The Board of Directors have great pleasure in presenting the Annual
Report together with audited Balance Sheet and Profit and Loss Account
of the Bank for the year ended March 31, 2007.
The year 2006-07 was quite eventful for the Bank with its seventieth
year of commencement of business on February 10, 2006, the Foundation
Day witnessing the taking over of Bharat Overseas Bank Ltd. with a
network of 103 branches. The historic merger was effective from the
close of business as on March 31, 2007 and Bangkok branch is a new
addition to existing five overseas branches.
During the year under review, the Bank crossed the milestone of Rs. one
lakh crore business level to reach Rs. 1,16,663 crore. Standard &
Poor's, the most reputed global rating agency, upgraded its rating of
the Bank to `BBB - Stable' on par with the Sovereign Rating for India.
The Financial Express-Ernst & Young study ranked the Bank first in
profitability and third in overall performance among all the
Nationalised banks for the year 2005-06. Amity International Business
School bestowed the Bank with Corporate Excellence Award.
Global Business Performance
The Bank improved its global deposits from Rs. 50,529 crore as at the
end of March 2006 to Rs. 68,740 crore as of March 2007. Global Gross
advances also went up significantly to Rs. 47,923 crore from Rs 35,759
crore in the same period. The CD Ratio registered high level of 69.72%
as at the end of the reporting period. Net investments of the Bank
increased to Rs. 23,974 crore. from Rs.18,952 crore in 2005-06.
The Bank had, at the end of March 2007, six full-fledged branches in
overseas - two in Hong Kong and one each in Singapore, Seoul, Sri Lanka
and Bangkok. The Bank regained Bangkok branch in Thailand following
merger of Bharat Overseas Bank Ltd. The Bank also had an extension
counter in Sri Lanka and two Remittance Centres in Singapore. The new
Remittance centre at Boon Lay in Singapore commenced its operations on
March 25, 2007. The Bank has two Representative Offices - one in
Guangzhou, China and another in Kuala Lumpur, Malaysia to support other
overseas branches and domestic branches in India in terms of business
The Bank deputed two of its officers to UAE to liaise between the
branches in India and the NRI clientele of the Bank and also to market
the various products of the Bank.
The Bank has obtained approval from Reserve Bank of India to open a
Representative Office in Vietnam and the Bank is in the process of
obtaining licence from The State Bank of Vietnam. The process of
obtaining necessary approval- for opening a Branch Office in New
Zealand is underway. The Bank also has plans to open a Representative
Office at U.A.E.
The Bank achieved a global operating profit of Rs.2,036 crore before
amortisation of investments of Rs.476 crore in 2006-07 (against Rs.1,
534 crore in 2005-06) and Rs.1,560 crore after amortisation. The growth
in operating profit was higher due to business expansion - both in
terms of quantity and quality - contributing substantially for
impressive growth in profitability in the period under review.
The Bank set apart a sum of Rs.552 crore towards provisions and
contingencies as per the extant guidelines.
The Bank's Net Profit rose from Rs.783 crore in 2005-06 to Rs.1,008
crore in 2006-07, thus surpassing the Rs.1,000 crore mark for the first
time in its history. The great achievement was made possible by
focusing on strengthening core business of the Bank and by venturing
into marketing of a host of insurance/mutual fund products with several
reputed/strategic partners including introduction of retail sale of
gold coins. A dividend of 30 % is being proposed for the year 2006-07.
Income and Expenditure Analysis
As at the close of business on March 31,2007, Bharat Overseas Bank Ltd.
was merged with its deposits of Rs.3,327 crore and net advances of
IOB's credit growth was higher at 29.05% (before merger) when compared
to System's growth of 27.61% as of March 30, 2007. The Bank raised its
BPLR from 11.00% at the beginning of the year to 12.50% at the end of
the year due to increase in cost of funds as well as provisioning
costs. Consequently, the total interest earnings of the Bank increased
to Rs.5,832 crore in 2006-07 when compared to Rs.4,406 crore in
2005-06. There was increase in interest income despite reduced yield on
investments in line with the market conditions.
Profit on sale of investments stood at Rs.237 crore when compared with
Rs.234 crore recorded in 2005-06. Non-interest earnings other than
treasury gains and amortisation of investments improved by 27% to
Rs.626 crore in 2006-07 as against Rs. 494 crore in 2005-06. The total
income increased to Rs.6,695 crore (Rs.5,134 crore in 2005-06) and
Rs.6,219 crore, before and after amortisation respectively.
The total interest expenditure increased to Rs.3,271 crore against
Rs.2,339 crore in the previous year mainly due to rise in volume of
deposits coupled with higher interest cost prevailed in the industry.
The volume of borrowings also increased due to raising of funds to
strengthen the capital base and credit growth. Despite increase in
cost of funds, the Bank was able to increase its Net Interest Income to
Rs.2,561 crore in 2006-07 against Rs.2,067 crore in 2005-06. The total
operating expenses increased to Rs. 1,388 crore during the financial
year 2006-07 as against Rs. 1,262 crore during the previous year. The
increase in operating expenses was moderate. The total expenses for the
year was at Rs.4,659 crore against Rs. 3,601 crore in 2005-06.
The operations, overall, resulted in increased Net profit of Rs.1,008
crore against Rs.783 crore in 2005-06 with a growth of Rs.28.7%.
Capital Adequacy Ratio
Bank's CRAR stood at 13.27% as at the end of March 2007 despite rapid
growth in credit expansion/increase in other Risk-weighted assets.
During the year 2006-07, the Bank opened 23 new branches and upgraded
146 extension counters into full-fledged branches. The Bank took over
103 branches of Bharat Overseas Bank Ltd. and one service branch along
with six extension-counters and one satellite office in India besides
an overseas branch. As at the end of March 2007, the total number of
branches in India stood at 1,781 with 561 Rural branches, 434
Semi-Urban branches, 434 Urban branches and 352 Metropolitan branches.
The Bank had 113 extension-counters.
During the year, the Bank had undertaken a Customer Service Survey, by
engaging the services of M/s AC Nielsen ORG-MARG. According to the
survey, the image of the Bank is held in high esteem by majority of its
customers. Politeness and customer loyalty of the staff are the
strengths of the Bank. Bank has healthy satisfaction score across all
categories of branches. Location of branches and ATMs and range of
products are identified as areas, which need improvement. By and large,
a high level of customer satisfaction is revealed through the survey.
Bank has adopted the Code of Commitment of Banking Codes and Standards
Board of India (BCSBI). Awareness programmes for a majority of staff
at all levels have been conducted by the Staff College, so that the
code is implemented in letter and spirit. During the year, the
following policy documents related to customer service, were
1) Policy on Collection of Cheques/instruments
2) Policy on Grievance Redressal
3) Policy on Compensation
4) Policy on Collection of Dues and Repossession of Security and
5) Pensioners' Charter
As a part of customer education, copies of Code of Commitment were
distributed to a large number of customers of the Bank.
The details of customer complaints received and redressed are given
(a) No. of complaints pending at the beginning of the year 48
(b) No. of complaints received during the year 1063
(c) No. of complaints redressed during the year 1028
(d) No. of complaints pending at the end of the year 83
The number of awards passed by the Banking Ombudsman and implemented by
the Bank are as under
(a) No. of unimplemented awards at the beginning of the year 2
(b) No. of awards passed by Banking Ombudsman during the year 1
(c) No. of awards implemented during the year 1
(d) No. of unimplemented awards at the end of the year 2
During the year 2006-07, 1,111 complaints were handled (including the
complaints carried over from the earlier year), of which 1,028
complaints were resolved. The settlement rate was 92.53%. During the
year, Customer Service Centre, for which the Bank is the convenor in
Chennai City had resolved all the complaints.
The complaints are being received directly by Central Office and
Regional Offices (through letters, e-mails and telephone) and also
through other channels like Reserve Bank of India, Banking Ombudsman,
Government of India etc. Bank, has, during the year, introduced Toll
Free Teleservices (No. 1800-425-4445) by engaging an outside agency,
through which customer complaints are received. These complaints are
being resolved within 48 hours.
Under the Right to Information Act 2005, the Bank handled during
2006-07, 174 enquiries, 54 first appeals and 10 second appeals. No
punitive action had been taken by Central Information Commission, New
Delhi for not furnishing the information or for furnishing incorrect
information or for delaying the information.
Retail Banking and Marketing
Retail Banking activities picked up momentum during the year and the
business on all spheres of retail banking has improved. Group Life
Insurance Linked Product IOB Jeevan' continued to generate good
response. Group Health Insurance linked product 'IOB Healthcare Plus'
also had a better reach. The other insurance linked products 'Vidya
Jyothi with Suraksha', 'Vidya Suraksha' and 'Liability Insurance for
Retail Loans' have also stabilized during the year.The Bank has
introduced 'NRI Shield', a new travel insurance product with health
cover advantage for NRIs, covering travel-related risks during their
visit to India.
Cover provided for Personal Accident, loss of baggage, loss of
passport, delay in receiving checked- in baggage. Additionally, fire
and allied perils cover is also provided for house property in India in
the name of insured. The NRI can also opt for Health Insurance cover
under `IOB-Health Care Plus'.
The sale of retail gold coins with certified purity of 999.9 received
excellent response. Bank sold 1,120 Kgs of gold coins.
The Bank has introduced `IOB Alankar', a loan scheme for purchase of
jewellery to women who are employed or professionals or housewives. The
Bank has launched MOB - SHG Family Insurance', a scheme under tie up
with L1C of India. The scheme provides for life insurance cover to
members of Self- Help Groups and their spouses for a very low premium
of Rs.100/- per annum.
The Bank's tie up with LIC of India and United India Insurance Company
Ltd. as a Corporate Agent for distribution of Life and Non Life
Insurance has resulted in increased fee- based business for the Bank.
To tap the enormous potential available in the non-life segment, the
Bank has entered into Non Life insurance Joint Venture with equity
participation from Allahabad Bank, Karnataka Bank Ltd., Dabur
Investments and a foreign partner Sompo Japan Insurance Inc., under the
name and style of `Universal Sompo General Insurance Company Limited'.
The joint venture is a unique business model with two public sector
banks joining together to form a joint venture with private and foreign
Retail Term Deposit campaigns for individuals were conducted twice
during the year to mop up retail deposits. Both the campaigns were very
successful and resulted in an inflow of retail deposits of about
Mutual Fund Distribution as a revenue model for augmenting fee-based
income yielded good results. To broad base the distribution, tie up
arrangements were made with two more mutual funds. With this, the Bank
has tie up with nine mutual funds for distributing their mutual fund
schemes. Mobilisation under mutual fund distribution also gained
Official Language Policy
The Bank took all efforts to implement the Official Language Policy of
Government of India during the year 2006-07. The area of focus was
Hindi training and use of Hindi in computers and to ensure compliance
of Sec 3 (3) of Official Language Act.
IOB Praveen course for learning Hindi was made online for the benefit
of staff members. Bilingual Software APS Corporate 2000++ has been
installed in all the departments of Central Office and Regional
Offices. A bilingual branch banking software `Script Magic' was
purchased by the Bank and is being installed in all the branches of `A'
region in a phased manner during the year 2006-07. Total 552 staff
members were trained in Hindi, in various Hindi examinations.
The Bank has been awarded fourth prize in `A', `B' and `C' regions for
the year 2005-06 by Reserve Bank of India for the commendable work done
in the field of Official Language Implementation. The Bank has also
received third prize for `B' and `C' regions and fourth prize for `A'
region for the year 2004-05 by RBI for Official Language
Implementation.During the year 2006-07, Hindi House Magazine `VANI' has
been awarded the First Prize for the year 2004-05, among all the Public
Sector Banks by Reserve Bank of India in the competition conducted by
them for Hindi house magazine of Banks and Financial Institutions. The
prize was awarded to the Bank by Shri. Y.V.Reddy, Governor of RBI in
Regional Offices were inspected regarding Official Language
Implementation by the Official Language Department, Central Office and
Rajbhasha Shields were awarded to Regional Offices and branches for
their performance in Official Language Implementation.
The third Sub Committee of Parliamentary Committee inspected the Bank's
Regional Office, Chennai I and has appreciated efforts in this regard.
The draft and evidence Sub-Committee of Parliamentary Committee on
Official Language had discussions with the Chairmen and head of Banks
of Town Official Language Committees at Patna, Coimbatore,- Ooty,
Panipat, Tirupati and Kolkata and Central Office and expressed their
satisfaction over the performance of the Bank in these locations.
Chennai Town Official Language Implementation Committee for which the
Bank was convenor, was awarded the second prize for its efforts in
implementation of Official Language Policy during the year 2005-06 by
the Ministry of Home Affairs, Government of India. On behalf of the
Committee, the Bank conducted two general Hindi workshops, Joint Hindi
month celebration, bilingual computer training Rajbhasha Sanghoshthi
were conducted during the year 2006-07 apart from, two half-yearly
Regional Rural Banks
The three Regional Rural Banks (RRBs) sponsored by the Bank, viz.,
Pandyan Grama Bank, Puri Gramya Bank and Dhenkanal Gramya Bank
performed well during the year. All the three RRBs recorded net profit
during the year.
Sound Corporate Governance is critical to enhance and retain investor
confidence. The timely and accurate disclosure of information regarding
the financial situation, performance, ownership and governance of the
Bank is an important part of Corporate Governance. The policies to
promote Corporate Governance arc based on the principle that the law
should be satisfied not only in letter but also in spirit and be
transparent/maintain a high degree of disclosure levels. They are also
based on the principle that management is only the trustee and
custodian of the public funds. In short, Corporate Governance is about
commitment to the values and ethical business conduct.
The Bank has been scrupulously following the directions of the
regulatory authorities in areas relating to observance of transparency
and disclosure norms. The Bank has always been proactive in adopting
good Corporate Governance practices. The Board of Directors recognizes
its accountability to all stakeholders of the Bank. The Bank has laid
down a Code of Conduct, which is applicable to ail the Board members
and all General Managers.
Pursuant to Clause 49 of the Listing Agreement, a Management Discussion
& Analysis Report and a Report on Corporate Governance are incorporated
as part of this Annual Report. A certificate by the auditors regarding
compliance of the conditions under Clause 49 of the Listing Agreement
is also attached to the Annual Report.
Board of Directors
Shri A.R. Nagappan, Executive Director, demitted office on
superannuation on April 30, 2006.
Shri A.V. Dugade assumed charge as Executive Director of the Bank with
effect from May 01, 2006. Smt. Chitra Chandramouliswaran was nominated
to the Board with effect from February 27, 2007 in place of Shri C.S.
Murthy as RBI Nominee Director. Shri N. Sridaran was nominated to the
Board as workman employee Director with effect from April 20, 2007 in
place of Shri S. Srinivasan.
Shri M. Ravindra Vikram, Chartered Accountant was nominated to the
Board for a period of three years with effect from October 11, 2006.
Shri S.K. Sehgal, Shareholder Director is deemed to have retired as
Director with effect from February 19, 2007 on account of reduction in
the total number of Shareholder Directors to a maximum of three in
terms of Amendment in the Banking Companies (Acquisition and Transfer
of Undertakings) and Financial Institutions Laws (Amendment) Act, 2006
read with Amendment to the Nationalised Banks (Management and
Miscellaneous Provisions) Scheme, 1970. The Board of Directors placed
on record the valuable contributions made by the erstwhile Directors
and extended a warm welcome to the new directors.
The Board of Directors place on record their gratitude to the valued
customers, shareholders, other stakeholders and correspondents of the
Bank in India and abroad for their goodwill, patronage and support.
The Directors acknowledge with gratitude the valuable guidance extended
by the Government of India, Reserve Bank of India, Securities and
Exchange Board of India (SEBI), Stock Exchanges, various State
Governments and Financial Institutions. The Board is also thankful to
the Hong Kong Monetary Authority, Monetary Authority of Singapore,
Financial Supervisory Services, Korea, Central Bank of Sri Lanka, China
Banking Regulatory Commission, Bank Negara, Malaysia and Bank of
The Directors are very happy that the industrial relations are very
cordial and happy on account of positive attitude on the part of
Employees' Union and Officers' Association. The Board of Directors also
express their appreciation of the valuable contribution of the members
of the staff in the achievements of the Bank during the year.
For and on behalf of
the Board of Directors
Chennai T.S. NARAYANASAMI
April 23, 2007 Chairman and Managing Director