I am pleased to place before you the highlights of your Bank''s performance during the financial year 2018-19. Details of the achievements made and initiatives taken by your Bank during the year have been provided in the enclosed Annual Report. We have taken several pioneering strides in catalyzing the growth trajectory of the Bank. As a financial institution, your Bank has been on a continuous journey of transformation, diversification and expansion.
The global economy is facing a confluence of risks, which could severely disrupt economic activity and inflict significant damage on longer-term development prospects. These risks include an escalation of trade disputes, an abrupt tightening of global financial conditions, geo-political risks and intensifying climate risks. Global inflation remains moderate, but is on an upward trend in majority of countries. Rising oil prices contributed to additional inflationary pressures in oil-importing countries over the course of 2018, while currency depreciation against the US dollar put upward pressure on imported prices in many countries. Economic activity has slowed in many Emerging Market Economies (EMEs). Financial markets have been driven by uncertainties surrounding US-China trade negotiations and Brexit.
The Indian economy retained its tag of one of the fastest growing major economies in the world for a second year in a row. On an annual basis, National Statistical Office (NSO) has estimated GDP growth at 6.8% in 2018-19, as against 7.2% in 2017-18. Sharp improvement in ease of doing business (India''s rank in World Bank''s Ease of Doing Business Survey has improved sharply from 142 in 2014 to 77 in 2018) has helped to significantly turnaround the investment sentiment in the country. Amid slowing economic growth and rising global uncertainty, the RBI had reduced the short-term lending rate (repo rate) by 25 basis points to 5.75% for third time in a row and left the door open for more policy easing to shore up a sagging economy.
The Indian economy witnessed robust industrial growth during FY 2018-19 and the momentum is expected to continue in the next year as well. The Index of Industrial Production (IIP) for the period 2018 -19 registered a growth of 6.9%, compared to 5.9% reported in the previous year. Eleven out of twenty-three industry-groups exhibited positive growth during 2018-19 over the previous year, with the industry groups Manufacture of Food Products and Manufacture of Wearing Apparel recording highest growth rates at 17% and 16.4%, respectively. Among other positives, industries such as capital goods and infrastructure/construction goods expanded significantly. Healthy growth in core sectors such as steel and cement is expected to strengthen further.
The year 2018 19 has been a crucial year of change and challenges for the banking sector. Major reforms initiated by the Government have encouraged development of a digital ecosystem which, in turn, has given the much-needed thrust to the vision of a cashless economy. The key innovations for 2020 as far as the banking industry is concerned are Artificial Intelligence and Cognitive opportunities, Block chain and Distributed Ledger Technology (DLT), Robotic Process Automation (RPA) and Cyber Security.
Looking forward, some of the major trends driving the banking industry in the coming years are:
- Corporate banking to make a comeback: In the last few years, the retail engine has been growing robustly. There are now expectations of corporate lending to make a turnaround. Infrastructure (especially roads, metro etc), commodities (steel, cement etc) and consumption companies are set to see action.
- Peaking of NPAs: The NPAs have almost peaked. As the banks have made huge provisions for stressed assets, year 2019 may see writing back of some provisions, as resolution of assets will also gather steam.
- More realization through IBC: In the last two years, the Insolvency and Bankruptcy Code (IBC) saw a lot of action in terms of amendments, challenges and counter claims. This will help the banks recover good value.
- Engaging the 2020 customer Digital footprint will be the way forward for all banks. How well the banks engage in competition with FinTech start-ups playing in emerging technologies will determine how they can differentiate in an increasingly crowded market that will likely see high customer churn. The success of these banks will largely depend on the customer base they target, adapt to, and the types of alliances Payment Banks form.
- FinTech or ''Financial Technology'' has become a buzzword in financial circles. Globally, FinTech players are challenging the status quo of the financial services industry by bringing in a fresh take on problems faced by customers, as seen through the lens of technology.
During the year, the Bank recorded a total gross business of Rs.1,44,056 crore comprising total deposit of Rs.80,420 crore and gross advances of Rs.63,636 crore as on March 31,2019, where as the net profit of the bank decreased to Rs.247.53 crore as compared to Rs.334.89 crore in the preceding year. The Bank widened its network gainfully across India with 870 Branches, 53 Extension counters, 1322 ATMs and 84 CRMs/CDMs. The Bank also opened 18 new outlets (16 Branches and 2 Extension Counters), 36 ATMs and 7 CRMs across the country during the financial year 2018-19.
The management team, led by the Managing Director & CEO has charted out a clear and sustained growth strategy with well defined risk appetite and risk management policies and practices, optimal capital allocation framework, sound internal control systems and compliance. The Bank has executed a focussed strategy during the year, of nimbly capturing opportunities and resolutely addressing challenges. The Bank has achieved robust growth in its retail business, across lending, deposit-taking and fee-based services. It continued to be at the forefront of technology-led innovation in the banking sector. The employees worked tirelessly to serve the large numbers of customers visiting branches during this period. In the area of corporate banking, the Bank continued to capture new opportunities, while focussing on resolution of stressed assets with perseverance.
At South Indian Bank, we remain focussed on running our business in a way which generates value for our customers, employees and other stakeholders. Technological innovations and initiatives play a predominant role in reducing costs, improving efficiency and canvassing business by providing excellent customer service. A great deal of emphasis is being placed by your Bank on digitizing core business processes and reassessing organizational structures and internal talent to be better equipped for facilitating enhanced customer satisfaction. Today your Bank has a robust technology framework which caters to all customer requirements and provides quick turnaround time.
During the year, Mr. Thomas Jacob K, retired from the Bank''s Board upon completion of his tenure. We thank him for his valuable contribution to the Bank''s Board over the years. I take this opportunity to welcome the newly appointed Directors Mr. M George Korah and Mr. Pradeep M Godbole, who bring diverse and rich experience with them, and I am sure that they will provide invaluable guidance to the Bank. Your Bank is privileged to have an inspiring value driven Board of Directors comprisinglO Directors, including six Independent Directors, with outstanding calibre and credentials in various segments of banking business.
With the continued support and patronage of all, I am confident that your Bank would reach greater heights during the coming years and look forward to our team scaling new heights of glory. I humbly thank all our shareholders for their continued faith in our strength and capabilities, Members of the Board and Reserve Bank of India for their valuable support and guidance, our customers for their continued support and trust and last but not the least, our employees for their tireless efforts and hard work towards achieving our goals.