It is my privilege to be addressing the shareholders of this Bank for the first time since I took charge as its MD & CEO through this message.
The year 2016 - 17 was a challenging year for your Bank. In the midst of these challenges, your Bank strived to tap the emerging opportunities to enable it to grow its business, especially on the retail and priority sector front, as a strategic move to minimise and mitigate concentration risk as well as meet regulatory requirements in this regard. As your Bank persisted in its efforts to improve its business fundamentals, it yielded positive results on some fronts, some of which I would like to highlight.
The thrust placed on rebalancing of the business mix has yielded positive results as can be evidenced from the rising share of retail advances to 43% as at end-March 2017 from 33% as at end-March 2016. Your Bank’s CASA deposits as well as Retail Term Deposits both grew by over 22% during the year. Furthermore, the share of CASA Deposits and Retail Term Deposits has been progressively increased to over 31% and 32%, respectively, during the year. Correspondingly, there has also been reduction in the share of bulk term deposits to 36%, which has helped in driving down the cost of funds to an extent. CASA per employee also has risen to Rs. 4.6 crore. The Bank’s fee income too has increased by over 6% during the year.
During the year under review, your Bank continued to make efforts for reimagining the customer experience and positioning it for success in an increasingly digital world. The efforts of the Bank saw introduction of a variety of new digital offerings such as its Unified Payments Interface (UPI) App ’PayWiz’, Social Media Banking ’Facebook - iEngage’ for retail internet banking customers and digital passbook ’mPassbook’ on Android platform, among various other initiatives. Furthermore, your Bank partnered the Government of India in furthering the objective of financial inclusion by leveraging its network to enhance enrolments under the Government schemes. In addition to such initiatives in the banking space, your Bank proactively funded multiple Corporate Social Responsibility (CSR) interventions in varied areas such as healthcare services, education, gender equality, sports, livelihood opportunities and holistic development of villages, etc.
Since your Bank has accorded excellence in customer service as the crux of its business strategy, it is imbibed in every employee to serve its customers better and go the extra mile to cater to their requirements. This approach of your Bank has earned it a ‘High’ rating as per the BCSBI Code Compliance Rating 2017, outperforming most of the other banks in the industry.
Your Bank’s initiatives in the banking space and beyond have been feted at various fora. Your Bank has carved a niche for itself as a recognized and trusted brand, also affirmed by the Millward Brown’s Report Brand Z, which has rated it among the ’Top 50 Most Valuable Indian Brands’. For its digital initiatives, your Bank was awarded the ’NetApp Innovation Awards 2017’ under the Trend Setter Award category and Silver Award for its Abhay Card Control App at the 6th Asia Pacific Customer Engagement Forum under the Most Admired Customer Engaged Mobile App category. The initiatives in the priority sector business saw your Bank being awarded the first prize for ’Excellence in Lending to Micro Enterprises’ at National Awards 2016, instituted by the Ministry of Micro, Small and Medium Enterprises (MSME), the Government of India and ASSOCHAM SME Excellence Award 2016 for its performance in Micro Lending.
Even as your Bank continued to perform well on some fronts, its performance was overshadowed by the deterioration in its asset quality, which saw rising level of Non-Performing Assets (NPA) as well as stressed assets. As a consequence of higher NPA and stressed assets, the provisioning rose, which in turn, negatively impacted the bottomline of your Bank and also raised concerns on the capital adequacy front. These developments have led to implementation of Prompt Corrective Action (PCA) framework on your Bank by Reserve Bank of India (RBI). We are ensuring that the RBI guidelines relating to distribution of dividend, branch expansion, capital expenditure, investment in subsidiaries, etc. are followed. In a way, the PCA framework has provided us with an opportunity to benchmark your Bank’s performance against the regulatory framework.
In view of the challenges, your Bank has devised a comprehensive turnaround strategy that seeks to leverage its strengths and entails identification of areas for cost containment and revenue maximization that would help in ensuring sustainable growth and profitability for the Bank. The multi-pronged turnaround strategy broadly focuses on six areas: aggressive recovery and prevention of further slippages; improvement in Capital Adequacy Ratio (CAR) in the short and medium term through fresh resource raising as well as reduction in the risk weighted assets; increase in retail and Priority Sector Lending (PSL) asset base with limited growth in corporate loan book to ensure a more sustainable business mix; reduction in operational cost; sale of select non-core assets and upselling as well as cross-selling of retail products. This strategy will enable the Bank to identify and address the existing lacunae, capitalize on core strengths and improve existing products and processes. Your Bank will leverage its inherent core strengths such as recognized brand identity, excellent customer service, innovative digital offerings, and talent pool of a young and professionally qualified workforce to strengthen its position in the banking space. I am confident that these strategic initiatives, in conjunction with the inherent strengths of your Bank, will enable it to surmount the challenges confronting it and tap new opportunities to emerge a better, stronger and valuable bank.
Your Bank’s journey so far is a testament to the continued confidence and encouragement of the Bank’s shareholders, the trust and loyalty of its customers and business partners, and the commitment and professionalism of its employees exhibited over the years, for which I would like to thank them. With stronger partnerships and your continued support, I am sure that we will position your Bank as a bigger, better and stronger bank that delivers enormous value to its stakeholders.
With best wishes,
Mahesh Kumar Jain
Managing Director & CEO