Oriental Bank of Commerce

Dear Shareholders,
 
 I have great pleasure in presenting to you the Annual Report of
 your Bank for the period ended March 2009, along with the
 Balance Sheet as of March 31, 2009 and the Profit and Loss
 Accounts for the year 2008-09.
 
 Global Economic Scenario:
 
 The year 2008-09 saw a sharp downturn in economic scenario.  It
 may be recalled that during 2007-08, we had witnessed the
 eruption of sub-prime crisis, rise in prices of oil, gold and
 commodities impacting both the Financial Sector and the Real
 Sector.
 
 Following the bankruptcy of Lehman Bros, in September 2008, the
 World witnessed extreme tightening of liquidity, shortage of
 capital and a shaken confidence leading to collapse and merger
 of several revered institutions. The Global Economy expanded by
 3.2%. While the Advanced Economies expanded by 0.9%, the
 Emerging Economies expanded by 6.1%.
 
 The World Economy is expected to see further downturn during
 2009 with an estimated growth rate of (-)1.3%, the first
 contraction in last 60 years. While Emerging Economies may be
 growing fairly better at 1.6%, the growth rate of Developed
 Economies is expected to be significantly lower at (-)3.8%.
 World trade as per WTO estimates is estimated to contract by
 about 9% which will further reduce demand, put pressure on
 Corporates and add to unemployment. Clearly the crisis has moved
 from the Financial Sector to the Real Sector taking the
 developed economies - USA, Europe and Japan into recession.
 This has had a contagion effect on the rest of the world. It is
 expected that the recession could be deeper and somewhat
 prolonged.
 
 Indian Economic Scenario:
 
 The tumultuous happenings the world over did have the effect on
 Indian economy. Despite India not being directly exposed to
 sub-prime markets and Indian growth story being largely domestic
 consumption and domestic investment driven, it got impacted. We
 saw liquidity tightening in mid September 2008, a sudden
 curtailment of demand - especially for exports and contraction
 in general economic activity.
 
 Clearly there is a slow down, which was aptly handled by the
 Govt, of India and the Reserve Bank of India. Government of
 India responded swiftly through two Stimulus Packages in
 December 2008 and January 2009 aimed at enhancing Public
 Spending, Government guaranteed funds for infrastructure
 spending, cut in Indirect taxes, enhanced guarantee cover for
 MSME and package for exports which had the quantifiable impact
 of about 3% of GDP.
 
 While the Government came with the Stimulus Packages. RBI was
 equally swift in its Monetary Policy response aimed at ensuring
 comfortable Rupee and Forex liquidity and maintaining a policy
 framework that would keep credit delivery on track and arrest
 moderation in growth. The various measures had primary liquidity
 potential of about 7% of GDP.  As a result Money Markets were
 stable and the Banks reduced their PLRs and ensured credit
 expansion so that growth is not moderated.
 
 Outlook 2009-10:
 
 In view of the Fiscal Stimulus and Monetary policy measures
 initiated during 2008-09 coupled with lower commodity prices, it
 is expected that domestic economic activity will resurge from
 the downturn. Further, on the assumption of a normal monsoon,
 RBI has estimated real GDP growth for 2009-10 at around 6.0 per
 cent.
 
 In view of the global trend in commodity prices and domestic
 demand supply balance, RBI has projected WPI inflation at around
 4.0 per cent by end-March 2010. WPI inflation, is expected to be
 near zero (not a reflection of demand contraction) during the
 first half, after which it will pick up with resurging economic
 activity.
 
 RBI has placed Money Supply (M3) growth for 2009-10 at 17.0 per
 cent. Further, Aggregate Deposits and adjusted Non-Food credit
 of Scheduled Commercial Banks are projected to grow by 18% and
 20%, respectively.
 
 Developments in Indian Banking:
 
 Despite the prevailing tough economic conditions, performance of
 Indian Banks during 2008-09 was impressive. Aggregate Deposits
 of the Scheduled Commercial Banks (SCBs) grew by 19.8% during
 the fiscal 2008-09 to a level of Rs.38,30,322 crore while Gross
 Advances showed a growth of 17.3% during the same period, to
 reach a level of Rs. 27,70,012 crore. Thus, the Credit-Deposit
 (CD) ratio as at end-March 2009 stood at 72.32%.  The SLR
 investments of the SCBs were of the order of Rs.  11,65,746
 crore comprising 30.43% of total deposits. IVioney Stock (M3) as
 at end-March 2009 was Rs.47,57,905 crore and recorded a growth
 of 18.4% on year-on-year basis.
 
 Performance Highlights of the Bank:
 
 I have great pleasure in sharing with you your Banks
 performance as also the working results for the year 2008-09.
 
 (a) Total business of your Bank as at end-March 2009 reached Rs.
 1,67,434 crore i.e. an increase by Rs.34,250 crore (a growth of
 25.72%) from a level of Rs.1,33,184 crore as at end-March 2008.
 As at end-march 2009, Deposits and Gross Advances stood at
 Rs.98,369 crore and Rs.69,065 crore, registering a growth of
 26.35% and 24.83%, respectively.
 
 (b) The CD ratio of your Bank stood at 70.48% as of March 2009
 as against 71.43% as of March end 2008, which is a result of
 higher growth in deposits vis-a-vis advances during the fiscal
 2008-09. The Advances portfolio of the Bank is well diversified
 and balanced. Further, your Bank has ensured that the productive
 and the needy sectors of the economy continue to get the
 required credit.
 
 (c) The Priority Sector (PS) Advances of your Bank constituted
 40.91% of Adjusted Net Bank Credit (ANBC) as against the
 requirement of 40%. In value terms, PS Advances increased by
 Rs.3,561 crore (a growth of 19%) to reach a level of Rs.22,321
 crore as at end March 2009 from Rs.18,760 crore as at end March
 2008.
 
 (d) Total advances to Agriculture Sector stood at Rs.8,621
 crore, out of which advances to Direct Agriculture constituted
 Rs.4,651 crore and the residual of Rs.3,970 crore was to the
 Indirect Agriculture Sector. Whereas total Agriculture Advances
 grew by 24.4%, growth recorded in Direct Agriculture was 34.23%.
 
 (e) Banks exposure to Small and Medium Enterprises (SME)
 increased to Rs.6,941 crore from Rs.6,228 crore, thus growing by
 11.45% during 2008-09.
 
 (f) Loans for Education and for Housing increased to Rs.790
 crore and Rs.7,014 crore from Rs.583 crore and Rs.5784 crore
 respectively, thus recording a growth of 35.51% and 21.27%,
 respectively, during the year 2008-09.
 
 (g) The Net Profit of your Bank increased to Rs.905.42 crore
 during 2008-09 from a level of Rs.840.94 crore during 2007- 08.
 Operating Profit of the Bank as at end March 2009 recorded a
 growth of over 38% to Rs. 1,685 crore from a level of Rs.1,219
 crore as at the end of the preceding year.  During the same
 period, Net Interest Income increased by 18.7% to Rs.1,997 crore
 from Rs.1,682 crore.
 
 (h) Your Bank made a recovery of Rs.841 crore during 2008-09, as
 a result of which Gross NPA stood at a level of Rs.1,058 crore
 or 1.53% of Gross Advances as against 2.31% during 2007-08.
 Similarly, Net NPA of the Bank improved to 0.65% as at end March
 2009 as against 0.99% as at end March 2008. The coverage on NPA
 has increased to 58.19% as at March end 2009.
 
 (i) I am pleased to inform you that your Bank has become Basel
 II compliant w.e.f. 31.03.2009 and Capital Adequacy Ratio (CAR)
 of the Bank stood at 12.98%, well above the minimum requirement
 of 9% stipulated by RBI.
 
 New Initiatives:
 
 In order to increase the share of Other Income in Total Income,
 your Bank has taken a number of steps that aim to augment the
 flow of Non Interest Income.
 
 The Bank has entered into a Joint Venture (with 23% stake) for
 Life Insurance Business with Canara Bank and HSBC Insurance
 (Asia Pacific) to form Canara, HSBC, Oriental Bank of Commerce
 Life Insurance Company Limited which started its operations
 w.e.f. 16th June 2008. During the period June 08-March 09, your
 Bank sold 12291 policies with First Premium Collection of
 Rs.68.40 crore and in the process earning a Commission of
 Rs.25.98 crores.
 
 Other avenues of generating Income include selling the following
 others products:
 
 a.  Non Life Policies of The Oriental Insurance Company Ltd.
 
 b.  Mutual Fund products of four major Mutual Fund companies.
 
 c.  Providing online trading facilities to its Demat A/c
 holders.
 
 d.  Providing tailor made and efficient Cash Management Services
 to the clients.
 
 Your Bank took a major step towards improving profitability by
 focusing on low cost funds through mobilisation of CASA
 deposits. Another important initiative was directed at focused
 lending to Large Corporates, Mid-Corporates and Retail lending
 through trifurcation of hitherto Credit Department. Each of
 these segments are now headed by an independent General Manager
 who is responsible for growth of his business segment.
 
 International Presence:
 
 Your Bank made its foray in International arena on 30.03.2009
 with the opening of its first Representative Office at Dubai.
 This overseas venture is the beginning of the Banks quest to
 spread its wings at important International Financial Centres in
 the future. Our Representative Office at Dubai will help in
 improving Non-Resident Deposits apart from marketing of our
 products and services in Dubai and assisting the NRIs and PIOs
 about business opportunities in India.
 
 Technology for Better Customer Service:
 
 Your Bank is amongst the few Public Sector Banks where 100%
 business is routed through the Core Banking Solution. All
 offices of the Bank are connected to the centralized network
 thereby offering one stop seamless service to customers.
 
 Your Bank has now come out with a new Corporate Website which is
 contemporary and in line with our Corporate image.  Value added
 interfaces like NSE Market Tracker, NSE Foreign Exchange
 Tracker, BSE Sensex, NSE Nifty, S&P CNX, Cricket Score etc. have
 been incorporated in the site. The website has also been secured
 by implementing SSL encryption from VeriSign.
 
 During the year, Bank upgraded the version of Retail Internet
 Banking thereby providing additional facilities of Online NEFT,
 e-Commerce, Online Trading of shares etc. 44,000 new customers
 have been registered for Internet Banking, taking the total base
 to 1.98 lakh.
 
 Some other IT (Information Technology) initiatives taken up by
 the Bank are as under:
 
 - Cheque Deposit Machines have been installed at 17 branches and
 Coin Vending Machines have been installed at six locations. In
 the light of our customer experience, this number would be
 enlarged.
 
 - Bank has procured web package for the centralized handling of
 Civil and Defence Pensions which is implemented at Service
 Branch, Delhi.
 
 - IT enabled Financial Inclusion has been implemented across
 Bhatinda, Dehradun, Amritsar and Singampuneri covering 319
 villages.
 
 - SMS alert has been launched.
 
 - e-Tax facility has been provided to the customers to deposit
 Direct Taxes, online through Net Banking.
 
 - The CBS software has been customized to generate large number
 of Statutory and Statistical Returns thereby ensuring prompt and
 accurate MIS.
 
 Dividend:
 
 In view of good performance of the Bank, the Board of Directors
 have proposed a dividend of 73% as against 47% paid during the
 previous year.
 
 Corporate Social Responsibility:
 
 As a part of its Corporate Social Responsibility, you Bank has
 set up a Trust in the name of OBC Rural Development Trust on
 09.12.2005 on the lines of Rural Development and Self Employment
 Training Institute (RUDSETI). The Trust has set up Institutes in
 four Districts, viz., Jaipur, Sriganganagar, Ferozepur and
 Dehradun. Since inception a total of 219 training programmes
 have been conducted benefiting 8266 candidates.  The activities
 of the Trust cover education of farmers in crop diversification
 formation of Self Help Groups, Skill Development,
 Entrepreneurship development and promoting use of non-
 conventional energy. Free training on skill development to rural
 unemployed youth is imparted for self-employment generating
 activities such as Tailoring, Stitching and Embroidery,
 Phulkari, Tomato sauce and Lemon squash preparation, etc.
 
 Bank has operationalised voice enabled ATMs for the visually
 impaired and Bio-metric ATMs. Your Bank has assisted in
 improving computer literacy among children and has provided
 financial assistance to NGOs and Institutions committed to
 social causes.
 
 Bank has adopted villages for financial inclusion and
 volunteered for 100% Financial Inclusion in districts where it
 is acting as Lead Bank. A pilot project for implementing
 Financial Inclusion by providing smart cards has been launched
 in 5 districts viz.  Bathinda, Amritsar, Dehradun, Singampuneri
 & Gurdaspur. Your Bank also provided medical assistance to
 villagers in some identified villages through a Rural Clinic
 programme.
 
 Corporate Governance:
 
 Your Bank has been maintaining the highest standards of
 Corporate Governance by adopting best industry practices. The
 Bank has been adhering to the corporate governance guidelines
 laid down by SEBI and RBI.
 
 Banks Corporate Governance policies recognize the
 accountability of the Board and the importance of its decisions
 to all our constituents including depositors, lenders,
 customers, employees and the regulatory authorities, and to
 demonstrate that the shareholders are the cause of ultimate
 beneficiaries of our economic activities.
 
 Risk Management / Implementation of Basel II:
 
 Your Bank has become Basel II compliant as on 31.03.2009 in
 terms of the New Capital Adequacy Framework guidelines issued by
 the Reserve Bank of India. The Bank is now gearing itself to
 adopt the advanced approaches in due course of time under
 different risks as per RBI guidelines.
 
 The Bank has put in place requisite Risk Management Systems
 which are reviewed and updated periodically in the light of
 guidelines received from Reserve Bank of India and other
 regulatory bodies from time to time. Your Bank is well
 capitalized and has a Capital Adequacy Ratio of 12.98%.
 
 Customer Service:
 
 With our customers, we share a long and enduring relationship
 that is built over the years on trust and an abiding hope that
 the Bank will always partner for the fulfillment of their dreams
 in a professional manner. We are committed for bringing to our
 esteemed customers the best of banking services, products and a
 tradition of excellence.
 
 The Road Ahead:
 
 It is with a sense of achievement and satisfaction that we put
 the Fiscal 2008-09 behind us. We enter the new Fiscal year 2009-
 10 with a hope that the economy will revive swiftly. We
 reiterate our promise of emerging stronger as the economic
 uncertainties end and Indian Economy moves back to the high
 growth trajectory.
 
 Looking into the future, your Bank aims to be the front runner
 in the industry by adopting and implementing contemporary
 technology for better customer service, offering tailor made
 products and solutions to its clients and having a dedicated
 pool of talented staff geared to meeting the challenges of the
 emerging financial architecture.
 
 On behalf of the Board of Directors and on my own behalf. I take
 this opportunity to express my gratitude to all the Shareholders
 of the Bank for reposing their faith in the Management. I also
 thank every employee of the Bank for their dedication and our
 loyal customers for their continued support and patronage. My
 sincere thanks to the Ministry of Finance, Government of India
 and the Reserve Bank of India for their continued guidance and
 support.
 
                                             (ALOK K. MISRA) 
                             CHAIRMAN AND MANAGING DIRECTOR