2 1 3-14 We Are with You! ANNUAL REPORT

Women Empowerment 2 1 3-14 we are with you! ANNUAL REPORT

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Commited to Rejuvenating Rural Economy

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we are with you! Head Office: 2-5-8/1 Near Ambedkar Statue, Ramanagar, Hanamkonda - 506 001 Warangal Dt. A.P. Ph: 0870 - 2577256 I Tollfree : 18004257900 I e-mail: [email protected] I www.apgvbank.in we are with you! Annual Report 2013-14

Empowering Rural Lives

we are with you!

9th Annual Report 2013-14

With Best Compliments from

K. Lakshmana Rao Chairman Andhra Pradesh Grameena Vikas Bank Head Office,Warangal AP

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Together..

we are with you!

We are with you...

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Vision

Repositioning the Bank in competitive rural market and accomplish the leadership spot in Rural Banking. Aspiring to realize the vision of excelling in Rural Credit and SME. Pursuing the best practices for alues delivering the value added service to the customers by transforming the key branches into profit and business centers.

Mission

With efficiency and service each one of us works in tandem to deliver quality rural service, no matter where our customers choose to experience it. With the advantage of a large network in the rural hinterland, it is our duty and obligation to serve the rural masses, the deprived and denied, retail and agriculture sectors through improved processes, deployment of technology, with an emphasis on employment of rural youth, augmentation of agricultural production, upliftment of the downtrodden and unabated service to rural poor with commitment to the sacred task of rural development and women's empowerment.

Values

· Commitment for rural development

· Excellence in customer service

· Respect to systems and procedures

· Team Synergy Vision, Mission and V

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Letter of Transmittal

Andhra Pradesh Grameena Vikas Bank Head Office : Warangal

Date: 30.06.2014

The Secretary, Ministry of Finance, Dept. of Economic Affairs, Banking Division, Government of India, Parliament Street, New Delhi-110001

Dear Sir,

In accordance with the provisions of Section 20 of the Regional Rural Banks Act 1976, I forward herewith the following documents.

A Report of Board of Directors as to the Bank's working and its activities during the period 1st April 2013 to 31st March 2014.

A copy of the audited Balance Sheet and Profit and Loss Account for the year ended 31st March 2014.

A copy of the Auditor's report in relation to the Bank's accounts for the period 1st April 2013 to 31st March 2014.

Yours faithfully,

(K. Lakshmana Rao) Chairman

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What's inside

1. Board of Directors

2. Executives Team

3. Chairman's Message and commitments

4. Key Performance Indicators

5. Accolades

6. Board of Directors Report

7. Auditor's Report

8. Balance Sheet, Profit & Loss Account and Schedules

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Geographical Area Regional& Offices

Srikakulam Warangal Saraswathi complex 2-739-1-3, First Floor Baker sahed peta Ramnagar, Hanamkonda Srikakulam 532001 Warangal 506001 Tel 08942-221041 Tel 0870-2577884 Fax 08942-221040 Fax 0870-2568010 [email protected] [email protected]

Vizianagaram Mahabubnagar 8-12-64/1, Himagiri theatre Mettugadda New S.P. Bungalow Mahabubnagar 509001 Vizianagaram 536002 Tel 08542-242861 Tel 08922-273956 Fax 08542-242862 Fax 08922-274221 [email protected] [email protected] Sangareddy Visakhapatnam Medak 502007 TPT colony Tel 08455-276263 Near Enadu Fax 08455-276603 Seethamdhara [email protected] Visakhapatnam Tel 0891-2713942 Ashoknagar Fax 0891-2746341 Ramachandrapuram Mandal [email protected] Medak 502032 Tel 040-20040773 Khammam Fax 040-23020238 Wyra Road [email protected] Khammam 507002 Tel 08742-226816 Bhadrachalam Fax 08742-228972 Bhadrachalam [email protected] Khammam 507111 Tel 08743-231492 Nalgonda Fax 08743-231020 Ramgiri, Nalgonda [email protected] Tel 08682-229943 Fax 08682-229945 [email protected]

06 BOARD OF DIRECTORS

Chairman DGM on deputation Shri K. Lakshmana Rao from State Bank of India

Nominees of Central Government under Section 9 (1) (a) of the Regional Rural Bank's Act, 1976 Shri C. Laxmunnaidu

Shri V. Hanumantha Reddy

Nominee of Reserve Bank of India under Section 9 (1) (b) of the Regional Rural Bank's Act 1976 Shri Samir Sarkar Asst. General Manager, Reserve Bank of India, Hyderabad Nominee of NABARD under section 9 (1) (c) of the Regional Rural Bank's Act, 1976. Shri Y. Hara Gopal Asst. General Manager NABARD Hyderabad

Nominees of State Bank of India under Section 9 (1) (d) of the Regional Rural Bank's Act, 1976 Shri Mihir Narayan Prasad Mishra Deputy General Manager (ABU) State Bank of India, LHO, Hyderabad Shri Sanjay Kumar DY General Manager, State Bank of India, Zonal Office, Secunderabad

Nominees of State Government under Section 9 (1) (e) of Regional Rural Bank's Act, 1976 Shri L. Prema Chandra Reddy, IAS Principle Secretary, Institutional Finance, Finance Department, GOAP, Hyderabad Shri G. Kishan, IAS District Collector & Magistrate, Warangal

07 we are with you! Annual Report 2013-14 Executive Team

K. Lakshmana Rao Chairman

Shri N. Ravindranath Shri DSRK Saibaba General Manager (HR) General Manager (Credit)

Shri S. Prakash Kumar Shri B. Narayana Sresty General Manager (Operations) General Manager (IT) 08 we are with you! Annual Report 2013-14

Our Mentors

Shri C.R. Sasikumar Shri Gopal Krishan Kansal Chief General Manager, General Manager (Network-I), State Bank of India, LHO, Hyderabad State Bank of India, LHO, Hyderabad

Our Regulators

Shri K.R. Das Shri Jiji Mammen Regional Director, Chief General Manager, Reserve Bank of India, Hyderabad NABARD, RO, Hyderabad

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Highlights 2013-14

* Growth in Business Rs 2227.85 Cr @17.88% (Rs 1772.77 Cr)

* Growth in Deposits Rs 922.02 Cr @ 15.71% (Rs 716.19 Cr)

* Growth in Advances Rs 1305.85 Cr @ 19.82% (Rs 1056.58 Cr)

* Net profit Rs 180.53 Cr growth @ 13.21% (Rs 159 Cr)

* Business per Branch Rs 20.86 Cr (Rs 19.53 Cr)

* Business per Employee Rs 5.34 Cr ( Rs 5.02 Cr)

* Profit per Employee Rs 6.55 Lakh (Rs 6.42 Lakh)

* Opened 66 New Branches (64 Branches) taking total to 704

* Opened 64 New Ultra Small Branches, taking total to 488

* Issued 2.17 Lakh RuPay ATM-cum-Debit Cards and 1.01 Lakh Kisan Cards.

* On boarded to Aadhar Payment Bridge System (APBS) on 21.11.2013 to implement Direct Benefit Transfer (DBT) for LPG subsidy and other benefits.

* Aadhar numbers seeded on 3,79,261 accounts during the year, of which 64,855 Aadhar Numbers were seeded on a single day on 24.9.2013

* Implemented Aadhar Enabled Payment System (AEPS) and making Aadhar authenticated payments of Social Security Pensions (SSP) and MGNREGS wages through BCAs, leveraging Biometric Technology.

* Opened 1,03,126 No Frills accounts in a single day on 24.8.2013 by all Branches and another 75328 accounts were opened on the same date by BCAs

* Opened 8 Financial Literacy Centres

* Conducted a record number of 1705 recovery camps on a single day on 14th February 2014.

* Stood first in Cross Selling (SBI Life)- Mobilized Rs 10.08 Cr business premium and Rs 1.49 Cr commission against the targets of Rs 10 Cr & Rs 1 Cr respectively

Note : Figures in the brackets pertain to Previous Financial year

10 Chairman’s Message

It's a special honour for me to be presenting the Bank's Annual Crore as against FY 2012-13 level of Rs 12458.77 Crore. Report for the fourth consecutive financial year. As someone Advances grew at 19.82% (Rs 922.02 Crore) and deposits at seeking to add value to the Organization, I and my entire team 15.71% (Rs 1305.85crores). of administration and staff, had yet another year which During the year the Bank has been subjected to Management witnessed a steady growth in business and strong Audit by State Bank of India (our Sponsor Bank), Statutory fundamentals. Inspection by National Bank for Agriculture and Rural I chose to draw attention to the fundamentals of our Bank so Development (NABARD) and Statutory Audit by an as to emphasize the fact that the Bank has been growing at an independent Chartered Accountants firm appointed by accelerated rate predictably. Government of India. Both the Supervisory and Regulatory authorities, after thorough scanning of the systems and The streak of success the Bank has had in the past, has come to functions of the Bank, have awarded 'A' Rating (Excellent) in be reinforced as a proven track record of the Bank. That the their reports. The Statutory Auditors M/s Umamaheswara business volume has almost doubled in the last four years is a Rao & Company, Hyderabad, while presenting the Financial testimony to the fact that the Bank has fallen into a rhythm of Accounts for the FY 2013-14, have made a special mention growth. An increase of over Rs 7000 Crore business (both that the Bank's Systems and Procedures have stabilized to a deposits and advances) was crystallized since 2010-11, with great extent over a period of three years (the firm has been advances increasing by 104% and deposits by 78.48%. In the the Statutory Auditors for the Bank since 2011-12). I quote same period, the Bank has shown consistent growth in the Board Resolution “The Statutory Auditor has expressed productivity parameters - the Per Branch Business has appreciation for the Bank's Management and staff for the increased from Rs 17.52 Crore to Rs 20.86 Crore, Per Employee business growth and improvements in qualitative aspects like Business from Rs 4.33 Crore to Rs 5.34 Crore and Per Employee stabilisation of Systems and Procedures, Information Systems Profit from Rs 4.86 Lakhs to Rs 6.56 Lakhs. etc. The Statutory Auditor has also made a special mention In FY 2013-14, our Business has grown by 17.88% with an that the Bank is functioning on sound lines more or less like absolute growth of Rs 2227.85 Crore to reach Rs 14686.64 any other commercial Bank. The staff have matured into

11 we are with you! Annual Report 2013-14 professional bankers by and large and are playing pivotal role development, a surprise fall out of this is the networking of in the credit delivery and thereby economic development of young people creating a common bond and transformation of the State.” young minds into “APGVBians”. I am sure this will take the Organisation to attain its full potential in the years to come. I I believe, this perception of the Statutory Auditor on the Bank have spent quite a lot of time with these young minds, in has something to do with the consistent improvement that different forums, particularly, during training programmes, the Bank has been bringing about in all aspects in the last three understanding their problems and potential like a parent and years. For example, data gaps in the CBS system has been one communicating the Bank's priorities and objectives. 'Feel at of the areas of serious concern for the Bank. To address this home', 'assurance', 'hopes of bright future and career' are serious issue, the loan accounts have been grouped some of the factors that I wanted every prospective APGVBian depending on outstandings and personnel have been to take home, while joining this Bank, thereby achieving the constantly deployed to verify each and every account, to congruence of visions of the APGVB and APGVBians. identify the data gaps for rectification. As at the end of FY 2013-14, all loans with outstanding of Rs 1 Lakh and above, We committed ourselves to continuous innovation, be it in have been thoroughly verified for their data accuracy and products / services or IT implementation. Apart from 6500 rectifications were carried out. There are around 5.5 Lakh plus villages that our Bank's brick and mortar branches extend small ticket loan accounts with outstandings below Rs 1 Lakh. financial services, we have leveraged technology to extend branchless banking services at 6571 villages under three The Bank has built up a strong foundation by making profits distinct segments viz., (a) AP Smart Card Project for payment consistently and increasing the Reserves and Surpluses to Rs of Social Security Pension and disbursement of MNREGS 878.65 Crore with an accretion of Rs 460 Crore over a period of Wages in 2083 villages (b) Financial Inclusion Plan (FIP) in 869 four years. The total salary and allowances (excluding villages with 2000 and above population (c) FIP in 3619 terminal benefits) which accounts for around 60% of the villages with population below 2000. All these villages were operating expenses, has almost doubled in the last four years unbanked and around 35 Lakh villagers did not have a Bank – it was Rs 6.5 Crore in April 2010 and Rs 12 Crore in March account before we ventured into these villages with a banking 2014. Headcount increased by around 700 since 2009 with package powered by technology. Opening of No Frill accounts newly recruited staff accounting for 45% of 2743 as on was a thrust area for the Bank and on a single day (24.8.13), 31.3.2014. The ability of the Bank to make profits 1,78,454 accounts were opened by all Branches and BCAs. continuously, after absorbing ever increasing staff and other Real time online transactions are happening in these villages operating costs exhibits the strength of the Organization. i.e., the beneficiaries accounts opened by Business Another noteworthy feature of the Bank's strong Correspondent Agents using handheld devices, have been fundamentals, is that the Bank could withstand the exodus of updated in CBS instantly and so are the day to day 558 experienced staff (due to retirements in the last four transactions. A transaction done in a remotest village by a years) and fill the vacuum by absorbing over 1200 new Bio-metric Card holder through BCA is updated instantly in recruits, by providing continuous training and re-training. In our CBS Server located in Mumbai. Ultra Small Branches fact around 1700 people were recruited since 2009, of which (USBs) were opened in 488 of these villages for FI operations. around 500 people have left the organization for better CBS connectivity through Laptops is being provided to these prospects. There has been an enormous activity on the HR USBs to enable FI customers to have their Statement of and training front, which the Bank could handle well to sustain Accounts etc. the smooth operations of the Bank. The Bank has given APGVB is the first RRB in the country (among SBI sponsored utmost importance to continuous training at our own RRBs) to have on-boarded to Aadhar Payment Bridge System Learning Centre and outside Institutes considerably (APBS) for DBT (LPG subsidy) and Aadhar Enabled Payment increasing the Training-spend. Apart from skill and attitude

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System (AEPS) for Aadhar authenticated payments of Social campaigns was to educate the borrowers to renew their crop Security Pension and MNREGS Wages. Seeding of Aadhar loans and benefit from the Bank finance. In a span of 3 ½ numbers with Bank accounts, has been taken as a campaign months, the Bank could renew 73422 KCC NPA accounts out of on day to day basis, so far covering around 3,79,261 customers 111850 accounts, by vigorous follow up through these On a single day, 64,855 Aadhar Cards have been seeded (on campaigns. During the year, the Bank could disburse Rs 24.9.13), creating huge awareness among customers. 1429.36 Cr to farmers as crop loans to take the total crop loan outstanding to Rs 3033.92 Cr. The Bank has also disbursed Rs Apart from the above, the Bank issued 2.17 Lakh ATM-cum- 1898.60 Crore to Self Help Groups (146753 Groups), taking Debit Cards and 1.01 Lakh Kisan Cards on RuPay platform, the total outstanding to Rs 2513.08 Cr (163388 groups). which have become so popular that the daily transaction limit APGVB holds the No. 1 position in the country among all RRBs agreed with State Bank of India, has to be revised upwards both in terms of no. of groups and amount financed. from Rs 25 Lakhs to Rs 50 Lakhs and to Rs 1 Crore subsequently. The year has another significant development that the Bank has started construction of own buildings for Regional Office / The Bank's initiatives in taking forward Financial Inclusion Training Centre and a branch on the lands owned by the Bank enabled by latest technology, have earned it the prestigious at Khammam, Sangareddy and Nalgonda. I thank the district Platinum Award in SKOCH Financial Inclusion & Deeping administration and State Government for all their favourable Awards 2014 under the category of “Excellence in Banking”. gestures in this regard. This is the second time the Bank has been recognized at national level, the first being the NASSCOM award for the Best It has been a wonderful and eventful journey so far, placing I.T. Driven Innovations in RRBs in 2012-13. the Bank on a strong growth trajectory. Like the drops make an ocean, behind this mighty organization and its success, During the year, the Bank has opened 66 new Branches (brick there are countless people / stake holders. I thank each and and mortar) as against the Government of India target of 64, every one who are responsible for the successful journey of taking the total number of branches to 704. the Bank. It is my privilege that I be at the helm of affairs of the The year that has just gone by has its share of uncertainties, in Bank which gave me immense satisfaction. view of political developments leading to bifurcation of the State into Telangana and Andhra Pradesh, thereby impending bifurcation of the Bank, apart from the long standing GOI Yours faithfully, proposal for amalgamation of APGVB and DGB, created a sense of transition-phase. This has not however had any adverse impact on the business growth. But, the preparation for State Assembly elections scheduled for the beginning of next FY has left its mark on the Assets side of the Balance (K Lakshmana Rao) Sheet. Chairman In the face of adverse environment, Bank has taken a number of open ended steps / initiatives to keep up the momentum and improve the recovery climate. A record number of 1705 recovery camps were conducted on a single day on 14th February 2014 by all our Branches. At frequent intervals special campaigns like “SHG NPA Reduction Day”, KCC-NPA Reduction Day” etc., were organised to motivate the staff in their recovery efforts. The main motive behind these

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16000 (Rs in Crores) Deposits Advances Business 14687 14000 12459 12000 10686

10000 9689 7895

8000 7675 6791 6698 6590 5869 5533 6000 5635 5133 4894 4795 4813 4001 3870 3805

4000 3394 3304 2934 2701 2718 2188 2095 2000 1813

0 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14

Reserves (Rs in Crores) Profit (Rs in Crores) 878.65 900 180 800 698.12 180 159 700 160 600 539.12 140 120 120 108 500 419.01 103 100 400 310.89 69 80 300 221.04 151.74 60 37 200 40 23 12 100 20 0 00

2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14

(Rs in Crores) (Rs in Crores) Others Capital & 570.04 Reserves

5% 225.29 354.59 Borrowing 972.74 9% 2280.39 2683.43 22%

7895.42 Deposits 6791.18

Cash and Balances with RBI Investments & Balances with Banks Capital & Reserves Deposits Borrowings Others Advances Fixed & Other Assets

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No. of Staff 3000 2743 2354 2477 2500 2277 2262 2215 2160 2202 2236

2000

1500

1000

500

2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14

Per Branch Business (Rs in Crores) Per Emp Business (Rs in Crores) 25.00 20.86 6.00 5.34 18.60 19.53 5.02 20.00 17.52 5.00 4.33 4.54 14.26 15.00 4.00 3.49 11.67 12.70 3.10 9.96 2.54 8.28 3.00 2.13 10.00 1.76 2.00

5.00 1.00

00.0 0.00

2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14

(Rs in Lakhs) (Rs in Lakhs) 6.55 Per Branch Profit 7.00 Per Emp Profit 6.42 30.00 26.93 24.92 6.00 25.00 4.83 5.10 20.91 4.68 19.14 19.53 5.00 20.00 4.00 3.21 13.14 15.00 3.00 7.65 1.67 10.00 4.77 2.00 1.01 0.52 2.44 5.00 1.00

0.00 0.00

2011-12 2013-14 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2012-13

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KEY PERFORMANCE INDICATORS Indicators 2010-11 2011-12 2012-13 2013-14 No. of Districts covered 8 8 8 8 No.of branches 553 574 638 704 a) Rural 429 432 468 509 b) Semi urban 88 104 131 148 c) Urban 36 38 39 47 d) Metropolitan … ... … .…. Ultra Small Branches …. …. 424 488 Total staff: Excluding Sponsor Bank Staff 2234 2354 2477 2743 Of which Officers 1298 1358 1480 1701 Deposits 47947222 51466664 58691854 67911806 Growth % 26.07 7.34 14.04 15.71 Borrowings outstanding 19546416 21703395 30191374 22803839 Growth % 22.16 11.04 39.11 -24.47 Gross loans and Advances outstanding 48944327 55327100 65895835 78954212 Growth % 26.48 13.04 19.10 19.82 CD Ratio 102.08 107.37 112.27 116.26 Investments outstanding 21472834 23769925 31177328 26599025 Growth % 29.19 10.70 31.16 -14.68 SLR Investment outstanding 9996983 11049708 13394391 16633397 Non-SLR Investment outstanding 11475851 12720217 17782937 9965628 Averages Average Deposits 39000837 46222989 52115979 60203159 Growth % 14.17 18.52 12.75 15.52 Average Borrowings 16607091 21477115 26412105 28764388 Growth % 26.08 29.32 22.98 8.91 Average Gross Loans And Advances 43335628 50715413 61230415 70659351 Growth % 27.01 17.03 20.73 15.40 Average Investments 15817799 21252000 12837700 27702372 Growth % -0.25 34.35 -39.59 115.79 Average working funds 80457660 80090412 87828980 109001922 Growth % 16.33 9.66 24.11 Loans issued during the year Loans issued during the year 38271901 34386800 50895100 51919118 Growth % 112.71 -10.15 48.01 2.01 Of above, loans to Priority Sector 29779956 23989900 35928100 34949580 Of above, loans to Non-target Group 8491945 10396900 14967000 16969538 Of above, SF/MF/AL 12309498 13912600 10898900 10484874 Productivity Per branch 1752115 186051 195279 208617 Per staff 43586 45618 50298 53425

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Indicators 2010-11 2011-12 2012-13 2013-14 Recovery Performance Demand 25472765 31646135 49277099 57704721 Recovery 20595069 25921335 40816089 45132478 Over dues 4877696 5724800 8461010 12572243 Recovery % (June position) 80.85 81.91 82.83 78.21 Asset classification a) Standard 46981468 52516641 63221348 75456049 b) Sub-Standard 1557742 1968405 1487376 1595302 c) Doubtful 389227 842073 1187111 1892399 d) Loss 15890 0 0 10462 Total 48944327 55327119 65895835 78954212 Std.Assets % to Gross Loans & Advances outstanding 95.99 94.92 95.94 95.57 Profitability analysis Interest paid on a) Deposits 2274695 3269287 3903175 4633385 b) Borrowings 1298240 1819293 2000828 2401763 Salary 1005186 1060152 1282593 1399743 Other operating expenses 546091 616399 753327 927612 Provisions made during the year a) Against NPAs 476104 592291 17788 713542 b) Other provisions 704346 446310 611062 216777 Interest received on a) Loans and Advances 5157559 5994919 7624046 8659163 b) Investments 1272310 1861158 2029303 2381503 Other income 750752 760303 764905 751509 Profit/Loss 1081292 1201030 1590042 1805331 Other information Share Capital deposit received 890850 890850 890850 890850 Cumulative Provisions against NPAs 476104 592291 538597 713542 Interest de recognized cumulative 124406 214134 180780 234515 Loans Written off during the year a) No. of accounts 13452 16793 1124 9339 b) Amount 76200 71077 41087 44344 Reserves / Accumulated profits 4190143 5391173 6981215 8786546 Net NPAs 136.38 200.00 172.81 255.01 % of Provisions to gross NPAs 24.28 21.00 22.26 20.39 % of Gross NPAs to advances 4.01 5.08 4.06 4.43 % of Net NPAs to advances 2.82 3.68 3.00 3.27 CRAR % 11.85 12.60 12.91 13.26

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Accolades

Skoch Group's Financial Inclusion & Deepening Award Platinum Award for Excellence in Banking Skoch Financial Sector Awards seek to recognise people, projects and institutions that have made significant contributions to the cause of financial inclusion, financial deepening, customer service or economic value add and demonstrated business success through strategy, innovation or use of technology. For the year 2013-14, the Skoch Groups chosen APGVB for Platinum Award for Excellence in Banking.

Sri. K. Lakshmana Rao, Chairman, APGVB is receiving the Financial Inclusion and deepening Platinum Award for Excellence in Banking from Skoch Unlike a large commercial bank, the Andhra Pradesh Grameena Vikas Bank has limited notified area of 8 districts in Andhra Pradesh. Yet, it has a vast network of 704 brick and mortar branches and 488 Ultra Small Branches and can give competition to any other large bank. It started technology enabled financial inclusion way back in 2007, started EBT payments of social security and MGNREGS wages and soon thereafter introduced core banking and AP Smart Card Project. It has enrolled and issued smart cards to 25,17,469 beneficiaries and has disbursed over Rs. 1,300 crore under SSP and MGNREGS. Clearly, the painstaking efforts by K Lakshmana Rao are paying off.

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Awards advertorial - Business Standard, 23rd June 2914 - Download PDF

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Board of Directors Report 2013-14

Colouring the Future

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BOARD OF DIRECTORS' REPORT 2013-14 particularly keeping in view the recent migration to CBS and possible We have pleasure in presenting the 9th Annual Report of data gaps resulting in high NPAs. Now that the data has been Andhra Pradesh Grameena Vikas Bank (APGVB) together with cleansed and system stabilised considerably and NPAs declared close to the real position, the Statutory Auditors have reckoned that the the Audited Statement of Accounts, Auditors' Report and the Bank had more provisions on rural advances. As Statutory Auditors, report on business and operations of the Bank for the financial have come to this conclusion, after studying the Branches that they st year ended on 31 March 2014. had audited and after perusing the reports submitted by the Branch Business Review Auditors, a sum of Rs 32 Crore provision was written back to Profit & Loss Account, compensating the additional provisions required for The Bank's business has crossed a milestone of Rs 14500 Crore the current year. Excluding Standard Assets, the Bank has made st to reach Rs 14686.64 Crore as on 31 March 2014 with an provisions of Rs 24 Crore compared to Rs 17 Crore last year. absolute growth of Rs 2227.87 Crore over March 2013 at a The other aspect which has relevance to the Net Profit was that growth rate of 17.88%. This growth in business over March during FY 2012-13, a provision of Rs 5.39 Crore was made towards 2013 level of Rs 12458.77 Crore is impressive in the backdrop of wage revision on account of ensuing 10th Bipartite Settlement. This Rs 1772.77 Crore growth registered during the year 2012-13. year, the Bank did not make any provision towards Wage Revision, keeping in view the high NPAs and resultant provisions and the fact 59% of the business growth of Rs 2227.87 Crore was that the Bank had already made provisions reasonably. contributed by loans and advances and the remaining 41% by Deposits with absolute growth of Rs 1305.85 Crore and Rs The Bank has also recovered a sum of Rs 13.72 Crore from Written off / AUCA Accounts under OTS this year adding to the profitability. 922.02 Crore respectively. Incidentally, this ratio of 59:41 was maintained as on 31.3.2013 also. The Operating profit of the Bank stood at Rs 242.97 Crore as on 31.3.14 with a marginal decline of Rs 4.86 Crore over previous FY figure of Rs 247.83 Crore. The Net profit of the Bank has, however, TOTAL Business (Rs in Crores) been on the rise in the last six years, although not at the same rate as 16000 14687 in the initial years. 14000 12458 (Rs in Crores) 12000 200 10686 180 Profit 180 9689 159 10000 160 7675 140 120 8000 6698 120 108 5635 103 6000 4813 100 4001 80 69 4000 60 37 2000 40 23 20 12 0 0

2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14

Income and Expenditure (Rs in Crores) Profit Analysis Particulars 2011-12 2012-13 2013-14 Growth % Interest Income 785.61 965.33 1104.07 14.37 The Bank continued to improve its efficiency parameters by Interest Expenditure 512.74 590.40 703.51 19.16 registering Net Profit of Rs 180.53 Crore for the year 2013-14 as Non-Interest Income 76.03 76.49 75.16 -1.74 against Rs 159.00 Crore for the previous FY 2012-13 at a growth rate Non-Interest Expenditure 167.66 203.59 232.74 14.32 of 13.21%. Increase in NPAs requiring additional provisions, Salary Gross Profit/ and Allowances, implementation of NRLM (National Rural Operating profit 181.23 247.83 242.97 -1.96 Taxes 52.40 62.40 68.82 10.29 Livelihoods Mission) implemented in five districts, which restricted Deferred Tax Asset & interest rates on SHG loans to Rs 12.5% vis-à-vis 14% charged in other Earlier year adjustments districts, refund of Rs 6.50 Crore to GOI on account of re-verification (excess) -6.11 -1.46 of ADWDRS are some of the factors which had impact on the Net Provisions and Profit. However, There was a plough back of Rs 32 Crore provision Contingencies 14.02 27.89 -3.34 -111.98 which helped the Bank to offset these factors. The Bank had made Prior Period depreciation & rent 0.83 0 0 - huge adhoc provisions in the last year and before on rural advances, Net Profit 120.10 159.00 180.53 13.21

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Net Interest Income v Operating expenditure has increased by Rs 29.15 Cr (@ The Net Interest Income has increased to Rs 400.56 Cr during 14.32%) from Rs 203.59 Cr in 2012-13 to Rs 232.74 Cr in the year vis-à-vis Rs 374.93 Cr in 2012-13 with a growth rate of current fiscal. This increase of Rs 29.15 Crore is marginally 6.84%. Continuous growth in advances since April 2013 and less when compared with the increase of Rs 35.93 Crore mobilization of more public deposits, restricting / (@ 21.43%) registered in 2012-13. Two important factors discouraging bulk deposits at higher rate, has contributed to that contributed to the increase in Operating Expenses rise in Net Interest Income. were Salary and Allowances (Rs 11.72 Crore), Other Expenses (Sundries) (Rs 15.35 Cr). The other expenses included ADWDRS amount refunded to GOI to the extent Interest Income (Rs in Crores) of Rs 6.43 Core, Service Tax of Rs 2.50 Crore etc., which are Interest Expenditure 1200.00 first of its kind during the year. All other head of 1104.75 expenditure have registered normal growth. The fall in 1000.00 965.32 Gratuity Contribution by Rs 10.66 Crore has offset the 800.00 785.60 703.52 hike in other heads. 642.98 590.40 600.00 577.39 512.74 Interest Income 447.17

400.00 357.29 326.00 v Interest income increased from Rs 965.32 Crore to 262.18 200.00 Rs 1104.07 Crore during the FY with an absolute growth of 0.00 Rs 138.75 Crore (at 14.37%). v 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 The Bank has earned an Interest Income of Rs 865.92 Crore from Loans and Advances in the current fiscal as Interest Expenditure against Rs 762.40 Cr in 2012-13 with an increase of Rs 103.52 Cr (13.58%). The growth rate has decreased v Interest paid on deposits has increased by Rs 73.01 Crore from 27.17% in 2012-13 to 13.58% in current fiscal. to reach Rs 463.33 Crore from the last FY's figure of Reasons for such a fall are additions of NPAs of Rs 75.83 Rs 390.32 Cr 2012-13. The growth was marginally lesser Crore during the year, reduction of interest rates on at 18.71% vis-à-vis 19.39% growth during 2012-13. housing loans to compete in the market etc. v The Bank has paid Rs 240.18 Crore towards interest on v The Interest Income received from Investments of borrowings (refinance from NABARD, SBI, NHB) during the Rs 2659.90 Crore was Rs 238.83 Crore as against Rs 209.83 year as against Rs 200.08 Crore of FY 2012-13. The growth Cr from FY12-13's investments of Rs 3117.70 Cr. There is a of Rs 40.10 Crore (at 20.04%) in interest on borrowings growth of Rs 29 Crore in interest income over previous FY during the year is higher compared to the growth of at 18.82%. Rs 18.16 Crore (at 10%) during the year 2012-13.

Interest Income on Advances (Rs in Crores) (Rs in Crores) Interest paid on Deposits 1000.00 Interest Income on Investments

500.00 Interest Paid on Borrowings 900.00 865.92 642.98

450.00 800.00 762.40 400.00 390.32 700.00 599.49

250.00 326.93 600.00

300.00 515.76

240.18 500.00 27.47 250.00 428.33 212.63 200.08 185.82 400.00

200.00 319.71 169.94 129.82

150.00 300.00 238.83 209.83 113.37 36.12 92.24

100.00 200.00 49.06 27.46 27.23 50.00 100.00 0.00 0.00 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14

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Provision for NPAs: The Bank has made a provision of Rs 71.35 Cr on NPAs taking the total Provisions available on Advances to Rs 93.03 Cr.

(Rs in Crore) Assets 2010-11 2011-12 2012-13 2013-14 O/s Provisions O/s Provisions O/s Provisions O/s Provisions Standard 4698.15 13.69 5251.70 15.23 6322.13 18.30 7545.60 21.68 Sub Standard 155.77 24.29 196.84 20.98 148.74 13.97 159.53 15.11 Bad & Doubtful 40.51 23.31 82.23 36.38 118.71 38.61 189.24 55.25 Loss 0 0 1.97 1.87 0 0 1.05 0.99 Total 4894.43 61.29 5532.7 74.46 6589.58 70.88 7895.42 93.03

Ratio Analysis

Ratios 2009-10 2010-11 2011-12 2012-13 2013-14 Amt / Ratio % Change 1 Yield on advances 12.55 11.90 11.82 12.45 12.40 -0.40 2 Yield on investments 9.44 7.90 8.76 8.65 8.55 -1.16 3 Cost of deposits 6.22 5.83 7.07 7.49 7.70 2.80 4 Cost of borrowings 8.18 7.47 8.47 7.58 8.35 10.16 5 Avg. cost of funds 5.14 4.37 6.40 6.19 6.45 4.20 6 Avg. return of funds 9.26 7.99 9.81 10.19 10.21 0.20 7 Cost of management 2.18 1.93 2.10 2.13 2.68 25.82 8 Misc .Income as % to Working Funds 0.71 0.93 0.95 0.80 0.69 -13.75 9 Net Margin 2.65 2.62 2.26 2.67 2.36 -11.61 10 Financial Margin 4.12 3.62 3.41 4.00 3.76 -6.00 11 Risk Cost 0.37 0.61 0.17 0.56 0.68 21.43 12 Return on Assets 10.16 8.92 10.63 10.22 10.9 6.65 13 Gross Rate of return 2.00 1.90 1.24 1.40 1.38 -1.43 14 Expenses ratio 45.87 43.00 48.05 45.10 46.79 3.75 15 Gross NPAs 88.26 196.28 281.00 267.45 349.81 28.35 16 Net NPAs 43.84 136.38 200.00 172.81 228.56 32.26 17 % Provisions to gross NPAs 45.32 24.28 21.00 22.26 26.81 20.44 18 % Gross NPAs to advances 4.01 5.08 4.06 4.35 7.14 19 % Net NPAs to advances 2.82 3.68 3.00 2.94 -2.00 20 CRAR % 11.22 11.85 12.60 12.91 14.08 9.06

Balance Sheet Size be Rs 5 Crore comprising of 5 Lakh shares of Rs 100 The Balance Sheet size has crossed Rs 10000 Crore each, subscribed by Government of India, Govt. of mark to reach Rs 11062.34 (including IBPC gap of Rs Andhra Pradesh and State Bank of India in the ratio of 448 Crore) with a moderate increase of Rs 865.04 Crore 50:15:35. The Balance Sheet has a Share Capital over March 2013 level. Deposit amount of Rs 89.08 Crore, contributed by the stake holders prior to amalgamation. The Reserves Capital & Reserves increased by Rs 180.53 Crore at 25.86% from The Bank's authorized and paid up capital continued to Rs 698.12 Crore as on 31.03.13 to Rs 878.65 Cr as on 31.03.14.

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3.6 a. Adjusted value of funded (Rs. In Crores) Reserves risk assets i.e., balance 1000.00 900.00 878.65 sheet items 5381.69 6595.65 7576.88 800.00 698.12 b. Adjusted value of non- 700.00 600.00 529.12 funded risk assets i.e., 500.00 419.01 balance sheet items 0 0 0 400.00 310.89 300.00 221.01 c. a+b 5381.69 6595.65 7576.88 200.00 151.74 d. Percentage of Capital 100.00 0.00 (Tier-I + Tier II) to Risk Weighted Assets 12.60 12.91 13.26 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 Net worth Deposits stood at Rs 6791.18 Crore, recording a rise of 15.71 Net worth of the Bank stood at Rs 972.73 Crore with a growth per cent over March 13 level of Rs 5869.19 Crore, with an of Rs 180.53 Crore (@ 22.79%) over previous FY's figure of Rs absolute growth of Rs 922.02 Crore. 792.21 Crore. Capital Adequacy Ratio Deposits (Rs. In Crores) The Capital Adequacy Ratio has further strengthened to reach 8000 6791 13.26% at the end of the year vis-à-vis 12.91% as on 31.3.2013, 7000 5869 well above the level of minimum 9% stipulated by Dr K.C. 6000 5153 4795 Chakravarthi Committee. 5000 3805 4000 3394 2934 3000 2718 The following table gives the position of Tier-I, Tier-II 2188 Capital, Reserves and computation of CAR. 2000 (Rs in Crore) 1000 Capital 2011-12 2012-13 2013-14 0 1 Tier-I 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 a. Paid up Capital 5.00 5.00 5.00 b. Share Capital Deposit 89.08 89.08 89.08 Deposits have started the positive growth from September c. Statutory Reserves & 2013 onwards. The average shortfall from April 2013 to July Surplus 109.15 140.96 177.06 2013 (over March 2013 level) was Rs 123 Crore, while the d. Capital Reserves 0.01 0.01 0.01 deposits growth achieved during 2012-13 was Rs 716 Crore, e. Other Reserves 14.31 14.31 14.31 which indicates the Bank was able to more or less sustain the f. Surplus in P&L 415.63 540.99 687.26 growth and carried it forward to current year. 539.10 696.27 878.65 Total Tier-I Capital 633.18 790.36 972.73 Deposits growth in 2013-14 (Rs. In Crores) 2 Tier-II a. Undisclosed Reserves - 7000 6800 6791 b. Revaluation Reserves - 6600 6322 6400 c. General Provisions & 6200 5996 6425 5869 5917 Reserves 44.63 61.10 32.00 6000 5729 5723 6166 5800 d. Investment fluctuations 5897 5600 5805 5711 5763 Reserves / Fund - 5400 5200 Total Tier-II Capital 44.63 61.10 32.00 5000 Grand Total (Tier I + Tier II)677.81 851.46 1004.73 -13 -13 -13 -14 -14 Mar Apr May-13 Jun-13 Jul-13 Aug-13 Sep Oct-13 Nov-13 Dec-13 Jan-14 Feb Mar

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a healthy competition among the branches/Regional Offices. Deposits growth from April 2010- March 2014 (Rs. In Crores) 8000 c) DNA Campaign launched from 24.09.2013 to 31.10.2013 to 6791 7000 5869 5917 mobilize deposits, disbursement of loans and reduction of 6000 5172 4799 4588 5153 6166 5000 5711 NPAs. 3842 3910 5003 5209 4000 4402 4772 3000 3685 3832 d) Bhagyalaxmi Campaign launched from 21.10.2013 to 2000 30.11.2013 to mobilize deposits in Bhagyalaxmi special 1000 0 deposit. -10 -11 -11 -12 -12 -13 -13 -14 -14 Apr Jun-10Aug-10Oct-10Dec-10Feb Apr Jun-11Aug-11Oct-11Dec-11Feb Apr Jun-12 Aug-11Oct-12Dec-12Feb Apr Jun-13Aug-13Oct-13Dec-13Feb Mar e) VIKAS Products Deposit Mobilization Campaign launched to mobilize Vikas Special Scheme deposits Vikas 18, Vikas Innovative Deposit Products launched Senior Citizen, Vikas Dhanavarsha & Bhagyalaxmi We have conducted hectic deposit mobilisation campaigns f) Millionaire Club members launched from 16.11.2013 to like Operation C2C, Fortnight Deposit mobilization campaign, identify the TOP performers in the key area of deposits, DNA Campaign, Bhagyalaxmi Deposit mobilization campaign, advances and management of NPAs. Vikas Products Deposit mobilization campaign, Millionaire club members campaign with different deposit products like g) Kamadhenu Deposit Mobilisation Campaign launched Vikas18, Vikas Double, Vikas Dhana varsha, Vikas Senior from 22-11-2013 to 31-12-2013 to mobilize deposits under citizen, Vikas RD2000, Vikas RD1000, Bhagyalaxmi, KAMADHENU Deposit scheme. Dhanalaxmi to suit the retail depositors and improved the h) 2nd Millionaire Club members launched from 16-12-2013 retail deposit base. to 15-01-2014 to encourage the TOP performers in the key There is a growth of Rs.966 Crores in retail deposits during area of deposits, advances and management of NPAs. 2013-14 and retail deposits constitutes 86% of total deposits I) Kamadhenu Saptah Deposit Mobilistion Campaign as on 31.3.2014. launched from 16-12-2013 to 23-12-2013 to mobilize Deposit Mobilization Campaigns: A number of Deposit KAMADHENU Deposits. mobilization campaigns launched for augmentation of Deposit Mix resources from time to time: CASA deposits has grown by 7.74% to reach Rs 2453 Crore a) Operation C2C campaign from 01.04.2013 to 30.06.2013 to from Rs 2277 Crore while Term Deposits reached to mobilize CASA, retail, fixed deposits and savings bank Rs 4337.43 Crore with a growth of Rs 745.73 Crore at 20.76% deposits) during the year. CASA constitutes 36.14% of total deposits b) Fortnight Deposit Mobilisation Campaign from 13.09.2013 while term deposits 63.86%. to 27.09.2013 to mobilize good number of deposits and create (Rs. In Crores) Deposit mix 2009 2010 2011 2012 2013 2014 Current A/c 163.18 129.80 179.38 123.56 122.96 55.41 Growth 90.33 -33.38 49.58 -55.82 -0.6 -67.55 Growth %age 72.43 -20.46 38.20 -31.12 -0.49 -54.94

Savings Bank A/c 1439.94 1567.68 2212.19 1839.50 2154.50 2398.34 Growth -23.34 127.74 644.51 -372.7 315.02 243.84 Growth %age -1.60 8.87 41.11 -16.85 17.13 11.32

Total CASA 1603.12 1697.48 2391.57 1963.10 2277.50 2453.75 Growth 1513 94.36 694.09 -428.52 314.40 176.29 Growth %age 0.95 5.89 40.89 -17.92 16.01 7.74

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Deposit mix 2009 2010 2011 2012 2013 2014 Term Deposits 1790.77 2107.03 2403.14 3183.60 3591.70 4337.43 Growth 445.26 316.26 296.11 780.47 408.09 745.73 Growth %age 33.09 17.66 14.05 32.48 12.82 20.76

Total deposits 3393.89 3804.51 4794.71 5146.70 5869.20 6791.18 Growth 460.39 410.62 990.20 351.96 722.47 921.99 Growth %age 15.69 12.10 26.03 7.34 14.04 15.71

Assets Investments Total investments portfolio– both SLR and Non-SLR - of the Bank has decreased to Rs 2659.90 Crore as on 31.3.14 from previous year's level of Rs 3117.70 Crore by Rs -457.83 Crore @ -14.68%. (Rs in Crores) 2009 2010 2011 2012 2013 2014 SLR Investments 621.17 758.90 999.69 1104.97 1339.44 1663.34 Growth 52.72 137.72 240.79 105.28 234.47 323.90 Growth %age 9.28 22.17 31.73 10.53 21.22 24.18 Non SLR Investments 1086.60 903.26 1147.58 1272.01 1778.3 996.56 Growth 119.75 -183.34 244.32 124.43 506.28 -781.73 Growth %age 12.39 -16.87 27.05 10.84 39.80 -43.96 Total Investments 1707.78 1662.16 2147.28 2376.98 3117.7 2659.90 Growth 172.48 -45.61 485.11 229.70 740.75 -457.83 Growth %age 11.23 -2.67 29.19 10.70 31.16 -14.68

Investment Policy Non SLR Investments The Bank has an Investment Policy in conformity with the Non-SLR investments are invested in TDRs of Banks. The Bank instructions received from RBI/NABARD/Sponsor Bank, has been monitoring and following up for prompt receipt of approved by the Board, in terms of which investments are interest due from Govt Securities /Bonds. There was no made. instance of income leakage from Non-SLR investments portfolio. The Investment Committee headed by the Chairman with four General Managers (viz., Credit, HR, Operations and IT) and CRR and SLR three Chief Managers (viz., Accounts, Planning & Credit) as The Bank has complied with the regulatory requirement of members, meets periodically to review the funds position and maintenance of adequate balances towards CRR and SLR. decide the deployment of funds in SLR and Non-SLR avenues. There was no default in maintenance during the year 2013-14. SLR Investments There is a well laid down system of assessing the CRR and SLR requirements taking into account the NDTL. The Bank has In terms of Section 24 of the BR Act 1949, the Bank has kept Rs 281.79 Cr in CRR and Rs 1770.49 Cr in SLR as on maintained investments in the avenues laid down in the Policy, 31.3.2014. to fulfill the SLR requirements. All SLR investments are made in GOI/State Govt Securities only. The purchase and sale of Credit Portfolio Govt Securities are undertaken by the Portfolio Management The credit portfolio of the Bank rose by 19.82% to Rs 7895.43 Services Department of State Bank of India. Crores during the financial year ended 31.03.2014, from the

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previous year's level of Rs 6589.58 Crores, thus showing an account for the credit balances in the KCC account. Further, absolute growth of Rs 1305.85crores as against the target of loan limits will be fixed for 5 years and documents will be Rs 1317.92 Crore. As such, the bank could achieve 99.08% obtained for the terminal limit. Year-wise limits will be fixed under advances budget. This year we have concentrated on basing on present Scales of Finance and keeping in view the improvement of Advances portfolio duly giving importance to future cost of investment. high yielding advances i.e. advances yielding interest of more Government of Andhra Pradesh has been implementing than 12%. Accordingly, we have planned for sizeable growth “Vaddileni Runalu / Pavala vaddi” under “Rythu Sri” scheme in the segments of SHG and PGL besides other segments like i.e. reimbursement of interest for prompt payers of crop loan Housing loans and Educational loans etc. borrowers from Rabi 2011-12. This year the GoAP has been Advances (Rs in Crores) releasing the interest on front end basis (from June 2014 onwards).Under this method farmers need not pay the 9000 8000 7895 interest portion. Claim is to be submitted through online on 7000 6590 daily basis. We have issued necessary guidelines to all our 6000 5533 branches for sending claims towards reimbursement of 5000 4894 3870 interest amount to the Bank on daily basis. 4000 3304 3000 2701 Our branches and Regional Offices are maintaining good 1813 2095 2000 rapport with the Officials of Agriculture Department and also 1000 0 Revenue Department in respect of lending to crop loan borrowers and also in recovery of KCC loans. 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 The Bank aims at issuing Kisan ATM Credit Cards to all eligible crop loan borrowers, providing hassle free, adequate and Credit to Agriculture timely short term credit support to the farmers for their crop A major part of advances portfolio relates to Agriculture production needs. The Bank has disbursed an amount of Sector that too KCC segment. Total credit to agriculture Rs 1373.12 Crores, during the year 2013-14 under KCC. The including allied activities excluding agriculture-portion of SHG bank has issued so far Kisan ATM Credit Cards of 72315. lending, stood at Rs 3359.28 Crore as on 31.3.2014 as against Instructions were issued to all the branches to cover all KCC Rs 2756.70 Crore with a growth of Rs 602.58 Crore (@ holders up to the age of 70 under Personal Accident Insurance 17.94%). Total number of Bank's borrowers in Agriculture Scheme, during the three year card holding period, with risk sector has increased to 703634 in FY 2013-14 vis-a-vis 666644 coverage of Rs.50,000/-. The annual premium of Rs.20/- was in FY2012-13, with an increase of 36990. More than 90% of jointly borne by the Bank Rs.13/- and the borrower Rs.7/- the credit to SHG finance is also towards agriculture. The Bank has disbursed Rs 2388.42 Crore to the agriculture during the year as against the previous year's disbursal of Rs 2376.05 Cr. Crop loans under revised Kisan Credit Card System As per the directions of Government of India and NABARD, we have implemented revised Kisan Credit Card System for crop loan borrowers from Kharif 2012. According to the guidelines of revised KCC, we have created a new product KCC-cum-SB account in the CBS for a period of 5 years. As per this system, the farmers can remit their surplus funds in the KCC account and can draw according to their requirement and they need not maintain separate Savings Bank account. There is a provision for giving interest as applicable for Savings Bank

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Tenant Farmers – Loan Eligibility Card Holders Government of India instruction and claimed an amount of The State Government has promulgated AP Land Licensed Rs 8,57,78,959/- towards 2% interest subvention from the Cultivators Ordinance to ensure loan and other benefits to GOI. tenant farmers, by means of Loan Eligibility Cards. Conducting of Grama Sabhas Tenant Farmers, whose number is reported to be in the range As per the directions of the Bank's Regulators/Controllers viz., of 12 to 40 Lakhs in the State, are the biggest losers during RBI/NABARD/SBI in the Empowered Committee Meetings natural calamities, apart from being not eligible for access to conducted quarterly for all RRBs, we have instructed all the bank finance. branches/offices to conduct Grama sabhas in the villages at The Bank made a small beginning by financing 8031 tenant frequent intervals. Accordingly, the branches have conducted farmers with a credit of Rs 17.87 Crore. Grama Sabhas for the customers, mainly for the purpose of educating the farmers in obtention of crop loans and other Joint Liability Groups (JLGs) agricultural loans and the necessity of prompt repayment. The concept of JLGs is gaining significance in the State, in the The crop loan borrowers have well responded for our wake of its multiple benefits to stakeholders viz., borrowers motivation during the Grama Sabhas. We have given wide and financial institutions. This is also expected to overcome publicity with regard to the scales of finance for crop loans the problem of tenant farmers getting deprived of and also 3% interest subvention incentive scheme of GOI and institutional credit. Our Bank has taken up financing through VLR scheme of GOAP. JLGs in right spirit and been popularizing the concept of JLGs Grama Sabhas were conducted using audio and video visuals by giving training to operating staff. In every monthly review to create awareness about the Banking Services made meetings, JLGs has become one of the agenda for reviewing available to them. Village elders, SHGs, Government officials the progress. particularly from IKP and agriculture departments have The Bank has financed an amount of Rs 4.28 Crores to the JLGs participated. during the year(in addition to disbursement of Rs.4.14 crores Self Help Groups to the Loan Eligibility Card holders i.e Tenant farmers) The Bank has disbursed Rs 1898.60 Crore to 146753 Groups Interest Subvention during the year as against Rs 1990.58 Crore disbursed to As per the directives of Government of India, the Bank had 78201 SHGs during the previous year. The total loans passed on the benefit relating to interest subvention incentive outstanding under SHG segment has risen to Rs 2513.08 Crore to the extent of Rs 9,72,64,000/- to the prompt repayers. constituting 32% of total advances as against previous FY's Further, the Bank had implemented the 7% interest rate to all level of Rs 2015.98 Crores, constituting 30% of total advances. the crop loan borrowers up to Rs.3.00 lakhs, as per the Lending to SHGs grew by Rs 497.10 Crore (@ 25%) compared to the last year's growth of Rs 350.79 Crore (@ 21%).

Awareness camps for farmers and SHG members conducted by our branches in Nalgonda Region 28 we are with you! Annual Report 2013-14

As per the directions of Government of India, SHG Cash Credit No of SHGs 200000 loans are also to be treated as normal Cash Credit Loans for 180000 172260 161077 163308 160186 163388 the purpose of classification of asset etc.. But, as per the 160000 139708 140000 guidelines of VLR scheme of GOAP, the SHGs have to repay a 120000 106350 minimum of 3% of drawing power every month to become 100000 82835 eligible for reimbursement of interest. We have, therefore, 80000 insisted the SHGs for repayment of 3% of drawing power 60140 60000 towards EMI, though it is sufficient if they pay only the interest 40000 and other charges if any, every month. 20000 0 Further, as per the new SHG Cash Credit scheme, we have arranged for fixing limits for a period of 5 years basing on their 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 present corpus and proposed thrift. This new system is facilitating the Self Help Groups for any number of Amt o/s (Rs in Crores) withdrawals from their Cash Credit Account within the 3000 drawing power. The loan documents will be obtained for the 2513 2500 limit of terminal year duly preparing the appraisal for 5 years 1200 2016 1665 and year-wise limits will be fixed basing on present corpus and 1472 1500 proposed thrift (subject to a maximum of Rs.5.00 lakhs). The 1164 1000 905 limit will be fixed as 8 times of corpus (1:8) for the current year 606 500 216 332 and for the subsequent years, the limit will be 1:8 of present 0 corpus PLUS expected thrift. Our branches and Regional Offices are maintaining good 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 rapport with the SERP and DRDA/IKP at District level in respect of lending to SHGs and also in recovery of SHG loans. The outstanding credit to SHGs at Rs 2513.08 Crore has also As a result our level of advances under SHG segment grown up been the highest in the country, among all RRBs. Over 32% of to Rs 2513.08 Crores as on 31.03.2014 from Rs 2015.98 Crores our total credit portfolio of Rs 7895 Crore is towards Self Help as on 31.03.2013. Groups and a mammoth 19 Lakh rural women have banking relationship with our Bank. Priority Sector Lending As per the directions of Government of India and NABARD, we The Priority Sector as defined by RBI constitutes loans have implemented Cash Credit System for SHG loans with extended to (a) Agriculture (Direct and Indirect finance) (b) effect from January 2012. According to the guidelines of Cash Micro and Small Enterprises (Direct and Indirect Finance) (c) Credit system, we have started conversion of all SHG Term Micro Credit (SHG/JLG) (d) Education Loans (e) Housing Loans Loans (only Standard Assets) in to Cash Credit system from upto Rs 25 Lakhs etc. Priority Sector loans should form at least January 2012 itself and now almost all the Standard SHG Term 60% of the total outstanding loans, of which 25% (i.e., 15% of loans were converted as Cash Credit Loans. Further, we have the total outstandings) should be to weaker sections. implemented sanction of SHG fresh loans (including The Bank's Priority Sector lending constitutes 82.45% of total renewals) under Cash Credit System only. advances. In absolute terms, total priority sector lending Government of Andhra Pradesh has been implementing stood at Rs 6509.83 Crore as on 31.3.2014 as against “Vaddileni Runalu” scheme i.e. reimbursement of interest for Rs 5308.21 Cr as on 31.3.2013. There is a growth of Rs prompt payers of Self Help Groups. The Bank would provide 1201.62 Crore @ 22.64%. The Weaker Sections Loans stood particulars of transactions in SHG accounts relating to all the at Rs 5526.80 Crore, which forms 85% of total priority sector branches to the SERP and basing on that, the SERP, lending, as against stipulated 25%. Hyderabad, arrives at the list of SHG accounts eligible for VLR scheme and accordingly release the interest amount which is credited to the respective SHG accounts directly.

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Government Sponsored Schemes The Bank has participated in Govt Sponsored Schemes and as on 31.3.2014, the total finance extended under various Schemes is as under. (Rs in Lakhs) Scheme Target Achievement No. of Amt. No. of Units Units Amt. SGSY 91 273.00 68 204.00 RYS 1472 1231.20 1035 859.50 SCAP 6379 5086.19 4559 3647.20 BCAP 10365 5398.45 7773 4041.95 STAP 765 519.35 558 379.45 Minorities 1473 974.32 1104 730.25 Weavers 573 178.80 522 162.90 Others, 814.39 DTG 71 36.07 54 27.40 KVIC ------PGL, 795.25 SHGs, 2513.08 Pasukranthi / PPK 687 1297.85 405 765.10 EL, 73.6 PMEGP ------HL, 339.4 Sericulture 35 40.16 31 35.55 MEPMA 1051 2210.41 788 1657.30 PHC 307 213.40 245 170.30 Others 1517 2660.34 1138 1995.60 Total 24786 20119.53 18280 14676.50 Achievement % 73.75% 72.95% Agr. 3359.28 (Rs in Crores) Scheme Outstanding Disbursement from as on 31.3.14 1.4.13 to 31.3.14 SHGs Agri HL No. of Amt. No. of Amt. EL PGL Others Units Units

(Rupees in Crore) RYS 1428 15.03 1211 12.11 2011-12 2012-13 2013-14 Rajiv Gruhakalpa 1062 1.78 0 0 No. of O/s No. of O/s No. of O/s SCAP 22962 106.43 4718 31.37 A/cs A/cs A/cs BCAP 9521 32.17 6012 31.31 1. Weaker STAP 20656 64.65 1199 7.42 Sections 743876 3892.90 766341 4612.70 805835 5526.80 Minorities 3608 18.49 869 5.74 2. Women borrowers 365718 1591.25 383170 2306.35 402917 2763.40 VAMBAY/Indiramma 6439 82.68 0 0 3. Minorities 40635 176.96 43790 263.58 46047 315.82 Palapragathi 658 3.06 658 3.06 4. SCs/STs 176086 766.83 186111 1120.22 195702 1342.22 Pasukranthi 7743 37.96 405 7.68 Others 1495 28.16 895 21.27 Total 75572 390.41 15967 119.96

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Inter Bank Participation Certificates In accordance with the RBI guidelines, this year, the Bank had participated in IBPC with State Bank of India for Rs.752.00 crores and issued IBPC for an amount of Rs.1200.00 crores. This amounts to selling our Bank's Priority sector advances of Rs. 1200.00 crores to SBI and purchasing non-priority sector advances of Rs. 752.00 crores from SBI.

Participation in State Credit Plans The Bank's participation in State Credit Plans is as under: (Rs in Crore) 2011-12 2012-13 2013-14 Target Achievement Target Achievement Target Achievement 1. Crop Loans 2035.26 1188.06 2274.93 1352.80 2734.06 1429.16 2. Total Agr & allied activities 574.27 19.38 745.72 27.96 792.85 9.95 3. NFS 205.98 213.10 220.30 241.47 279.38 308.21 4. OPS 805.62 978.45 1014.48 1990.58 1113.36 1742.77 5. Total Priority Sector 3621.13 2398.99 4255.43 3612.81 4919.65 3490.09 % of achievement 66 85 71

Retail Lending Most of our branches are located in rural/remote areas and as such our branch is the only Banking channel for many of the rural people. The village people including farming community and small business people etc., depend on our Bank for obtaining personal gold loans for their urgent needs. Our branches are catering to the needs of such people without any delay. As the Personal Gold Loans are safe and secured besides high yielding, we have encouraged the branches to improve the advances portfolio under this segment also and our branches have responded positively to the call of Head Office. We have conducted special Campaigns during this year to improve the advances under PGL segment. As a result our level of advances under PGL segment grown up to Rs 795.25 crores as on 31.03.2014 from Rs 727.62 crores as on 31.03.2013 with a growth rate of 9%.

Small Business Units financed by our Bank

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Apart from Retail business, Housing and Education loans were our priority area. (Rs in Crore) O/s Mar- 2011-12 O/s Mar 2012-13 O/s Mar 2013-14 S.No Segments No of A/Cs Amount No of A/Cs Amount No of A/Cs Amount 1 Housing Loans 5760 237.25 5769 281.72 5851 339.77 2 Mortgage Loans 4049 81.69 2895 58.20 2470 54.52 3 Education Loans 4504 76.80 4326 72.08 4189 73.60 4 Demand Loans 29778 135.34 26754 154.61 25977 170.75 5 Non Farm Sector - Term Loan 53992 162.67 54857 162.90 43542 137.20 6 Personal Loans 14622 159.40 16285 176.22 17703 197.11 7 Personal Gold Loans 104067 488.27 135967 727.62 154305 795.25 Total 216772 1341.42 246853 1633.35 254037 1768.20

Jawaharlal Nehru National Solar Mission registration of equitable mortgages as and when new The Jawaharlal Nehru National Solar Mission aims at accounts are opened, are being done by our Regional Offices addressing one of the most severe problems of the country (covering all their branches) and Scale-IV/V Branches by today i.e., energy conservation. The Bank has taken the themselves. We have issued detailed guidelines in this initiative of financing the solar lighting systems, supporting regard. the national cause. During the year 4520 units were financed. With this, the details of the security interest created in favour of our bank is available on a public domain (on payment of required fee) for search by citizens / other banks / FIs as a result of which the potential fraud / multiple financing against the same property can be prevented. Asset Quality – Management of Non Performing Assets The Non-Performing Assets have increased by Rs.82.36 Crores from Rs. 267.45 Crores as on 31st March 2013 to Rs.349.82 Crores as on 31st March 2014 even after recovery of Rs.78.13 Crores i.e. 29% from out of Rs.267.45 Crores NPAs pertaining to last year. The main increase in NPAs was in KCC to the tune of Rs.54.67 Crores, Rs.21.08 Crores in SHG and Rs.4.12 Crores in ISB sector. The farmers and SHG women expecting yet another debt waiver not came forward to repay their dues. As such there is an increase in NPAs in these segments. Most of Central Registry of Securitisation Asset Reconstruction and the ISB loans sanctioned under government sponsored Security Interest of India (CERSAI) schemes have gone bad and have become NPAs. No units are available and in many cases borrowers are also not available. During the year, our Bank has registered with CERSAI in terms Even though the recovery climate was not good (all major of RBI guidelines and complied with the instructions. political parties have promised waiving crop loans and AGLs, Equitable mortgages in respect of all our loans, which are some of them have even promised to waive loans sanctioned covered under Securitisation and Reconstruction of Financial to SHGs, Weavers), we have taken it as a challenge and Assets and Enforcement of Security Interest Act, 2002, conducted 5 exclusive KCC reduction camps at all villages (SARFAESI Act) as on 31.03.2014 have been registered with during the last quarter due to which more than 22000 KCC- CERSAI centrally at our Head Office level by collecting the NPA accounts amounting to Rs.74.35 Crores were necessary data / information. From 01.04.2014, onwards closed/regularised. A “Mega recovery camps day” was

32 we are with you! Annual Report 2013-14 conducted across the Bank on 14th February'2014 wherein v Compromise proposals were entertained for recovery of more than 1700 camps were conducted and around Rs.14 old dues where the chances of recovery in full were not Crore NPAs were reduced. We have also conducted 2 exclusive possible and Rs.6.16 Crores was recovered through SHG-NPA Reduction campaign days during the month of Compromises. March involving IKP and other government machinery due to In view of huge magnitude of NPAs to be followed up for which 883 SHG-NPA accounts amounting to Rs.9.69 Crores regularisation and to save the precious time by avoiding going were upgraded. round the borrowers for recovery of small amounts, i) NPAs v Chairman and General Managers used to call 3 high with outstanding up to Rs.5000/-, ii) Loans with outstanding branches each to review and motivate the staff members up to Rs.25000/- sanctioned before 31.3.2005 and classified to improve recovery position. as NPAs and iii) Loans sanctioned before 31.3.2005 and classified as Doubtful and Loss Assets where 100% provision is v Gramsabhas were conducted on large scale involving the available having outstanding up to Rs.100000/- were written farmers, government officials and village elders advising off during the year. the benefits of repaying the crop loans viz., Pavalavaddi, Interest subvention, Crop insurance, enhanced scales of

finance etc., 9000 (Rs in Crores) NPAs S Assets 349.81 v All Chief Managers at Head Office (HODs) have been 8000 allocated one region each to monitor NPA position. They 7000 267.45 have camped at the allotted region for major part of the 6000 281.04 196.28 last quarter visiting branches and participated in recovery 5000 camps. 4000 3000 6322.13 7545.6 v

Officials of the Departments at Head Office were deputed 4698.15 5251.7 2000 to the regions for reduction of NPAs. 1000 v Letters addressed to CEO/SERP and Secretary (IF) seeking 0 2010-11 2011-12 2012-13 2013-14 their help in recovery of overdues in SHGs and ISB segments duly submitting the borrower wise soft copies. These measures have yielded results culminating into recoveries. v Special Scheme for One Time Settlement (SSOTS) for Agricultural/Allied agriculture Term Loans was announced during the year keeping in view that the borrowers who were affected by drought and the downfall in the land prices. An amount of Rs 13.73 Crore was recovered through SSOTS. v Created competition among branches/regions by announcing cash awards to the best performing branches/Regional Offices. v SARFAESI Act was effectively utilised and good number of loans were either regularised or recovered during the year. v The exercise of correction of technical NPAs was taken up at all regions with a time bound programme. Special team SHG-NPA reduction campaign organized by our Bank was identified for the task and necessary training was imparted to undertake the corrective measures.

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(Rs in Crores) Assets 2010-11 2011-12 2012-13 2013-14 O/s % O/s % O/s % O/s % Standard 4698.15 95.99 5251.7 94.92 6322.13 95.94 7545.61 95.57 Sub Standard 155.77 3.18 196.84 3.56 148.74 2.26 159.53 2.02 Bad & Doubtful 40.51 0.83 82.23 1.49 118.71 1.80 189.23 2.40 Loss 0 0 1.97 0.04 0 0.00 1.05 0.01 Total NPAs 196.28 4.01 281.04 5.09 267.45 4.06 349.81 4.43 Total Advances 4894.43 100.00 5532.74 100.00 6589.58 100.00 7895.42 100.00

Movement of NPAs (Rs in thousands) S No Particulars Current Year (2013-14) Previous Year (2012-13) i Movement of Gross NPAs Opening balance 2674486 2810478 Additions during the year 1605003 760635 Reductions during the year 781325 896627 Closing balance 3498164 2674486 Gross NPAs as % to total Advances 4.43 4.06 ii Movement of Net NPAs Opening balance 1728084 2004049 Additions during the year 1075396 549176 Reductions during the year 253379 825141 Closing balance 2550101 1728084 Net NPAs to Net Advances (%) 3.27 3.00

Internal Control System – Inspection & Audit The Bank has an effective audit system put in place in the Bank. The Risk Focused Internal Audit Report System, as suggested by State Bank of India, has been implemented in the Bank from July 2009 and with effect from 1.9.2011, the Bank has raised the benchmark for the Inspection ratings, to tighten the criteria to qualify for better rating:

Rating Range of Marks now revised Previous range of Marks Excellent >=850 >=750 Good >750 and <=850 >600 and <=750 Satisfactory >600 and <=750 >500 and <=600 Not Satisfactorily Run <600 <500

Branches with 'Excellent' and 'Good' ratings are audited within branch would undertake self audit as per the format three 18 months from the previous audit date while the Branches months prior to the commencement of regular audit. It with 'Satisfactorily Run' and 'Not Satisfactorily Run' rated facilitated branches to identify and regularise the branches are audited within a year. irregularities well before commencement of audit. The To prepare the Branches well in advance to face the regular effective follow up for implementation of self audit system Audit, a self audit format has been introduced. Under this, the has contributed to the improvement of branches rating.

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During the year 414 branches have fallen due for Audit and all 414 branches have been subjected to audit. Rating acquired by 414 branches is as under: Rating Out of 442 Branches audited Out of 414 Branches audited during 2012-13 % during 2013-14 % Excellent 178 40 209 50 Good 232 52 202 49 Satisfactory 32 7 3 1 Not Satisfactorily Run 0 0 0 0 442 100 414 100

The upward revision in the benchmark has resulted in downgrading of some branches even though the marks have not come down. v 2 Branches have upgraded from 'Satisfactory' to 'Excellent'; v 58 Branches have upgraded from 'Good' to 'Excellent'; v 30 Branches have upgraded from 'Satisfactory' to 'Good'; v 103 Branches have retained 'Excellent' rating; v 127 Branches have retained 'Good' rating; v 3 Branches remained with 'Satisfactorily Run' rating; v Totally 29 Branches have downgraded to a lower grade. The break-up of rating is as under:

Sl. No. Particulars Position as 31-3-10 31-3-11 31-3-12 31-3-13 31-3-14 01 Excellent 276 310 311 247 320 02 Good 242 196 206 301 310 03 Satisfactory 7 21 26 26 03 04 Unsatisfactory - - - - - 05