DIRECTORS' REPORT

The Board of Directors have pleasure in presenting the 66* Annual Report of the Bank along with the Audited Balance Sheet, Profit and Loss Account and the report on Business and Operations for the year ended March 31,2016 (FY- 2015-16).

MANAGEMENT DISCUSSION AND ANALYSIS

I. ECONOMIC ENVIRONMENT

Global Economy:

After the crisis of 2008 many countries had partly recovered though on weak foundations. Those foundations have crumbed for a variety of reasons and some of the countries are already in recession and some others on its threshold. While there is a high degree of disturbance, confusion and uncertainty and some would like to characterize the current situation as a newer version of VUCA (volatility, uncertainty, complexity and ambiguity).

The recovery after 2008 was heavily dependent on government funding. The US invented quantitative easing which was later on followed by EU and Japan. The objective was to control the inflation by lowering the rate of interest. These expectations were not achieved because neither consumption nor investment increased. The money pumped into the economy merely bloated up debt and pushed up asset prices.

Some countries in EU could not progress with 'over-valued' euro and crumbled under its pressure. Portugal, Ireland, Greece, Italy, Spain, had to be bailed out and with the austerity measures adopted by them growth has become difficult. Even France and Germany find the going tough in spite of the negative interest rate initiated by the European Central Bank. Unemployment in EU is over 9 per cent. Further pressures will mount if Britain leaves EU.

The emerging market economies are no better; some countries, like Brazil and Russia are already deep in recession. Of the BRICS countries only China and India have high positive growth though China has climbed down considerably creating fears of bubble burst. The yuan dropped to 16 month low and exports shrunk 25 per cent. Fears of further weakening of the Chinese economy, its falling equity market and the depreciation of its currency loom large over global economic prospects. In January 2015, capital outflows from China triggered sell-offs across both Advanced Economies (AEs) and Emerging Market & Developing Economies (EMDEs), exacerbating currency declines and heightening volatilities. Apart from uncertain recovery prospects in the AEs, the major reason behind such turbulence is the real prospect of a Chinese slowdown. Global economic performance post GFC has been largely supported by Chinese growth and demand, particularly for commodities (oil, industrial metals, etc.), needed to support the huge infrastructure build-up. In fact, China is said to be now taking steps to cut down excess capacities in sectors like steel and coal mining over the next few years. The scope for further activity in this sector, therefore, looks diminished at this juncture. Simultaneously, the financial health of banks and local bodies, which had funded this huge expenditure, is being called into question. Corporate profits in India have declined and investment in private sector will take time to recover.

The situation in many countries is similar to that before the last recession. Retail sales are down; factory orders are down; corporate profits are down; commodity prices are down; exports are down. But their central banks have little room to manage. Interest rates are already negative with high debt-overhang . That has created fears that recession may be round the corner.

Indian Economy:

The economy has been steadily moving at more than 7 per cent though different sectors have their own momentum. Industrial production has not shown much improvement in spite of substantial value addition. The monsoon last year was deficient and food grains production was negatively affected. Services sector kept its pace. Exports have been falling every month for more than a year now. Inflation was down to less than 5.5 per cent which prompted the RBI to ease monetary policy. Most parameters are positive and indicate a positive trend in future.

Agriculture

More than food grains, however, it is the non-food grains sector which is gaining more importance in terms of its contribution to GDP and food consumption. For instance, India is now the largest producer of milk with about 18.5 per cent of world production and accounts for 1 percent of our GDP. The Union Budget for 2016-17 allocates much larger funding to agricultural development with emphasis on irrigation and crop insurance. This was necessary not only to improve the incomes of farmers but also to keep inflation in check.

Industry

Some of the industries are in recovery mode. Car production was the highest so far and increased nearly 5 per cent in March. Some of the other  industries like steel have been stagnating due to decline in world demand and fall in international prices.

Corporate balance sheets reflect the stressed conditions. Profits have declined in spite of positive consumer sentiments.

Investment

Since FY11 when investment in private sector peaked at Rs.3.1 trillion, it has been steadily declining. There were reasons. First, there is underutilization of capacity to the extent of 20 per cent; second, with lower profits and volatile market which made IPOs difficult, companies had to depend more on debt the repayment of which has become difficult for business borrowers and has become an issue with PSU banks and Government. The value of expected investment stalled projects rose in Jan-March 2016 to 8.4 percent of GDP. Had this investment fructified GDP growth would have been 2 per cent higher.

The 'Make in India' has created some interest in foreign investment particularly in defence industries. Foreign Direct Investment in India was $31.6 billion in the first 11 months of 2015-16 about a fifth more than in the same period previous year.

The Stock Market

The market has become volatile for a variety of reasons. In fact the international events influence domestic markets much more than domestic factors. The policy stance of US Federal Reserve, the slowdown in China or the chaotic situation in the Middle East have much greater impact than even the earnings by companies in India.

FII investment for the most part was negative. In the first three months of 2015 investment in March was mostly cancelled off by disinvestment in the rest of the months.

Inflation

There was some weakening of inflation since the beginning of this year. This trend may continue if, as predicted by IMD, the monsoon this year is normal. That will stabilize prices since agriculture has been the starting point of inflation. International commodity prices, mainly of oil and metals, have been falling which have dampened WPI. The RBI is hopeful that inflation will ease with better management of liquidity.

External Trade

The slowing down of the world economy has decreased export of almost every country. A reversal has not yet come through. India's merchandise exports dropped from the $350 billion target by more than 15 per cent. But India has an advantage in services exports which partly covered the trade gap. Besides, imports also declined and consequently the current account deficit (CAD) dropped to 1.3 per cent of GDP.

The Prospects

Most estimates about growth rate in FY 2016-17 by different institutions are in the range of 7.4 - 7.8 per cent. There is also agreement that if the Government goes in for genuine reforms and improvement in governance, investment would be high and growth will cross 8 per cent. The last budget, it was expected, would open the economy further. That did not happen. GST and 'Entry and Exit' Policy are critical and every effort needs to be made to implement them as early as possible.

The Government is committed to low interest rate regime. It is expected that with low interest rates investment in the private sector, which is currently in retreat, will increase and generate growth and employment. Government has taken necessary initiatives for rate reduction as much for the financial market as for the RBI to cut the policy rate of interest. The Government has lowered the Government-regulated interest rates.

Lower interest rate however is no guaranty that capex will increase because investment depends on a variety of other factors. Since 2011 investment in the private sector has been declining in spite of the drop in interest rates. But as a long term strategy a low interest regime is undoubtedly desirable.

In US, EU or Japan interest rate is near zero or negative over a number of years. But neither consumption nor investment has revived. India is investment hungry and if the right reforms are initiated and easy entry and exit are ensured there would be investment resurgence which is critical for high growth and employment.

MONETARY AND BANKING DEVELOPMENTS

On 5th April the RBI announced its first bimonthly policy for the year 2016-17 with a cut in repo rate by 25 bps. Important announcements were also made to ensure efficient liquidity management. The stock market did not react favorably since the 25 bps cut was already factored in. Some banks however have reduced interest rates based on marginal cost norms prescribed by RBI.

Entire banking industry in India is under deep stress due to high ratio of stressed assets. This is particularly true of public sector banks which have to recover over Rs.3 trillion of loans. Corporate Debt Restructuring (CDR) has not delivered desired result and as a better alternative Strategic Debt Restructuring (SDR) has been introduced, but its full impact is yet to come.

RBI is expected to come out with guidelines on Large Exposures Framework and Enhancing Credit Supply through Market Mechanism. The Reserve Bank will also undertake revision of the guidelines on the securitization framework in the light of the BCBS revisions to the securitization framework which is to be implemented by January 2018.

In addition to recently licensed differentiated banks such as payments banks and small finance banks, the Reserve Bank would explore the possibilities of licensing other differentiated banks such as custodian banks and banks concentrating on whole-sale and long-term financing.  

FINANCIAL PERFORMANCE

bank's per formance during the year was delimited by setting of priorities for gaining desired results in the field assets. the main performance indicators of growth, profitability, efficiency, productivity, and solvency are is und

the bank has registered an operating profit of Rs. 1811.80 crore during the financial year 2015-16 compared to rs.2427.94 crore in the financial year 2014-15, registering a decline of Rs..616.14 crore (25.37%). net profit of the bank for the year 2015-16 stands at Rs. (-281.96) crore compared to a net profit of Rs..255.99 crore in fy 2014-15. gross profit per employee decreased from Rs. 15.98 lakh as on mar'15to Rs.. 12.09 lakh as on march'16.

Income and Expenditure Analysis

interest income of the bank reached Rs.9936.67 crore in 2015-16 compared to Rs.10180.48 crore earned during the year 2014-15. interest income being a direct function of growth in advances and the rate of interest charged. bank cut its base rate twice during the year 2015-16 to pass on the benefit of rate cut made by rbi. non-interest income decreased by Rs..279.38 crore (15.99%) from Rs.1746.91 crore in the financial year 2014-15 to Rs.1467.53 crore in the financial year 2015­16. the yield on advances declined to 9.93% as at march 2016 compared to 10.80% as at march 2015.

Interest Expenditure declined by Rs.33.71 crore to.7656.11 crore in 2015-16 compared to Rs.7689.82  crore in 2014-15. lower interest expenditure was ensured by slashing of the rate of interest on retail term deposits in all the brackets. the cost of depositi 2015-16. the bank contained its increase in operating expenses at 7.00% amounting to Rs. 126.66 crore

BUSINESS GROWTH

Deposits

Deposits of the bank reached Rs. 116401 crore as on 3 lsl march, 2016 registering a y-o-y growth of 6.97%. bank's savings deposits grew by 10.86 per cent to reach a level of rs.40810 crore as on march 31.2016. s ha re of casa deposits to total deposits stood at 41.92% as on march 31,2016. bank's retail term deposit stood at Rs. 61822 crore with a growth of 8.28%. share of bulk deposits and deposits at preferential rate in total  deposits further declined to reach at 4.97% and 1.31% respectively.

The bank's customer acquisition campaign resulted in growth of customer base of the bank from Rs. 3.60 crore a- at march 2015 to Rs. 3.93 crore as at march 2016.

The total credit portfolio of the bank has started looking up. gross advances of the bank increased by Rs. 2342 crore (3.39%) and reached Rs.71412 crore as on march 31, 2016. credit deposit ratio stood at 61.35% as on march 2016. bank achieved the prisec advance target of 40% of anbc. intensive marketing of retail credit products brought considerable growth in retail advances supported by increase in housing loan bank's non-food credit increased from rs.67667 crore to Rs. 70046 crore, while food credit came down from Rs. 1403 crore as on march 31, 2015 to Rs.  1366 crore at the end of march, 2016.

TOTAL BUSINESS

The total business of the bank reached Rs. 187813 crore at the end of the current financial year 2015-16. the total business of Rs. 187813 crore consists of Rs. 116401 crore of deposit and Rs.71412 crore of advance with a cd ratio of 61.35%.

productivity, as measured by business per employee, increased from Rs. 11.51 crore as on 31.03.2015 to Rsl2.37 crore as on 31.03.2016.

RETAIL LENDING OPERATIONS

retail credit has been one of the thrust area of the bank during the fy 2015-16. bank has laid special emphasis on sanctioning retail loans with focus on housing loan and mortgage loan which are the major contributors to growth under retail credit & comprised 65.03% of total retail credit portfolio of the bank.

performance:

during the fy 2015-16, lending under retail credit has witnessed a positive growth of Rs. 601.41 crore from Rs. 12050.95 crore as on 31ST  'march, 2015 to Rs. 12652.36 crore as on 31" march, 2016, registering a y-o-ygro with of 4.99%.

the growth during the period has primarily resulted on account of the housing loan segment which has clocked a positive growth from Rs.5092.74 crore as on 31.03.2015 to Rs.5969.67 crore as on 31.03.2016 registering an impressive growth of 17.22%.

special initiatives undertaken:

• bank has given special emphasis for tie-up with reputed builders to boost up growth in housing loan. many upcoming housing projects of reputed builders have been tied up and bank's name is being published in their brochure for enhancement of visibility in the home loan market.

• bank has made tie-up with reputed educational institutions to boost up growth in education loan segment

• a special loan scheme for the brightest and most talented students studying in premier educational institutes of India was offered with various extra special benefits and reduced rate of interest. the list of such institutes was also widened to offer these benefits to a larger section of students.

• Credit Guarantee coverage initiated for the students availing loan under Education loan scheme.

• New products in the name of United Affordable Housing Loan scheme under Prime Minister Awas Yojana launched with subsidy coverage for the Economically Weaker Sections and Low Income Groups and Roof Top Solar Lighting scheme has been launched to popularize it as a part of Housing loan.

• United Two Wheeler Loan Scheme for Salaried, Professional and Self employed and Businessmen and Agriculturists and Bank Mitras has been launched during the financial year.

• Bank has integrated with Vidya Lakshmi Portal in consonance with the Govt guidelines to enable students to apply Online and avail Education loan with ease.

• Bank is a member of Interest Subvention Scheme of Govt, providing Interest Subvention to eligible education loan borrowers as per guidelines of Govt, of India.

• Interest rate of retail loan schemes have been modified to make them more competitive and attractive.

• The online application facility for Retail Loans like Housing and Education was a major success during the FY 2015-16 as many applicants are now actively using this hassle free system for availing such Loans. Online Education Loan applications are being provided with In principle sanction instantly.

• SMS facility has been introduced for facilitating Housing, Car and Two Wheeler loans.

• Wide publicity has been given in respect of retail loan products mainly, Housing, Mortgage and Car loan by displaying advertisement in prime locations of city and urban areas, banners in and around branch premises and by advertisement in FM Radio / TV channel.

• Bank's official Facebook Page has been launched which features latest information on Bank's products / services and offerings and emerged as a major marketing tool for retail products.

• Marketing effort has been intensified with a dedicated marketing team consisting of qualified marketing officials to market retail products of the Bank.

Retail Hubs

Bank has established Retail Hubs for faster appraisal and professional approach in processing of loan proposals, thereby making loan sanctioning process hassle free and reducing Turn Around Time (TAT). During FY 2015-16,24 Retail Hubs functioning in 23 Regions of the Bank sanctioned 6955 retail credit proposals amounting to Rs. 1028.83 Crore as against 5373 proposals amounting to Rs.756.93 Crore during the FY 2014-15

TREASURY AND INTERNATIONAL OPERATIONS

The investment portfolio of the Bank increased from Rs.43440 Cr as on 31.03.2015 to Rs.44934 Cr as on 31.03.2016 registering a growth of 3.44%. The SLR investment portfolio increased from Rs.-35020Cras on 31.03.2015 to Rs.36009Cr as on 31.03.2016.

Portfolio modified duration increased to 4.66 as at March 2016 compared to 4.62 a year ago. The modified duration of the Available for Sale (AFS) portfolio has also increased to 3.73 as at March 2016 from 3.59 as at March 2015.

The Bank had earned a total trading profit of Rs.824Cr from domestic segment of Treasury during the year 15-16.The average return on investment' during the year 15-16 was 8.28%> and Yield on Investment during the year 15-16 was 8.02%.

Foreign exchange Business turnover of the bank aggregated to Rs.15089.59 Cr comprising of Rs.3606.59 Cr under Exports, Rs.4430.40 Cr under Imports and Rs.7052.60 Cr under remittances during the year ended 31.03.2016.

Outstanding export credit of the bank stood at Rs.l207.27crore as at 31.03.2016.Bank earned exchange profit of Rs. 135 Cr during the year 2015-16 against Rs 97 Cr during 2014-15.

The bank's overseas presence covered two countries namely Myanmar and Bangladesh with one Representative Office each at Dhaka, Bangladesh and Yangoan, Myanmar. Indo-Myanmar trade is routed through our Bank. Twenty five (25)banks of Bangladesh maintain thirty eight(38) Vostro accounts in USD and EUR and fifteen( 15) banks of Myanmar maintain Twenty three(23) Vostro accounts in EUR, USD, INR & SGD with our Bank. Global IME bank Ltd., Nepal is maintaining Vostro accounts in INR & USD with our Bank.

The bank's International operations are well supported by a wide network of more than 616 correspondent relationships and 18 Nostro accounts opened with overseas banks in 8 currencies maintained abroad.

OTHER SERVICES

Merchant Banking Division managed Bank's issue of Basel-Ill compliant Additional Tier-I bonds for Rs.150 Crore on 29.09.2015. Bank holds certificate of Registration issued by SEBI on Banker to an Issue, Debenture Trustee and Merchant Banker under which it continues to discharge defined duties and responsibilities as per regulatory norms.

GOVERNMENT BUSINESS

Under Government Business, the Bank undertakes the following types of Government Business Activities like:

• Collection of Central Government Revenue viz. Direct and Indirect Taxes (CBDT, CBEC and Customs) through physical mode by Authorise' branches and through e-mode (Internet Banking) by all branches of the Bank.

• Collection of State Revenues and Taxes (Sales Tax, VAT, Professional Tax etc), both on line and offline.

• Mobilization of Govt deposits as also Social Security Scheme under PMJDY (PPF, SCSS, Sukanya Samriddhi Account, Savings Bond, Inflation Index Bond, Sovereign Gold Bond, Atal Pension Yojana etc.)

• Handling of Govt Fund (Departmentalized Ministries' Accounts, State Govt Treasury Operation)

• Payment of School Teachers' Salary and all types of pension (Central Govt. State Govt and different autonomous organizations).

The Bank has been authorized to act as Point of Presence (POP) by the Pension Fund Regulatory and Development Authority (PFRDA) and 1094 Branches have been registered as Point of Preference-Service Provider (POP-SP) in Central Recordkeeping Agency, NSDL system for implementation of subscribers' registration process in National Pension System (NPS) for allcitizens of India.

The Bank has also been authorized to act as Aggregator by PFRDA and 1400 branches of the Bank have been registered as NPS lite Collection Centres (NL-CCs) in Central Recordkeeping Agency, NSDL system for implementation of subscribers' registration process in NPS lite / Swavalamban Yojana for unorganized sector and economically disadvantaged people. The Bank has registered 8356 subscribers from unorganized section of the society under NPS/NPS lite / Swavalamban Yojana.

A new Social Security Scheme namely Atal Pension Yojana (APY), has been introduced by the Govt, of India on June, 2015 especially a defined pension scheme for the unorganized sectors of the society between the age group (18-40) years to secure their old age income by way of monthly pension ranging between Rs.( 1000-5000) on attaining 60 years of age.

All our branches are authorized to enroll subscribers under this new pension scheme. Nearly 35000 subscribers are enrolled into this scheme during this year. This scheme replaced the existing Swavalamban Scheme.

Central Pension Processing Centre (CPPC) set up at H.O. is handling disbursement of Pension to more than 1.04 lac Central Civil, Telecom, Postal, Political, Railway and Defence Pensioners.

To facilitate dissemination of relevant information to the Pensioners, "Pensioners' Charter" has been displayed in Bank's website and also in all pension disbursing branches. Bank has also introduced the Digital Life Certificate facility for the pensioners where they can submit their yearly life certificate digitally without visiting the branch, if their account is seeded with A ADH AAR.

On-line pension grievance redressal mechanism is available on Bank's website. Pensioners' pay-slip are also available in the website of the Bank.

Turnover in respect of Government Business handled by the Bank and Agency Commission earned on such business during the financial year amounted to Rs.42,693.21 Crore and Rs.42,93 Crore respectively. Agency commission earned from Government business during financial year 2015­16 was as follows:

ASSET QUALITY AND RISK MANAGEMENT

The problem of piling up of bad loans starting due to economic downturn when a slowdown in demand and stalled projects made it difficult for borrowers to repay debt, got bigger in size with the Intensive Asset Quality Review (AQR) conducted by the Reserve Bank of India in a bid to start a long overdue clean-up of stressed assets held by the banks. Besides, banks were required to ensure that they are all broadly on the same page in terms of recognition and provisioning, even though each one had flexibility on individual cases.

Despite constant follow up with the recalcitrant borrowers, monitoring of stressed assets and tough measures in hard account, the Bank was not able to contain further growth in NPA level which reached a level of Rs9471 crore i.e 13.26% of gross advances.

The major steps taken by the Bank for recovery of stressed assets during the year were a liberalized limited period offer of one time settlement (OTS)  for NPAs with outstanding balance below Rs.5 lac. To create general awareness among the public the Bank took the initiative by putting up silent road shows and peaceful demonstrations before the establishments of defaulting borrowers.

Asset Quality

The Bank has been complying with RBI guidelines relating to Income Recognition, Asset Classification and Provisioning in percentage terms, gross NPA Ratio of the Bank stood at 13.26% as on 31.03.2016 as against 9.49% at the end of the previous year. In absolute terms Gross NPA stood at Rs9471croreas on 31.03.2016. The Net NP Aratio of the Bank stood at 9.04% as on 31.03.2016 against 6.22% as on 31.03.2015. In absolute terms, the Net NPA stood at Rs.6111 crore as on 31.03.2016. The fresh slippages during the FY 2015-16 increased to Rs5011 crore as against Rs.408 7crore during the FY 2014-15. The cash recovery during the year was Rs. 541 crore and the upgradation during the year was Rs349crore. The provision coverage ratio of the Bank stood at 53.36% as on 31.03.2016 as against 58.50%) as on 31.03.2015. The recovery in technically written off accounts was Rs 110 crore during the year 2015-16.

The Bank has a comprehensive Recovery Policy duly approved by the Board covering all avenues for recovery and reduction of NPAs like One time settlement (OTS), sale of charged assets, sale to Asset Reconstruction companies (ARC) etc. The Bank came out with liberalized guidelines during the year for recovery of small value NPA accounts having outstanding balance below Rs.5 lac. The Bank preferred to go for sale of NPA to the tune of Rs.553 crore to ARCs during the FY 2015-16.

CAPITAL & RESERVES

Net Worth of the Bank was assessed at Rs.4685.14 crore as on March 31,2016. Total paid-up capital of the Bank was Rs.839.52 crore and reserves and surplus was Rs.4999.67 crore. The Government shareholding in the Bank stood at 82% at March 2016.

Capital Adequacy Ratio under Basel-Ill norms assessed at 10.08% with Tier-1 Ratio at 7.93% and CET1 ratio at 7.74% as at March 2016. Capital Adequacy Ratio under Basel-II norms assessed at 10.46% with Tier-1 Ratio at 7,23% as at March 2016. The Bank has adequate headroom available under both Tier-1 and Tier-2 options to raise capital to support business growth momentum.

Risk Management

The Bank has an Integrated Risk Management system to ensure that the risks assumed by it are within the defined risk appetites and are adequately compensated. To address the various risks to which the Bank is exposed to, the Bank has a robust Risk Management Architecture in the Bank comprising Risk Management Structure, Risk Management Policies and Risk Management Implementation and Monitoring Systems.

Risk Management Structure:

The overall responsibility of setting the Bank's risk appetite and effective risk management rests with the Board of Directors, apex level management of the Bank. Bank has constituted a Board level Committee named as Risk Management Committee of Board oF Directors (RMCBOD) to monitor the implementation of the Risk Management systems of the Bank. There are other internal committees of Top Executives like Credit Risk Management  Committee (CRMC), Operational Risk Management Committee (ORMC) and Asset Liability Management Committee (ALCO) to supervise various risk management functions and activities of the Bank.

Bank's Asset Liability Management Committee (ALCO) is a decision making unit responsible for the strategic management of interest rate and liquidity risks. ALCO met 12 times during the year to review various issues namely interest rates scenario, product pricing for both deposits and advances, desired maturity profile of the incremental assets and liabilities, demand for Bank funds, fixation of Bank's Base Rate, cash flows of the Bank, profit planning and overall balance sheet management.

The Operational Risk Management Committee (ORMC) has the responsibility of monitoring the operational risk of the Bank and the responsibility of evaluating and taking necessary steps for mitigation of operational risk by designing and maintaining an explicit operational risk management process. It also ensures that the norms, policies and guidelines laid down in Operational Risk Management Policy are strictly adhered to. ORMC met 8 times to discuss various issues from operational risk point of view.

The Credit Risk Management Committee (CRMC) monitors various credit risk aspects relating to credit policy, procedures and to Analyze, manage and control credit risk on a bank wide basis. The Committee met 7 times during the year to discuss various issues from operational risk point of view.

Risk Management Policies:

To address various risks like credit risk, market risk, operational risk, liquidity risk, forex risk and other Pillar-2 risks, the Bank has formulated various risk management policies to identify, manage and mitigate such risks that the Bank is exposed to. The major policies formulated and approved by the Board of Directors of the Bank to address such risks are Lending Policy, Policy on ICAAP, Operational Risk Management Policy, Business Line Mapping Policy, Asset Liability Management Policy, Investment Policy, Disclosure Policy, Credit Audit Policy, Stress Testing Policy, and Policy on Credit Risk Mitigation Technique & Collateral Management etc.

Credit Risk:

To address the Credit risk. Bank has formulated a Lending Policy which lays down policy guidelines for Credit Management covering all areas of operation where credit Risk is involved. The policy enables the Bank to enhance the risk management capabilities by undertaking lending decisions guided by the policy framework for a steady and healthy growth in its loan portfolio.

The Bank has set various prudential limits to individual borrowers, group borrowers, entry level exposure norms, substantial exposure limits, benchmark financial ratios, borrower standards, exposure limits/ceilings to industries, sensitive sectors, rating category etc in alignment with RBI directives. The Board has reviewed such limits during the year.

During the year, analysis of various exposure norms has been undertaken on half yearly basis to ensure Bank's various exposures are within the exposure limits/ceilings fixed by RBI/Bank's Board.

Bank has made its loan appraisal function independent of Risk Rating function. Internal risk rating of loan accounts is carried through a software based rating model to assess the credit proposal and rating of a borrower.

During the year. Bank conducted the credit portfolio analysis on quarterly interval, to study the impact of a particular industry / sector on the credit portfolio of the Bank and adopt strategies to improve the quality of credit portfolio and reduce the potential adverse impact of concentration risk.

During the year. Bank has also undertaken the rating migration analysis of its borrowers on half yearly interval to analyze the stability rate, up gradation rate, down gradation rate and default rate for a one year, two years, three years and four years time horizons and appropriate corrective actions are initiated to protect the portfolio quality.

Market Risk:

For management of Market Risk, the Bank has given emphasis on measuring, monitoring and managing liquidity, interest rates, foreign exchange and equity risk of the Bank. The Market Risk in trading book is monitored and managed as per appropriate control mechanism in place. Market position, funding patterns, duration, counterparty limits and various sensitive parameters are also monitored by the Bank on regular basis. The advanced Risk Management tools such as Value at Risk (VaR), Earnings at Risk (EaR), Net Overnight Open Position Limits (NOOPL) and modified duration limits are used in managing Market Risk.

The Bank measures and monitors liquidity risk for all items of balance sheet through structural liquidity statements and stock ratios on regular basis. The Bank also monitors its Interest rate risk through interest rate sensitivity gap reports.

The Bank has formulated and reviewed its Investment Policy to set operating guidelines for its treasury functions. The Bank has also put in place an Asset Liability Management Policy to address the liquidity risk, interest rate risk etc. These policies comprise management practices, procedures, prudential risk limits, review mechanisms and reporting systems etc. These policies are reviewed periodically in line with changes in financial and market conditions.

Bank has an "Integrated Treasury Management System (1TMS)" software to monitor its investment and treasury portfolio on an ongoing basis along with automated computation of capital charge for Market Risk as well as strengthening the internal control system of investment portfolio of the Bank.

Operational Risk:

The Bank has framed an Operational Risk Management Policy for managing the Operational Risk in an effective manner. The Bank has also formulated Business Line Mapping Policy for mapping various products, activities, and income into different business lines.

Bank's Operational Risk Management Committee (ORMC) has the responsibility of monitoring the operational risk of the Bank. ORMC also reviews the operational risk loss event data, new products, process and systems adopted by the Bank and provides suggestions for taking corrective/preventive measures to strengthen the internal systems and procedures.

Basel-II and Basel-Ill Compliance:

In line with guidelines of the Reserve Bank of India, the Bank has successfully migrated to Basel-II framework w.e.f 31" March 2009 by adopting Standardized Approach (SA) for Credit Risk, Basic Indicator Approach (BIA) for Operational Risk and Standardized Duration Approach (SDA) for Market Risk for computing the capital adequacy ratio.

The Bank has also followed Basel-Ill capital regulation norms w.e.f 1" April 2013 in line with RBI guidelines. The Bank has been computing the Capital to Risk Weighted Assets Ratio (CRAR) on both under Basel-Ill and Basel-II norms at quarterly interval.

To comply with Pillar 2 guidelines of RBI, the Bank has formulated a Policy on Internal Capital Adequacy Assessment Process (ICAAP) for the assessment of all material risks the Bank is exposed to and the risk management processes which are put in place to manage and mitigate those risks and also to evaluate its capital adequacy commensurate with such risks.

In line with the ICAAP policy, the Bank prepares the ICAAP Document on yearly basis and submits to RBI after internal validation and approval by the Board of Directors of the Bank. The ICAAP document of the Bank for 2015-16 has been submitted to RBI.

The Bank has reviewed its capital requirement both under Basel-II and Basel-Ill norms and taken necessary steps for strengthening its capital base. The Bank also reviewed its ICAAP on quarterly basis for monitoring both risks and capital requirement of the Bank.

In line with RBI guidelines and as per the Stress Testing Policy of the Bank, the Bank conducted Stress Testing analysis on quarterly interval on various risks like Liquidity Risk, Interest Rate Risk, Forex Risk, Credit Risk, Market Risk, and Operational Risk and assessed the impact on capital adequacy and profitability.

For skill development in Risk Management area, the Bank also nominates its officers on regular basis for various trainings/seminars on Risk Management conducted by reputed institutions like CAFRAL, NIBM, IB A, IDRBT, CAB etc.

PRIORITY SECTOR ADVANCES

Bank's lending to the Priority Sector has reached to Rs.29809 crore as at 31st March 2016 which is 41.16% of ANBC. After issuance of revised guidelines on Priority Sector Lending by Reserve Bank of India, with an objective to surpass the stipulated targets, Bank has given special thrust on financing Small & Marginal Farmers, Micro segment under MSME apart from exploring other potential avenues of increasing PRISEC advances like engaging Collateral Management Companies for Pledge Financing, financing large size units of Dairy, Poultry units, vegetable and flower production under controlled condition (Green House/ Poly House), Plantation etc.

Agriculture Lending:

Bank has disbursed Rs.7401 crore during the FY 2015-16 against a target of Rs. 7698 crore recording an achievement of target to the tune of 96%. Lending to Agriculture Sector stands at Rs. 12605 crore as on 31 st March 2016 which is about 11.40% of ANBC against the stipulated target of 18% of ANBC. Lending to Small & Marginal Farmers stands at Rs.5477 crore which is 7.56% of ANBC against the stipulated target of 7% of ANBC for the year 2015-16.

Lending to Weaker Section:

Lending to weaker section reached to Rs.7733 crore as on 31 March 2016 which is 10.68% of ANBC against the stipulated target of 10%.

Lending to Minority Community:

Bank's lending to Minority Communities reached to Rs.4474 crore at the end of March 2016 which is 15% of PSL conforming to the stipulation.

Kisan Credit Card:

Bank has organized several special camp for issuance of Kisan Credit Cards to bring more number of new farmers under KCC net as per revised scheme. Bank has issued 94799 fresh KCCs during 2015-16 with credit limits of Rs.538 crore. Total number of outstanding KCCs as on 31" March 2016 stands at 559923 with aggregate outstanding balance of Rs.2266.56 crore. In line with the Government guidelines on issuance of Rupay based ATM enabled cards to all the KCC holders, Bank has issued 3.60 lakh ATM cards to the KCC holders till 31.03.2016 which is 93% of eligible KCC holders (excluding illiterate, unwilling and NPA KCC holders).

Self Help Group:

Bank has credit linkages with 87015 SHGswithan outstanding balance of Rs.366.62 crore as on31"March 2016. Bank has been implementing NRLM programme for SHGs by providing initial credit limit of Rs. 1.25 lakh on i" grading of SHGs as per the decision of SLBC, West Bengal. Bank has started participating in Community Based Recovery Mechanism (CBRM) with the assistance from State Rural Livelihood Mission (SRLM) which has placed Bank Sakhi/ Bank Mitra at the branches.

Corporate Social Responsibility:

As part of corporate social responsibility, Bank has undertaken the following activities:

United Bank Rural Self-Employment Training Institute (UBRSETI)

Bank has so far set up 14 RSETIs in the states of West Bengal, Assam and Tripura to impart training to the potential entrepreneurs from the financially weak sections of the society. RSETIs have been actively engaged themselves in number of special training programmes, as directed by the government like PMEGP, MGNREGA etc.

During the FY 2015-16, these institutes have imparted training to 11333 rural youths/women, of which 55% trainees have been settled by establishing own economic venture. Out of the total self employed trainees about 75% belong to women and weaker sections communities. These institutes are providing post training hand holding support to the trainees including arrangement of loan from our bank branches to enable them to set up their own ventures.

FLCC

Bank has also set up 38 Financial Literacy Centre (FLCs) in the states of West Bengal, Assam, Tripura and Manipur to extend financial literacy and credit counseling services to the poorer section of the society. In the Financial Year 2015-16, these FLCs are conducting regular outreach programmes which include Outdoor Activities for imparting financial literacy.

United Bank Socio-Economic Development Foundation (UBSEDF)

United Bank Socio Economic Development Foundation (UBSEDF) was established on 30th March 2007 with the objective of promoting and carrying out social and economic developmental activities and rendering assistance to weaker and under privileged section of the society in terms of decision taken by the Board of Directors of the Bank. Bank has extended financial assistance in 71 various welfare activities involving a total sum of Rs.213.00 Lakh towards its CSR activities till 31.03.2016. During the financial year 2015-16, focus was on extending assistance to the proposals under Swachh Bharat Mission/ Swachh Vidyalaya Campaign. In the year, Bank has disbursed Rs.20.59 Lakh for 5 projects for implementation by the respective organizations towards cause of the society.

Advances under MSME of the Bank has decreased from Rs. 12949crore as on 31 -03-2015 to Rs. 11885crore as on 31 -03-2016.

MSME target could not be achieved due to i) Amendment of PRISEC guidelines by RBI thereby reclassification of Agro processing units to Agriculture from MSME ii) General economic slowdown iii) Withdrawal of CGTMSE guarantee coverage.

Strategies to attain MSME target.

Initiatives to increase flow of credit to MSME sector:

• Keeping in view the MSME target of Rs. 14000 Crore for this financial year and the corresponding NPA, our entire attempt is focused on building a quality MSME asset portfolio by credit linkage to quality MSME entrepreneurs/units, recovery in NPA accounts and preventing fresh slippages.

• To reduce the turnaround time and to create quality asset portfolio a Centralised MSME - Loan Processing Centre (MSME-LPC) has been set up at Head Office. The MSME-LPC will process and sanction the eligible MSME loan proposals of Rs 1.00 Cr and above received from all the locations across country.

• The Regions have been given quarterly and annual MSME targets for Branches under their control. MSME specialized branches and branches having potentiality of MSME advance including those located in close proximity to industrial area / clusters have been advised to focus on procuring new business from the entrepreneurs. Regular follow up in this regard is being done on weekly basis from Head Office.

• Bank considers MSME as one of the thrust areas of the lending and Bank has re-designated 100 additional branches as MSME Specialized Branches and the total number of MSM E Specialized Branches now stands at 180 from 87.

• Regular interface with the MSME Associations / Tie up with NS1C and participation in their promotional programmes / workshops / seminars and EDP programmes.

• CGTMSE guarantee coverage for the Bank, which was discontinued from October'2014 has now been restored w.e.f. 01.04.2016 based on Differential Rate Structure of Annual Service Fee (ASF).

• Under Capacity Building approach, Officers dealing with MSME loans and faculty members at Staff Training College (s) are provided training on regular basis for hassle free and dedicated service to MSME entrepreneurs.

• Bank has adopted cluster based approach for MSME financing.

• Bankhas encouraged collateral free loan to MSE sector up to Rs. lO.OOlac.

LEAD BANK DIVISION

The Lead Bank Scheme was introduced by Reserve Bank of India in December 1969. The Lead Bank Scheme envisages assignment of lead roles to individual banks (both in public sector and private sector) for the districts allotted to them. The lead bank acts as a leader for coordinating the efforts of all credit institutions in the allotted districts to increase the flow of credit to agriculture, small-scale industries and other economic activities included in the priority sector in the rural and semi-urban areas, with the district being the basic unit in terms of geographical area.

The Bank is the Convener of State Level Bankers' Committee (SLBC) in the States of West Bengal & Tripura. The Bank is entrusted with Lead Bank responsibility in 34 districts spread over four states; 10 districts in West Bengal, 12 districts in Assam, 4 districts in Manipur and 8 districts in Tripura.

As Lead Bank of the State, the bank remained actively involved in formulation and finalization of Annual credit Plan (ACP) for the State and has drawn up suitable action plan for implementation of different socio economic activities keeping close liaison with Reserve Bank of India, NABARD and State Government Authorities.

The year 2015-16 had been eventful for the Bank as SLBC Convener for both West Bengal & Tripura.

The SLBC meeting organized in Tripura State have been attended regularly by dignitaries like Mr. Yashpal Singh, Chief Secretary, Government of Tripura, Dr. G.S.G. Ayyangar, Principal Secretary, Finance, RD & Agriculture, Government of Tripura, General Manager, Reserve Bank of India and Senior Executives of Line Department of the State.

Dr. Amit Mitra, Hon'ble Finance Minister of Govt, of West Bengal, Regional Director, RBI, CGM, NABARD, Director, DFS, MoF, Gol and the Pricipal Secretaries of Line Departments of the State have regularly attended at the SLBC meetings in the State of West Bengal during the year 2015­16 to enrich the level of discussion on important issues concerning development of the State.

Under leadership of the Bank the following achievements took place during the year in the States of West Bengal & Tripura:

• In both the States under the leadership of the Bank as SLBC Convener, three Social Security Schemes viz. Pradhan Mantri Jivan Jyoti Bima Yojona (PMJJBY), Pradhan Mantri Suraksha Bima Yojona (PMSBY) and Atal Pension Yojona (APY) were launched in a befitting manner on 9* May 2015. SriNarendra Modi, Hon'ble Prime Minister inaugurated all three Social Security Schemes on 9a May 2015 from Kolkata.

• In both the States of West Bengal and Tripura, the roadmap for covering the villages having population more than 5000 have been allotted to member banks for opening of Brick & Mortar bank branches within 31.03.2017.

• Recognition of the contribution made as SLBC Convener of TRIPURA for securing FIRST rank in maximum coverage of Sub Service Areas under Pradhan Mantri Jan-Dhan Yojana.

• Recognition of the contribution made as SLBC Convener of WEST BENGAL for securing FIRST rank in maximum percentage achievements of identified household coverage under Pradhan Mantri Jan-Dhan Yojana.

• Recognition of the contribution made as Lead District Manager, Bankura (West Bengal) of United Bank of India for securing FIRST rank in maximum coverage of sub service areas under Pradhan Mantri Jan-Dhan Yojana.

• Under the Leadership of the Bank, Nagaon district of Assam & North 24 Parganas district of West Bengal have been awarded as Best Districts for implementation of PMJDY by Sri Narcndra Modi, Hon'ble Prime Minister of India.

FINANCIAL INCLUSION

With the evolution of digital payment and mobile technology there are means now to deliver advanced products to the population and regions excluded. This in conjunction with large BC network of4252 Bank Mitras established across 13250 un-banked villages equipped with the latest and best of breed technology, has enabled the Bank to deliver various basic banking services to the excluded population right at their door step.

The highlights of achievements for implementation of Financial Inclusion under Pradhan Mantri Jan Dhan Yojana (PMJDY) during the FY. ended 2015-16 are enumerated hereunder:

• Under PMJ D Y, 72.99 lakh accounts have been opened till end of March' 16.

• Rs.4244.37 crore deposit has been mobilized in PMJDY Accounts upto March'l 6.

• Out of72.99 lakh accounts opened, 11.05 lakh accounts (15.15%) are under 'Zero' balance.

• Credit linkage through Bank Mitra channel has been established in 18.78 lakh FI customers with an outstanding amount of Rs.337.64 crore.

• Bank has rolled out JLG Loan module through Bank Mitras. 26510 FI customers have availed JLG loan where outstanding balance is Rs.3434.17 lakh as at 31 * Mar' 16, without any default.

• 46.97 lakh RuPay Debit Cards have been issued.

• 21.10 Lakh PMJDY Accounts have been Aadhaar linked.

• 20.98 Lakh customers have been enrolled under Pradhan Mantri Suraksha Bima Yojana (PMSBY).

• 3.77 Lakh customers have subscribed for insurance cover under Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY).

• Out of385 death claims lodged under PMJJBY, 242 claims have been settled by LICI.

• Under PMSBY, as against 47 accidental insurance claims received, NIC has settled 24 cases and repudiated 5 cases.

• Our Bank has been awarded as Best Bank in West Bengal by Forum for Inclusive Financial Services (FF1FS) on 06.08.2015 under the category Highest Deposit account opened under PMJDY.

• Chamber of India Micro Small & Medium Enterprise(CMSME), New Delhi has recognized our Bank as Best Bank in 3 categories viz. Best Bank under PMJDY, Best Bank for promotional schemes under emerging Banks and Special Jury award for Turn Around Bank.

Financial inclusion initiatives rest on partnerships which bring together leadership, expertise, experience, and funding. Financial inclusion is our collective responsibility. So, Bank is collectively leveraging the digital technology for ensuring greater financial inclusion

Out of total 2011 branches as on 31.03.2016,885 (44.01% )are located in 85 Minority Concentration Districts (MCDs) throughout the country. CBS:

All branches are covered under Core Banking Solution (Finacle) system and deployed other applications to facilitate customer service and effective management. As part of its Business Continuity Plan (BCP), Bank conducts periodic DR (Disaster Recovery) Drills.

Network:

Bank is revamping its existing traditional network architecture from Point-to-Point to next generation MPLS technology and also upgrade network bandwidth for higher availability & better performance. Bank has deployed VSATs, ISDN, High Speed Data Connectivity using 3G as back up , connectivity at Branches to provide network connectivity in the event of cable cut, failure of BSNL Exchange etc. Bank has implemented WAN optimization solution in all Branches to improve network performance for smooth functioning of bandwidth rich banking application.

Payment Systems:

All branches of the Bank and sponsored RRBs are enabled for interbank fund transfer through Next Generation RTGS and NEFT using Straight Thorough Processing (STP). RTGS/NEFT facilities are also available through Internet Banking for Retail and Corporate customers. Our Mobile Banking customer can also avail NEFT facility. The SWIFT services are seamlessly being offered for worldwide inter-bank financial communication through one 'A' Category AD Branch and 39 'B' Category AD Branches. Bank has also made strategic Business Continuity Planning (BCP) for uninterrupted delivery of services. In order to make continuous effort to improvise the system, Bank has migrated inland Letter of Credit (LC) operation using Straight Thorough Processing (STP) between SFMS & CBS.

Bank Website and Intranet:

Bank's Intranet portal is used extensively for information sharing, knowledge management and online examinations. Bank has implemented Grievance online, Housing loan, Car loan, Personal Loan on Bank's website as per directions of Ministry of Finance. These applications enable customers to make all requests online and to keep online tracking of the fate of their applications. Bank has made its Websites IPv6 compliant and DDoS protected. Bank has also setup DRsite for its Websites.

Self-service Kiosk:

A new technology initiative of self-service kiosk services has been deployed in the selected branches. The services offered are Passbook printing. Cash deposit and Cheque deposit services.

Mail Messaging System:

Corporate Mail Messaging System with centralized archival solution covering all offices is in place.

SOC & IT Security:

With the growing dependence on IT systems and exponential increase in transactions through electronic delivery channels, Bank has identified Information Security as the key area for sustenance of business. RBI guidelines on Information Security, Electronic Banking, Technology Risk Management and Cyber Frauds are taken as the guiding principles for management of Information Security in the Bank. Bank is actively pursuing to mitigate gaps to fully comply with RBI guidelines. Bank has engaged professional agency for providing Anti-Phishing, Anti-Pharming, Anti-Trojan and Anti-Mai ware Managed Services for Bank Websites. Bank has implemented Security Operations Centre (SOC) by integrating all critical devices deployed in data center and disaster recovery center for recording and monitoring of logs. SOC provides the centralized view of Information Security status and command centre for IS Security operations.

Biometric:

Department of Financial services, Ministry of Finance directed all the Public Sector Banks to introduce biometric log-in for employees of the Bank to prevent incidences of authentication frauds. Bank has implemented Biometric Authentication Solution across all its branches.

ISAUDIT

Bank is conducting VAPT (Vulnerability Assessment & Penetration Testing) of external facing applications in certain intervals and mitigates the vulnerabilities, if any observed. Information Security (IS) audit is carried out by External agencies for its Core Banking Solution and all other applications as well as for Data Centre/Disaster Recovery Centre Infrastructure.

Electronic Passbook:

With an aim to leverage technology, the Bank has introduced electronic Passbook (United ePassbook) facility for the customers as a mobile application to view account transactions. A customer can download mobile application from Google Play Store to see transaction history and many other unique features like adding personalized remarks to transactions, creating personalized ledger, maintaining historical transactional data, receiving the account statement through e-mail.

Centralised Payment HUB

The Bank has set up a Centralised Payment HUB at Head Office to handle high volume of transaction of different payment system in a secured, efficient and reliable manner. The Centralised Payment HUB has started its operation w.e.f. 3.11.2014.

The department is catering the following services:-

• NACH Debit

• NACH Credit

• ABPS (Aadhar Bridge Payment System)

• Mandate Management System of NPCI

• DBTL (Direct Benefit Transfer to LPG Customers)

• DBT ( Direct Benefit Transfer to beneficiaries for different scheme of Govt of India)

• ECS Credit as Sponsor Bank centrally at CPH, H.O. (migrated from RBI to NACH on 17.02.2015 which was earlier being processed by branches / service branch before coming on NACH platform)

• ECS Debit as Sponsor Bank including Mandate Management System migrated from RBI to NACH platform.

• AEPS (Aadhar Enabled Payment System) Reconciliation.

• CMS Payment Services

• Corporate Bulk Payment

• GePG (Government e-Payment Gateway)

• CMS Collection Services

• Indo Nepal Remittance Service

• Centralized Mandate Based Direct Debit Service

• Corporate Cash & Cheque Collection Service

• Core ASB A(Application Supported By Blocked Amount)

• Syndicate ASB A

• e-ASBA (through e-banking/Net banking platform)

MANPOWER PROFILE

The total staff strength of the bank stood at 14981 as on March 31,2016 as against 15192 last year.

The total staff strength comprises 51.31 % officers, 33.49% clerks and 15.20% Sub-Staff. Women employees numbering 3334 constitute 22.25% of the Bank's total staff strength.

For 2015-16 Bank recruited 552 Officers and 326 Clerks through IBPS. The recruitment process was initiated for filing up the vacancies to meet effectively succession planning process and man power management for smooth running of the organization.

Inter cadre and inter scale promotions were successfully conducted during FY 2015-16 and in total 885 numbers of employees were promoted to next higher cadre/scale.

Training /Human Resource Development (HRD)

First time United Bank of India has launched a Mentoring process. Top executives shall guide the newly recruited 552 POs. Bank signed MOU with NUT - IFBI for a period of three years to train the SWOs for induction and refresher course.

Special Training programmes were conducted with focus on creation of talent pool of officers in critical areas like Credit Risk Management, Financial Inclusion, Management Development, Fraud Analysis, Forex etc. During the year total 231 training programmes were conducted with 4999 employee participants comprising 3409 officers and 850 clerks of the Bank to attend in-house training.

As per Govt guidelines pre-promotion training for employees belonging to SC/ST candidates were conducted for 900 employees at Staff Training College, Kolkata, Regional Training Centres and other different locations. Bank has also conducted in-company training programmes during the year wherein 25 officer employees have participated. Bank had sent 1225 office employees for 71 different external training programmes. During the year Bank had sent one top executive for overseas training programme.

Establishment of HRMS Back Office

• A dedicated HRMS back office has been set up at HO to take care of all staff related payments like:

• Centralized salary payment for all branches/offices. Centralized TA/LFC/Medical bill processing and payment

CUSTOMER ORIENTATION

The bank has taken several initiatives to remain customer friendly by providing prompt services, bringing in diversified technology supported products/ services, quickly responding to customer queries/ suggestions and redress of customer complaints. The Code of Commitment to customers issued by BCSBI has been made available at the Bank's website and also sent to all the Branches & Regional Offices across the country in the form of printed booklet. In order to improve the quality of customer service, a Toll free contact facility at Customer services Department is provided to facilitate the customers to represent their grievances/ suggestions. The toll free facility is made available from 8 AM to 10 PM. With a view to expediting receipt and redressal of complaints/grievances from the customers, no. of toll free desks have since been increased. For ATM related issues a separate Toll free contact facility at Head Office is provided to facilitate the customers. Notably the bank has implemented online grievance redress system through the Bank's website where the customers can track the status of their complaints also.

In order to facilitate quicker and fair non-discriminatory redress of grievances, Bank has introduced a portal styled as Comprehensive Complaint Management System (CCMS) by leveraging technology. Under this system the complaints received by Branches, Regional offices and Departments at Head office are uploaded/entered by the concerned Branch/Regional Office /Head office Department on the "On line Grievance Redressal" (CCMS) Portal, available at intranet link and the status of redressal/settlement is also uploaded on real Time Basis. The complaint can be lodged on the CCMS Portal directly by the customer also which is added by the system in the outstanding data base of CCMS.

The comprehensive Complaint Management System has helped us track the status of each complaint and to take a comprehensive look with regard to the total complaints received by the Bank during the period and status thereof. The necessary follows-up measures are immediately taken up for expeditious disposal of the complaints and grievances with the concerned Branch/RO/Department of Head Office. The system enables the officials of the Customer Service Department to classify the nature of complaints with respect to the products and services to which the complaints are related. The analysis of data aims to help the bank management to take appropriate action to improve service in the areas which are found deficient. The complaints

from various sources, like those received through mails of the officers of Customer Service Department and from the Banking Ombudsman are also entered on the CCMS Portal. The consolidation of complaints from all the ends on the CCMS portal has helped the management in their analysis so as to be able to identify their nature, areas from which maximum complaints are received as also the time taken for the redressal. Such analytical study is aimed at improving the standard of customer service and identifying the areas where staff members are to be trained, products and services are to be suitably modified and communication with the customers is to be strengthened besides bringing about remedial action on systemic issues.

As per recommendations of the Damodaran Committee set up by Reserve Bank of India, our Bank has appointed a C.C.S.O. (Chief Customer Service Officer) w.e.f. 07.12.2015 to enhance the customer confidence and hasten the process of complaints redressal making it more transparent. The customers, if not fully satisfied by the redressal of their complaint by the Bank, are provided with an additional tier to escalate their grievance to CCSO (Internal Ombudsman).

To have a direct feel of the quality of customer service in Kolkata based Branches, incognito visits by the officials of Head Office were conducted which additionally covered several issues such as ambience, discipline, punctuality and matters related to preventive vigilance to safeguard the mutual interest of Bank and customers.

Besides, to educate the young officers of the Bank about its products and services and to help them render quick and improved customer service, an online application titled as 'Quest' was started in June 2015. 'Quest' is an application accessible to all the members of award staff and officers of the Bank for raising queries related to Operational Banking on the 'Intranet'. The queries are replied by the select HO officials within a deadline of 24 hours. The process of questioning and answering has been going on since inception on regular basis. The response of the officials to 'Quest' has been overwhelming and strongly positive.

In financial year 2015-16, percentage of customer complaint redressal has been 99.01%. 472 nos. of complaints were outstanding as at the end of the year out of which 4 nos. of complaints were outstanding for more than one month. 219 nos. of complaints were related to cases filed with the consumer forum. 99.40% of ADC related complaints were resolved within the stipulated period.

No complaint on the GOI Portal (CPGRAMS) was pending for redressal as on 31/03/2016.

INTERNAL CONTROL

Internal Inspection of all the operational units of the Bank is carried out on a continuous basis to ensure effectiveness of internal control mechanism and to provide high quality counsel to management on the effectiveness of risk management and internal controls including regulatory compliance by the Bank. The bank undertakes Risk Based Internal Audit (RBIA) which examines and evaluates the adequacy and effectiveness of the Bank's system of internal control.

The Audit & Inspection department at the apex level along with its extended arms of seven Regional Inspection Units (RIUs) and a team of Internal Inspectors / External Auditors( CA Firms) at field level is continuously engaged in inspection of Branches / Offices of the Bank as per Board approved Audit & Inspection Policy, for evaluating the level of implementation and adherence to the prescribed procedures and norms, and for identification, measurement and mitigation of risks involved in different functional areas. In order to align with changing scenario of the Banking System, Inspection Process is updated and necessary changes are incorporated in Audit & Inspection Policy of the Bank from time to time. To achieve these objectives, various types of Audits like Risk Based Internal Audit, Concurrent Audit, Credit Audit, Information System Audit, Snap Audit, Revenue Audit, Inspection of HO Departments and Management Audit of Regional offices are conducted.

Risk Based Internal Audit (RBIA) of branches is carried out to focus on effective Risk management and internal controls in respect of areas of potential risks and to play an important role in protecting the Bank from various risks. During the year 2015-16, Risk Based Internal Audit of 1296 branches has been completed.

Concurrent Audit by external audit firms is conducted in branches/offices to ensure accuracy, authenticity and due compliance with Internal Systems, Procedures and guidelines of the Bank. During the year 2015-16, Concurrent Audit of 512 branches have been completed covering total deposit of 53%), total advance of 86%> and total business of 66%> of the Bank as a whole.

Credit audit is undertaken as an effective monitoring tool by identifying the gaps in the credit delivery process at branches and suggesting ways to bridge the gaps and also monitoring the compliances. During the year 2015-16, the credit audit has covered 91% of the total credit portfolio as on 31 March, 2015 of the bank.

With the increased technology adoption by Bank, the complexities within the IT environment have given rise to considerable technology related risks. The Information System Audit of Bank's IT infrastructure is conducted to mitigate and effectively manage these technological risks.

KNOW YOUR CUSTOMER (KYC)

The Bank continues to take appropriate measures for strict adherence to KYC norms in case of all the customers and monitor transactions closely for implementation of AML (Anti Money Laundering) standards.

Steps taken to ensure compliance of KYC/AML guidelines are as follows:

The Bank has put in place an effective AMLprogramme by establishing appropriate procedures and ensures its strict implementation.

Cash Transaction Reports (CTRs), Suspicious Transaction Reports (STRs),Non-Profit Organization Transaction Reports(NTRs),Cross Border

Wire Transfer Reports(CWTRs) and Counterfeit Currency Note Reports(CCRs) are filed with FIUIND in prescribed formats within the time  limits.

Officially Valid Documents (OVDs) are being obtained from all the customers towards identity and address proof. These documents are being captured in CBS system.

• Risk categorization of all the customers and their profile updation is being done through the system.

The Bank has completed the process of allotment of Unique Customer Identification Code (UCIC) to all the customers on the basis of PAN, Passport and Aadhar number.

SECURITY ARRANGEMENTS

The Bank has taken necessary steps to strengthen the security arrangement in branches by installing security gadgets from time to time in conformity to the guidelines issued by the Reserve Bank of India. Additional security gadgets / services provided at our Bank's branches are as follows:-

In order to further strengthen the security of the branches all the branches would be equipped with CCTV surveillance system. All the currency chest branches have already been equipped with CCTV system. In addition CCTV System has also been already provided in 751 non currency chest branches. Total 835 branches have been covered with the CCTV Surveillance. Purchase order has been placed and the installation process in the remaining branches is underway.

As a safeguard against loss of money in the event of cutting of cash safe, 90 most vulnerable branches have been supplied with a higher class of cash safe.

As an additional safety measure all the Currency Chest branches within the jurisdiction of Kolkata Police have been brought under the Integrated Security Solution (ISS) which has a control monitor at Lai bazar Police Control Room for directly viewing of the activities inside the currency chests in case of a distress.

In order to implement the Reserve Bank of India Clean note policy all the branches are being equipped with (1+1) pocket Desk Top Authenticator cum Sorter to help the branch to identify the Forged Indian Currency Notes (FICN) at the counter itself. This will also enable the branches to sort the currency notes in to issuable and non issuable currency notes for redistribution amongst the customers and members of public. During year 2015-16 the security department pursued and recovered about Rs. 86,55,608 of the insurance claim dues, for the money lost during crime against the bank at different branches, pending with the Insurance Company.

In order to regulate and monitor visitors to the Bank's Head Office a Computerized Visitors' Management System has been installed at the Main Entrance gate of the Head Office.

To combat the growing menace of cheque frauds, the Bank has redesigned its cheques by incorporating additional security features which include elaborate U V Bands. The number ofattempts of frauds through use of fabricated/tampered cheques has come down drastically as a result of it.

PREMISES

Purchase:

Purchase of Land at Agartala under Tripura Region from State Govt, of Tripura for Construction of Bank's own Building with Currency Chest.

Purchase of 4BHK Flat at Neelamber Apartment, 28B Shakespeare Sarani, Koikata-700017 and used as Office-cum-residence of Executive Director

Purchase of SBHKApartment at Gujrat Vihar, New Delhi for StaffTraining Centre.

Construction:

Bank's own multi-storied building was constructed at Bank's Commercial Plot 192D, Block-B, Sector-52, NOID A, UP having total construction area of6249.42 sft spread across Basement, Stilt, Upper Ground Floor, 1  Floor and 2nd Floor.

Upgradation:

Renovation of the Main Entrance Lobby of Head Office forproviding a Corporate Ambience.

Renovation of Bank's Flat no.7G, 7* floor, Neelamber Apartment, 28B Shakespeare Sarani.Koikata-700017 for usage as Office-cum-residence of Executive Director.

Modification of existing Water Treatment Plant, its Triennial Overhauling, Annual Maintenance and its Day-to-Day Operation at Bank Officer's quarters at Shantikunj Apartment, Bansdroni, Kolkata.

Initial Damage Assessment & Structural Audit Report of our Head Office Building in view of the frequently occurring earthquakes and preparation of estimate on Structural Repairs of our Head Office Building as per remedial actions suggested in the Structural Audit Report.

Supply and installation of solar garden lights at 5th floor terrace garden at UBI Head Office.

Ongoing:

Expression of Interest (EOI) obtained from Central Government Agencies / State Government Agencies / Public Sector Units for Engagement as Project Management Consultant on "Deposit Works Basis" for various Construction and Procurement Projects of United Bank of India in different parts of India

Installation of Photo- Voltaic Grid connected lOOKWp Solar Plant at H.O. and STC,Kolkata.

Phase-Wise conversion of normal light fittings with energy efficient LED Fittings (around 700 nos. have already been converted)

Replacement and upgradation of old low tension Air Circuit Breakers at Head Office.

Supply, Instal lation and Commissioning of Eco friendly DG sets at Bank's Officers' Quarter at Shantikunj Apartment.

Electrical Audit of Branches.

Overhauling and repairing of Water Treatment and Softening Plants vis-a-vis Annual Maintenance Contract for their Day-to-Day operation and maintenance for 3 (three) years installed at United Bank of India, Head Office Premises.

Initiative taken for implementation of "SWACHH BHARAT" Mission during the Bank's 66* Foundation Day Celebration on 18-12-2015 for improved ambience at Branches and Offices. Distribution of dust-bins amongst the vendors located around H.O. and increasing their awareness towards cleaner surroundings.

IMPLEMENTATION OF OFFICIALLANGUAGE

With a view to implement the Official Language Policy of the Government, 31 Officers were trained in regular Hindi of Praveen & Pragya courses at Head Office. Hindi workshops and Unicode training in Hindi were organized for the Officers & employees of the Bank in each quarter at the Staff Training College, Kolkata. The quarterly meetings of Official Language Implementation Committee of Head Office was held under the chairmanship of the Managing Director & CEO. Two issues of in-house Hindi magazine of the Bank were released. Inspection of different Regional Offices and department of Head Office were done to ensure implementation of Official Language.

Head Office has received First Prize from Town Official Language Implementation Committee (Bank) Kolkata for best performance in Hindi. Different regions of the Bank i.e. Patna, Paschim Medinipur, Bhubaneswar, & Mumbai and different Branches like- Nagpur, Pune, Dehradoon, Bhopal & Banaras were received prizes from the TOLIC for implementation of Official Language policy successfully.

REGIONAL RURAL BANKS (RRB)

Bank has sponsored 4 Regional Rural Banks - Bangiya Gramin Vikash Bank (BGVB) in West Bengal, Assam Gramin Vikash Bank (AGVB) in Assam, Tripura Gramin Bank (TGB) in Tripura and Manipur Rural Bank (MRB) in Manipur. The total network of branches stands at 1169 (including 8 non-functional Branches of MRB due to law and order problem).

On 31.03.2016 their total Business was Rs.35213 crore with total Deposit of Rs 23678 cr & Advance of Rs. 11535 crore. Total profit earned by them is Rs.97.56 crore including Rs.3.23 crore loss of MRB. Average Gross NPA was 13,61 %.

All the RRBs are now working on CBS platform and enabled to NEFT, RTGS, AEPS/ATM through Rupay Card/Nach/PFMS/NECS/PoS. They are equipped with Locker, ALM, Fixed Asset Module, Biometric Authentication & e-kyc etc like technology driven products.

United Demat

'United Demat" is a Demat Service designed to give hassle-free, fast and accurate transactions in capital market. Bank is offering Demat services to its customers since 2007-08 as Depository participant (DP) of Central Depository Services (India) Limited (CDSL).

Benefits:

Easy and convenient way to hold securities

Immediate transfer of securities and No stamp duty on transfer of securities

Safer than paper-shares (earlier risks associated with physical certificates such as bad delivery, fake securities, delays, thefts etc. are eliminated) Reduced paperwork for transfer of securities

Automatic credit into Demat account for shares arising out of bonus/split, consolidation/merger etc. Direct credit of shares allotted in IPO in Demat A/c and Credit of Dividend in linked bank account

A single Demat account can hold investments in both Equity and Debt instruments. Even Mutual Fund Units, Sovereign Gold Bonds, Insurance Policies etc can be held in Demat form in the same Demat Account.

Services available:

Opening of Demat account Purchase and Sale of Securities Dematerialization & Rematerialization Pledge & Unpledge Freeze & Unfreeze Transmission & Transposition Redemption of Mutual Fund Units

Bank had launched its share trading product "U-Connect-Trio" on 14th October, 2015 in association with M/s Kotak Securities Ltd. "U-Connect Trio" offers the convenience of opening 3-in-l account (Savings / Current Account, Demat Account & Trading A/c), wherein. Savings & Demat Account is maintained with United Bank of India while the Trading account is opened with Kotak Securities Ltd

Customer can invest in Equity market as well as in Mutual Fund schemes online using trading platform of KSL.

ALTERNATE DELIVERY CHANNELS

Bank has always been committed to provide convenience based banking and has thus been introducing all popular and latest alternate banking channels. Bank has been regularly upgrading its systems for development of new products and in improvisation of the processes for operational convenience.

The following new initiatives have been undertaken during the FY 2015-16:

•On-line SB Account opening facility.

• Platinum chip based RuPay debit card with higher limits. Mudra RuPay debit card.

•IMPS based 24x7 funds transfer facility through Internet Banking.

• Sovereign Gold bond application through Internet Banking. Hindi version of Internet & Mobile Banking.

•Self registration of Internet Banking through debit cards.

• Personalized debit card proactive issuance against expired cards.

•Instant fund transfer to other Banks customer on the basis of Mobile number only, named as UFT (United Fund Transfer)

•Mobile & Internet based Wallet services introduced, named United Wallet.

With the above roll out of new products / features, Bank is able to increase the e-mode based transactions to 53%. Bank also remained in the top 5 position in terms of ATM acquiring transactions amongst peer group.

COMPLIANCE

Based on the RBI guidelines and as part of its ongoing sound practices, the bank has also set up a Compliance Department whose role is to co-ordinate the identification of compliance issues, assess and mitigation of compliance risk. Board adopted Compliance Policy has been framed and in activity wise areas like deposit and services, advances, KYC-AML, BCSBI Codes , compliance issues are identified . Role responsibility as regards compliance functions is defined for every tier in the bank. Bank has introduced On-Line Compliance system as apart of green initiative through which all Branches are submitting the compliance, covering important areas of the guidelines from Regulator/Bank. The system facilitates a real time position of Compliance which could be monitored by RO & HO.

Further through random testing by Designated Compliance Officers of Regional Offices and Officers from Compliance Department, the Compliance status is being monitored

Under Corporate Governance, the Board of Directors periodically reviews compliance reports to ensure timely submission of regulatory returns by the different departments of the Head office to the GOI / RBI / IBA on regular basis and adherence to all applicable provisions of law, rules and guidelines.

Awards/ Accolades

• Our Bank has been awarded as Best Bank in West Bengal by Forum for Inclusive Financial Services (FFIFS) on 06.08.2015 under the category Highest Deposit account opened under PMJDY.

Chamber of India Micro Small & Medium Enterprise(CMSME), New Delhi has recognized our Bank as Best Bank in 3 categories viz. Best Bank under PMJDY, Best Bank for promotional schemes under emerging Banks and Special Jury award for Turn Around Bank.

Corporate Governance:

The report of the Board of Directors on Corporate Governance is covered in the separate section on the subject.

Proposed Dividend:

In view of the loss incurred by the Bank for the FY 2015-16, the Board of Directors abstained from declaring any dividend.

Acknowledgement:

The Board of Directors wishes to place on record its appreciation to the patronage and cooperation received from all the stakeholders. The Board also likes to place on record the valuable guidance and excellent support extended by the Reserve Bank of India, Government of India, State Government of West Bengal, other regulatory agencies and all other state level financial institutions. The Board of Directors appreciates the commendable services of the employees at all levels.

For and on behalf of the Board of Directors

Petluri Srinivas

Managing Director & Chief Executive Officer

Date: 17"'May 2016

PLACE :  Kolkata