Shamrao Vithal Co-operative Bank Ltd.

It is indeed a pleasure to welcome you all to the 97th Annual General Meeting of your Bank. Once again your Bank has met the challenges head on and proved that it deserves its stellar reputation as one of the best and professionally managed Co-Operative Bank in India. The Annual Report of your Bank for the year ended March 31, 2003 which is with you, reiterates this fact. I am sure this aspect would not have been missed by you when perusing through the Report.

Your Bank’s progress in the financial year 2002-03 has to be viewed in the context of overall growth in the Banking Industry, especially in the Co-operative Banking Sector. While growth in aggregate deposits (net of mergers) was around 12.2%, your Bank has recorded a growth of 14.17% in deposits over the previous financial year. On the advances front while the overall growth in Bank credit offtake to the commercial sector was 11.3% your Bank registered a growth of 11.88% in advances.

Your Bank has also made attempts to reduce its cost of funds, which stood at 8.62% on 31-03-2003 as against 9.06% on 31-03-2002. Profitability has however recorded an increase of only around 2% over the previous year because your Bank consciously, keeping in mind the overall future benefits has undertaken additional expenditure in the following areas:

As a result of the above expenditure incurred during the year 2002-03, your Bank now has its Corporate Office in its very own prestigious building christened ‘SVC Tower’ at Santa Cruz (East). The Corporate Office will soon house the central database of your Bank, which will bring about Any Branch Banking (ABB) services to all its customers. On the Treasury front, inspite of the restrictions imposed on trading by Co-operative Banks, your Bank has in a short span of four months, earned a respectable profit of Rs.7.37 crores for the period ended 31.03.2003

Having summarized the progress, I am sure that each one of you present here would join me in upholding my sincere belief that your Bank is amongst the best in the co-operative banking sector and would look to accelerate its progress in the next three years and become THE BEST CO-OPERATIVE BANK during the years leading to the centenary celebrations to be held in 2006.

Corporate Philosophy: I am indeed proud to inform you that your Bank has always looked up to principles upon which sound business is conducted. Your Bank respects honesty, integrity, transparency, accountability and a healthy profit margin for the good of shareholders. Your Bank is one amongst the few banks in the co-operative sector who have consistently practiced Corporate Governance that leads to immense benefits to the shareholders, customers, vendors and employees. Your Bank will always practice and preach corporate ethics and integrity in the business world. While these may seem basic principles, I’ve always believed that the foundation on which customer confidence will be built is the fundamentals. These basic fundamentals were inherited from the founding father of the Bank, Late Shri Rao Bahadur Talmaki and we continue to uphold and implement these basic fundamentals.

The above principles are enshrined within the entire organization and will continue to be implemented in the days to come.

The Road Ahead: The significant transformation of the banking industry in India, in recent times, is clearly evident from the changes that have occurred in the Capital Markets, Financial Institutions and the plethora of innovative and customized products and services offered to customers. While deregulation of the banking sector has opened up new vistas for banks to augment their revenues, it has also resulted in cutthroat competition. However, despite the competition, there is tremendous scope for a reputed Co-operative Bank like The Shamrao Vithal Co-operative Bank Ltd. to expand its operations in the tier II cities. Developments in the banking sector have resulted in customized solutions to fulfill the financial needs of consumers, who have become more discerning and demanding, compelling banks to offer a broader range of customized products through various distribution channels.

The need today is to build on effective and well-coordinated long-term strategies along with medium term and short-term business plans to keep pace with the reform process. Risk Management would assume greater importance as change becomes a constant factor in the competitive environment.

Each and every strategy planned would have to consider the following economic and operational factors:

Profitability: Profitability levels determine the operational strength of an organisation. Your Bank plans to increase its profits by:

Marketing Strategy
- Target increased business volumes through aggressive marketing strategies to reach existing customers and reach prospective customers in geographical areas that your Bank operates in. Your Bank has introduced innovative and customized products and services to meet the specific requirements of its customers.
Treasury Operations
- Your Bank has decided to give extra attention and support to the Treasury Operations. Despite the strict RBI rules and guidelines that regulate the Treasury Operations and the consistent lowering of the interest rates, your Bank has, in a short span of four months, beginning December 2002, your Bank has earned profits of Rs.13.00 crores from treasury operations, primarily from active trading activities. This activity will continue in the future.

Ensure compliance of RBI guidelines and rules
Review risk levels and ensure that these are kept at the lowest levels by adopting effective risk management strategies and
Make effective use of its resources.

Technology
- Your Bank has invested in a state of art Information Technology System and it is amongst the few banks that have developed an in-house banking software called Genius. It is heartening to note that the IT Division has successfully developed an upgraded version, viz. Genius I and the same has been successfully implemented at all the branches of your Bank. Your Bank has also made progress in providing Any Branch Banking (ABB) facilities to its customers. Your Bank has also consciously upgraded the software programme. Any Branch Banking (ABB) services in the ensuing year will be available at all 37 branches & the 4 Extension Counters of your Bank.
- Your Bank is the only Co-operative Bank to install IP Telephony over its own leased lines. This service connects all 37 branches & the 4 Extension Counters and the various functional departments. This has enabled its employees to communicate without any charges that are levied by MTNL, resulting in substantial savings in telephone expenses.
ATM:
- The Bank has presently installed 20 ATMs that are interconnected and provide ‘Cache24’ services on a 24x7 basis.
- The ATM base has grown from 10 as of 31.03.2002, and 17 as of 31.03.2003.
Controlling Costs
- Your Bank has consciously made sincere efforts to control the operating costs and overheads.
- The investment in state of the art Technology and the centralised location of all the major functional departments under one roof has improved the communication amongst its employees and it has also enhanced their efficiency.
- Your Bank has consistently operated within the budgeted amounts and this has resulted in substantial savings, leading to the reduction of cost of funds from 9.06% as on 31.03.2002 to 8.62% as on 31.03.2003.
Fee based Income
- Your Bank is currently engaged in negotiations with various Insurance Companies and Mutual Funds to distribute their products and services through its 37 branches and 4 extension counters.
- Your Bank is planning to offer customized financial solutions to its customers to assist them in planning a secured financial future. The introduction of insurance and mutual fund products and services together with the innovative banking services offered to its customers will help your Bank in this endeavour.

NPA Management: The management of NPAs continues to be the biggest challenge before the banking sector, especially with the tightening of NPA norms. Your Bank already achieved a landmark victory in the Star Glass Works case (Shamrao Vithal Co-operative Bank Ltd. v/s. Star Glass Works AIR2003BOM205) after it successfully argued and got in its favour a historic decision which upheld your Bank’s contention that a Co-operative Bank is for the purposes of debts due to the Bank and the Financial Institutions Act 1993 a Banking Company within the meaning of clause ( c ) of section 5 of the Banking Regulation Act 1949. Consequently, all the Co-operative Banks will now have access to the Debt Recovery Tribunal (DRT) for recovery of its dues. Your Bank, having achieved the above success has now drawn up a strategic plan after examining options available under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI) and the Debt Recovery Tribunal (DRT), to curb the NPA level.

Capital Adequacy: The ability of a bank to face an uncertain and highly competitive scenario is solely dependent upon the size of its capital base. Recent refinements in the Capital Adequacy Norms have also increased the capital requirements. Towards this end your Bank has increased its authorised share capital from Rs.20.00crores to Rs.35.00crores. Appropriate steps are now being taken to increase your Bank’s paid up share capital. Every effort would be put in to ensure the maximisation of profits and reduce the impairment of assets to ensure increase in the net worth.

Management: Recent developments in the banking industry have brought to the fore the need for a banks’ management to exercise proper vigilance and supervision over the functioning of their operations. Corporate Governance, which represents the value framework, the ethical framework and the moral framework under which business decisions are taken, calls for transparency in decision-making and accountability to stakeholders.

Your Bank has a professionally qualified management team and the senior executives are members of the Committee of Management Executives (CME). The CME is a ‘think tank’ and a forum for the heads of various functional areas to come together to plan and implement the policy decisions made by the Board of Directors.

The objective of the CME is also to ensure better co-ordination and communication of decisions taken in various areas of operation. I would once again like to assure members that your Bank will always live up to the philosophy of Corporate Governance. The Directors, Management and Staff of the Bank would continue to maintain a high degree of transparency, accountability and responsibility.

Systems & Controls: The sustained and consistent growth of your Bank’s operations have also brought to fore risks associated with growth. Your Bank has given due importance to management of operational risks, by:

Customer Service: The need for customer service in today’s highly competitive banking industry cannot be over emphasized. The cut throat competition amongst various banks, financial institutions coupled with the consistent reduction in interest rates resulting in reduction in interest rate spreads has made it very difficult for a bank / financial institution to generate adequate profits.

Your Bank has embarked on a plan to increase the strength of its marketing team and it is also using innovative methods to locate prospective customers and convert them into life long partners in progress.

During the past year, your Bank has introduced schemes such as the ‘Bfree’ scheme for payment of customer utility bills.

Today, the customer is well informed about his needs and various banks and financial institutions are engaged in a fierce competition to service his needs. Since the products and services offered by various banks and institutions are quite similar in nature, it is the quality of customer service that separates a good bank from an also-ran bank. You will be pleased to know that your Bank’s services are tailored to meet the specific needs of its customers and your Bank is successfully living up to its motto of ‘Personalised Service’.

Marketing: Increased competition on several fronts has made your Bank realise the need to compete with the situation and not with other Banks and Financial Institutions. A full-fledged marketing set-up with aggressive strategies to build up the corporate image of your Bank has been approved by the Board and will be implemented in the next few months.

I sincerely believe that the above and several other such strategies and changes would in times to come further strengthen the Bank’s firm foundation to face the challenges that lie ahead.

Corporate Office: Your Bank now has its Corporate Office in its very own prestigious building ‘SVC Tower’ at Vakola, Santa Cruz (East). With the blessings of H.H. Shrimat Sadyojat Shankarashram Swamiji, who raised the foundation stone of the Corporate Office building, your Bank will continue to scale new heights in times to come.

Personnel: I take pleasure in recording the Board’s appreciation of the contributions made by the Management, Officers and members of the Staff. Their commitment and sincerity have further helped to improve the employee productivity ratio to Rs. 3.38 crores as on March 31, 2003, (an increase of 12% in employee productivity) which continues to be amongst the highest recorded by any Urban Co-operative Bank.

The Bank’s Annual Report Cover: Your Bank has successfully during the 97 years of its existence withstood the various upheavals and vicissitudes emerged as a strong and dominant player in the Urban Co-operative Banking Movement. I am confident that your Bank would continue to scale new heights with your support and trust in us. Your Bank’s Corporate Office building is the first step towards this direction. The prestigious building stands tall with an image and identity of its own.

Acknowledgement:I take this opportunity on behalf of the Board to express our gratitude to our Shareholders, Depositors, Borrowers and Well Wishers for their valuable support.

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

I take this opportunity on behalf of the Board to express our gratitude to our Shareholders, Depositors, Borrowers and Well Wishers for their valuable support.