Progress in the year 2004-05, except for growth in advances has been in line with the progress in the banking industry in general. Growth in advances was lower mainly because of the recent trend where banks have been lending at interest rates equal to or below their prime lending rates. In the current year your Bank plans to fine tune the asset liability management process so as to be able to compete at the required market interest rate levels. A consistent effort to reduce the cost of funds will also benefit in this exercise. I am pleased to inform you that as on March 31, 2005, cost of funds had further reduced to 6.86% from 7.65% as on March 31, 2004.

Your Bank has declared a net profit of Rs. 20.10 crores which is an improvement of around 0.5% over the previous financial year. The growth in profitability has to be viewed in the context of the situation in the Treasury market where security prices fell substantially. Inspite of the depreciation provision and the fact that opportunities to earn profit on sale of securities were fewer during the year, your Bank has made a profit of Rs.5.64crores in Treasury operations and maintained its overall profitability levels. Your Bank maintains an Investment Fluctuation Reserve of 2.80% (as against 2% required as per RBI guidelines) to guard against market risk on the investment portfolio.

As you are aware, expansion opportunities are fewer in the co-operative sector as the RBI is yet to review its stance of not issuing licenses for opening new branches to Banks in this sector. We have made a review of the options available and plan to move ahead through opening of extension counters and takeovers/mergers of smaller co-operative banks. We have set in place a team to identify potential banks for takeover/merger.

On the NPA front, your Bank has managed a smooth transition to the 90 days norm. Net NPAs reduced further from 3.74% as on March 31, 2004 to 2.87% of net customer assets as on March 31, 2005. The tireless energy and commitment of the recovery team increased recoveries during the financial year 2004-05 by 76% over the previous year.

In the year under review, your Bank opened an extension counter at New English High School , Bandra (East). With the opening of this extension counter, we are able to develop a customized product for schools that assists them on their fee collection and management. The product will be launched at the New English School Extension counter in the current year and will give us a competitive edge over other banks in this area.

Technology Identification Having identified technology as a key driver for its growth strategy, your Bank continues to lay emphasis on enhanced levels of customer services through technology driven products that offer convenience and improve productivity and efficiency. Your Bank has also been a frontrunner in adopting technological changes introduced by the Reserve Bank of India . We are the first Co-operative Bank to implement Straight-Through-Processing for Real Time Gross Settlement (RTGS) of transactions. The product titled ‘QuickEST’ ensures that a customer makes and receives remittances to and from counterparties within a span of two hours. Additionally, your Bank has also introduced the Electronic Clearing System (ECS) to facilitate speedy payment of interest to deposit holders and dividend to members. Advanced technology has also earned your Bank centralized registration for service tax. In this area too, your Bank is the 1st Co-operative Bank that has the convenience of centrally monitoring the service tax collections and payments. During the year, we have also increased the number of ATM installations to 33 thereby widening the scope of any time banking for customers.

We are committed to maintaining the highest levels of ethical standards, professional integrity and regulatory compliance. We have always believed in disciplined and healthy growth. This has been reiterated in the Statutory Audit recently completed where the Bank has maintained an ‘A’ Audit classification. Your Bank is committed to maintaining it in future too.

The Banking industry in future is likely to witness diminishing marginal returns. We would rely on its ability to differentiate between product needs of disparate customer segments and become more customer-centric to increase business volumes and thereby profit growth. To support thinning spreads, your Bank is also planning introduction of additional fee based businesses such as Demat and Exchange of Foreign Currency through an authorized agent.

Your Bank has already initiated action in the area of Risk Management as specified by RBI. As a proactive measure, we are setting up a team to study and implement appropriate procedures to ensure that we conform to Basel II norms as and when implemented for the Co-operative Banking Sector.

The Indian Banking System has seen sweeping changes over the years. Co-operative Banks especially have testing times ahead having to compete not only with fellow co-operative banks but also with other private and public sector banks that have forayed into their customer segment, i.e. the SME sector. Restrictions on business further add to difficulties in banking in this sector. However, under the guidance of a professional Board of Directors and a well-qualified professional management team, we firmly believe that your Bank is well-placed to capitalize on emerging opportunities

In the years to come, the main thrust areas would be:

Introduction on technology driven customer centric products
A well planned asset liability management system to compete on interest rates
Expansion though extension counters and takeovers/mergers
An aggressive marketing strategy to establish our presence as a Co-operative Bank, “A Bank with a Difference”
Risk Management to monitor risk area and appropriate controls in place
Timely action on defaulters to ensure maximum recoveries from NPA accounts.
I take pleasure in putting on record the Board’s appreciation of the contribution made by the Management team and all the members of the staff. Their commitment and devotion has helped further enhance the employee productivity ratio in the Bank that happens to be amongst the best in the co-operative banking fraternity.

Your Bank has already entered its 100th financial year and it has been our privilege to be the part of the team taking your Bank into its hundredth year. Your unstinted support and trust in us has given us the confidence to remain young and look forward to another 100 years in banking. I take this opportunity to express our gratitude to our members, depositors, clients and well wishers for their valuable support.

Your Bank is obliged to the officials of the Reserve Bank of India, especially the Urban Banks’ Department, the Central Registrar, Co-operative Societies, New Delhi, the Commissioner of Co-operation, Pune and the officials of the Departments of Co-operation in the states of Maharashtra, Goa and Karnataka for their invaluable guidance, support and assistance from time to time.

The Board is grateful to all the members for their continual support and trust in us.

The Board also would like to place on record its appreciation for the professional services offered by the Bank’s Legal Advisers, Management and Tax Consultants, Architects, Concurrent Auditors, Internal Auditors and especially the Statutory Auditors for their co-operation, guidance and completion of audit in record time.

I would also like to thank all those institutions, authorities and individuals who have extended their support and helped your Bank scale new heights.

Let us together walk confidently into our hundredth year with added zeal and enthusiasm to achieve much more.

Suresh S. Hemmady

Chairman.