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Indian Overseas Bank

BSE: 532388 | NSE: IOB |

Represents Equity.Intra - day transactions are permissible and normal trading is done in this category
Series: EQ | ISIN: INE565A01014 | SECTOR: Banks - Public Sector

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BSE Live

Feb 20, 16:00
9.00 -0.14 (-1.53%)
Volume
AVERAGE VOLUME
5-Day
110,535
10-Day
178,090
30-Day
114,720
95,021
  • Prev. Close

    9.14

  • Open Price

    9.14

  • Bid Price (Qty.)

    0.00 (0)

  • Offer Price (Qty.)

    0.00 (0)

NSE Live

Feb 20, 15:57
9.00 -0.15 (-1.64%)
Volume
AVERAGE VOLUME
5-Day
1,081,654
10-Day
1,938,863
30-Day
1,244,794
960,306
  • Prev. Close

    9.15

  • Open Price

    9.20

  • Bid Price (Qty.)

    0.00 (0)

  • Offer Price (Qty.)

    9.00 (41021)

Annual Report

For Year :
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Director’s Report

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. Overseas Branches 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 growth. 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. Financial Performance 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. Provisions The Bank set apart a sum of Rs.552 crore towards provisions and contingencies as per the extant guidelines. Net Profit/Dividend 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 Rs.2,235 crore. 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. Branch Network 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. Customer Service 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 formulated. 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 below: (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 partners. 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 Rs.3,800 crore. 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 strength. 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 July 2006. 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 meetings. 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. Corporate Governance 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. Acknowledgements 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 Thailand. 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

Director’s Report