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| Chairman's Statement |
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Text of the speech delivered by Shri. C P Swarnkar, Chairman and Managing Director of SyndicateBank at the Bank’s Seventh Annual General Meeting of Shareholders held at SyndicateBank Golden Jubilee Auditorium on 24th June 2006
Ladies and Gentlemen,
I have great pleasure in extending warm welcome to all of you for the Seventh Annual General Meeting of SyndicateBank.
Before I present the highlights of your Bank’s performance, let me briefly touch upon the macro economic scenario in which the Bank has been operating.
MACROECONOMIC SCENARIO
During 2005-06, the global financial markets experienced many critical challenges in terms of large and continuing global imbalances on account of rising oil prices, heightened geographical tensions, unprecedented growth in credit demand, which had wide implications on performance of the financial and banking sector. The world economy grew at around 4.9% during 2005-06, as against 3.6% registered during 2004-05.
However, the Indian economy has demonstrated a strong performance by registering a GDP growth of 7.9 percent during April-December 2005. The country’s GDP is expected to grow at 8.1 percent in 2005-06 as per advance estimates. While the growth in agricultural sector was only 2.3%, the growth in industrial sector was 8%, with services topping the growth chart at 10.1%. The manufacturing and power sectors recorded impressive growths of 9.4% and 5.4% respectively.
In line with the growth of the economy, the money supply grew by 20.40% during the financial year as against growth rate of 12.1% recorded in the previous year. The aggregate deposits of Scheduled Commercial Banks (SCBs) registered a y-o-y growth of 22.1% while the aggregate credit at industry level showed a robust y-o-y growth of 37%. The expansion in non-food credit was a healthy 30.08%. On the external front, the country’s exports went up by 24.7% while the imports clocked a higher growth of 31.5%. The foreign exchange reserves of the country stood at USD 151.6 billion as at the end of March 2006.
HIGHLIGHTS OF BUSINESS PERFORMANCE
Your Bank turned in a highly encouraging performance during the 2005 – 06, keeping pace with the industry level growth trends.
PROFITABILITY
The Bank achieved an Operating Profit of Rs.1038 Crore and a Net Profit at Rs.536 Crore. Despite decline in profit on sale of investment, net profit showed a significant rise of 33%. The return on assets improved from 0.82% in 2004-05 to 0.91% in 2005-06.
GLOBAL BUSINESS
The Bank’s global business reached a level of Rs. 91,284 Crore in fiscal 2006 compared to Rs. 74031 Crore in fiscal 2005 registering a fair growth of 23.31%. Credit Deposit Ratio improved to 70% in 2005-06 from 60% in 2004-05.
DEPOSITS
The global deposits of the Bank grew by Rs.7329 Crore from Rs. 46295 Crore in fiscal 2005 to Rs.53624 Crore in fiscal 2006. On the back of conscious efforts to reduce the share of high cost deposits, the deposit mix of the Bank improved in cost terms and the cost of deposits declined from 4.58% in 2004-05 to 4.48% in 2005-06. The low cost deposits constituted 38% of the total deposits as at 31.03.2006.
ADVANCES
The global advances of the Bank rose from Rs. 27736 Crore in fiscal 2005 to Rs.37,660 Crore in fiscal 2006 registering a substantial year-on-year growth of 35.8%. The retail credit grew by 26.90% from Rs.7936 Crore in fiscal 2005 to Rs.10071 Crore in fiscal 2006.
CAPITAL & RESERVES
The networth of the Bank has improved from Rs. 2199 Crore as at 31.03.2005 to Rs.2834 Crore as at 31.03.2006. Accretion to reserves amounted to Rs. 585.11 crore in fiscal 2006. The Capital to Risk weighted Assets Ratio (CRAR) of the Bank was 11.73% as at 31.03.2006.
ASSET QUALITY
The strategies adopted by the Bank in managing Non Performing Assets have paid rich dividends. Net NPA declined below the 1% mark going down from Rs.426 Crore to Rs.313 Crore, i.e. from 1.59% to 0.86%. Provision Coverage was further strengthened from 67.27% to 76.77%.
As announced by the Hon’ble Finance Minister, the Bank has implemented One Time Settlement (OTS) Scheme for Small and Medium Enterprises (SME) Accounts as communicated by Reserve Bank of India. Bank has also put in place a special OTS scheme for NPAs in smaller accounts up to Rs.25,000/- to extend an opportunity to settle their dues.
The Bank is utilising the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act–2002 as an effective tool for recovery of non-performing assets. 4430 notices were issued under the Act and Bank could recover Rs.187.32 Crore in 2797 accounts.
TREASURY OPERATIONS
The Bank’s net domestic investments decreased by 15.64% from Rs.20296.91 Crore as on 31.03.2005 to Rs.17122.92 Crore as on 31.03.2006. This was primarily due to the conscious decision to shed excess SLR securities and revamp the portfolio to free resources for credit growth. The Bank could earn a trading profit on securities other than shares of Rs.38.75 Crore despite adverse market conditions during the previous year. The Bank has strengthened the equity desk and has taken advantage of the buoyant equity market. The Bank earned a profit of Rs 61.59 Crore in equity trading, as against Rs 45.03 Crore in the previous year
NATIONAL PRIORITIES
The Bank has maintained its excellent track record of pre-eminence in social lending, which it views as a major business opportunity. The priority sector advances of the Bank reached a level of Rs.14626.62 Crore constituting 44.87% of Net Bank Credit and were well above the mandatory target of 40%. Adequate care has been taken to ensure that the credit needs of the weak and underprivileged section such as SC/ST, minority communities and women are fully met.
The agricultural credit increased substantially during the year and reached the level of Rs.5874.37 Crore forming 18.02% of Net Bank Credit as against the mandatory norm of 18%. In tune with the implementation of Special Plan for Agricultural Credit, the disbursement of agricultural credit during the year amounted to Rs. 3078 Crore recording an impressive increase of 56.64% over that of the previous year.
The Bank recorded a noteworthy performance under Syndicate Kisan Credit Card Scheme by surpassing the regulatory target. The Bank issued 89,529 Kisan Credit Cards during the year. The Bank also launched a new credit product named “Syndicate General Credit Card” to meet the general credit needs of customers of small means.
RURAL DEVELOPMENT INITIATIVES
The Bank has been in the forefront in promoting adoption of new technology in the field of agriculture for improving farm productivity and efficiency. As many as 950 Rural Extension Education Programmes were organized by the branches during the year.
Syndicate Rural Development Trust was established to promote rural development by fostering rural entrepreneurship and promoting micro credit as the means of helping the rural poor, especially women. During the year 214 training programmes were organised benefiting 7272 persons of whom 3933 were women through eight Syndicate Institutes of Rural Entrepreneurship Development.
The Bank, in association with Canara Bank and Sri Dharmasthala Manjunatheswara Educational Trust, has sponsored 20 Rural Development and Self-Employment Training Institutes across the country.
COMMUNITY CONCERN
The Bank effectively participated in implementing Government sponsored poverty alleviation and employment generation schemes and organised training programmes for skill development through Syndicate Institute of Rural Entrepreneurship Development and Rural development Self Employment Training Institutes. The total credit disbursed under these schemes namely PMRY, SGSY, SJSRY and SLRS amounted to Rs.74.10 Crore benefiting 13915 persons during the year.
Aiming at harnessing Solar Energy, Bank has taken up a project for financing Solar Home Lighting Systems in Karnataka State with interest subsidy support from United Nations Environment Programme. The Bank financed 2097 Solar Water Heating Systems and 669 Solar Home Lighting Systems during the year. The total credit support given by the Bank during the year for popularising solar appliances amounted to Rs.6.65 Crore.
INFORMATION TECHNOLOGY
IT policy and strategies adopted by the Bank aim at achieving operational efficiency, enhancing customer satisfaction and meeting the market expectations. Bank continues to induct technology to deliver sophisticated products that continuously raise the standards of customer service.
The Bank is the first among the Public Sector Banks to implement Core Banking Solution (CBS). During the year, the Bank has further consolidated implementation of CBS by networking 529 branches spread across over 212 centres covering over 60% of the Bank’s business. During the ensuing fiscal the Bank has plans to extend CBS to an additional 1000 branches, thereby taking the total number of branches covered under CBS to over 1500 encompassing 80% of the Bank’s business.
The CBS Project has enabled the Bank to deliver banking products and services over multiple delivery channels like networked ATMs, Telebanking, and Internet Banking etc. so as to provide Anywhere Anytime Anyhow (AAA) banking service to customers.
HUMAN RESOURCES MANAGEMENT
The HR Policy has been geared to meet the Corporate objectives of accelerated and profitable growth. This includes Campus and Direct Recruitments for replenishing skilled Man Power in Agricultural Finance, Information Technology, Accounts and Financial Management, International Business, Credit, Marketing, Risk Management etc. As always the Industrial Relations in the Bank have been harmonious and cordial.
NEW PRODUCTS & SERVICES
As part of its innovative strategies in product development process, Bank has constantly reviewed and redefined many of its products to meet the ever-changing needs and expectations of the customers. During the year 2005-06 Bank has redefined several existing products, namely SyndNivas (Housing Loan Scheme), SyndVidya (Education Loan Scheme), SyndSwarna (Jewel Loan Scheme), SyndArogya (mediclaim cum personal accident cover product).
Keeping in view the varied classes of customers in its client base and technological advancements, the Bank has also introduced several new products / services during the year 2005-06, namely SyndBillPay, a product specifically designed for utility bill payment through internet, e-Payment: a product specifically designed for payment of Excise and Service taxes through internet Banking and SyndInstant an RTGS System for instant transfer of funds.
With a view to delivering banking services at an affordable cost to vast sections of financially excluded persons / groups, Bank has come out with No Frills Account in line with the directives of the Reserve Bank of India. Bank has launched a new product “SyndSamanya Savings Bank Account” which will cater to the banking needs of all sections of the population. All person/s who are eligible to open Savings Bank Account can open accounts under this scheme with an initial deposit of zero balance.
DIVIDEND
The Board of Directors of the Bank has declared an interim dividend of 15% during February 2006 and proposed a final dividend of 10% aggregating to a total dividend of 25% for the year 2005-06. The total dividend payment amounts to Rs.148.79 Crore (including interim dividend).
RISK MANAGEMENT
The Bank views risk management as integral to its business for creating and maintaining best practices in business operations and administration. The Bank’s objectives and strategies for risk management are designed to complement the organization’s vision and goals. The primary aim of the risk strategy is to maintain the quality of the Assets, while ensuring continuous profitability.
BASEL II COMPLIANCE
The Bank considers Basel II as a business imperative and not as a compliance issue. The Bank has already initiated steps to implement the Standardized Approach for Credit Risk and Basic Indicator Approach for Operational Risk by March 2007. The Bank is planning to adopt best international practices in Credit Risk Management and Basel II implementation by outsourcing end to end solution viz., on-line appraisal system, risk assessment, risk inputs estimates, capital computation and RAROC framework. The Bank is also in process of engaging reputed consultants to design and implement Operational Risk Management Framework.
NEW INITIATIVES
In its continuous quest for new financial partners, Bank has tied up with National Exchange Company of Kuwait and Zenj Exchange Company of Bahrain, two popular Money Transferring outfits, for remittances.
Bank signed MoU with SMERA (Small & Medium Enterprises Rating Agency of India Ltd.) to create a platform for bank’s SME clients to get themselves rated and gain concession in interest rates.
Bank entered into a MOU with M/s CMC Ltd with the aim of making Syndicate Institute of Bank Management (SIBM), the Apex training institute of the Bank, a Centre of Excellence of global standard. Under the tie-up arrangements, the Bank will make available the infrastructure, including faculty support, at SIBM and other Training Centres and M/s CMC will provide its expertise in course design and training content, developing appropriate learning aids, including software and generate demand for training from external sources.
CORPORATE GOVERNANCE
The Bank has adopted a highly effective system of Corporate Governance to ensure continued growth of shareholder value keeping in view the interests of all stakeholders. The system permits adequate autonomy to the Board of Directors and the top management to take decisions that can further the progress of the Bank within the framework of regulatory prescriptions, corporate goals and social responsibilities. The audit committee of the Board oversees the quality of the internal audit systems and monitoring mechanism apart from reviewing the financial accounts. The Bank has been actively promoting greater transparency as a part of its measures through wider disclosure of information that reflects the quality of governance.
ACKNOWLEDGEMENTS
I take this opportunity to thank the members of the Board for their valuable guidance, the members of the staff and the top management team for their excellent co-operation in achieving corporate objectives, our valued customers for their continued patronage and our shareholders for the confidence that they have reposed in us. I express my gratitude to Government of India and the Reserve Bank of India for their direction and support. I look forward to the continued support and goodwill from all our stakeholders in the months ahead.
C P SWARNKAR
Chairman and Managing Director
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