The financial year 2000-01 witnessed significant trends and developments in the banking sector towards a more open and competitive market-driven system. The year saw persistent signals for lowering the rate of interest, with the Government and the RBI announcing initiatives for lower interest rate regime. The competition for deposits among Scheduled Commercial Banks intensified. With lower off-take of major credits, retail banking witnessed intensified competition for a share in the market pie. Few bold mergers and acquisition moves by new generation private  sector banks set the trend for the new players to spread their wings. Clearly, the stage for operating on a much thinner interest margin and  better operational efficiency, is ushered in.

To bring in economies in the operating costs and reducing the excess manpower, many Public Sector Banks, including Union Bank of India implemented Voluntary Retirement Scheme and the resultant process of right sizing and realignment are underway. 

In the above backdrop of renewed phase of developments in competitive banking; Union Bank turned out a commendable performance during the financial year, both in terms of business growth and operating results. The Bank crossed yet another milestone when it surpassed Rs.50,000 crore in business, reaching a total business of Rs.53,162 crore.

The highlights of the Bank's performance during the year 2000-01 are covered here below:

PROFITS

• The net profit up from Rs. 101 crores to Rs. 155 crores, giving a growth of 54%.

• The net profit is arrived at after providing for Rs.106 crores being VRS amortisation for the year.

• Total income up from Rs.3,614 crores to Rs.4,044 crores, a growth of 12%.

• Interest income up significantly during the year by Rs. 418 crores, an improvement of 12.6%.

• The cost of deposits has been effectively brought down over tile last two years from 8.17% in 1998-99 to 8% in 1999-00 and further to 7.57% during this year.

• With yield on advances at 12.10% and investment at 11.75%,. The Bank improved its spread from 3.02% to 3.43%. 

• The Bank strengthened its Tier-II Capital with Rs.100 crores bonds issue with aggressive pricing of 11.25% for a 63 months bond, in February ‘01.

• Capital Adequacy Ratio stood at 10.86%.

Rightsizing and restructuring of branch network and administrative offices were the focus during the year.

Total number of branches stood at 2053. 7 new branches were opened.

• Deposits of the Bank showed a growth of Rs.3,697 crores, close to 12% from Rs.31,105 crores to Rs.34,802 crores.

• As a result of focus on increasing savings bank deposits, the average share of savings bank portfolio up from 23.3% to 24.5%. Overall, the average low-cost deposits improved its share from 32.5% to 33.5% ill the total deposits.

• The total advances of the bank grew by Rs.2,636 crore, close to 17% from Rs.15,724 crores to Rs.18,360 crores.

• Housing finance in particular up by Rs.530 crores 

• Under retail finance schemes, Bank repackaged its personal loan, vehicle loans and other innovative consumer loan schemes with competitive features. Thus, the Bank achieved fresh disbursements to the turn of Rs.533 crore under retail finance schemes and together with housing finance, the total disbursement amounted to Rs. 1063 crores.

• Priority sector loans registered a growth of Rs.1,349 crores from Rs.5411 crores to Rs.6760 crores, growing by a significant 25%.

• The share of priority sector has moved up to 45% from 40% of the adjusted net bank credit, thus, surpassing the stipulation of 40%.

• Agriculture loans up by Rs.353 crores to Rs.2051 crores, registering a growth of 21%

• The Bank issued over 90,000 Kisan Credit Cards to farmers, taking the total number of cards over 1 lakh with a credit facility of Rs.220 crores. 

• Export credit up by Rs.277 crores, from Rs.1530 crores to Rs. 1807 crores.

The investment portfolio of the Bank up from Rs.11,502 crores to Rs.13,712 crores, a growth of Rs.2210 or 19%.

NON-PERFORMING ASSETS

• The percentage of net NPA to net, advances has come down from 7.97% to 6.87%.

• Coverage of NPAs through cumulative provisions up from 34.9% to 41.3%. The Bank proposes to increase the coverage further to 50% in this year.

• Under the scheme of one-time settlement 'Settlement Advisory Committee' Scheme, the Bank has settled over 28,000 accounts and the amount of settlement is Rs.151 crores. 

• The Bank has also set up a Asset Reconstruction Branch in Mumbai to handle major non-performing loans of the Region. 

The Bank has put in place a structured ALM system, which is based on a reliable and accurate MIS set up for the purpose. 

• Various ALM analysis such as Interest Sensitive Gaps, Impact on NIM, Duration of Equity, Fortnightly Dynamic Liquidity Statement are discussed at Asset Liability Committee (ALCO) regularly.

• Pricing decisions are taken by ALCO based on ALM gaps. 
• Liquidity gaps in near time bands upto 28 days are well within the 20% tolerance.

• Taking into account substantial fixed income securities and also to hedge interest rate exposures on foreign currency deposits, the Bank has made a foray in to Interest Rates Swaps(IRS).

• The Bank is well with prudential norms for single and group exposure limits.

• The Bank maintains diversified portfolio without major concentration in any on-line of activities.

• Exposure to sensitive sectors is fully under control.
• The Bank employs ICRA-Moody model for tracing individual credit default risk.

• With a view to improving credit appraisal  system, the Bank is also  introducing CRISINFAC Industry Information System to carry out industry analysis.

• Bank is utilizing Capital 2000 information database to enable peer-to-peer analysis.

• The Bank has introduced Internal Loan Review Mechanism (ILR) with sufficient independence in their functions, to bring about qualitative  improvements in credit administration. The responsibilities of ILR include, evaluating the effectiveness of loan administration, maintaining the integrity of credit grading process, assessing loan loss provisions and portfolio quality.

• The Bank implemented VRS in December 2000. Over 4300 people have opted for the same and all eligible staffs have been relieved.

• The business per employee, which was Rs.135.44 lacs in March 2000, has gone up to Rs.186.36 lacs in March 2001. On the post-VRS strength, the productivity will stand at Rs.201.37 lacs. 

The Bank has computerised 70% of its business, thereby improving the number of partially computerised branches from 511 to 908 and totally computerised branches from  103 to 108.

• During the year 2000-01, bank has taken major initiatives in enhancing its IT capabilities. 

• M/s. Ernst & Young, has drawn the Technology Road map for the Bank. Based there on, the Bank has embarked upon a Core banking Solution on a centralised database as a long term IT strategy, to provide seamless banking for Bank wide customers.

• The Bank has also engaged KPMG as its Strategic Technolology Consultant for assisting the bank in implementing the programme.

• The Core Banking Solution will be implemented in 20 pilot branches within a period of 18 months. 

• The investment on IT infrastructure through Wide Area Network of the Bank now covers 137 branches and 42 offices in 33 centres and used extensively for Voice, Data, messages, etc. This WAN infrastructure will form the backbone for our future initiative enabling the Bank in extending hi-tech delivery channels to it customers.

• E-mail culture which was initiated last year has taken deep roots and now most of the inter office communications are handled through the WAN facilitating faster transmission of messages and data at a reduced cost. 

• Bank has installed 11 ATMs. 9 ATMs are installed in Mumbai, one each at Delhi and Chandigarh. Two of the eleven ATMs are working online.

• Tele banking facility is available at 88 branches throughout the country

TRAINING COLLEGE ACQUIRES ISO 9001

• The Staff Training College of the Bank has acquired ISO 9001 in February '01, perhaps the only training system in the industry having been conferred such distinction. The quality manual developed by the Staff Training college and the system put in place have been authorised ISO certification for development and provision of customized training programme for banking sector. Thus, the Bank's training system has maintained its pursuit of excellence, having been awarded the coveted 'Golden Peacock National Training Award' from the Institute of Directors, New Delhi in 1998.

• The excellent training infrastructure that the bank possess in its training college at Bannergatta, Bangalore, is now promoted as centre for training to other banks, financial institutions as also those in IT industry to utilise the training facility.

• The Bank has targeted to achieve a growth of 20% in its business during the current year. The total business targeted is Rs.62,500 crores.

• IT strategy fine tuned to take full benefit of networking for business and customer focused applications.

• The thrust of the business growth will come from retail banking front wherein the Bank proposes to introduce a few more new products both on deposits and loans. This will include structured schemes for lending to professionals like doctors and revamp of the education loan scheme and the like.

• The Bank will bring in value added service in personal and commercial banking areas like DEMAT facility and Cash Management products and Government collections like taxes, Relief Bonds and Utility Payment services.

• The Bank will take up G-sec retailing as a thrust area for individuals as well as institutions like PF trustees. This facility will be available through selected branches all over the country.

• The Bank proposes to enter Corporate Insurance Agency for non life as well as life insurance through strategic alliance with insurance companies.

• The treasury operations of the Bank will be stepped up to bring in further gains in this area and boost non-interest income significantly.