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Allahabad Bank, a banking institution with a rich legacy, continues to serve and value the trust of its more than 4 crore customers for over a century and a half.
Before I proceed with the Bank''s performance during the financial year 2016-17 (FY17), I would like to give a bird''s eye view on how the Indian economy and banking sector fared in FY17. During FY17, amid the volatilities and uncertainties in the global economy, India''s gross domestic product (GDP) clocked a growth of 7% in Dec''16 quarter. In the last fiscal, India remained a bright spot as it has attracted higher inflow of funds from overseas and the rupee also strengthened towards the end of the fiscal. The Indian economy is expected to pick up momentum in FY18 on account of better output in industrial production, higher consumer spending due to remonetisation, transmission of past policy rates by banks, various proposals in Union Budget and expectations of normal monsoon. In terms of inflation, risks are evenly balanced around the trajectory in the present scenario.
In FY17, stressed assets of public sector banks burgeoned due to falling profit margins and constrained debt repayment capabilities of the corporate sector. This resulted in higher provisions for impaired loans which in turn affected the bottom-line of the banks. The RBI''s Financial Stability Report Dec''16 shows that the GNPA ratio of scheduled commercial banks (SCBs) increased to 9.1% from 7.8% between Mar''16 and Sep''16, thereby pushing the overall stressed advances to 12.3% from 11.5%. Further, despite the improvement in the domestic economy, demand for bank credit remained subdued owing to sluggish industrial and corporate activity. Credit growth almost halved from around 10% in Sep''16 to around 5% in Mar''17. Further, the small, payment and universal banks became operational, which pose another challenge to traditional banks due to increased competition.
Going forward, the retail segment is expected to drive credit off-take in the economy especially with the real estate benefitting from RERA and low cost housing projects and increased demand for consumer goods. The industrial sector is set to recover indicating that the banks will be able to recover their over dues resulting in improved asset quality. Your Bank will also certainly benefit from this as one of our prime focus this year will be on recovery of dues. In addition to that, the RBI''s new directives on NPA resolution will help the Bank to resolve stressed accounts and help improve asset quality. Also, the Insolvency and Bankruptcy Code 2016 is expected to ensure quicker resolution of NPAs.
Allahabad Bank''s performance during FY17
During FY17, the banking sector posed challenges in terms of competition as small payment banks along with universal banks started their operations. Allahabad Bank through its network of 3246 branches and committed workforce conducted business amidst this backdrop along with benign growth in the economy. Your Bank, therefore, aligned its business goals accordingly in FY17 and adopted a three pronged strategy viz., aggressive growth in CASA (current and savings) business, expansion of retail loan portfolio and recovery of over dues, thus arresting slippages. The Bank made a significant progress in these areas.
I would now like to share with you some of our key performance highlights of FY17:
- As on 31st Mar''17, your Bank''s total business rose by 0.45% Y-o-Y to Rs. 3,59,974 crore. Total deposits surged to Rs.2,01,870 crore, thereby registering a Y-o-Y growth of 0.61% despite shedding of high cost deposits to the tune of Rs.33,582 crore, thereby bringing down the cost of deposits. Gross credit also registered a positive growth albeit marginally (0.25%) and stood at Rs.1,58,103 crore as on 31st Mar''17.
- Your Bank''s continued focus on low cost deposits has resulted in a robust Y-o-Y growth of 27.15% in CASA deposits and the build-up stood at Rs.91,598 crore as on 31st Mar''17. Subsequently, CASA share improved to 45.79% as on 31st Mar''17 from 36.20% a year ago. Your Bank''s Credit- Deposit ratio stood at 79.03%.
- Your Bank''s concerted effort to expand the retail segment has helped to increase retail credit portfolio to touch a level of Rs.29168 crore, recording a Y-o-Y growth of 12.64% as on 31st Mar''17 and share to gross credit increased to 18.50%.
- Your Bank''s operating profit decreased by 6.46% Y-o-Y on account of stress on advances portfolio and resultant reversal/ non-booking of interest. It stood at Rs.3867 crore during FY17. Spread or net interest income stood at Rs.5287 crore during FY17.
- In terms of net profit, the quantum of losses decreased in FY17 as provisions were lower by 14.29% and there was an increase in non-interest income levels. Net loss decreased to Rs.314 crore in FY17 as compared to a net loss of Rs.743 crore a year ago.
- In terms of key financial ratios, your Bank''s net interest margin stood at 2.54% during FY17. Owing to reduction in bulk deposits, the cost of deposits decreased to 5.94% during FY17 from 6.61% in FY16.
- Your Bank has been able to maintain its Capital Adequacy Ratio above the regulatory requirement. The Bank''s CRAR stood at 11.45% which constitutes Tier I ratio of 8.49% and Tier II ratio of 2.96% in FY17.
- The Indian economy during FY17 was marred by tepid growth particularly in the industry and poor demand. Therefore, balance sheets of corporate entities continued to be stressed that put a constraint to their repayment capacity. The Gross NPA ratio therefore went up by 333 bps to 13.09% in FY17. The net NPA ratio stood at 8.92% in FY17. Your Bank''s provision coverage ratio stood at 50.11% as on 31st Mar''17.
- Your Bank laid specific focus on recovery of bad debts to arrest fresh slippages and proactive monitoring of loan portfolios across businesses. A separate vertical headed by General Manager (Credit Monitoring) has been functioning at Head Office level for close monitoring and supervising the Bank''s loan assets. A new online version of LAMP (Loan Asset Monitoring Portal) has been introduced for effective monitoring of all credit accounts with aggregate exposure of Rs.1.00 Crores and above. All important documents related to the accounts are available for functionaries at all levels and can be viewed and examined to arrest any stress signals (Including Early Warning Signals).
Social Banking (Financial Inclusion)
Your Bank is committed towards the socio-economic development of the people and uplifting the society. Banking services do not discriminate people; it includes people from all walks of life under its umbrella. Your Bank works in tandem with self-help groups (SHGs) and other agencies to extend its services to the masses.
Your Bank has actively participated in mobilizing Pradhan Mantri Jan Dhan Yojana (PMJDY) accounts since its inception. As on 31st Mar''17, the Bank has opened 65.95 lakh PMJDY accounts with deposit of Rs.1220 crore. To extend card based transaction to such customers, micro- ATMs have been introduced at 5041 business correspondent (BC) locations.
Here, I would like to share that your Bank''s concerted efforts have helped the Bank to be adjudged as the Best Bank in PMJDY implementation in the category of Group- Other States and bag the prestigious Prime Ministers'' Award for Excellence in Public Administration for North 24 Parganas (West Bengal). Also, your Bank bagged the Winner shield in the Mid-sized Banks category in recognition of excellent performance for Aadhaar Enable Payment Systems by National Payment Corporation of India for FY16. Lastly, as acknowledgement of financial inclusion landscape achieved by your Bank, it has been adjudged as runner-up in the category of Best Financial Inclusion Initiatives amongst medium-sized banks-Banking Technology Award 2017 by Indian Banks Association.
Under the Financial Inclusion Project (FIP), your Bank has provided basic banking facilities through inter-operable Kiosk Banking Solution (KBS) at 5063 Bank Mitra locations using Micro ATMs. Additionally, facility of e-KYC has been made available at all kiosk locations operated by Bank Mitras for auto-population of Aadhaar and Mobile seeding. Under New Initiative Plan, Pass Book printing facility at Bank Mitra locations is at advanced stage. RD/FD Opening Functionality at Bank Mitra Locations have already been commenced.
Your Bank provides financial awareness/ literacy though 19 Financial Literacy Centres (FLCs) located in all the lead districts and also through Bank Mitras located in villages through kiosks. Various meeting and camps are organized at regular intervals through FLC counselors and also at Bank Mitra locations. These camps and meetings emphasize on creating awareness about PMJDY, Atal Pension Yojana (APY), MUDRA loans, Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) and Pradhan Mantri Suraksha Bima Yojana (PMSBY).
Strides in Technology and Alternate Delivery Channels
Until now, your Bank focused on building alternate delivery channels like ATM, cash deposit machines, internet banking, mobile banking, etc. It is now working towards ensuring a superior customer experience and for better alignment of its services with the customers'' expectations and also to further the cause of a less-cash economy. Therefore, the Bank has now undertaken several initiatives to improve the quality of internet banking and mobile banking along with debit card services to increase the ease of banking. The Bank has introduced security features for VISA cards transaction through one-time password authentication (OTP). The growth in usage as well as new registration of alternate delivery channels of the Bank has increased manifold since their introduction.
To further reach out to customers, the Bank has also introduced the facility to register for mobile banking through internet banking and network of ATMs. Also, new features like registration for APY, facility to link different accounts in mobile banking, scheduling RTGS/NEFT transactions, State tax payment of Tamil Nadu and Chattisgarh and online submission of 15G/ 15H has been enabled.
In the present times, where everything is technology driven and mobile phone has become an integral device in our day to day functioning, your Bank has launched ''AllBank Unified Payment Interface'' app which allows funds transfer facility through mobile from one account to another by means of virtual addresses, link all accounts including those opened with other banks for making transactions and facilitate payments to merchants as an alternate to POS machines and cash transfer.
Human Resource Development
During FY17, HR climate in the Bank was extremely harmonious and conducive to business development. In the area of manpower planning, cadre wise superannuation vis-a-vis manpower requirement and promotion in various cadres and scales were taken into consideration. The Bank recruited 1276 employees comprising 452 POs, 145 Specialist Officers, 660 clerical staff and 19 sub-staff.
Keeping in view the corporate priorities, special programmes with focus on Retail Credit and Recovery were conducted for officers in various scales. With a view to improve NFNI earnings, programmes were conducted on products related to government business for officers handling government business in branches. A special programme, Developing Future Managers was devised and conducted for officers who were on the verge of completing two years of service in the Bank to make them competent for shouldering higher responsibilities.
The Bank also conducted induction programmes for the newly recruited Probationary Officers (POs) and Single Window Operators-A (SWO-A). Refresher programmes were conducted for POs and Clerical staff who were recruited in the previous year and had undergone Induction programme. With a view to strengthen the HR Cells at FGMO and ZO level, a programme was conducted for officers posted therein. A Faculty Development Programme was also conducted for all the in-house faculties of the Bank.
Awards and Accolades
Your Bank has earned awards and accolades in different areas. Most notably, your Bank has been awarded in recognition of its constant efforts towards financial inclusion as already stated earlier. Further, your Bank has been receiving award from NSDL for the last 4 consecutive years in opening the maximum number of Demat Accounts under PSU Banks category in the eastern region. The award was again conferred on the Bank during the NSDL''s 31st DP Conference held at Kolkata on 24th Dec''16.
Way Forward and Future Strategies
The RBI has projected India''s gross value added (GVA) to rebound by 7.4% in 2017-18. The banking sector will definitely benefit and shall ride along the wave of growth. Taking into account the optimistic outlook of the economy and its different sectors, your Bank will align its business objective to maximize its gains. The Bank shall primarily focus on aggressive recovery drive, further build-up in CASA, rebalancing of loan book with focus on SMARt loans (S: Small, M: Micro, A: Agriculture and Rt: Retail loans), thereby increasing its share to the loan book supported by technology. Further, the Bank believes that its employees are its valuable assets and therefore, up-scaling of officers by means of training shall be undertaken. The Bank will also look at different avenues to raise capital.
To conclude, I extend my appreciation and gratitude to all the stakeholders of this heritage banking institution along with its valued customers, committed employees and directors for their persistent support and untiring trust. The Bank is also grateful to the GoI, RBI and other regulatory authorities and financial institutions for their continued co-operation.
Managing Director and CEO