Shamrao Vithal Co-operative Bank Ltd.

The Shamrao Vithal
Co-operative Bank Ltd.


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	SPEECH DELIVERED BY SHRI SURESH S. HEMMADY, CHAIRMAN AT THE 101^th ANNUAL GENERAL MEETING HELD ON Jume 09, 2007

	A warm welcome to you all to the 101^th Annual General Meeting of your Bank.Having just completed a long arduous and fruitful journey of hundred years ,the Bank is now well poised to meet new challenges in the ever growing competitive era of globalisation. It is indeed a great pleasure for me to addressing this distinguished gathering and sharing my thoughts on the present banking scenario in general and your Bank in particular. Before I present highlights of your Bank's performance, let me briefly touch upon the macro economic scenario in which the Bank has been operating. Corporate India is witnessing unprecedented growth over the past two economic growth rate averaging above 9%. The acceleration of growth during this period has been accompanied by significant moderation in volatility ,especially in industry and services sectors. The Reserve Bank Of India in its annual policy statement for 2007-08 has projected the real GDP growth in the range of 8.5%.The robust growth experienced in the industrial and services sector is echoed by the Indian Banking industry which is seen as quite healthy and continues to enjoy high growth rates especially in the Bank credit which has been averaging about 30%. A Few years ago,the Reserve Bank of India was encouraging expansion of Bank credit, while, more recently, they are trying to moderate such expansion in order to tame inflation which was hovering around 6%.The anti inflationary measures taken by government and RBI are proving effective as the wholesale price inflation rate slowed to an eight-month low of 5.27% in the week ended May 12 and also these measures could end up restricting credit growth to below 25% in the current year.The rupee gained 9.1% this year to a nine year high, helping reduce the cost of imports and inflationary pressures however affecting the exporters.Aggregate deposits of scheduled commercial banks have increased by 23% during 2006-07 as against 18.1% in the previous year.Demand deposit growth declined to 16% from 27.5% in 2005-06, but term deposit growth of 24.5% was notably high vis-à-vis 16.4% in the previous year. Apart from acceleration in economic activity, RBI attributes the high growth in term deposits to increase in interest rates on deposits and extension of tax benefits under Section 80C for deposits with maturity of 5 years and above. In The Year 2006-07 , your Bank achieved a business growth of 23.75% registering a growth of 21.80% in operating profits due to gradual increase of net interest income which increased by 28% in the last two years and containment of operating expenses at moderate level.This demonstrates the Bank’s improved ability to compete in today’s challenging environment.The Net profit showed only marginal increase as Income Tax has taken away a third of our profit and due to the cost of acquisition of 3 banks acquired in the year under review. This Year ,more emphasis will be on profitability apart from business volumes as the key deciding factor for assessing individual branch performance and our business focus for the current year will be on improving Demand Deposit portfolio from the present 22.35% to 26%, increasing non-fund based income and transforming branches into sales outlets. Segment specific teams will be formed at select branches for augmenting all round business growth and improving the post sanction follow-up in credit. The main thrust areas will be to further improve bottom-line and to improve ratio of Capital to Risk Asset beyond 12% as availability of capital will be a key factor in determining the future growth. Having successfully integrated the 3 medium sized co-operative banks, your Bank has grown in size from the tally of 48 to 70 in the FY 2006-07. Now with the increased number of outlets of 22 branches, your Bank’s growth will be driven by wider customer base,geographic expansion as well as increased penetration of the existing customer base with an eye on profitable business without compromising on portfolio quality. At the same time, our customers can look forward to product refinements to match changing requirements. Enhancement of technical skills and continuous training to employees has been stepped up and is expected to provide the Bank with a competitive advantage. There will be greater thrust on Retail and SME lending which is gaining momentum and will continue with all vitality and vigor. On the Investment & Treasury front, ALCO is engaged in evolving optimal Asset/Liability structure for the Bank on an on going basis with a view to containing mismatches, optimizing profit from trading in securities and ensuring risk management. Interest income on investments during the year has increased by Rs.6.68 crore. In the context of the rise in yield curve / decline in prices of securities during FY 2006-07, the opportunities from price gains in securities declined. However, your Bank has been able to earn a profit of Rs. 2.20 crore from trading in securities. Your Bank maintains an Investment Fluctuation Reserve (including capital reserve created out of gain on sale of securities from held to maturity category) of Rs. 10.50 crore to guard against market risk on the investment portfolio. Your Bank is committed to establishing a framework of strategic control and continuously reviewing its efficacy and in this endeavor, has created Centralised Credit Cell (CCC) and Retail Assets Cell (RAC) for reduction in turn around time for sanction of credit proposals, skill pooling and to improve quality of appraisal which has resulted in significant improvement in customer service levels, creation of skilled and motivated teams and also reduction in operating cost for the Bank. To enable the Bank to be in a position to anticipate various risks, evolve effective and proactive mechanism and to provide top management outlook on major macro variables, performance analysis of peer level banks and helping the Bank in its effort to tap the emerging opportunities, a new department ‘Performance Planning and Review’ was set up in Sept.-2006. On the recovery front, your Bank continues to address both the facets of NPA management, i.e., recovering out of existing NPAs, as well as arresting the emergence of fresh ones. In the context of additions of Rs. 40 Crores to NPA on account of 3 acquired banks,percentage of Net NPA to Net Advances increased by 1.72% to 3.02% as on 31 March 2007. Your Bank is committed to stepping up its recovery efforts further to achieve 0% Net NPA in the near future. Your Bank continues to lay emphasis on enhanced levels of customer service, data integrity and fall back systems through technology driven products that offer convenience and improve productivity and efficiency. The Bank was able to put in place and automate the accounting procedures arising out of the mergers that happened in the year. In recognition of IT efforts of your Bank, 3 awards were conferred during the year. Your Bank has received permission from the RBI for leasing its software to other cooperative banks and has already bagged two orders in this respect. The Bank has adopted effective system of Corporate Governance which permits adequate autonomy to the Board of Directors and the top management to take decisions that can enhance the progress of the Bank within the framework of regulatory prescriptions, corporate goals and social responsibilities. 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. In conclusion, I would like to state that over the last hundred years your Bank has built a strong foundation based on strong parentage, technological support, professional approach and prudent risk management. Looking ahead I view your Bank’s future with continued optimism and am confident that the Bank’s esteemed shareholders,customers and employees would benefit from the expected growth in the Bank’s business and earnings in the years to come. The Board is greatful to the RBI, Central Registrar of Co-operative Societies, Statutory and Concurrent Auditors, Consultants, Legal Advisors and various other authorities who have supported us in the march towards this progress year after year. I would also like to thank our employees who make a significant contribution to your Bank’s success and they deserve to be congratulated for their efforts. Suresh S. Hemmady Chairman.