Dear Members,It is indeed a great pleasure to welcome you all to the 98th Annual General Meeting of your Bank. The Annual Report of your Bank is already with you and I am sure that you all must have, by now, gone through it. While doing so, I am sure that you must have realized that your Bank has yet again proved by its performance during the year that it has continued to effectively pursue its belief in its ideology to take all challenges head on and in the end, excel in its performance. Your Bank is confidently moving towards its Centenary that would indeed be a coveted achievement and I am sure, will do it in true grace and honor.

Progress: Your Bank’s progress in the year 2003-04 has been better than the one prevailing in the industry in general and the co-operative banking field in particular. It can boast of a growth rate that has been better than the one achieved by like-minded co-operative banks and has recorded a growth of 19.16% in deposits and 24.77% in advances over the previous financial year.

Conscious of the costs your Bank has made a sustained effort in bringing the cost of funds down from 8.62% as on March 31, 2003, to 7.65% as on March 31, 2004. All efforts are made to bring this down further to keep in tune with the trends in the banking system by laying more thrust on demand deposits and low cost term deposits.

Your Bank has declared a net profit of Rs. 20 crore which is an improvement of around 20% over the previous financial year. The Bank has an ideal blend of profit out of banking operations as well as through treasury operations. During the financial year 2003-04, the profit of your Bank through banking operations got a major boost and was aptly supplemented by that out of treasury operations. During the financial year 2003-04, the Bank’s gain from the sale of securities was Rs. 20.17 crores as against Rs. 7.37 crores earned in the previous financial year.

Your Bank is now required to provide for the Investment Fluctuation Reserve in compliance with the Reserve Bank of India guidelines on the matter. Moreover, the burden of depreciation on the Corporate Office and the other related assets for the full year was effectively sustained by your Bank.

The end of the financial year 2003-04 saw a further tightening of the NPA norms and witnessed the full-fledged formal shift from the erstwhile ‘180 day’ norm to the ’90 day norm’ of NPA identification. This switchover was supposed to have had a marked impact on the entire banking system in general and the co-operative banking system in particular. As advised by the Reserve Bank of India, your Bank had also devised a ‘transition plan’ for the purpose and had meticulously followed the same. This resulted in keeping the severity of the impact of such a switchover totally under control. In fact, despite the said switchover, your Bank could, for the first time in the last three years register a fall in the percentage of gross and net NPAs to total advances outstanding. The gross NPAs have reduced to 10.86% from 11.26% as of the earlier year whereas, the net NPAs have fallen from 5.06% as on March 31, 2003 to 3.74% as of March 31, 2004. Your Bank had put in concerted efforts on recovery during the said year and could achieve a record rise of 106% in recoveries from NPAs as compared to the previous year.

Your Bank thus, complied with the Reserve Bank guidelines in respect of switchover to the ‘90 day norm on NPA identification’ and made substantial additional buffer provisions over and above those required under the guidelines for the purpose.

In the year under review, your Bank opened a branch at Gamdevi in October 2003, in the first Co-operative Housing Society in Asia, called Saraswat Buildings, today, a heritage structure. In fact, this was a moment of glory, since it was like completing a full circle. These were the premises where your Bank had its first stable office way back in 1915. An extension counter was also opened in Hessarghatta near Peenya in Bangalore.

Paramount importance has always been accorded to technology and has believed that growth from now onwards has to be essentially technology driven. Your Bank has been one amongst a handful of banks that run their entire banking operations on it’s in-house software, christened ‘Genius-1’, and has successfully implemented it at all the 38 branches and 4 extension counters. All these 42 establishments have successfully connected and has thus been successfully offering ‘24 X 7 banking’ in the form of Any Branch Banking [ABB] and also Any Time Banking through the network of its 22 ATMs. The customers can utilize any of these ATMs for their cash requirements by having an on-line access to any of the branches where they may have accounts including the branches not having an ATM.

Your Bank has recently started offering SMS Banking and Tele banking whereby the customers can get balance enquiry, details of the last few transactions etc, using these products. Your Bank recognizes the importance of data warehousing and data mining and to this end has successfully developed in-house its own data warehouse by the name ‘Gold mine’.

It is indeed a matter of immense pride that all these products are developed in-house, by the committed staff members of the Bank.

A foray has also been made into Bancassurance during the financial year 2003-04 by concluding tie-ups with ICICI Prudential and Bajaj Allianz for distribution of their life and non-life insurance products respectively.

Membership of the Real Time Gross Settlement (RTGS) has been obtained by your Bank and has recently gone live on the RTGS. This will open up new vistas in offering better customer service and achieving a higher level of customer satisfaction in times to come.

Your Bank has always cared for the morals and values that have been inherited from the founders, Shri Shamrao Vithal Kaikini and Rao Bahadur Shripad Subrao Talmaki and firmly believes in conducting sound business without compromising on the basic fundamentals and principles. Paramount respect and importance is accorded to Honesty, Integrity, Transparency and Accountability as well as Business Ethics and sound Corporate Governance. Your Bank believes that all these collectively have brought immense benefits to all its committed members, depositors and clients over a period of time. In fact commitment to this ideology has resulted in maintaining an ‘A’ Audit classification continuously and your Bank is committed to maintaining it in future too.

Consequent to the promulgation of the new Multi-State Co-operative Societies Act, 2002, the elections to the Board of Directors of your Bank was conducted in January 2004 under the supervision and control of the Returning Officer appointed by the Central Registrar, in keeping with the provisions of the Act and the new Board of Directors so elected has assumed office for a full term of five years as set out in the Act and the By-laws of the Bank. The newly elected Board comprises of the required number of professionally qualified directors as well as those experienced in the field of banking.

The Banking industry in India has seen a significant transformation in recent times. The recent changes on the political front and resultantly, on the socio-economic front would have its own impact on the banking industry in the country. No doubt, the times have been testing for the co-operative banking sector and would continue to be so for quite some time in future.

The margins and the spreads have been thinning, there is a further tightening of various norms governing co-operative banks including those on NPAs and stiff cut-throat competition from private sector and public sector banks, thereby making the situation pretty testing for the co-operative banks.

But this does not deter a bank of the stature of Shamrao Vithal Co-operative Bank that has always believed in taking all challenges head-on and emerging a more effective performer.

The need today is to effectively manage change by way of effective long term strategizing through medium and short-term business plans and to this end, your Bank is gifted with a professional Board of Directors and a well-qualified and professional management team that is committed to carrying out the plans and policies as laid down by the Board of Directors.

The road ahead would be more technology driven as far as your Bank is concerned. Thrust is laid on technology-oriented future growth and expansion that would also ensure an optimum utilization of its available human resources.

Technology is going to play a key role in an era of thinning spreads, where cost cutting assumes paramount importance. Extensive use of Technology would assume an important role in controlling transaction costs, overheads and establishment expenses in future thereby enhancing operational efficiency, productivity and profitability.

While concentrating on the conventional areas of banking operations, proper importance would also be given to further development of the Investment and Treasury Department of the Bank since this would be one department that would also turn out to be an important profit center in times to come.

Marketing: Marketing is another area that will hold the key to enhancing the efficacy of operations in times to come. Your Bank has a Marketing Department that has been doing a good job. There is a need to concentrate more on modern concepts like ‘Customer Relationship Management’ [CRM] that are here to stay and also lay more stress on conceptualization, introduction of new schemes, customized products and services to cater to the need of the existing clientele and also capable of attracting new clientele. The Marketing Department would strive to introduce those essential products and services that would help in transforming your Bank into a much desired ‘One-stop Shop’ offering customized financial solutions to serve the financial needs of the entire family, in times to come.

To this end, your Bank is actively planning to venture into forex and has, to start with in a phased manner, also submitted an application to the Exchange Control Department of the Reserve Bank of India for a Full-Fledged Money Changers’ Licence.

In the process of cost cutting and enhancing operational efficiency, the aspect of recovery and NPA management assumes immense significance. Your Bank would continue to lay stress on the two-pronged action plan of recovering out of the existing NPAs and curbing emergence of fresh NPAs out of effective post sanction monitoring and initiation of timely legal action through the avenues lately made available to the Multi-State Co-operative banks. Your Bank acknowledges and appreciates the fact that every rupee recovered out of the NPAs goes a long way in consolidating the profitability of your Bank. The Legal and Recovery Department is equipped with specialists in the field of recovery and this department has also been functioning with the spirit of being significant contributors to the bottom line of your Bank.

Roadmap: To summarize, the roadmap would be technology driven banking, achieving an ideal blend of conventional banking operations properly supplemented by treasury operations, thrust on cost-cutting, effective NPA management, thrust on internal systems, control measures, proper security, effective marketing to facilitate evolving into a ‘one-stop shop’ for financial solutions thereby achieving a higher magnitude of customer satisfaction through effective customer service.

I take pleasure in putting on record the Board’s appreciation of the contribution made by the Management, the Officials and the members of the staff. Their commitment and devotion has helped further enhance the employee productivity ratio in the Bank that happens to be the best in the co-operative banking fraternity.

Your Bank is making confident strides towards the coveted centenary mark in a couple of years’ time. In the process, the Bank is committed to scaling new heights and crossing all boundaries of success and performance excellence, the feeling that is more appropriately conveyed by the cover page of the Annual Report. Of course, your Bank acknowledges the fact that this is possible only with your unstinted support and trust in us. On behalf of the Board, I take this opportunity to express our gratitude to our members, depositors, clients and well wishers for their valuable support.

Acknowledgement: 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 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 put 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 Statutory Auditors for their co-operation and guidance.

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

I take this opportunity to assure you that your Bank believes in raising the bar by setting higher goals for itself and that there shall be a sustained and committed endeavor to ensure accomplishment of the set goals and objectives so that by the centenary, your Bank emerges as the best co-operative bank, when judged on quality, based on strong fundamentals and an inherent strength.

 

Suresh S. Hemmady

Chairman