.4Financial Literacy :
Bank has opened 22 Financial Literacy Centres across Karnataka. The Counsellors working in these centres are conducting regular camps in villages spreading Financial literacy to various target groups like farmers, SHG members, students etc. Our Counsellors also visit 115 skill centres (ITI s) mapped to these FLCs with the aim of spreading financial Literacy amongst the students of ITIs.
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HUMAN RESOURCES:
Manpower Profile:
The total manpower strength of the Bank as at March 2016 stood at 10,650, as against 10,193 in the previous year. The staff strength comprised 3,742 officers, 4,972 clerical staff and 1,936 subordinate staff. Of these, 874 are Ex-defense personnel, 167 belong to physically handicapped category and 556 belong to the Minority community.
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Women's Representation:
As at March 2016, there were 3,029 Women employees (comprising 669 Officers and 2,560 Other Employees) in the Bank, compared to 2,891 as at March
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(comprising 543 Officers and 2,348 Other Employees). The share of women employees stood at 28.4% as at March 2016. The Bank continued to provide equal opportunity to women in their career progression.
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Scheduled Castes/Scheduled Tribes - Representation:
As at March 2016, there were 1,877 Scheduled Caste employees, comprising 633 Officers, 786 Clerical Staff and 458 Subordinate staff. There were 682 Scheduled Tribe employees comprising 267 Officers, 299 Clerical staff and 116 Subordinate staff as at March 2016. All the guidelines of the Government of India for safeguarding the interests of SC/ST employees have been complied with.
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Human Resources Management Solutions (HRMS):
Bank has implemented Human Resources Management Solutions (HRMS) on 1st April 2010, to handle all HR activities in a phased manner. HRMS Cell was formed to integrate salary, perquisites, reimbursement and leave details of the employees. The cell has implemented salary, reimbursement of Annual Medical expenses, furniture supplied to officers, furniture maintenance charges, monthly reimbursements of perks, reimbursement of brief case expenses, besides sanction of increment through HRMS portal. Asset & Liability Statement and Annual
Appraisal Report are also implemented through HRMS.
HRMS portal facilitates uploading of Annual Appraisal Report of officers which are reviewed and noted by respective authorities online. It is planned to integrate e-learning portal 'Gnanodaya' with HRMS site from FY17 onwards, so that lessons which are to be mandatorily attended gets automatically reflected in their Annual Appraisal Report.
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Training:
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Training Activities and Coverage:
The Bank regards its employees as its critical & valuable assets. To make the employees more competitive and knowledgeable in banking field, honing their skills is one of its priorities.
With a view to achieve the desired goals and to establish highly professional work culture, Bank's staff college at Jakkur and 3 learning centers at Bengaluru, Mysuru & Hubballi are imparting training on wide spectrum of subjects viz. Advances and Deposits and knowledge about their various products, communication & leadership skills, marketing, behavioral science, etc. Also to gain competitive edge in new technology being adopted by the Bank, several programmes on latest technology developments like Internet Banking, Mobile Banking and other alternate delivery channels are conducted regularly.
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The training methodology of the Bank constantly aims at keeping its workforce pro-active and customer centric, so that they can discharge their duties effectively in the challenging Banking scenario. Bank continues to focus on imparting training to maximum number of employees to update their skills & knowledge periodically.
Our staff college at Jakkur and Learning Centers at Bengaluru, Mysuru & Hubballi have conducted in all 237 training/ workshops both functional and computer based programmes. During the year total 4,805 staff got trained at our Learning Centers.
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The Bank regularly deputes officers, based on the job profiles, for training to Apex Training Institutes of SBI and other training institutes like NIBM, IIBF, College of Agricultural Banking- RBI (Pune), CAFRAL (Centre for Advanced Financial Research & Learning), IDRBT, CRISIL etc. to hone their skills and update their knowledge. During the year, 1,026 officials were deputed to the Apex Institutes and external training institutes.
Keeping in view the need for imparting training in specialized areas, the Bank has also conducted several specialized training programmes/ workshops on MSME business, KYC/ ALM compliance, workshop for NPA training, Risk Management Awareness Workshop, Leadership Development Programme for Branch Managers, Skill Development Programme for Officers, Training for Retiring Staff, programme for 1st time Branch Managers, Stress Asset Management programme, Programme on agri credit, ADC programme, etc.
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e-learning (Gyanodaya):
In addition to the class-room training provided to employees at our Staff Learning Centres and ATIs, Bank had also launched an e-learning portal “Gyanodaya” with the objective of imparting on-line learning and training to all the employees of our Bank. SBM e-Learning portal is available 24X7 and all 365 days on internet system and also on intranet system.
The portal is made available to all our employees. The users can access/ read more than 300 lessons /topics covering general banking, Alternate Delivery channels, credit management, agriculture, foreign exchange, behavioral science, etc., by which they can enrich their knowledge in all aspects of banking and can also do self-evaluation by attending online tests.
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Pre-promotional training:
Pre-Promotion training programmes for SC/ST/OBC were conducted at the Learning Centers at Bengaluru & Mysuru during the year, for eligible and aspiring candidates from Clerical to Officer cadre.
During the year 112 employees belonging to SC/ST/OBC category were given training. Based on the feedback received the programmes were well appreciated by the participants.
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Training to subordinate staff:
To bring about awareness among the subordinate staff and to make them realize their potential & importance in the organization, Bank has conducted exclusive training programme for 313 subordinate staff at our Learning Centres, Bengaluru, Mysuru & Hubballi.
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Training to retiring officers/ staff:
To enable our retiring officers / staff to lead a happy and peaceful retired life with inputs on financial planning matters, our Learning Center, Mysuru had conducted 12 special training programmes for retiring employees during the year 2015-
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covering 452 employees.
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Other Training Programmes:
Training programmes were also conducted for newly promoted CMs/ AGMs, Specialized credit training programme for officials of HOCC/NWCC/ ZOCC/RO & Specialized Training to officials of CPPC, Mangalore.
4.2.10 Roll out of new initiative- Mentoring of branches:
Mentoring initiative is a process by which one person guides the development of individuals, seen as protege/mentee. It is a part of a leader's role that has growth as its primary outcome. It enables to establish a partnership that helps the protege / mentee to grow and deliver better results, through the process of collaboration, discussion and support. The mentor is to act as counselor, encourager, supporter, information provider but not the solution provider.
With a view of improving the performance of the branches, more specifically the very old branches, this new initiative - mentoring of branches is rolled out in our Bank with 18 top executives (DGMs and GMs) as mentors. Initially, it is rolled out in 36 select branches at Bengaluru city on pilot basis.
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INDUSTRIAL RELATIONS:
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Terminal Benefits to Retired Staff:
The Bank gives due importance to the timely settlement of terminal benefits to staff comprising of Gratuity, PF, Pension, either on reaching superannuation or on any other grounds. During the FY 2015-
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as many as 570 members of staff have retired from the services of the Bank.
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New Pension Scheme (NPS)
Now known as National Pension System: Employees who have joined the services of the Bank w.e.f. 01.04.2010 are covered under the above scheme, which is governed by the provisions of the NPS introduced for employees of Central Government w.e.f. 01.04.2004 and
modified from time to time. As at March
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as many as 3,570 employees have been covered under NPS.
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Retired Employees Medical Benefit Scheme - II (REMBS-II):
REMBS-II, a scheme for reimbursement of medical expenses to employees retiring / retired under superannuation was implemented w.e.f 15.12.2012, with an upper limit for claims ranging from '2 lacs to '20 lacs, based on eligibility criteria. This scheme is in addition to the already existing SBMREMB scheme with a ceiling of '2 lacs. During 2015-16, the Bank has received 1,212 applications and disbursed amount of '271.66 lacs.
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STAFF WELFARE ACTIVITIES :
Central Staff Welfare Committee allocates funds for various staff welfare activities. The welfare measures provided to the members of the staff are : Holiday Homes, Group Insurance Cover, Scholarship Scheme, Farewell Scheme for the retiring employees, financial assistance to the employees with physically/mentally challenged children, Medical Expenses Reimbursement Scheme, Birthday Memento & recurring expenses for Staff Welfare Activities.
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Technology Up-gradation & Support Functions
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ATM Rollout and performance:
During FY16 we have installed 82 ATMs including 13 Brown Label ATMs taking the total number of ATM installed to
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416 as part of State Bank Group's 56000+ networked ATMs. In addition to basic services, value added services like Aadhar registration, LPG registration, Mobile Banking Registration, card to account/card to card transfer and payment of donations are also made available.
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Internet Banking:
The number of registrations and volume of transactions through internet banking has seen a growth of 22% and 29% respectively during the year. The facility is available for visually challenged customers also.
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Mobile Banking:
Bank is offering Mobile Banking Services under the name State Bank Freedom to all its retail customers. The service includes enquiry, mini statements, top up and recharge, interbank fund transfer through NEFT and IMPS and bill payment facilities. There is a steady growth in the number of registrations and transactions by 192% and 28% respectively during FY16. The customers having Internet Banking connection can also transact from their mobile phone through a separate Mobile App - State Bank Associate. In FY16 Bank also launched a separate Mobile App named SBM Virtual under which all Banking transactions and information available through different sites can be accessed at a single point.
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Electronic Payment System:
All branches of the Bank are enabled for RTGS/NEFT/GRPT remittance facility besides Electronic Clearing Service (ECS) and IMPS over Mobile Banking Platform. Percentage of all electronic transactions to Total transactions of the Bank is 48.95% as on 31.03.2016.
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Bank's Website :
The Bank's website http://wwwhttp://www .
statebankofmysore.co.inis a repository of information about the Bank, its products and schemes. Information on Schemes and products for various segments, besides online loan applications for Education, Housing, Car, Gold loan are available. Special links have been provided to access other relevant sites. A separate text version of the website is available for the benefit of the visually challenged customers in English.
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Social Networking:
Bank has uploaded the features of Bank's products and technological initiatives on face book.
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Digital Signage Solution:
Digital Signage Solution is a method of providing information to our branch customers on various products and services displayed on LED screen at the branches. We have installed a centrally controlled online Digital Signage Solution at 999 branches and propose to extend the solution at the remaining branches during the FY 2016-17.
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Cheque Truncation System (CTS):
Cheque Truncation System (CTS) is basically an online image-based cheque clearing system where cheque image are transmitted for effecting transaction obviating the need for physical movement of instrument. Bank has implemented CTS in MICR centers/ Branches located at Southern, Western and Northern grid.
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Merchant Acquiring Business:
Our Bank has started MAB - sourcing and installing POS machines during March 2013. As on 31.03.2016 we have installed 5,021 POS machine across India and routed 25.23 lakhs in the FY 2015-16. We have also installed 440 Mobile type of POS machines (m-POS) during 2015-16.
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Cash Recycler / Cash Deposit Machine:
Cash Recycler is designed to accept deposits and dispense cash with dual functionality. We have installed 74 Cash Recyclers and 9 Cash Deposit Machines.
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Barcode Based Passbook Printing Kiosk (BBPPK):
We have rolled out a new product called as BBPPK. It is Passbook Printing self service machine working on Barcode Technology.
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e-Touch:
As part of our endeavor to deliver a wide array of financial services and products to our customers, a state of the art outlet, named as “e Touch” was opened at Avenue Road, adjoining our Head Office during May 2015. 15 e-Touch outlets have been installed by the Bank during FY16.
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Information Security, Business Continuity and Disaster Recovery:-
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In the backdrop of growing complexity of financial products and the increased leveraging of technology, operational risks have assumed critical importance in recent times. The treatment of technology risk/operational risk as part of the movement towards Advanced/ Management approach is a manifestation of the significance of the risks in impacting the risk profile of a Bank. Keeping this in mind our Bank has adopted:
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a well-defined IT Policy and IS Security Policy, which is being periodically reviewed and updated.
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become a part of well-established (common for State Bank Group) state-of-the art IT infrastructure which is certified as ISO 22301.
is part of the Security Operations Centre for online monitoring of transactions.
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Our Bank has taken proactive measures to respond to business discontinuities and ensure uninterrupted availability of all key business resources that support critical Banking functions.
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The Bank has adopted a well defined Business Continuity Plan and Disaster Recovery Plan Policy. Our Bank is part of a well established high-end Business Continuity and Disaster Recovery infrastructure which ensures seamless continuity in case of need. The Disaster Recovery drill is being conducted on a half-yearly basis, during which the transactions of our branches are routed through the DR site. In addition to this, the Bank has a nearby site to ensure zero data loss in the event of a disaster. The Bank has implemented Business Continuity Plan in all the branches and also in the administrative offices together with periodic reviews and updates. The Bank has also introduced Electronic Document Management System for safe keeping of documents in electronic form.
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Management Information System (MIS):
The MIS Department consolidates and maintains the Credit Information System (CIS) database apart from collating information from branches and Head Office Departments for submission of various statements to Reserve Bank of India like Basic Statistical Returns, Sectoral Deployment of Funds etc,. The Department also provides information to the Top Management and other user Departments in Head Office.
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The scope of CIS has also been extended to submission of data to Credit Information Companies to whom the Department is submitting individual borrower-wise credit information every month after due processing. In turn, the Credit Information Reports (CIRs), drawn from the CICs database, serve as important fraud prevention tool to the credit appraisal/sanction functionaries.
The Department coordinates with SBI-EDWP for submission of various reports validated from User Departments to RBI under Automated Data Flow (ADF) apart from collating logic information from Head Office User Departments and providing logic, source system to SBI- EDWP for generating various reports.
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The Department coordinates with
CDC and the Centralized Credit Data Processing (CCDP) for facilitating data correction and improvement in data quality.
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SYSTEMS AND PROCEDURES:
Systems and Procedures Department is a special resource available at Head office for effective management of work organization by laying down and also framing suitable Systems and Procedures. The Department also vets process changes and reviews charges on the general service provided and modifies the same in accordance with the changing environment and aspirations of customers. The last such change was effected in Nov'15.
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The Department also undertakes revision of Delegation of Financial Powers to various functionaries and effect changes, with the approval of Top Management for effective supervision and smooth functioning of the organization.
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CONTROL AND SUPERVISION
RISK MANAGEMENT :
An independent Risk Governance structure is in place for Integrated Risk Management, covering Credit, Market and Operational Risks. This framework visualizes empowerment of business units at the operating level, with technology being the key driver, enabling identification and management of risk at the place of origination.
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BASEL Implementation :
The Bank has migrated to the Basel
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framework, with the Standardized Approach for Credit Risk, Basic Indicator approach for Operational Risk and Standardized Measurement Method for Market Risk.
Capital regulations under Basel III have come into effect in India w.e.f 01.04.2013. Bank has complied with both the norms and has maintained its capital adequacy above the RBI mandated level of 9% along with Tier-I at 7%. The Capital Adequacy Ratio computed as per Basel
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guidelines effective from 1st April 2013 stands at 12.43% as at March 2016, against 11.42% as at March 2015. The CRAR of 12.43% consists of CET - I of 9.01%, AT-I of 0.27% both forming TIER-I Capital besides 3.15% of TIER-II Capital. The CRAR under Basel II guidelines as at March 2016 stood at 12.93% as against 12.02% in the previous year. The Capital Adequacy ratio of the Bank increased mainly due to raising of Tier-II capital of Rs. 500 crs during the year and change in treatment of Deferred Tax Assets as per the recently revised RBI guidelines.
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CREDIT RISK MANAGEMENT:
Reserve Bank of India has issued guidelines on implementation of Internal Ratings Based Approach for calculation of capital charge for Credit Risk in Dec 2011 and our Bank has accordingly applied for permission to RBI for migrating to Advanced Approach for Credit Risk under Basel II. The Bank has submitted Letter of Intent to RBI in terms of the guidelines detailing therein the models for developed for risk assessment and computation for different components viz. Probability of Default Estimation (PD), Loss Given Default (LGD) & Exposure at Default (EAD) besides adoption of Basel II compliant policies approved by the Board of Directors. The Bank has received a response from RBI in July 2013, advising the Bank to further strengthen the areas of IRB framework before the commencement of parallel run process for Foundation IRB (FIRB) approach.
As part of group synergy, State Bank Group is in the process of implementing the latest version of Oracle Financial Service Analytical Applications (OFSAA) with enhanced functionality, which will enable the Bank to have an enterprise wide, integrated view of risk and finance under various areas including the technology for risk engine.
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MARKET RISK MANAGEMENT :
Bank is using Standardized Measurement Method (SMM) for computation of capital
charge and the necessary systems for migration to IMA are in place. The Bank has submitted Letter of Intent to RBI in Oct 2013 for migration to IMA. The Bank would be on parallel run for computation of capital charge under both SMM & IMA, after the approval from RBI.
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OPERATIONAL RISK MANAGEMENT:
Reserve Bank of India has prescribed three approaches for computing capital charge for Operational Risk, viz.
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Basic Indicator Approach (BIA)
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The Standardized Approach (TSA)
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Advanced Measurement Approach (AMA)
Currently the Bank is following the Basic Indicator Approach. As per AMA guidelines, Banks are allowed to switch over from BIA to AMA directly. Bank is endeavoring to move directly to the Advanced Measurement Approach in view of the minimal changes in capital requirement under TSA, as compared to BIA. All the policies and documents have been reviewed, as suggested by our consultants, to meet minimum required standards. A Letter of Intent (LOI) was submitted to Reserve Bank of India in Oct 2013, seeking permission to migrate to AMA. However, as per the communication received from RBI, the AMA application has been put on hold till a detailed assessment is completed in respect of similar application by SBI. The Operational Risk Management Department (ORMD) has been organizing training programmes for creating awareness among officers about Basel II requirements, Operational Risk Management, Advanced Measurement Approach for Capital Computation and Fraud Prevention Measures.
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ASSET LIABILITY MANAGEMENT:
The Asset Liability Management Committee (ALCO) of the Bank is entrusted with the task of managing liquidity and interest rate risk. The committee meets regularly to monitor the risks and Net Interest Margin (NIM) on an ongoing basis. The tolerance limits for liquidity mismatches and interest rate risks are fixed in accordance with RBI guidelines and Bank's ALM Policy and reviewed by ALCO at regular intervals. Various interest rate revisions, revision of Base Rate and possible mismatches in the Structural Liquidity projections of the Bank are also discussed and appropriate decisions are taken.
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BUSINESS PROCESS
RE-ENGINEERING (BPR):
Bank has rolled out various BPR initiatives since 2005, in consonance with the design principles provided by SBI. The BPR initiatives leverage technology to significantly enhance customers' satisfaction and convenience. So far 19 BPR initiatives have been rolled-out. Loan Origination Software for processing of Retail Loans has been successfully implemented in our Bank at Bangalore, Mysore and Delhi Centres besides other Metro centres. The software has been extended to other Urban/Semi-Urban centres and we plan to roll-out completely by September 2016, thereby cutting down the processing period besides improving the quality of the processing and asset. The Bank also opened another RACPC at Bengaluru to meet the requirement of expanding network.
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The Central Pension
Processing Centre (CPPC) :
The Central Pension Processing Centre (CPPC) is functioning at Mangalore and pension/arrears of pension has been disbursed to 1,56,953 pensioners online throughout the Bank. CPPC is now using SBI package for disbursing Central Government pensions. We have also introduced system of online submission of Digital Life Certificate (Jeevan Praman), whereby pensioners can submit life certificate from the comfort of their house after seeding their Aadhar & Mobile numbers with the Bank.
Centralised deduction of Income Tax on pensions beyond taxable limit, effected from October 2015.
9 .2. Our Centralized Clearing Processing Centres (CCPCs) at Bangalore, Mysore, Chennai, Delhi and Mumbai undertake entire clearing work of all branches through decentralized Model of Cheque Truncation System of clearing thus obviating the necessity of physical transfer of cheques as per the directions received from Reserve Bank of India in this regard.
GOK have announced plans to completely switch over to CTS mode in respect of Govt cheques also and do away with Paper to Follow procedure, whereas GOI have already shifted to CTS mode w.e.f. February'16. Now, the entire clearing process is being migrated to WebCTS with only 1 production centre at each of the 3 grids Viz, Northern, Western and Southern grids. Accordingly work is underway to integrate the clearing process of Bengaluru, Mysuru, Chennai, Mangaluru centres besides Service Branches at Hubballi and Kolkata into Bengaluru centre and close down other centres. This will further speed up the clearing process without the need for physical movement of cheques. All branches have been provided with Scanners to upload the image as and when received. CCPC Bengaluru has been identified as the Nodal Branch for National Automated Clearing House (NACH) and also for Mandate Management. With migration to CTS mode, on decentralised basis and only 1 operative centre at each grid, Service Branches at Hubballi, Kolkata and Hyderabad have been closed down and their residual functions shifted to the main branches.
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Currency Administration Cells:
Rollout of 2 Currency Administration Cells at Tumakuru and Hoskote has been completed during the year. We are planning to add 3 more CACs at Puttur, Hassan and Mandya in FY 17.
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AUDIT AND INSPECTION
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Audit:
The overall objective of Internal Audit is to contribute to the effectiveness of the Internal Control System in achieving the Bank's objectives, besides providing high quality counsel to management on the effectiveness of Risk Management and Regulatory compliance by the Bank. Towards this end, Risk Focused Internal Audit (RFIA) and IS Audit were conducted in all the 680 branches/BPR entities, envisaged in the Annual Audit Plan 2015-16. That apart, 104 newly opened branches were subjected to Spot Audit, besides 8 Head Office departments. We have also conducted Management Audit of 3 Zonal Offices, 2 Regional offices and 3 Networks. During 2015-16, 99% of our branches have secured Well Controlled/ Adequately Controlled rating and none rated as 'Unsatisfactory'. However, 6 branches have slipped from Adequately Controlled to Moderately Controlled rating as on Mar'16 and we are taking steps to strengthen compliance level at these branches also.
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Concurrent Audit is a major function which monitors proper follow-up of laid down systems and procedures on a continuous basis. 212 branches/offices covering 53% of aggregate deposits and 69% of total advances and 8 Head Office departments were subjected to Concurrent Audit during this year.
We also conduct Special Revenue Audit every year to guard against income leakage. 365 branches with advances level of more than '20 crs and income leakage of '5 Lacs and above were subjected to Special Revenue Audit (as against 462 branches during the previous year). The total income leakage detected was '538.11 lacs and fully recovered subsequently.
The summary findings enumerated in these audit reports are appraised to the Audit Committee of the Board and follow up actions are ensured.
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Credit Audit:
The audit of loan appraisal and administration for high value credit accounts with the aim of improving the asset quality of the Bank is undertaken by the Credit Audit Department. Accounts with total exposure of '2 cr and above are covered under Credit Audit. During the financial year 1,132 loan accounts in 175 branches were covered under Credit Audit, of which 968 accounts
(85%) were rated as Low and Very Low Risk accounts.
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Vigilance:
Vigilance administration as an important aspect of management function is carried out as per the directives of the Central Vigilance Commission so as to achieve good Corporate Governance for the overall growth of the Bank.
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"Whistle Blower” policy has been introduced in our Bank for the employees to report to the Management, instances of unethical behavior, actual or suspected fraud or violation of the Bank's code of conduct or ethics policy.
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The officers from Vigilance Department conducted surprise inspections of 52 offices/branches during the year under report. The main areas of scrutiny are adherence to systems and procedures, rotation of staff and deficiencies in fraud-prone areas. The deviations and other irregularities are brought to the notice of the Module/Regional Heads for taking corrective actions. Vigilance Department is bringing out a Quarterly House Magazine, which contains vital information on vigilance related matters useful to the operating staff.
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In accordance with the guidelines of the Central Vigilance Commission, the 'Vigilance Awareness Week' was observed at all the offices of the Bank from 26th October 2015 to 31st
October 2015. The focus of observing the Vigilance Awareness Week was "Preventive Vigilance as a tool of Good Governance”. Seminars and meetings were conducted, wherein information relating to evolving and effectively implementing preventive techniques in vigilance administration, which includes transparency, accountability and fair play, objectivity and timely response in dealing with matters relating to public administration etc., were explained to customers/Staff members. The role of leveraging of technology in respect of all systems and process for deliverance of services to be synchronized through use of technology, was strongly emphasized. The valedictory function was held on 31st October 2015 and addressed by Shri. T.M.Bhasin, Vigilance Commissioner, CVC, Chief Guest on the occasion.
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Fraud Monitoring and Investigation Cell (FMIC):
The Fraud Monitoring and Investigation Cell (FMIC), functioning under the administrative control of the General Manager & CVO, monitors certain critical areas of branch functioning on regular basis. Thrust is laid for taking certain preventive measures by monitoring various exceptional reports generated through CBS covering transactions related to expenditure, advances, manual debits to interest a/c besides all other unusual transaction including those reported in Sundays and holidays. During FY15-16, two officers have been honored with Staff Alertness Award in recognition of their contribution in preventing and detection of frauds.
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Special committee of the Bank in terms of RBI has been constituted for monitoring and follow-up of high value frauds of '1 cr and above. The committee besides monitoring and follow-up is tasked to identify, systemic lacunae, reasons for delay in detection, ensuring staff accountability besides efficacy of the remedial measure. The committee held 2 meetings during FY15-16.
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OTHER ASPECTS:
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Customer Grievance Redressal:
The Bank has also implemented a friendly Customer Redressal System called SMS UNHAPPY to facilitate customers air their grievances/complaints/ feed back by simply sending an SMS message
“UNHAPPY” to 99 0002 0002. The bank's dedicated staff from “Happy Room” call back the customers for speedy redressal of their grievance.
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Complaint Management System (CMS) package:
The Bank has implemented a three tier automated system for complaints management and monitoring and resolution. All the complaints received at the Branches/Regional Offices/ Zones/Networks and Head Office level are lodged in a common digital platform. The complaints are acknowledged with a unique number on their receipt. Presently, the acknowledgements are being sent through e-mails registered by the complainants with us or by post.
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Contact Centre :
State Bank of Mysore has established a dedicated “SBM Contact Centre” to provide information on Products and Services of the Bank besides status of customer's account through a toll free number 1800-425-2244 accessible throughout the country. The information is provided in English, Hindi and Kannada languages 24x7x365 basis. Further, as a part of the initiative, Lead Management System (LMS) launched in our Bank generate leads through customer calls helpline No.1800 425 2244 which are forwarded to the concerned branches, and converted into business.
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SBM QUICK:
A missed call / SMS, from the mobile number of the customer registered in the account with the Bank, is accepted as an authorized request to provide convenient, cost effective and prompt basic banking services. Initially following facilities have been introduced:
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Balance Enquiry of registered account
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Mini Statement of registered account
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Blocking of ATM card
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Customer Services Committee of the Board:
The Bank has put in place Standing
Committee on Customer Service and Customer Service Committee of the Board are in place to oversee the implementation of Customer service initiatives/directions of Government of India/Reserve Bank of India. Standing Committee on Customer Service held 4 meetings on 21.05.2015,
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14.12.2015 & 12.02.2016 during the year. The Customer Service Committee of the Board has met thrice on
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31.12.2015 and 14.03.2016 during the year. A Chief Customer Service Officer (CCSO), an internal ombudsman has been appointed in the Bank w.e.f
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in terms of RBI directive as part of the move towards the objective of attaining zero tolerance to customer complaints.
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Right to Information Act, 2005:
Revised list of Central Public Information Officers (CPIOs) and Appellate Authorities (AAs) made available in Bank's website and also circularized.
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Productivity:
Business per employee increased from '11.72 crs as at March 2015 to '11.84 crs as at March 2016. The Business per branch has marginally increased from '117.75 crs in March 2015 to '121.55 crs in March 2016 due to our policy of not aggressively marketing bulk/corporate business besides addition of 25 new branches opened during the year.
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Public Relations
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Bank's publicity has been effectively carried out through the medium of attractive hoardings, press advertisements, banner displays, glow sign displays at Kempegowda International Airport Limited, Railway Station and Bus Stations in important cities/towns and advertisements on modern bus shelters, etc. Customers meetings were conducted especially in rural centers to project the image of the Bank and publicize the advantages of thrift and timely repayment of Bank loans.
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LCD based Video hoarding in the
Head Office compound covers the entire spectrum of banking activity with attractive messages on products and services with periodical updates on interest rates etc. Messages having social content are also displayed.
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The Bank has been actively participating in various State-level seminars, District utsavas, fruit and flower shows, music, cultural and sporting events at various districts/taluks. This brings us closer to society and enhances our Brand Image. Bank has been participating in the Karnataka Rajyotsava function and sponsoring SBM Tableau in Dasara Parade at Mysuru, which is appreciated by one and all.
The hoardings installed at vantage points were periodically changed with attractive themes, greeting the public on festivals with our latest deposits/lending schemes, revision of interest rates etc. Special media campaigns covering the various loans schemes, special offer in housing, vehicle, gold loans and MSME loans under CGTMSE scheme, other retails loans and new deposit schemes like Savings Bank, Term Deposit, Personal Accident Insurance, Vidyarthi Sanchay were carried out periodically in the print and electronic media and through hoardings.
Bank's performance highlights, launching of new products and services, opening of new branches, ATMs, BPR initiatives and technological achievements were also extensively covered in print and electronic media.
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Organizational Development
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Branch Expansion:
The Bank has opened 25 new branches during the FY 2015-16. With this, the Bank's network of branches stands at 1,037 spread over 17 States and 1 Union Territory. The branch network comprised 243 Metro, 225 Urban, 228 Semi-Urban and 341 Rural branches.
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After effective implementation of CTS system, 3 Service Branches at Kolkata, Hubli and Hyderabad have been
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closed with their residual work transferred to Cells attached to nearest branches.
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Branches in Minority Concentrated Districts - Centers (MCDs)/ Under Banked Districts: During the year, the Bank has opened 4 branches in Minority Concentrated Districts/Centers and 1 branch in Under-Banked Districts. As at March 2016, out of 1,037 branches, the Bank has 90 branches in MCDs constituting 8.7% of the branch network and 114 branches in Under-Banked Districts, constituting 11% of the branch network.
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Implementation of Official Language Policy:
Bank is progressively encouraging usage of Hindi and Regional Languages to facilitate ease of doing business to the customers in the language of their choice. Constant efforts are being made to create healthy atmosphere for use of Official Language. For progressive use of Hindi, our Bank's Website is also made available in Hindi and also Kannada with constant updates from time to time. The option of Hindi and Regional Language is provided in all ATMs of our Bank along with generation of transaction slips in Hindi. Hindi facility has been made available in Mobile Banking also. For enriching knowledge of Hindi of our Staff, separate Quarterly Hindi Magazine "MYBANK BHASHADARSHINI" is being published regularly. During the year under review, the parliamentary committee on official language inspected Head Office, Bangalore on 07.01.2016 and appreciated our efforts made for the progressive use of Hindi in our Bank.
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Head Office received an "EXCELLENCE CERTIFICATE" and a "SHIELD" by the Town Official Language Implementation Committee (Banks), Bangalore for the special efforts made by the Bank in the field of Official Language Implementation. Mysore, Hubli, Central and Mangalore Zones also received awards from respective Town Official Language Implementation Committees. Under the aegis of Government of India, "Hindi Sanghosti" and "Hindi Seminars" were organised at various places apart from organising "Functional" and "Computer" Workshops at various places.
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Community Services Banking:
Our Bank as a caring and responsible corporate entity is conscious of the nurturing we have received from society and are alive/ aware of our duty to payback a fraction of what we have received from them as a sense of gratitude. As per the Government of India guidelines, bank is authorized to spend 1% of its net profit towards Community Service activities by making equitable donations to any organization engaged in Community Development activity with a clean image and good track records. Such donations are made without any strings attached.
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During FY16, Bank had
undertaken various activities/
programmes include conduct of health camps, tree planting programme,
sponsoringTaluk and district level sports, donating text books, utensils, table and writing benches, blankets to orphanages,
equipments to children with special
needs, sponsored prevention of cancer awareness programmes etc.
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Bank also participated in the Swachchh Bharat Abhiyaan and donated '26.10 lac for constructing Green Toilet to rural schools besides contribution of '10 lacs for rejunevation and development of lakes situated in Mysuru.
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