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INDIAN OVERSEAS BANKConstituted under the Banking Companies (Acquisition & Transfer of Undertakings) Act, 1970
Central Office: 763, Anna Salai, Chennai - 600 002Tel: (044) 2851 9438/2841 5702 Fax: (044) 2852 3372 Website: www.iob.com
Email: [email protected]
Public Issue of 10,00,00,000 equity shares of Rs.10 each for cash at a premium of Rs. 14 at a price
of Rs. 24 each aggregating Rs. 240 crores.
GENERAL RISK
Investment in equity and equity related securities involve a degree of risk and investors should not invest any funds inthis issue unless they can afford to take the risk of losing their investment. Investors are advised to read the RisksEnvisaged by Management carefully before taking an investment decision in this Issue. For taking an investmentdecision, investors must rely on their own examination of the Issuer and the Issue including the risks involved. Thesecurities have not been recommended or approved by Securities and Exchange Board of India nor does Securitiesand Exchange Board of India guarantee the accuracy or adequacy of this document.
The attention of Investors is drawn to the statement of Risks Envisaged by Management on Page iii of the Prospectus.
ISSUER’S ABSOLUTE RESPONSIBILITY
The Bank, having made all reasonable inquiries, accepts responsibility for, and confirms that this Prospectus containsall information with regard to the Issuer and the Issue, which is material in the context of the Issue, that the informationcontained in this Prospectus is true and correct in all material respects and is not misleading in any material respect, thatthe opinions and intentions expressed herein are honestly held and that there are no other facts, the omission of whichmakes this document as a whole or any of such information or the expression of any such opinions or intentionsmisleading in any material respect.
LISTING
The equity shares of the Bank are already listed on the Stock Exchange, Mumbai (BSE, the Designated Stock Exchange),The Madras Stock Exchange (MSE), and the National Stock Exchange of India Ltd. (NSE). The new shares which areranking pari-passu with the existing shares in all respects would also be listed at these Stock Exchanges and the “in-principle” approvals for listing from MSE, NSE and BSE have been received on 28.07.2003, 08.08.2003 and 13.08.2003respectively.
PROSPECTUS
LEAD MANAGER TO THE ISSUE REGISTRAR TO THE ISSUE
SBI CAPITAL MARKETS LIMITED CAMEO CORPORATE SERVICES LTD.202, Maker Tower ‘E’, Cuffe Parade Subramanian Building, No.1,
Mumbai – 400 005 Club House Road, Chennai – 600 002
Phone: (022) 22189166, Fax: (022) 22188332 Tel: (044) 2846 0390, Fax: (044) 2846 0129E-mail : [email protected] Email: [email protected]
ISSUE OPENS ON : September 5 , 2003
ISSUE CLOSES ON : September 12 , 2003
TABLE OF CONTENTS
Abbreviations ............................................................................................................................................................. i
Risks Envisaged by Management & Management Proposals to Address the Risks ............................................. iii
Highlights ................................................................................................................................................................... x
Part I
I. General Information ....................................................................................................................................... 1
II. Capital Structure ............................................................................................................................................ 9
III. Terms of the Present Issue ............................................................................................................................. 12
IV. Tax Benefits .................................................................................................................................................... 18
V. Particulars of the Issue ................................................................................................................................... 22
VI. Bank and Management .................................................................................................................................. 23
VII. Overview of the Banking Sector ................................................................................................................... 24
VIII. Bank and Management .................................................................................................................................. 26
IX. Asset Classification, Income Recognition & Provisioning ............................................................................ 36
X. Capital Adequacy Ratio ................................................................................................................................. 42
XI. Subsidiaries and Regional Rural Banks Sponsored By IOB ....................................................................... 44
XII. Organisation Structure & Management ......................................................................................................... 47
XIII. Significant Regulatory Matters Related to the Bank ..................................................................................... 50
XIV. Stock Market Data .......................................................................................................................................... 52
XV. Management Discussion and Analysis of Financial Performance ............................................................... 53
XVI. Basis for Issue Price ....................................................................................................................................... 54
XVII. Outstanding Litigation, Defaults and Material System Developments ......................................................... 55
XVIII. Investor Grievance & Redressal Systems ..................................................................................................... 57
XIX. Risks Envisaged by Management & Management Proposals to Address the Risks .................................. 58
Part II
A. General Information ....................................................................................................................................... 63
B. Financial Information ..................................................................................................................................... 67
C. Statutory and Other Information ..................................................................................................................... 89
D. Main Provisions of the Bank Nationalisation Act .......................................................................................... 90
E. Material Contracts and Documents for Inspection ........................................................................................ 93
PART III
Declaration ................................................................................................................................................................ 95
ABBREVIATIONS
ALCO Asset-Liability Management CommitteeALPM Automated Ledger Posting MachineATM Automated Teller MachineBIS Bank of International SettlementsBSE The Stock Exchange, MumbaiBTC Bankers’ Training CollegeCAGR Compounded Annual Growth RateCAR Capital Adequacy RatioCBDT Central Board of Direct TaxesCDSL Central Depository Services (India) Ltd.CMD Chairman & Managing DirectorCPPD Computer Planning & Policy DepartmentCRISIL The Credit Rating Information Services of India LimitedCRR Cash Reserve RatioCVO Chief Vigilance OfficerDDP Double Deposit PlanDesignated Stock Exchange The Stock Exchange, Mumbai (BSE)DICGC Deposit Insurance and Credit Guarantee Corporation of India LimitedDP Depository ParticipantDPG Deferred Payment GuaranteeDRT Debt Recovery TribunalECGC Export Credit Guarantee Corporation Of India LimitedECS Electronic Clearing ServicesEFT Electronic Funds TransferELB Exceptionally Large BranchEPS Earning Per ShareFCNR (B) Foreign Currency Non Resident AccountFEDAI Foreign Exchange Dealers Association of IndiaFIs Financial InstitutionsFIIs Foreign Institutional InvestorsFRA Forward Rate AgreementFY Financial YearGoI Government of India/Central GovernmentHRDD Human Resources Development DepartmentHUF Hindu Undivided FamilyICD Inter-Corporate DepositsIDRBT Institute for Development & Research in Banking TechnologyINR Indian National RupeeIRS Interest Rate SwapIT Information TechnologyINFINET Indian Financial NetworkIRDA Insurance Regulatory and Development AuthorityKVIC Khadi Village Industries CommissionKVP Kisan Vikas PatraL/C Letter of CreditLIC Life Insurance Corporation Of IndiaMIDL Modernisation & Institutional Development LoanMRTP Monopoly & Restrictive Trade Practices ActMSE Madras Stock Exchange LimitedNABARD National Bank for Agricultural and Rural Development
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NAV Net Asset ValueNBFC Non Banking Finance CompanyNCST National Centre for Software TechnologyNHB National Housing BankNI Act Negotiable Instruments ActNIBM National Institute of Bank ManagementNICL National Insurance Company LimitedNPAs Non-Performing AssetsNRE Non-Resident ExternalNRNR Non-Resident Non-Repatriable AccountNRO Non-Resident OrdinaryNRIs Non-Resident IndiansNSC National Savings CertificateNSDL National Securities Depository LimitedNSE The National Stock Exchange of India Ltd.OCBs Overseas Corporate BodiesPAN Permanent Account NumberPD Planning & DevelopmentP/E Price to Earnings RatioPLR Prime Lending RateQCS Quick Collection ServiceQIB Qualified Institutional Buyer, as defined in SEBI (DIP) Guidelines.RBB Retail Banking BoutiqueRBI Reserve Bank of IndiaRetail individual investor An investor applying for shares of or for a value of not more than Rs.50, 000/-RIDF Rural Infrastructure Development FundRRB Regional Rural BankSEBI The Securities and Exchange Board of IndiaSIDBI Small Industries Development Bank of IndiaSLBC State Level Bankers’ CommitteeSLR Statutory Liquidity RatioSSI Small Scale IndustriesSWIFT Society for Worldwide Inter Bank Financial TelecommunicationTBM Total Branch MechanisationTDS Tax Deducted at Sourcethe Bank/the Issuer/IOB Indian Overseas BankThe Bank Nationalisation Act The Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 as
amended in 1994, 1995 & 1996The Board The Board of Directors of the BankThe BR Act The Banking Regulation Act, 1949 as amendedThe Companies Act Companies Act, 1956 as amendedthe Issue Public Issue of 10,00,00,000 equity shares of Rs.10 each for cash at a premium of
Rs. 14 at a price of Rs. 24 each aggregating Rs. 240 croresThe IT Act Income-tax Act, 1961 as amendedUSD US DollarUTI Unit Trust of IndiaVLB Very Large BranchVRS Voluntary Retirement SchemeVSAT Very Small Aperture Terminal
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RISKS ENVISAGED BY MANAGEMENT & MANAGEMENT PROPOSALS (MP) TO ADDRESS THE RISKS
Following are certain issues for the investors to consider before taking an investment decision in the offer. In someof the risks, reference page numbers have been provided, which can be used to obtain more details about the saidrisk.
Internal Risks
1. Contingent Liabilities
As on March 31, 2003 the contingent liabilities of the Bank were at Rs.7,001.29 crores comprising claimsagainst the Bank not acknowledged as debts (Rs.7.36 crores), liability on account of outstanding forwardexchange contracts (Rs.2,612.30 crores), guarantees on behalf of constituents (Rs.1,782.74 crores), acceptances,endorsements and other obligations (Rs.2,329.61 crores) and others (Rs.269.28 crores).
MP: The contingent liabilities have arisen in the normal course of business of the Bank and are according to theprudential norms prescribed by RBI.
2. Various proceedings against the Bank relating to Income Tax amounting to Rs. 138.11 crores (including casesfiled against the Bank by the IT authorities to the tune of Rs.74.14 crores) and Interest Tax amounting toRs. 37.71 crores are pending in appeal with the Income Tax authorities. The Bank has not made any provision inthis regard and adverse ruling, if any, shall affect the financials of the Bank.
MP: Appeals have been referred to concerned Tax authorities in respect of the above.
3. Profits of the Bank
The growth in Net Profits of the Bank from Rs.223.46 crore in FY 2002 to Rs.471.75 crore in FY 2003 (111.11%)can be mainly attributed to treasury profits, which may not be sustainable in future. The Bank made a profit ofRs. 244.32 crores from sale of investments (treasury income) during FY03.
MP: It may be noted that operating profit of the Bank has come from diversified income streams comprising NetInterest Income, Profit on Sale of Securities and Other Income which account for 70%, 14% and 16% of thetotal operating profit respectively. Hence, a substantial part of the growth in operating profits is accounted for byNet Interest income.
4. Non Performing Assets (NPAs)
As on 31.03.2003, the net NPAs of the Bank stood at 5.23% of its net advances amounting to Rs. 912.21 croresin absolute terms. In the event of non-recovery of these assets, the Bank may have to provide for these NPAsin future, which might affect the profitability of the Bank in future. For details, investors are advised to refer topara ‘Asset Classification, Income Recognition & Provisioning’ on page 36 of the Prospectus.
MP: The Net NPAs of the Bank have consistently been declining in percentage terms, from 6.32% as on31.03.2002 to 5.23% as on 31.03.2003 and the Bank has provided for its NPAs in conformity with RBI guidelines.The Bank is taking steps to reduce the proportion of non-performing assets through aggressive recovery drivescombined with improved risk management practices. Further, there have been substantial changes in thelegislative and operating environment enabling FIs and Banks to pursue recovery of overdues. Besides DebtRecovery Tribunal (DRT) set up for faster settlement of recovery litigation, GoI has enacted ‘The Securitisationand Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002’ enabling FIs andBanks to securitise and reconstruct financial assets and enforce security more effectively. Reserve Bank ofIndia has formulated detailed guidelines for operation of the scheme. The Bank has issued notices under the Actto 1,830 parties/borrowers and recovered Rs.23.74 Crores from those borrowers. Thus, the Bank has beentaking recourse to all the available methods to recover its over dues from the borrowers.
5. Decline in return ratios
Yield on Investment of the Bank (excluding profit on sale of investments) has shown a declining trend from11.91% in FY1999 to 11.76% in FY2000, 11.68% in FY2001, 10.95% in 2002 and 9.88% in FY2003. The Yieldon Advances of the Bank has decreased from 10.64% to 10.13% during the same period. Average rate ofinterest earned on interest earning assets has fallen from 10.69% in 2001 to 9.85% in 2003.
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MP: Yield on Investments and average rate of interest earned has come down because of the interest rate ingeneral coming down. The continuous downward trend in the interest rates over last one year has been the majorreason for decline in Yield on Investment of the Bank. For example, the yield on 10 year GoI security, which was11.2% as on 31.03.1999 has fallen to 6.26% on 31.03.2003. As compared to this, decline of 494 bps (or 4.94%),the yield on investment (domestic) for the Bank has fallen by 203 bps (or 2.03%).
6. Asset Concentration
The top 5 industries (non-food) account for 19.80% of the gross credit exposure of the Bank as on 31.03.2003.Also, the top ten borrowers of the Bank account for about 8.61% of the gross total advances of the Bank as on31.03.2003. The borrower specific and industry specific behaviour may potentially affect the overall assetquality of the Bank. Any adverse global trends on these industries will have implications on the financials of theBank.
MP: The Bank has put in place a credit monitoring mechanism to monitor the performance of its borrowers,regularly perform appraisal and do the requisite follow up. The top ten borrowers of the Bank as mentioned aboveare Standard Assets as on 31.03.2003. As regards the industry concentration, it has been the policy of the Bankto diversify the assistance over different industry/promoter groups with a prudential cap of 10% to a singleindustry. Investors are advised to refer to para ‘Industry-wise Classification’ on page 31 of the Prospectus.
7. Credit Risk
The Bank’s main business of lending carries an inherent credit risk, which involves inability or unwillingness ofa customer or counterparty to meet commitments in relation to lending, trading, hedging, settlement and otherfinancial transactions.
MP: The Bank takes adequate care to minimise such risks by having a well-diversified loan portfolio. The Bankalso follows a comprehensive project/credit appraisal system and lending norms, which govern industry/clientexposure. The Bank has put in place a credit rating system under which the borrowal accounts of Rs 2 lacs andabove are rated on several parameters and the risk is priced with a suitable mark-up over PLR based on thecredit rating. The Bank has also implemented an active Risk Management Policy aimed at mitigating variouscredit related risks. For other details on the credit risk management process in the Bank, the investors may referto the para ‘Risk Management’ on page 42 of the Prospectus.
8. Outstanding Litigations against the Bank
There are 611 cases against the Bank with monitory relief amounting to Rs.11.40 crores claimed therein againstthe Bank. There are 7 cases in which the amount claimed exceeds Rs. 1 crore. For details, please refer to thepara on Litigation on page 55.
9. Litigation against the Bank’s subsidiaries and sponsored institutions
Cases Against Bharat Overseas Bank Ltd: There are 34 cases of claims/suits filed against the Bank and theamount involved as on 31.03.2003 is Rs. 12.04 crores. For details, please refer to the para on Litigation on page55.
10. Regional concentration of the Bank
Indian Overseas Bank has a regional concentration in southern and eastern parts of the country accounting forapproximately 75.27% of all branches in terms of numbers. The regional presence of the Bank may compromiseits competitive position vis-à-vis its national level competitors.
MP: The regional presence of the Bank may not be a hindrance to its growth prospects. The Global deposits ofthe Bank have grown at a CAGR of 13.75% to Rs. 36,698.59 crores and the Global Net advances have grownat a CAGR of 14.24% to Rs.17,447.00 crores during the past 5 years. The Bank has 1,427 branches and 243extension counters as on 31.03.2003 with presence in all the states and also 6 branches overseas. The Bank isendeavouring to increase its presence in other parts of the country. Also, the Bank proposes to effectivelyutilise technology to increase its reach and presence. For details of geographical distribution of branches,investors are advised to refer to para ‘Geographical Distribution of Branches’ on page 27 of the Prospectus.
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11. Asset Liability Position
A large portion of the funding of the Bank is in the form of short and medium term deposits. The asset liabilityposition of the Bank could be affected if the depositors do not roll over the deposits
MP: As per the normal behavioural pattern and past experience, a large portion of the deposits gets rolled over.The Bank feels that in the event of these deposits not being rolled over, the fresh accretion of deposits wouldtake care of the Asset Liability mismatches. In addition, the Bank has the cushion of Investments of Rs.12,825.94crore in the long-term (over 5 years) category, which can be utilized to correct any medium term mismatches.Moreover, the Bank has an Asset Liability Management system in place to actively monitor and manage theduration and liquidity mismatches. For more details on the Asset Liability position refer to the para ‘AssetLiability Management’ on page 38 of the Prospectus.
12. RBI’s Annual Financial Inspection Report
The Annual Inspection Report of RBI on the financial position of the Bank as on 31.03.2002 has identifiedcertain weaknesses in the system, operational irregularities and other deficiencies in the internal controls.
MP: The Bank would like to clarify that the inspection of the Bank by RBI is a regular exercise and is carried outperiodically by RBI for all the banks and financial institutions. The reports of RBI are strictly confidential and theBank is in dialogue with RBI in respect of observations made by RBI in their report for previous years. RBI doesnot allow disclosure of its inspection report and that all the disclosures in the Prospectus are on the basis ofmanagement and audit reports of the Bank.
13. Contingent Liabilities of RRBs sponsored by the Bank
As on 31.03.2003, contingent liabilities of RRBs sponsored by the Bank aggregated Rs.3.99 crores.
MP: The above contingent liabilities have arisen in the normal course of business of the RRBs.
14. Verma Committee Recommendations
The Verma Committee, which carried out a study of the banking sector in 1998 and 1999, had suggested sevenparameters for assessing a bank’s strength/weakness covering three major areas namely, solvency, earningcapacity and profitability. Based on the above, Indian Overseas Bank was classified in the third category ofbanks, which complied with the Capital Adequacy requirement but did not meet five or six of the remainingparameters for the years 1998 and 1999. For an understanding of what the categorisation signifies, investorsmay refer to para ‘Verma Committee Recommendations’ on page 50 of the Prospectus.
MP: The Bank has put in place the required systems to bring the entire operations under the purview of AssetLiability Management. The Bank has stepped up the recovery efforts and the Net NPA as a % of Advances hascome down to 5.23%. The Bank has Risk Management Department in addition to a Credit Risk ManagementCell. The Bank does not envisage impairment to bank’s solvency, earning capacity or profitability.
15. Export Credit Target
The Bank has not met export credit target (12% of net credit) for the last five years. For more details, refer topara ‘Export Credit’ on page 33 of the Prospectus.
MP: The non-achievement of this target has no negative impact on the working results of the Bank. RBI has nottaken any punitive action against the Bank for non-achievement of the targets.
16. The number of branches of the Bank has reduced from 1,441 in FY02 to 1,427 in FY03.
MP:The Bank had reduced the number of branches by either merging or closing some of the loss makingbranches with a view to improve profitability
17. Tier I capital as a percentage of total risk weighted asset has come down from 6.16% in 2002 to 5.83% in 2003.
MP: Percentage of Tier-I capital has come down because a substantial portion of the retained profit is allocatedto Investment Fluctuation Reserve, which is being treated as Tier-II capital as per RBI guidelines.
18. The interest outgo on account of unsecured loans taken by the Bank at high interest rates may adversely affectthe Bank’s future profitability.
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MP: High cost borrowings could not be repaid as there is no foreclosure clause available. The percentage of highcost borrowings to total liablities is less than 1% and as such its effect on future profitability would be minimal.Further, the Bank is also hedging its high cost liabilities through derivatives to reduce the cost thereof.
19. Risk in overseas operations
MP: The Bank has decades of experience overseas and has put in place systems, procedures and policies tostreamline the operations of its overseas branches and to withstand any risk arising out of changes in policiesof foreign governments, exchange rate fluctuations etc.
20. Utilisation of Funds
The utilisation of the funds proposed to be raised through the public issue is entirely at the discretion of theBank and no monitoring agency has been appointed to monitor the deployment of funds.
MP: The funds raised through the public issue are not meant for any specific project and hence a monitoringagency may not be required. The Bank is managed by professionals under the supervision of its Board ofDirectors. Further, the Bank is subject to a number of regulatory checks and balances as stipulated in itsregulatory environment. Therefore, the management believes that the funds raised through the public issuewould be utilised only towards satisfactory fulfilment of the ‘Objects of the Issue’ as stated on page 22 of theProspectus.
21. The shares of the Bank are not actively traded at the Madras Stock Exchange .
MP: The Bank’s shares are listed on BSE and NSE besides being listed on the Madras Stock Exchange. Theshares of the Bank are regularly traded on BSE and NSE.
22. Any future offering by the Bank or its existing shareholders may dilute the holdings of the allottees of thepresent public issue or may affect the market price of the shares of the Bank adversely.
23. Prices of equity sharers of the Bank may fluctuate as a result of several factors, including:
� Volatility in the Indian and Global Securities market.
� Results of operation and performance.
� Market for investment in the Banking sector.
� Performance in Indian economy.
� Significant development in India’s economic liberalization and deregulation policies, specifically those relatedto the Banking sector.
� Significant development in India’s fiscal and environmental regulations.
External Risks
1. Regulatory restrictions on the Bank and limitations of the powers of shareholders of the Bank
There are a number of restrictions as per the Bank Nationalisation Act and Banking Regulations Act,1949(Amended), which impede flexibility of the Bank’s operations and affect/restrict investors’ right. These areas under:
i. The Banks can carry on business/activities as specified in the Act. There is no flexibility to pursue profitableavenues if they arise, in contrast with companies under the Companies Act, where shareholders can amendthe Objects Clause by a special resolution.
ii. In terms of Rule 8 of The Banking Regulation Act, 1949, the Bank is prohibited from doing trading activity,which may act as an operational constraint.
iii. In terms of Rule 17(1) of The Banking Regulation Act, 1949, every banking company shall create a ReserveFund and shall, out of the balance of profit of each year as disclosed in the Profit & Loss a/c prepared underSection 29 and before any dividend is declared, transfer to the Reserve Fund a sum equivalent to not lessthan twenty five percent of such profit.
iv. In terms of Rule 19 of The Banking Regulation Act, 1949 there are some restrictions on the bankingcompanies regarding opening of subsidiaries which may deny the Bank from exploiting emerging businessopportunities.
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v. In terms of Rule 23 of The Banking Regulation Act, 1949 there are certain restrictions on the bankingcompanies regarding opening of new place of business and transfer of existing place of business, whichmay hamper the operational flexibility of the Bank.
vi. In terms of Rule 25 of The Banking Regulation Act, 1949 each banking company has to maintain assets inIndia which is not less than 75% of its demand and time liabilities in India which in turn may prohibit theBank from creating overseas assets and exploiting overseas business opportunities.
vii. There are restrictions in the Banking Regulation Act regarding,
a) Management of a bank including appointment of directors.b) Borrowings and creation of floating charge thereby hampering leverage.c) Expansion of business, as the branches need to be licensed.d) Disclosures in the profit & loss account and balance sheet.e) Production of documents and availability of records for inspection by shareholders.f) Reconstruction of banks through amalgamation.g) Further issues of capital including issue of bonus shares/rights shares for which prior MoF approval is
required.
viii. The financial disclosures in the Prospectus may not be available to the investors after listing on a continuousbasis.
ix. Various rights/powers of shareholders available under the Companies Act in this regard are not available tothe shareholders of the banks. These rights include rights such as calling for general meetings, inspectionof minutes and other material records, application for relief in cases of oppression and mismanagement,voluntary winding up, right to receive dividend within 42 days etc.
x. As per Section 3 (2E) of the Bank Nationalisation Act, “no shareholder other than Central Government shallbe entitled to exercise voting rights in respect of any equity shares held by him/her in excess of one percent of the total voting rights of all the shareholders of the Bank”.
No banking company shall pay any dividend on its shares until all its capitalised expenses (including preliminary,organisational expenses, share selling commission, brokerage, amounts of losses and any other item representedby tangible assets) have been completely written off. The Bank has received an exemption from GoI, Ministryof Finance, Department of Economic Affairs (Banking Division) vide gazette notification ref. F. No. 11/4/2003-BOA dated 22.07.2003 from the provisions of the said Section 15(1) relating to the payment of dividend, for aperiod of five years from the date of the notification.
2. Sensitivity to the economy and extraneous factors
The Bank’s performance is highly correlated to the performance of the economy and the financial markets. Thehealth of the economy and the financial markets in turn depends on the domestic economic growth, state of theglobal economy and business and consumer confidence, among other factors. Any event disturbing the dynamicbalance of these diverse factors would directly or indirectly affect the performance of the Bank including thequality and growth of its assets.
3. Competition from existing and new commercial banks
Competition in the financial sector has increased with the entry of new players and is likely to increase furtheras a result of further deregulation in the financial sector. The Bank may face competition both in raising resourcesand in deploying them.
MP: The Bank has an established broad-based presence and has been taking steps to enhance customersatisfaction by upgrading skills, systems and technology to meet such challenges. The Bank is attempting toadd quality assets on competitive terms. The Bank is also taking steps to broad base its product bouquet witha special emphasis on enhancement in the non-fund based income. On the resource-raising front, the Bank isactively endeavouring to broaden its reach and raise resources through its wide distribution network of 1,427branches and 243 extension counters and 6 branches outside India. For more details on the business environmentof the Bank, investors are advised to refer to the para ‘Management Discussion and Analysis of FinancialResults’ on page 53 of the Prospectus.
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4. Changes in regulatory Policies
Major changes in Government/RBI policies relating to banking sector may have an impact on the operations ofthe Bank.
MP: The policy changes may provide both opportunities and challenges for the Bank. The Bank has a longpresence in the banking sector, for more than 66 years and does not perceive policy changes to be a majorthreat.
5. Disintermediation in the financial markets:
Development of capital markets may result in disintermediation by current and potential borrowers wherebymany companies may access the markets directly, thereby reducing their dependence on the banking system.
MP: The Bank has, in recent years, launched several retail lending schemes and value added products so asto broaden its borrower base. Further, disintermediation brings with it the opportunity for the Bank to expand itsfee-based activities. The Bank has been endeavouring to develop a presence in several financial services toearn fee based income by focussing on businesses such as foreign exchange, treasury, investments, cashmanagement, insurance, depository, debenture trustee etc., thus taking advantage of the disintermediationphenomenon.
6. Forex risk
Exchange Rate fluctuations may have an impact on the Bank’s financial performance.
MP: As per RBI guidelines, banks are not allowed to keep open position on their foreign exchange transactionsbeyond prescribed limits on a daily basis. Foreign exchange transactions beyond such limits, if any, must besquared off at the end of each day. Hence, the risk from exchange rate fluctuations is minimised. The Board ofDirectors of the Bank has also prescribed limits for gaps or mismatches in maturities of Bank’s foreign currencyassets and liabilities and forward transactions in foreign exchange. The Bank operates within the limits fixed forgaps or mismatches in maturities of Bank’s foreign currency assets and liabilities and forward transactions inforeign exchange, thus minimising the risks of mismatches in maturities and interest rates.
7. Interest rate risk
Interest rate volatility exposes the Bank to an interest rate risk or market risk. Such interest rate risk has apotential impact on net interest income or net interest margin as well as on the market value of the fixed incomesecurities held by the Bank in its investment portfolio.
MP: These risks are inherent in the banking business. However, the Bank has put in place a system of regularreview of lending and deposit rates in order to minimise the interest rate risk. The Asset Liability ManagementCommittees of the Bank reviews the risk on a regular basis. Continuous Risk Management measures areinitiated depending upon the movement in the market interest rates. The movement in the interest rates isclosely monitored for appropriate action. For more details on the Risk Management procedures, investors areadvised to refer to para ‘Risk Management’ on page 42 of the Prospectus.
8. Operational Risk
Operational risk is a result of failure of operating system in a bank due to certain reasons like computer break-downs, power disruptions, fraudulent activities, natural disaster, human error or omission or sabotage.
MP: For managing operational risk, the Bank has laid down well-defined systems and procedures. The Bank hasset up a separate department to improve the systems and procedures to suit the changing environment. TheBank has also in place a strong internal inspection and audit system. For managing IT related risks, theInformation Systems Security Policy is in place. The Bank has an effective HRD department, which formulatesand monitors delegation of duties and responsibilities at different levels.
9. Financial Statements in the Prospectus
The financial statements and derived ratios therefrom contained in the Prospectus are prepared/computed asper the permissible accounting practices. While due care has been taken to reflect the true economic realityregarding the financials of the Bank as far as possible, the investors may want to make their own adjustmentsto the same before arriving at an investment decision in the Issue.
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MP: The financial statements and the derived ratios have been prepared in conformity to the extant guidelinesand the same have been certified by the statutory auditors of the Bank. The Bank is also governed by theprudential norms of RBI for income recognition, NPA provisioning etc.
NOTES TO RISK FACTORS
� Net worth (excluding revaluation reserves) of the Bank as on 31.03.2003 is Rs.1,300.52 crores.
� The present public issue of the Bank inclusive of premium aggregates Rs. 240 crores at the price of Rs. 24/- pershare
� The Book Value of the share as on March 31, 2003 is Rs. 29.44 (face value of Rs. 10/-)
� Cost per share of the Bank to the Government of India is Rs.10.
� During FY 1996-97, the Bank had adjusted accumulated losses of Rs. 1,000.00 crores, from its paid-up capitalas on 31.03.1997 by setting off the same against the paid-up capital of the Bank
� Section 3(2B)(c) of the Bank Nationalisation Act provides that the paid-up capital may, from time to time, beincreased by such amounts as the Board of Directors of the Bank may, after consultation with the RBI and withthe previous sanction of the Central Government, raise by Public Issue of equity shares as may be prescribed,so however, that the Central Government, at all times, holds not less than fifty-one per cent of the paid-upcapital of each of the Corresponding New Bank. The Banking Companies (Acquisition & Transfer of Undertakings)and Financial Institutions’ laws (Amendment Bill 2000) propose to reduce the minimum stake of the Governmentfrom 51% to 33%.
� The shareholders of the Bank do not have a right to receive dividend within 42 days as is available to companiesunder the Companies Act.
� IOB Properties Pte, a subsidiary of Indian Overseas Bank has entered into the following transactions withIndian Overseas Bank during the last three years:
a. IOB Properties Pte is availing of following limits from Indian Overseas Bank.
(Rs. in crores)
Particulars Outstanding balance as on 31st March
2001 2002 2003
Cash Credit Limit 59.80 44.20 65.00
Outstanding 48.11 38.02 64.33
b. The following are other transactions between Indian Overseas Bank and IOB Properties Pte. (Rs. in crores)
Year ended March 31st 2001 2002 2003
Rent paid by the Bank to IOB Properties Pte Ltd. 2.82 2.82 2.82
� For details of transactions between Indian Overseas Bank and the Regional Rural Banks (RRBs) sponsored byit, the investors are advised to refer to the para ’Regional Rural Banks’ on page 45 of the Prospectus.
� The financial information as contained in PART II under para I to para IX including the notes to accounts,significant accounting policies as well as auditors’ qualifications has been duly certified by the statutory auditorsof the Bank. As far as possible, these audited numbers have been used for computation or derivation of otherfinancial information contained in the Prospectus. However, such other financial information contained in theProspectus except as contained in PART II under para I to para IX has been certified by the management of theBank.
� In terms of recommendations of RBI Working Group on ‘Consolidated Accounting and Other QuantitativeMethods to Facilitate Consolidated Supervision’ (December 2001), all banks, whether listed or unlisted, shouldprepare and disclose Consolidated Financial Statement (CFS) from the financial year commencing from 01.04.2002in addition to solo financial statements at present.
ix
HIGHLIGHTS
� Bank with 66 years of existence.
� The Bank is professionally managed with a track record of profitability
� The Bank has a large network of branches spread throughout the country that may enable it to raise fundscompetitively. The domestic network of the Bank stood at 1670 offices as on 31.03.2003, which includes 1,427branches and 243 extension counters. The Bank has 6 overseas branches also.
� The Bank has also opened specialised branches to cater to the needs of industrial finance, trade finance,personal banking, international banking, NRIs and small-scale industries.
� Capital Adequacy Ratio of 11.30% as on 31.03.2003 is above the minimum of 9% prescribed by RBI.
� The Bank’s training infrastructure consists of a Staff College, 9 Staff Training centres and a Rural BankingTraining Centre.
� Product portfolio includes Trade Finance, Consumer Loans, Agri-Business Consultancy Services, InsuranceMarketing Services, Demat Services, Credit Cards, Kisan Cards etc.
� Consistent Deposits growth: Deposits have grown by a CAGR of 13.75% during the last 5 years.
� Consistent Advances growth: Gross Advances have grown by a CAGR of 14.24% during the last 5 years.
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PART I
I. GENERAL INFORMATION
Shri M.Ct.M. Chidambaram Chettiar, a forerunner in the areas ofbanking, insurance and industry founded the Indian OverseasBank on 10.02.1937. The Bank initiated business immediately inKaraikudi, Chennai and Rangoon followed by a branch in Penang.By the year 1947, IOB had increased its domestic and internationalcoverage, with 38 branches in India and 7 branches overseas.Subsequently, it has been constituted as a Corresponding NewBank under the Banking Companies (Acquisition and Transfer ofUndertakings) Act, 1970.
The Bank is offering for subscription 10,00,00,000 equity sharesof Rs.10/- each for cash at a premium of Rs.14 aggregatingRs. 240 crores (including reservation of 1,00,00,000 equity sharesof Rs. 10/- each for cash at the same price aggregating Rs. 24crores for each of the following categories: (i) the permanent/regular employees and whole-time directors of the Bank and (ii)NRIs, FIIs and OCBs on repatriation basis).
AUTHORITY FOR THE PRESENT ISSUE
The issue of equity shares is being made pursuant to the sanctionof Government of India (GoI) in consultation with the ReserveBank of India (RBI), vide its letter no. F. No. 11/4/2003-BOA dated30.03.2003 under Section 3(2B)(c) of the Banking Companies(Acquisition and Transfer of Undertakings) Act 1970, as amendedand the resolutions passed at the meeting of the Board ofDirectors of the Bank on 22.02.2003 and the shareholders of theBank at the AGM held on 18.07.2003.
It is to be distinctly understood that the sanction/approval of theGoI and RBI should not in any way, be deemed or construed thatthe Prospectus has been cleared or approved by them nor dothey take any responsibility either for the financial soundness ofthe Bank or the correctness of the statements made or opinionsexpressed in the Prospectus.
The Bank can undertake the existing and proposed activities inview of the present approvals, and no further approvals from anyGovernment authority are required by the Bank to undertake theproposed activities.
DISCLAIMER CLAUSE
IT IS TO BE DISTINCTLY UNDERSTOOD THAT THESUBMISSION OF THE PROSPECTUS TO SECURITIES AND
EXCHANGE BOARD OF INDIA (SEBI) SHOULD NOT, IN ANYWAY, BE DEEMED OR CONSTRUED THAT THE SAME HASBEEN CLEARED OR APPROVED BY SEBI. SEBI DOES NOTTAKE ANY RESPONSIBILITY EITHER FOR THE FINANCIALSOUNDNESS OF ANY SCHEME OR THE PROJECT FORWHICH THE ISSUE IS PROPOSED TO BE MADE OR FOR THECORRECTNESS OF THE STATEMENTS MADE OR OPINIONSEXPRESSED IN THE PROSPECTUS. THE LEAD MANAGER,SBI CAPITAL MARKETS LTD, HAS CERTIFIED THAT THEDISCLOSURES MADE IN THE PROSPECTUS AREGENERALLY ADEQUATE AND ARE IN CONFORMITY WITHSEBI (DISCLOSURE AND INVESTOR PROTECTION)GUIDELINES IN FORCE FOR THE TIME BEING. THISREQUIREMENT IS TO FACILITATE INVESTORS TO TAKE ANINFORMED DECISION FOR MAKING INVESTMENT IN THEPROPOSED ISSUE. IT SHOULD ALSO BE CLEARLYUNDERSTOOD THAT WHILE THE ISSUER BANK IS PRIMARILYRESPONSIBLE FOR THE CORRECTNESS, ADEQUACY ANDDISCLOSURE OF ALL RELEVANT INFORMATION IN THEPROSPECTUS, THE LEAD MANAGER IS EXPECTED TOEXERCISE DUE DILIGENCE TO ENSURE THAT THE BANKDISCHARGES ITS RESPONSIBILITY ADEQUATELY IN THISBEHALF AND TOWARDS THIS PURPOSE, THE LEADMANAGER, SBI CAPITAL MARKETS LTD, HAS FURNISHEDTO SEBI A DUE DILIGENCE CERTIFICATE DATED 21.07.2003IN ACCORDANCE WITH SEBI (MERCHANT BANKERS)REGULATIONS, 1992, WHICH READS AS FOLLOWS :
“(1) WE HAVE EXAMINED VARIOUS DOCUMENTS INCLUDINGTHOSE RELATING TO LITIGATION LIKE COMMERCIALDISPUTES, DISPUTES WITH COLLABORATORS ETC.,AND OTHER MATERIALS IN CONNECTION WITH THEFINALISATION OF THE DRAFT PROSPECTUSPERTAINING TO THE SAID ISSUE;
(2) ON THE BASIS OF SUCH EXAMINATION AND THEDISCUSSIONS WITH THE BANK, ITS DIRECTORS ANDOTHER OFFICERS, OTHER AGENCIES, INDEPENDENTVERIFICATION OF THE STATEMENTS CONCERNING THEOBJECTS OF THE ISSUE, PRICE JUSTIFICATION ANDTHE CONTENTS OF THE DOCUMENTS MENTIONED INTHE ANNEXURE AND OTHER PAPERS FURNISHED BYTHE BANK,
INDIAN OVERSEAS BANKConstituted under the Banking Companies (Acquisition & Transfer of Undertakings) Act, 1970
Central Office: 763 Anna Salai, Chennai - 600 002Tel: (044) 2851 9438/2841 5702, Fax: (044) 2852 3372 Website : www.iob.com
Email: [email protected]
Public Issue of 10,00,00,000 equity shares of Rs.10 each for cash at a premium of Rs. 14 at a price ofRs. 24 each aggregating Rs. 240 crores
2
WE CONFIRM THAT:
(A) THE DRAFT PROSPECTUS FORWARDED TO SEBIIS IN CONFORMITY WITH THE DOCUMENTS,MATERIALS AND PAPERS RELEVANT TO THEISSUE;
(B) ALL LEGAL REQUIREMENTS CONNECTED WITHTHE SAID ISSUE AS ALSO THE GUIDELINES,INSTRUCTIONS, ETC. ISSUED BY SEBI, THEGOVERNMENT AND ANY OTHER COMPETENTAUTHORITY IN THIS BEHALF HAVE BEEN DULYCOMPLIED WITH; AND
(C) THE DISCLOSURES MADE IN THE PROSPECTUSARE TRUE, FAIR AND ADEQUATE TO ENABLE THEINVESTORS TO MAKE A WELL INFORMEDDECISION AS TO THE INVESTMENT IN THEPROPOSED ISSUE.
(3) WE CONFIRM THAT BESIDES OURSELVES, ALL THEINTERMEDIARIES NAMED IN THE PROSPECTUS AREREGISTERED WITH SEBI AND THAT TILL DATE SUCHREGISTRATION IS VALID.”
FILING OF THE PROSPECTUS WITH SEBI DOES NOT,HOWEVER ABSOLVE THE BANK FROM ANY LIABILITIESUNDER SECTION 63 OR 68 OF THE COMPANIES ACT ORFROM THE REQUIREMENT OF OBTAINING SUCHSTATUTORY OR OTHER CLEARANCES AS MAY BEREQUIRED FOR THE PURPOSES OF THE PROPOSED ISSUE.SEBI FURTHER RESERVES THE RIGHT TO TAKE UP, AT ANYPOINT OF TIME, WITH THE LEAD MANAGER (S) ANYIRREGULARITIES OR LAPSES IN THE PROSPECTUS.
The Lead Manager has issued a fresh due diligence certificatedated 22.08.2003 which reiterates the statements made in theabove referred certificate and states that all observations madeby SEBI vide letter no. CFD/DIL/SNB/15801/2003 dated21.08.2003, have been incorporated in the Prospectus.
DISCLAIMER CLAUSE OF THE STOCK EXCHANGE,MUMBAI
The Stock Exchange, Mumbai (“BSE”) has given, vide its letterList/smg/aak/2003 dated 13.08.2003, permission to the Bank touse the name of BSE in this Prospectus as one of the StockExchanges on which this Bank’s securities are proposed to belisted. BSE has scrutinised this Prospectus for its limited internalpurpose of deciding on the matter of granting the aforesaidpermission to the Bank. BSE does not in any manner –
1. warrant, certify or endorse the correctness or completenessof any of the contents of this Prospectus; or
2. warrant that this Bank’s securities will be listed or will continueto be listed on BSE; or
3. take any responsibility for the financial or other soundnessof this Bank, promoters, management or any scheme orproject of this Bank;
And it should not be, for any reason be deemed or construedthat this Prospectus has been cleared or approved by BSE. Everyperson who desires to apply for or otherwise acquires anysecurities of this Bank may do so pursuant to independent inquiry,investigation and analysis and shall not have any claim against
BSE, whatsoever, by reason of any loss which may be sufferedby such person consequent to or in connection with suchsubscription/acquisition whether by reason of anything stated inthe Prospectus or any other reason whatsoever.
DISCLAIMER CLAUSE OF THE MADRAS STOCKEXCHANGE
The Madras Stock Exchange Limited, Chennai (“MSE”) has given,vide its letter dated 28.07.2003 permission to the Bank to use thename of the exchange in this Prospectus as one of the stockexchanges on which this Bank’s securities are proposed to belisted. MSE has scrutinised this Prospectus for its limited internalpurpose of deciding on the matter of granting the aforesaidpermission to the Bank. MSE does not in any manner –
1. warrant, certify or endorse the correctness or completenessof any of the contents of this Prospectus;
2. warrant that this Bank’s securities will be listed or will continueto be listed on the exchange; or
3. take any responsibility for the financial or other soundnessof this Bank, promoters, management or any scheme orproject of this Bank;
And it should not be, for any reason be deemed or construedthat this Prospectus has been cleared or approved by MSE. Everyperson who desires to apply for or otherwise acquires anysecurities of this Bank may do so pursuant to independent inquiry,investigation and analysis and shall not have any claim againstMSE, whatsoever, by reason of any loss which may be sufferedby such person consequent to or in connection with suchsubscription/acquisition whether by reason of anything stated inthe Prospectus or any other reason whatsoever.
DISCLAIMER CLAUSE OF THE NATIONAL STOCKEXCHANGE OF INDIA LIMITED
“As required, a copy of this Prospectus has been submitted toNational Stock Exchange of India Limited (“NSE”). NSE has givenvide its letter no. NSE/LIST/49711 dated 08.08.2003, permissionto the Issuer to use the exchange’s name in this Prospectus asone of the stock exchanges on which this Issuer’s securities areproposed to be listed. NSE has scrutinised this Prospectus for itslimited internal purpose of deciding on the matter of granting theaforesaid permission to this Issuer. It is to be distinctly understoodthat the aforesaid permission given by NSE should not in anyway be deemed or construed that the Prospectus has beencleared or approved by NSE; nor does it in any manner warrant,certify or endorse the correctness or completeness of any of thecontents of this Prospectus, nor does it warrant that this Issuer’ssecurities will be listed or will continue to be listed on the exchange;nor does it take any responsibility for the financial or othersoundness of this Issuer, its promoters, its management or anyscheme or project of this Issuer.
Every person who desires to apply for or otherwise acquire anysecurities of this Issuer may do so pursuant to independent inquiry,investigation and analysis and shall not have any claims againstthe Exchange whatsoever by reason of any loss which may besuffered by such person consequent to or in connection with suchsubscription/acquisition whether by reason of anything stated oromitted to be stated herein or any other reason whatsoever.”
3
DISCLAIMER IN RESPECT OF JURISDICTION
This offer is made in India to persons resident in India and toNRIs/OCBs/FIIs on a non-repatriation as well as repatriation*basis. This Prospectus does not, however, constitute an offer tosell or an invitation to subscribe to shares offered hereby in anyother jurisdiction to any person to whom it is unlawful to make anoffer or invitation in such jurisdiction. Any person into whosepossession this Prospectus comes is required to inform himselfabout and to observe any such restrictions. Disputes arising outof this Issue shall be subject to the jurisdiction of appropriatecourt(s).
* The Bank has received permission from Exchange ControlDepartment, RBI vide its letter C.CO.FID/1042/10.02.40/(9103)2003-04 dated 02.08.2003 for allowing NRIs, OCBsand FIIs to invest in the shares offered in the Issue onrepatriation basis to the extent of 10% of the Issue.
GENERAL DISCLAIMER
The Bank accepts no responsibility for statements madeotherwise than in the Prospectus or in the advertisements or anyother material issued by or at the instance of the Bank and thatanyone placing reliance on any other source of information wouldbe doing so at his/her own risk.
FILING
The draft Prospectus was filed with SEBI, Mittal Court, NarimanPoint, Mumbai for its observations and SEBI has given itsobservations. A copy of this Prospectus, having attached theretothe ‘Material Contracts and Documents’ referred to elsewhere inthe Prospectus, has been delivered for registration to BSE (beingthe Designated Stock Exchange). The Bank has also incorporatedthe comments given by SEBI before filing the Prospectus withthe said stock exchanges. A complete copy of ‘Material Contractsand Documents’ has been kept open for public inspection at theHead Office of the Bank. The Lead Managers and the Bank shallmake all information available to the public and investors at largeand no selective or additional information would be available for asection of investors in any manner whatsoever. Also, The Bankand the Lead Manager are obliged to update the Prospectus andkeep the public informed of any material changes till the listingand trading commencement.
LISTING
Applications have been submitted to the Stock Exchange, Mumbai(the Designated Stock Exchange), Madras Stock Exchange andthe National Stock Exchange of India Ltd., to list the new equityshares now being offered through this Prospectus and to seek apermission to deal in such shares. The “in-principle” approvalsfor listing from the Madras Stock Exchange, The Stock Exchange,Mumbai, and the National Stock Exchange of India Ltd have beenreceived on 28.07.2003, 13.08.2003 and 08.08.2003 respectively.
The Bank shall comply with the requirements of the listingagreement to the extent applicable to it on a continuous basis.
If the permissions to deal in and for an official quotation of theequity shares are not granted by any of the Stock Exchanges,the Bank shall forthwith repay, without interest, all such moneysreceived from the applicants in pursuance of this Prospectus. Ifsuch money is not repaid within eight days after the Bank becomesliable to repay it (i.e. from the date of refusal or within 70 days
from the date of closing of the subscription list, whichever isearlier), then the Bank will be liable to repay the money, withinterest, as prescribed under Section 73 of the Companies Act.
ELIGIBILITY OF THE BANK TO COME OUT WITHTHE PUBLIC ISSUE
The SEBI (Disclosure and Investor Protection) Guidelines, 2000prescribe eligibility norms for a company to come out with a publicissue. Clause 2.3 of the Guidelines specifies the eligibilityrequirements for public issue by a listed company. However, theBank is eligible to come out with the public issue in terms of clause2.4.1, which exempts a banking company from theserequirements.
PROHIBITION BY SEBI
The Bank, its directors, its associates and companies with whichthe directors of the Bank are associated as directors orpromoters are not prohibited from accessing the capital marketunder any order or directions passed by SEBI.
ISSUE OF SHARES IN DEMATERIALISED FORMAT
The Bank has entered into a tripartite agreement with NSDL andCDSL for dematerialisation of shares for the existing/proposedshareholders. The Bank has also given an option to thesubscribers/shareholders/investors to receive the sharecertificates in physical form or in the demat form.
IMPERSONATION
As a matter of abundant caution, the attention of the investor isdrawn to the provision of Section 68 (A) of the Companies Act,1956, reproduced below:
“Any person who
(a) makes in a fictitious name an application to the Bank foracquiring or subscribing for any shares therein; or
(b) Otherwise induces the Bank to allot or register any transferof shares therein to him or any other person in a fictitiousname
shall be punishable with imprisonment for a term which may extendto five years”, as applicable under the provisions of law.
MINIMUM SUBSCRIPTION
If the Bank does not receive the minimum subscription of 90% ofthe issued amount, on the date of closure of the Issue, or if thesubscription level falls below 90% after the closure of the Issueon account of cheques having been returned unpaid or withdrawalof applications, the Bank shall forthwith refund the entiresubscription amount received. If there is delay beyond 8 daysafter the Bank becomes liable to pay the amount, the Bank shallpay interest as per Section 73 of the Companies Act, 1956.
LETTERS OF ALLOTMENT/SHARE CERTIFICATES/REFUND ORDERS
Letters of Allotment/Share Certificates or Refund Orders, as thecase may be, will be despatched by Registered Post or as perextant postal rules at the sole risk of the applicant to the sole/firstapplicant within thirty days from the date of closing of thesubscription list. In accordance with the extant postal rules the
4
Bank will ensure dispatch of refund orders of value up toRs. 1500/- under Certificate of Posting and refund orders of valueabove Rs. 1500/- by Registered Post only and adequate funds forthe purpose shall be made available to the Registrars by the Bank.
Further, as far as possible, the allotment of the equity shares shallbe made within 30 days of the closure of the Issue and the Bankshall pay interest at the rate of 15% per annum (except to theapplicants applying through stockinvest) if the allotment has notbeen made and/or the Letters of Allotment/Refund Orders havenot been despatched to the investors within 30 days from thedate of the closure of the Issue, for the delayed period beyond30 days.
The Bank will provide adequate funds to the Registrars to theIssue, for the purpose of despatch of letter(s) of allotment/sharecertificate(s)/letter(s) of regret/cancelled stockinvest(s)/refundorder(s). Despatch of share certificates/refund orders/cancelledstockinvests and demat credit would be completed and allotmentand listing documents shall be submitted to the Stock Exchangeswithin 2 working days of finalisation of the basis of allotment.Formalities pertaining to listing and trading of the securities offeredthrough this Prospectus shall be completed at all stock exchangeswhere they are proposed to be listed within 7 working days ofdate of finalisation of the basis of allotment.
DENOMINATION OF SHARESThe Bank undertakes that at any given time, there shall be onlyone denomination for the shares of the Bank and that the Bankshall comply with such disclosures and accounting normsspecified by SEBI from time to time.
OVERSUBSCRIPTIONIn the event of the present Issue of equity shares beingoversubscribed, the basis of allotment will be finalised inconsultation with the the Stock Exchange, Mumbai (the DesignatedStock Exchange) in accordance with SEBI guidelines.
ISSUE PROGRAMMETHE SUBSCRIPTION LIST WILL OPEN AT THECOMMENCEMENT OF BANKING HOURS AND WILL CLOSEAT THE CLOSE OF BANKING HOURS ON THE DATESMENTIONED BELOW:
ISSUE OPENS ON : 5 September 2003
ISSUE CLOSES ON : 12 September 2003
ISSUE MANAGEMENT TEAM
LEAD MANAGERS TO THE ISSUE
SBI CAPITAL MARKETS LIMITED (SBICAP)202, Maker Tower ‘E’Cuffe Parade, Mumbai – 400 005Tel: (022) 218 9166, Fax: (022) 218 8332Email: [email protected]
DSP MERRILL LYNCH LIMITED (DSPML)
Mafatlal Centre, 10th Floor
Nariman Point, Mumbai – 400 021Tel: (022) 5632 8000, Fax: (022) 2282 5103Email: [email protected]
KOTAK MAHINDRA CAPITAL COMPANY LIMITED (KOTAK)
Ceebros Centre Ist Floor39, Montieth Road, EgmoreChennai - 600 008Tel: (044) 2857 2477, Fax: (044) 2858 9279Email: [email protected]
AK CAPITAL SERVICES LIMITED (AKCAP)Flat No. 5, Sagar Apartments6, Tilak MargNew Delhi – 110 001Tel: (011) 2338 5704, Fax: (011) 2338 5189Email: [email protected]
ALLIANZ SECURITIES LIMITED (ALLIANZ)C-2, Green Park ExtensionNew Delhi – 110 016Tel: (011) 2696 0587, Fax: (011) 2656 2693Email: [email protected]
INTER-SE ALLOCATION OF RESPONSIBILITIESBETWEEN THE LEAD MANAGERS
ACTIVITIES RESPON- CO-SIBILITY ORDINATOR
Capital Structure with the relative SBICAP SBICAPcomponents and formalities such DSPMLas composition of debt and equity, KOTAKtype of instruments. ALLIANZ
AKCAP
Drafting and design of Prospectus SBICAP SBICAPThe designated Lead Manager DSPMLshall ensure compliance with the KOTAKGuidelines for Disclosure and ALLIANZInvestor Protection and other AKCAPstipulated requirements andcompletion of prescribed formalitieswith Stock Exchange and SEBI.
Advertisement and Issue of SBICAP SBICAPthe Statutory Prospectus DSPMLAdvertisement as per SEBI KOTAKGuidelines ALLIANZ
AKCAP
Advertisement / publicity material SBICAP DSPMLincluding brochures and newspaper DSPMLmaterials. The designated Lead KOTAKManager shall ensure compliance ALLIANZwith the Guidelines for Disclosure AKCAPand Investor Protection and otherstipulated requirements andcompletion of prescribed formalitieswith Stock Exchange and SEBI.
Selection of various agencies SBICAP ALLIANZconnected with the issue, namely: DSPMLi) Registrars to issue KOTAKii) Printers ALLIANZiii)Advertising agencies AKCAP
����������� ����
5
ACTIVITIES RESPON- CO-SIBILITY ORDINATOR
Marketing of the issue, which will SBICAP Retailcover, inter-alia, formulating DSPML Investors:marketing strategies, KOTAK DSPMLpreparation of publicity budget, ALLIANZarrangements for selection of AKCAP Institutionalad media Investors:
AKCAP
Distribution of publicity and issue SBICAP DSPMLmaterial including Application Form, DSPMLProspectus and brochure and KOTAKdeciding on the quantum of the ALLIANZissue material. AKCAP
Arrangement for selection of SBICAP DSPMLcenters for holding press/ broker/ DSPMLinvestor conferences KOTAK
ALLIANZAKCAP
Selection of the Bankers to the SBICAP KOTAKIssue and follow-up with DSPMLbankers to the issue to get KOTAKquick estimates of collection ALLIANZand advising the Issuer about AKCAPclosure of the issue based on thecorrect figures.
The post issue activities will SBICAP KOTAKinvolve essential follow-up steps, DSPMLwhich must include finalisation KOTAKof Basis of Allotment/ weeding out ALLIANZof multiple applications, listing of AKCAPinstruments and despatch ofcertificates and refunds, with thevarious agencies connected withthe work such as Registrars to theIssue, Bankers to the Issueand the bank handling refundbusiness. Even if many of theseactivities would be handledby other intermediaries, thedesignated Lead Manager shallbe responsible for ensuringthat these agencies fulfill theirfunctions and enable him to discharge this responsibilitythrough suitable agreementswith the Issuer Bank.
CO-MANAGERS TO THE ISSUE
RR FINANCIAL CONSULTANTS LIMITED412-422, Indra Prakash Building21, Barakhamba RoadNew Delhi – 110 001Tel: (011) 2335 2496, Fax: (011) 2335 3703Email: [email protected]
CENTRUM FINANCE LIMITED10
th floor, Eucharistic Congress Building III
Convent Street, ColabaMumbai – 400 039Tel: (022) 2202 3838, Fax: (022) 2204 6096Email: [email protected]
ASHIKA CAPITAL LIMITED7, Bipin Behari Ganguly Street4th Floor, Kolkata – 700 012Tel: (033) 2215 9418, Fax: (033) 2215 9418Email: [email protected]
REGISTRARS TO THE ISSUE
CAMEO CORPORATE SERVICES LIMITEDSubramanian Building, No.1Club House Road, Chennai – 600 002Tel: (044) 2846 0390, Fax: (044) 2846 0129Email : [email protected]
BANKERS TO THE ISSUE
INDIAN OVERSEAS BANKCentral Office, 763 Anna SalaiChennai – 600 002Tel: (044) 2851 9438/2841 5702, Fax: (044) 2852 3372Email: [email protected]
LEGAL ADVISOR TO THE ISSUET. RAGHAVANAdvocate,New No. 47, Mowbrays RoadAlwarpet, Chennai - 600 018Tel.: (044) 2499 1458 Fax: (044) 2499 6598
COMPLIANCE OFFICERMr. SIVARAM SWAMYGeneral Manager, Indian Overseas BankCentral Office, 763, Anna Salai, Chennai – 600 002Tel: (044) 2851 9419, Fax: (044) 2852 3372E-mail: [email protected]
AUDITORS TO THE ISSUEPADMANABHAN PRAKASH & COChartered Accountants5, Smith Road, II FloorNorth Wing, Chennai - 600 002Tel: (044) 2852 3905
GUPTA& COChartered Accountants53 A, Mirza Ghalib StreetKolkata – 700 016Tel: (033) 2229 2638/6241, Fax: (033) 2229 1859
6
BUBBER JINDAL & COChartered Accountants3072, Pratap StreetGola Market, DaryaganjNew Delhi – 110 002Tel: (011) 2327 2880, Fax: (011) 2328 4562
BANSAL & COChartered AccountantsE-95, Himalaya House23, Kasturba Gandhi MargNew Delhi – 110 001Tel: (011) 2331 0579, Fax: (011) 2372 0213
AMIT RAY & COChartered Accountants5-B, Sardar Patel MargAllahabad – 211 001Tel: (0532) 601 763, Fax: (0532) 466 154
VED & COChartered AccountantsAjanta Building, G.T. RoadGhaziabad – 201 001 (U.P.)Tel: (0120) 2850 481, Fax: (0120) 2852 319
REGIONAL OFFICES OF INDIAN OVERSEAS BANKChief Regional ManagerIndian Overseas BankRegional Office, Chinubhai TowersOpp. Handloom House, Ashram RoadAhmedabad - 380 009
Chief Regional ManagerIndian Overseas BankRegional Office, 10/1, Palace RoadIII Floor, Lakshminarayana ComplexVasanth Nagar, Bangalore - 560 052
Chief Regional ManagerIndian Overseas BankRegional Office, P.B.No.2513Manubhai Towers, 6
th Floor, C-Wing
Sayajigunj P.O., Vadodra - 390 005
Senior Regional ManagerIndian Overseas BankRegional Office, Church RoadBerhampur - 760 001
Chief Regional ManagerIndian Overseas BankRegional Office, B/2West Sahid Nagar, Bhubaneshwar - 751 007
Chief Regional ManagerIndian Overseas BankRegional Office, SCO 11,Madhya Marg, Sector 7-CChandigarh - 160 019
Chief Regional ManagerIndian Overseas BankRegional Office, 807 Anna SalaiFirst Floor, Chennai - 600 002
Chief Regional ManagerIndian Overseas BankRegional Office (Non-Metro), 807 Anna Salai6
th Floor, Chennai - 600 002
Chief Regional ManagerIndian Overseas BankRegional Office, 11/952 Cross Cut RoadGandhipuram, Coimbatore - 641 012General ManagerIndian Overseas BankRegional Office, Rachana Building3
rd Floor, 2, Rajendra Place,Pusa Road
New Delhi 110 008
Senior Regional ManagerIndian Overseas BankRegional Office, Vettukkattil BuildingsJose Junction, M.G. Road, ErnakulamKochi - 682 016
Senior Regional ManagerIndian Overseas BankRegional Office, 164/3Muthu Mariamman Koil St.Thirunagar Colony, Erode - 638 003
Chief Regional ManagerIndian Overseas BankRegional Office, 5-9-299Surya Lok Complex, Gun FoundryHyderabad - 500 001
Senior Regional ManagerIndian Overseas BankRegional Office, Chandra NivasD-23A, Prithiviraj RoadC-Scheme, Jaipur - 302 005
Senior Regional ManagerIndian Overseas BankRegional Office69/70, Sheikpet Nadu StreetKancheepuram - 631 501Senior Regional Manager
Indian Overseas BankRegional Office, 26/7, College RoadSubramaniapuram, Karaikudi - 630 002
Chief Regional ManagerIndian Overseas BankRegional Office, White HouseFirst Floor, 119, Park StreetKolkata - 700 016
Chief Regional ManagerIndian Overseas BankRegional Office (Non-Metro), White House119, Park Street, Kolkata – 700 016
Senior Regional ManagerIndian Overseas BankRegional Office, 11/41EM Sons Arcade, Cherooty RoadP.B. No 302, Kozhikode - 673 001
7
Chief Regional ManagerIndian Overseas BankRegional Office, Navchetna KendraIII Floor, 10, Ashok MargLucknow - 226 001
Chief Regional ManagerIndian Overseas BankRegional Office, Fountain ChowkCivil Lines, Ludhiana - 141 001Chief Regional ManagerIndian Overseas BankRegional Office, 40, Eighty Feet RoadArignar Anna Nagar, Madurai - 625 020
Chief Regional ManagerIndian Overseas BankRegional Office, LIC BuildingMangal Pandey NagarOpp. Chaudhary Charan Singh University, Meerut - 250 005
Chief Regional ManagerIndian Overseas BankRegional Office (M), Maker Towers ‘E’ 5
th Floor. Cuffe Parade
Mumbai - 400 005
Chief Regional ManagerIndian Overseas BankRegional Office (NM)Maker Towers ‘E’, 5
th Floor
Cuffe Parade, Mumbai - 400 005
Senior Regional ManagerIndian Overseas BankRegional Office, 584Public Office Road, VelypalayamNagapattinam - 611 001
Senior Regional ManagerIndian Overseas BankRegional Office, 552/3, First FloorM.S. Road, VetturnimadamNagercoil - 629 003
Senior Regional ManagerIndian Overseas BankRegional Office, Salgaoncar CentreII Floor, Rua De Ourem, PanajiGoa - 403 001
Senior Regional ManagerIndian Overseas BankRegional Office, II & III FloorsNaseema Building, West Gandhi MaidanPatna - 800 001
Senior Regional ManagerIndian Overseas BankRegional Office, 44, Brahmin StreetMudaliarpet, Pondicherry - 605 004
Chief Regional ManagerIndian Overseas BankRegional Office, Ideal Garden Complex7/54, Junction Main RoadFive Roads, Salem - 636 004
Senior Regional ManagerIndian Overseas BankRegional Office, 85/PMarket Road Extn.Thanjavur - 613 001
Chief Regional ManagerIndian Overseas BankRegional Office, IOB BuildingsT.C No. 26/170, M.G.RoadThiruvananthapuram - 695 001
Chief Regional ManagerIndian Overseas BankRegional Office4, Bharathidasan Salai CantonmentTiruchi - 620 001
Senior Regional ManagerIndian Overseas BankRegional Office, 131, East Car StreetTirunelveli Town, Tirunelveli - 627 006
Senior Regional ManagerIndian Overseas BankRegional Office, Shanmuga Complex65A, East Car Street, Tuticorin - 628 002
Chief Regional ManagerIndian Overseas BankRegional Office, D.No. 40-9-27Ring Road, I & II FloorsAdj Telco Yard, Near Benz CircleVijayawada - 520 008
Senior Regional ManagerIndian Overseas BankRegional Office, Apurupa ArcadeNo 13-26-2, MaharanipetaVisakhapatnam - 530 017
BROKERS TO THE ISSUE
All Brokers who are members of recognised Stock Exchangescan act as Brokers to the Issue.
CREDIT RATING/DEBENTURE TRUSTEES
Since the present issue is of equity shares, credit rating andappointment of trustees are not required.
UNDERWRITING
The present issue of equity shares is not underwritten.
CORPORATE GOVERNANCE
The SEBI guidelines in respect of corporate governance, in linewith the regulatory framework for public sector banks, areapplicable to the Bank. In this regard, the Bank has already broadbased its Board of Directors and also set up the necessarycommittees as per the requirements of the revised guidelines.
Board of Directors: In terms of section 7(2) of the BankingCompanies (Acquisition And Transfer of Undertakings) Act 1970,the general superintendence, direction & management of theaffairs and business of the Bank is vested with the Board of
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Directors. The present strength of the Board of Directors is thirteencomprising of two whole time directors (including CMD) and elevennon-executive directors, of which four directors representshareholders, who are independent directors.
Committees of the Board: To facilitate the decision-making process,Board has constituted the following committees and delegatedspecific powers to them:
1. Management Committee of the Board (MCB): MCB isconstituted as per the provisions of the Nationalised Banks(Management and Miscellaneous Provisions) Scheme, 1970.Some of the important delegated functions and duties of MCBare as under:
a) Sanction of credit proposals (fund based and non-fundbased).
b) Loan Compromise/write off proposals.
c) Proposals for approval of capital and revenueexpenditure.
d) Proposals relating to acquisition and hiring of premisesincluding deviation from norms for acquisition and hiringof premises.
e) Filing of suits/appeals, defending them etc.
f) Investments in Government and other approvedsecurities, shares and debentures of companiesincluding underwriting.
2. Audit Committee of the Board (ACB): This committee isconstituted by the Board of Directors as per instructions ofthe RBI. The main delegated functions and duties of the ACBare as under:
� To provide direction to and to monitor the operation ofthe total audit function of the Bank including organisation,operationalisation, quality control of the internal audit,
inspection within the Bank and follow up on the statutory/external audit of the Bank and inspections of RBI.
� To review the internal inspection/audit function in theBank: the system, its quality and effectiveness in termsof follow-up and to review the inspection reports of thespecialised and extra large branches and all thebranches with unsatisfactory rating.
ACB also focusses on the follow up on Inter-branchadjustment accounts, un-reconciled long outstanding entriesin inter-bank accounts and nostro accounts, arrears inbalancing of books at various branches, frauds and all othermajor areas of house-keeping.
3. Shareholders Grievances Committee: A non-executiveindependent director elected by the shareholders heads theShareholders Grievances Committee. The following are thecommittee members: 2 shareholder directors and theExecutive Director. The committee is responsible for lookingafter the grievances of the shareholders and meets once ina quarter.
4. Other Committees: There are various other committees likeRisk Management Committee, Asset Liability ManagementCommittee, Investment Committee, Top ManagementCommittee consisting of CMD, ED and GMs along withdepartment executives, which have been constituted for day-to-day functioning, review and monitoring various aspectsof business.
5. Remuneration Committee: The Board has not set up aremuneration committee to determine the remunerationpayable to the executive directors as the remuneration tothem is decided by the Central Government and the Bankdoes not pay any remuneration except sitting fees to non-executive directors.
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II. CAPITAL STRUCTUREAs on 31
st March 2003 (in Rs.) Face Value Issue Amount
A. Authorised capital1,50,00,00,000 Equity Shares of Rs. 10/- each 15,00,00,00,000
B. Issued, subscribed and paid up capital*44,48,00,000 Equity Shares of Rs. 10/- each 4,44,80,00,000
C. Present issue through this Prospectus10,00,00,000 Equity Shares of Rs. 10/- each at a premium of Rs.14/- each 1,00,00,00,000 2,40,00,00,000Out of which1,00,00,000 Equity Shares of Rs.10/- each for cash at a premium of 10,00,00,000 24,00,00,000
Rs.14/- each are reserved for allotment to regular/permanentEmployees & whole-time Directors of the Bank
1,00,00,000 Equity Shares of Rs.10/- each for cash at a premium of 10,00,00,000 24,00,00,000Rs.14/- each are reserved for allotment to NRIs, OCBs &FIIs applying on repatriation basis.
D. Net offer to Indian public8,00,00,000 Equity Shares of Rs. 10/- each at a premium of Rs. 14/- each 80,00,00,000 1,92,00,00,000
E. Paid - up capital after the issue54,48,00,000 Equity Shares of Rs. 10 each 5,44,80,00,000
F. Share premium accountBefore the issue NilAfter the issue 1,40,00,00,000
Return of Capital: The Board of Directors of the Bank has passed a resolution on 07.06.2003 approving the return of capital notexceeding Rs. 75 crores to GoI, subject to necessary approvals. The shareholders of the Bank have approved the return of capital atthe Annual General Meeting held on 18.07.2003. The Bank has asked for necessary permission from the Department of EconomicAffairs, Banking Division, Ministry of Finance, GoI vide its letter dated 17.06.2003. On receiving the GoI permission, date of return ofcapital will be firmed up. In any case, the return of capital will take place after the shares offered in the present issue are listed.
* The Government of India presently holds 75% of the equity capital of the Bank. The Government of India, Ministry of Finance,Department of Economic Affairs (Banking Division) has given its approval for the present Issue vide letter no. F. No.11/4/2003/BOA dated 30.05.2003. After the issue, shareholding of GoI will be 61.23%.
NOTES TO CAPITAL STRUCTURE
1. Share Capital history (since nationalisation on July 19, 1969)
(Rs. in crores)
Year ended December 31 Increase/ Mode Paid-up capital(Decrease) in capital
1970 - - 1.001972 1.00 Capitalisation of Reserves 2.001976 2.00 Capitalisation of Reserves 4.001977 2.00 Capitalisation of Reserves 6.001979 2.00 Capitalisation of reserves 8.001980 2.00 Capitalisation of Reserves 10.001982 3.00 Capitalisation of Reserves 13.001985 20.00 Capital contributed by Government of India 33.001986 32.00 Capital contributed by Government of India 65.001989 45.00 Capital contributed by Government of India 110.001990 140.00 Capital contributed by Government of India 250.001991 70.00 Capital contributed by Government of India 320.001992 50.00 Capital contributed by Government of India 370.001994 705.00* Capital contributed by Government of India 1075.001995 258.60* Capital contributed by Government of India 1333.601997 (1000.00) Adjustment of accumulated Losses
(please refer to note 5 below) 333.602000 111.20 Public Offer 444.80
* The contribution of capital by GoI has been in the form of recapitalisation bonds.
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2. Details of lock-in: Ministry of Finance, Department ofEconomic Affairs, Banking Division, GoI, has given theapproval to lock-in 20% of the post issue capital for 3 yearsfrom the date of allotment in the public issue vide letter dated17.07.2003. The shares issued last shall be locked in first.
3. The present shareholding pattern of the Bank (as on30.06.2003) is as follows:
Category No. of % of shareshares held holding
GoI 33,36,00,000 75.00Banks, FIs, Insurance Cos. 87,92,148 1.98FIIs 6,05,000 0.14Private Corporate Bodies 93,20,836 2.10Indian Public 9,13,03,502 20.53NRIs/OCBs 5,12,360 0.12Trusts 7,500 0.00Clearing Member 6,58,654 0.15
Total 44,48,00,000 100.00
After the Issue, GoI stake would reduce from 75% to 61.23%.
4. The authorised share capital of the Bank is Rs. 1500.00crores as per sub-section 2A of section 3 The BankingCompanies (Acquisition and Transfer of Undertakings) Act,1970, as amended from time to time.
5. The Government of India, Ministry of Finance, Departmentof Economic Affairs (Banking Division), vide its letter F.No.12/2/96-BOA dated 27.03.1997, in exercise of the powersconferred by Section 3 (2BBB) inserted in the BankingCompanies (Acquisition and Transfer of Undertakings) Act,1970 by the Banking Companies (Acquisition and Transferof Undertakings) Amendment Act, 1995, and in consultationwith the Reserve Bank of India, has permitted the Bank toreduce its paid-up capital by adjusting accumulated lossesof Rs. 1000.00 crores from its paid-up capital as on31.03.1997. The present paid-up capital of the Bank is Rs.444.80 crores.
6. Under section 3A of the Bank Nationalisation Act, no noticeof any Trust, express, implied or constructive, shall beentered on the Register or be receivable by the Bank. Interms of this section, while Trusts could make investmentsin equity shares of the Bank, this could be only in the nameof the Trustees and no details of the Trust would be takencognisance of by the Bank on its Register of Shareholders.
7. i) Section 3 (2E) of the Bank Nationalisation Act providesthat no shareholder other than Central Government shallbe entitled to exercise voting rights in respect of anyequity shares held by him/her in excess of one percent(1%) of the total voting rights of all the shareholders ofthe Bank.
ii) Section 3 (2B)(b) of Bank Nationalisation Act providesthat the paid up capital of every corresponding new bankfrom time to time be increased by such amounts as theCentral Government may, after consultation with theReserve Bank of India, contribute to such paid-upcapital.
iii) Section 3(2B)(c) of Bank Nationalisation Act providesthat the paid up capital of every corresponding new bank
may from time to time be increased by such amountsas the Board of Directors of the Bank may, afterconsultation with the Reserve Bank of India and withthe previous sanction of the Central Government, raiseby Public Issue of shares as may be prescribed, sohowever, that the Central Government shall at all timeshold not less than fifty-one percent of the paid-up capitalof each corresponding new bank. The BankingCompanies (Acquisition and Transfer of Undertakings)Act, 1970 and Financial Institutions Laws (Amendment)Bill, 2000 proposes to reduce the minimum stake of theGovernment from 51% to 33%.
8. In the event of oversubscription, the allotment shall be madeon a proportionate basis as is outlined elsewhere in thisProspectus. Investors are advised to refer to para ‘Basis ofAllotment’ on page 16 of the Prospectus. In the process ofrounding off to ensure allotment in marketable lots, the Bankmay make such adjustments in the Basis of Allotment, asmay be necessary, in consultation with BSE, so that suchan adjustment does not exceed 10% of the Net Offer toPublic.
9. Only permanent/regular Employees and whole-time Directorsof the Bank as on the cut-off date i.e. 1.7.2003, would beeligible to apply in this Issue under reservation for Employeeson competitive basis. The number of permanent/regularEmployees of the Bank as on 1.7.2003 is 24,297.
10. The unsubscribed portion, if any, out of the equity sharesreserved for Employees of the Bank and NRIs, OCBs andFIIs (on repatriation basis) will be added back to the net offerto the public.
11. In case of under-subscription in the net offer to the publicportion, the excess subscription, if any, in the reservedcategory for Employees and whole-time Directors would bepermitted to spill over to the net public offer portion.
12. No single applicant in the net offer to the public categorycan make an application for a number of equity shares,which exceeds the net offer to the public. No single applicantin any reserved category can make an application for anumber of equity shares, which exceeds the reservation inthat category.
13. A minimum 50% of the net issue to the Indian public will bemade available for allotment in favour of those individualapplicants who have applied for not more than Rs. 50,000worth of shares This percentage may be increased inconsultation with the Stock Exchange, Mumbai depending onthe extent of response to the Issue from investors in thiscategory. The balance of the net issue to the Indian publicshall be made available for allotment to investors, includingCorporate Bodies, Institutions and Individual applicants whoapply for more than Rs. 50,000 worth of shares. Theunsubscribed portion of the net issue to any one of the abovetwo categories shall be made available to the applicants inthe other category, if so required and allotment made on aproportionate basis as per the relevant SEBI guidelines.
14. GoI, Directors of the Bank and the Lead Managers have notentered into any buy-back and/or standby arrangements forpurchase of the equity shares of the Bank with any person.
15. The Bank has not availed of any Bridge Loan against theproceeds of this Issue.
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16. The Bank undertakes that it shall not make any further issueof capital whether by way of issue of bonus shares,preferential allotment, rights issue or public issue or in anyother manner, during the period commencing from submissionof draft Prospectus to SEBI for the public issue till thesecurities referred in the Prospectus have been listed orapplication monies refunded on account of failure of the issue.As of date the Bank does not propose to alter the capitalstructure by way of split/consolidation of the denominationof shares or issue of shares on preferential basis or issueof bonus or rights or further public issue of shares or anyother securities within a period of six months from the dateof opening of present issue.
17. GoI or the directors of the Bank have not undertaken anytransactions in the equity shares of the Bank in the last sixmonths.
18. On the date of filing the draft Prospectus with SEBI, therewere no outstanding financial instruments or any other rightwhich would entitle the existing promoters or shareholdersor any other person any option to receive equity shares afterthe public issue.
19. The number of shareholders as on 18.08.2003 of the Bankis 1,49,026.
20. Top 10 Shareholders of the Bank at the time of StockExchange filing
S.No. Shareholder’s No. of % ShareName Shares held holding
1. GoI 33,36,00,000 752. Andhra Bank 13,91,065 0.313. Punjab And Sind Bank 12,03,873 0.274. Meenakshi Bhargava 10,97,383 0.255. Central Bank of India 9,81,489 0.226. Life Insurance
Corporation of India 8,03,900 0.187. Vijay Bhargava 7,66,832 0.178. Jaiprakash Industries
Limited 7,21,600 0.169. Kotak Mahindra (UK) Ltd.
A/C Premier 6,85,000 0.1510. Madhukar C Sheth 6,45,978 0.15
Top 10 Shareholders of the Bank 10 days before StockExchange filing
S.No. Shareholder’s No. of % ShareName Shares held holding
1. GoI 33,36,00,000 752. Andhra Bank 13,91,065 0.313. Punjab And Sind Bank 12,03,873 0.274. Meenakshi Bhargava 10,97,383 0.255. Central Bank of India 9,81,489 0.226. Life Insurance
Corporation of India 8,03,900 0.187. Vijay Bhargava 7,66,832 0.178. Jaiprakash Industries
Limited 7,21,600 0.169. Punjab National Bank 7,00,000 0.1610. Kotak Mahindra (UK) Ltd.
A/C Premier 6,55,000 0.15
Top 10 Shareholders of the Bank 2 years before StockExchange filing
S.No. Shareholder’s No. of % ShareName Shares held holding
1. GoI 33,36,00,000 75.002. Punjab National Bank 36,07,900 0.813. Union Bank of India 18,03,900 0.404. Punjab And Sind Bank 18,03,900 0.405. Life Insurance
Corporation of India 18,03,900 0.406. Central Bank of India 18,03,900 0.407. Andhra Bank Funds
Investment Dept. 14,45,564 0.328. Oriental Bank of
Commerce 10,82,400 0.249. Vijaya Bank 10,82,400 0.2410. Jaiprakash Industries
Limited 7,21,600 0.16
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III. TERMS OF THE PRESENT ISSUE
The Bank is offering for public subscription through this Prospectus10,00,00,000 equity shares of Rs.10 each for cash at a premiumof Rs. 14 at a price of Rs. 24 each aggregating Rs. 240 crores.
The equity shares are being offered subject, inter-alia, to the termsof this Prospectus, the Application Forms, the provisions for listingas specified in guidelines issued by Stock Exchanges and theGoI from time to time, the terms and conditions stated in theallotment letters/share certificates to be issued, the provisions ofthe Bank Nationalisation Act, the Banking Regulation Act, 1949,the provisions of the Companies Act, 1956, the letter from GoI,Ministry of Finance, Department of Economic Affairs (BankingDivision) vide their letter No.11/4/2/3/BOA dated 30.05.2003approving the Issue, the guidelines for Disclosure and InvestorProtection issued by SEBI and the provisions of the DepositoryAct, 1996 to the extent applicable.
RIGHTS OF THE EQUITY SHAREHOLDERS
a) Right to receive dividend, if declared.
b) Right to attend general meetings and exercise voting powers,unless prohibited by law.
c) Right to vote either personally or by proxy, subject to Section3(2E) of the Bank Nationalisation Act.
FACE VALUE OF EQUITY SHARES
Each equity share being offered will have a face value of Rs. 10/-and is offered at a premium of Rs. 14/- at a price of Rs. 24/-.
RANKING OF EQUITY SHARES
The equity shares, now being offered shall rank pari-passu withthe existing equity shares of the Bank in all respects includingdividend, save and except as the following:
As provided in section 3(2B) of the Bank Nationalisation Act, “Noshareholder other than central government shall be entitled toexercise voting rights in respect of any equity shares held byhim in excess of 1% of the total voting rights of all theshareholders of the Bank.”
Investors are requested to refer to section 15(1) of the BankingRegulation Act, 1949. As per the above section, “No bankingcompany shall pay any dividend on its shares until all its capitalisedexpenses (including preliminary expenses, organisationalexpenses, share selling commission, brokerage, amount oflosses incurred and any other item of expenditure not representedby tangible assets) have been completely written off.” The Bankhas got an exemption from Ministry of Finance, Department ofEconomic Affairs (Banking Division) vide notification F. No. 11/4/2003-BOA dated 22.07.2003 from the provisions of the said section15(1) relating to the payment of dividend up to 21.07.2008.
TERMS OF PAYMENT OF THE EQUITY SHARES
Applications should be for a minimum of 100 equity shares and inmultiples of 100 thereafter. The offer price is Rs. 24/- per shareand the entire amount is payable on application. Where an applicantis allotted lesser number of equity shares than he/she has appliedfor, the balance if any, will be refunded to the applicant. No interestwould be payable on application money pending allotment up to30 days from the date of closure of the Issue.
INTEREST IN CASE OF DELAY IN ALLOTMENT/REFUNDS
The Bank agrees that as far as possible, allotment of equityshares shall be made within 30 days from the date of closure ofthe Issue. Further, the Bank shall pay interest @ 15% p.a., exceptto applicants applying through stockinvests, if the allotment is notmade and/or the refund orders are not dispatched to the investorswithin 30 days from the date of closure of the Issue for the periodof delay beyond 30 days.
TRANSFER OF SHARES
As per Section 3 (2D) of the Bank Nationalisation Act, the sharesof every corresponding new Bank, not held by the CentralGovernment, shall be freely transferable.
Provided that no individual or company resident outside India orany company incorporated under any law not in force in India orany branch of such company whether resident outside India ornot, shall at any time hold or acquire by transfer or otherwiseshares of the corresponding new bank so that such investmentin aggregate exceed the percentage, not being more than 20% ofthe paid up capital as may be specified by the central governmentby notification in the official gazette.
Explanation: For the purposes of this clause, “company” meansany body corporate and includes a firm or other association ofindividuals.
PROCEDURE FOR APPLICATION AND MODE OF PAYMENT
AVAILABILITY OF PROSPECTUS AND APPLICATION FORMS
The Memorandum Form 2A containing the salient features of theProspectus together with application forms and copies of thisProspectus may be obtained from the Lead Managers to theIssue, Brokers, Bankers to the Issue named herein, the collectioncentres of the Bankers to the Issue mentioned in the ApplicationForms, the Head Office, Regional Offices and all designatedbranches of the Bank. The investors are advised to retain thecopy of the Prospectus/Memorandum in Form 2A for their futurereference.
APPLICATION MAY BE MADE BY
(a) Indian Nationals Resident of India who are adult Individualsin single name or joint names (not more than three).
(b) Hindu Undivided Families (HUF) through the Karta of the HUF.(Applications by HUF would be given the same treatment asthat to applications by Individuals)
(c) Companies, Body Corporate and Societies registered underthe applicable laws in India and authorised to invest in theShares.
(d) Scientific and/or Industrial Research Organisations, whichare authorised to invest in the equity shares.
(f) Indian Mutual Funds registered with SEBI.
(g) Indian Financial Institutions & Banks.
(h) Companies registered under the Societies Registration Act,1860 or any other applicable Trust Laws and authorised undertheir constitution to hold and invest in shares subject toprovisions of Section 3A of the Bank Nationalisation Act.
(i) Commercial Banks and Regional Rural Banks. Co-operativeBanks may also apply subject to permission from ReserveBank of India.
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(j) Permanent and Regular Employees/ whole-time Directors ofthe Bank.
(k) Non-Resident Indians (NRIs), Overseas Corporate Bodies(OCBs) and Foreign Institutional Investors (FIIs) on non-repatriation as well as repatriation* basis in the public portion
* The Bank has received permission from Exchange ControlDepartment, RBI vide its letter C.CO.FID/1042/10.02.40/(9103)2003-04 dated 02.08.2003 for allowing NRIs, OCBs andFIIs to invest in the shares offered in the Issue on repatriationbasis to the extent of 10% of the Issue amount.
APPLICATIONS NOT TO BE MADE BY
1. Minors
2. Foreign Nationals
3. Partnership firms or their nominees
4. Trust or Society (except as stated above)
5. HUFs (except as stated above)
A single application can be made only for the number of equityshares that are being offered to respective category.
JOINT APPLICATIONS IN CASE OF INDIVIDUALS
Applications may be made in single or joint names (not more thanthree). In case of Joint Applications, refund, pay orders, dividendwarrants etc. if any, will be drawn in favour of the first applicantand all communications will be addressed to the first applicant ather/his address as stated in the application form.
MULTIPLE APPLICATIONS
The Application Form shall contain space for indicating numberof shares subscribed for in demat and physical shares or both.No separate applications for demat and physical can be made. Ifsuch an application is made, the applications for physical shareswill be treated as multiple applications. An applicant should submitonly one application form (and not more than one) for the totalnumber of equity shares applied for. Two or more applications insingle or joint names will be deemed to be multiple applications ifthe sole and/or first applicant is one and the same.
The Bank reserves the right to accept or reject, in its absolutediscretion, any or all multiple applications.
Applications made by permanent/regular Employees of the Bankboth under the reserved category for Employees as well as inthe net public offer shall not be treated as multiple applications. Aseparate single cheque/draft/stockinvest must accompany eachApplication Form.
APPLICATION BY MUTUAL FUNDS
In case of applications by Mutual Funds, a separate applicationmust be made in respect of each scheme of an Indian MutualFund registered with SEBI and such applications will not be treatedas multiple applications, provided that the application made by theAsset Management Company/Trustees/Custodian clearly indicatetheir intention as to the scheme for which the application has beenmade.
APPLICATIONS UNDER POWER OF ATTORNEY OR BYLIMITED COMPANIES
In case of applications under Power of Attorney or by Companies,Bodies Corporate, Societies registered under the applicable laws,
trustees of Trusts, Provident Funds, Superannuation Funds,Gratuity Funds and Scientific and/or Industrial ResearchOrganisations, a certified copy of the Power of Attorney or therelevant authority, as the case may be, must be lodged separatelyat the office of the Registrars to the Issue simultaneously withthe submission of the Application Form, indicating the serialnumber of the application form and the name of the Bank and thebranch office where the application has been submitted and theBank and the branch on which the cheque/draft has been drawn.The Bank in its absolute discretion reserves the right to relax theabove condition of simultaneous lodging of the power of attorneyalong with application form subject to such terms and conditionsas it may deem fit.
PAN/GIR NUMBER
Where an application is for a total value of Rs. 50,000 or more,i.e., 2100 shares or more, the applicant, or, in case of applicationsin joint names, each of the applicants should mention his/her/theirPermanent Account number (PAN) allotted under Income Tax Act,1961 or where the same has not been allotted, the GIR Numberand the IT Circle/Ward/District should be mentioned. In case whereneither the PAN nor the GIR number has been allotted, or theapplicant is not assessed to Income tax, the appropriate boxprovided for the purpose in the Application Form must be ticked.Applications without this will be considered incomplete and areliable to be rejected.
Signatures, Thumb impressions and signatures other than inEnglish/Hindi or any other language specified in the 8th Scheduleto the Constitution of India, must be attested by a Magistrate or aNotary Public or a Special Executive Magistrate under his/herofficial seal.
NOMINATION FACILITY
As per Section 109A of the Companies Act, 1956 and theNotification No: G.S.R. 836(E) dated 24.10.2000 amending Form2B of nomination form of the Companies (Central Government’s)General Rules and Forms, 1956, only individuals applying as SoleApplicant/Joint Applicant can nominate, in the prescribed manner,a person to whom his share in the Bank shall vest in the event ofher/his death. Non-individuals including Society, Trust, BodyCorporate, Karta of HUF, holder of Power of Attorney cannotnominate.
OTHER APPLICATION DETAILS
1. Applications must be made only on the prescribed ApplicationForm and should be completed in BLOCK LETTERS inENGLISH in accordance with the instructions containedherein and in the Application Form, and are liable to rejectionif not so made. The prescribed Application Forms will havethe following colours:
Category Colour of form
Resident Indian public & NRIs/FIIs/OCBswithout repatriation WhiteEmployees PinkNRIs/OCBs/FIIs (on repatriation basis) Blue
2. Payments should be made by cash, stockinvest, cheque, ordemand draft drawn on any Bank (including a Co-operativeBank), which is situated at, and is a member of or sub-member of the bankers’ clearing house located at the centrewhere the Application Form is submitted. Outstation cheques/
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bank drafts drawn on banks not participating in the clearingprocess will not be accepted and applications accompaniedby such cheques or bank drafts are liable to be rejected.Money orders/Postal orders will not be accepted.
3. All Application Forms duly completed together with cash/cheque/demand draft/stockinvest for the application moneypayable must be delivered before the close of thesubscription list to any of the Bankers to the Issue namedherein or to any of their branches mentioned in the ApplicationForm and not to the Lead Managers or the Registrars to theIssue (except in the circumstances described in clause 6herein below).
4. Unless the Bank specifically agrees in writing with or withoutsuch terms and conditions it deems fit, a separate cheque/bank draft/stockinvest must accompany each ApplicationForm. No receipt will be issued for the application money.However, the Bankers to the Issue will issue anacknowledgment by stamping and returning to the applicantthe acknowledgment slip attached to the Application Form.The acknowledgement slip given by the Bankers shall bevalid and binding on the Bank and others connected with theIssue.
5. All cheques/bank drafts accompanying the application shouldbe crossed “A/c Payee Only” and made payable to theBankers to the issue and marked:
Category of Application Cheques/Bankdrafts favouring
Resident Indian Public “Indian Overseas Bank A/Cand NRI/OCBs/FIIs without IOB Public Issue”repatriation
Employees “Indian Overseas Bank A/CIOB Public Issue -Employees”
NRIs/OCBs/FIIs (on “Indian Overseas Bank A/Crepatriation basis) IOB Public Issue - NR”
6. Applicants residing at places where no collection centreshave been opened may submit/mail their applications at theirsole risk along with the application money due thereunto byDemand Draft to the Registrars to the Issue at their Chennaiaddress, superscribing the envelope “Indian Overseas Bank- Public Issue”, so as to reach the Registrars to the Issueon or before the closure of the subscription list. Such demanddrafts should be payable at Chennai only. The charges, ifany, for purchase of demand drafts will have to be borne bythe applicant.
7. Section 269SS of the Income Tax Act, 1961
Having regard to the provisions of Section 269SS of theIncome Tax Act, 1961, the payment against an applicationshould not be effected in cash if the amount payable togetherwith any earlier outstanding loan or deposit placed with IndianOverseas Bank by the applicant is Rs. 20,000 or more. Incase payment is effected in contravention of this, theapplications are liable to be rejected without interest.
8. In case of partial allotment, allotment will be done in dematoption for the shares sought in demat and balance, if any,will be allotted in physical shares
PAYMENT BY STOCKINVEST
Applicants, being Individuals and Mutual Funds only, have theoption of using the “stockinvest” instrument for payment ofapplication money in lieu of cash/cheque/demand draft. Applicantsusing stockinvests should submit them along with the applicationform to any of the collecting centres/Bankers to the Issuementioned in the Application Form. Stockinvests should be payableat par at all the branches of the issuing Bank and as suchoutstation stockinvests can be attached to the Application Forms.Applicants can approach the Banks concerned for obtainingstockinvest and detailed instructions for the same. Thestockinvests will be realised through Indian Overseas Bank.
The applicant has to fill in the following particulars:
1. Title of the Account as mentioned in the Application Form.
2. Number of equity shares applied for.
3. The amount payable on the equity shares applied for
The applicant should thereafter sign the instrument. It should alsobear the stamp of the Bank issuing the instrument and should becrossed “A/c Payee Only” and made payable only to “IndianOverseas Bank”. Service charges, if any, for issuing thestockinvest must be borne by the applicant. The applicant shouldnot fill in the portion to be filled up by the Registrars to the Issue(right-hand portion of the instrument). The Registrars to the Issuewill fill up the right-hand side of the stockinvest indicating the equityshares allotted to the applicants, calculated as follows:
i. In case of full allotment, the number of equity shares on theright-hand side will be the same as that on the left-hand sideof the instrument;
ii. In case of partial allotment, the number filled up by theRegistrars to the Issue on the right-hand side of theinstrument will be less than the number filled up by theapplicant on the left-hand side;
iii. In case the allotment is nil, the number filled up by theRegistrars to the Issue on the right-hand side of theinstrument will be nil.
Investors may please note that multiple applications received witha single stockinvest are liable to be rejected
The stockinvest should be used by the Purchaser and the nameof the Purchaser/one of the Purchasers should be indicated asthe first applicant in the Application Form. Thus, if the signature ofthe Purchaser/one of the Purchasers on the stockinvest and thesignature of the first applicant in the Application Form do not tally,the application and the stockinvest are liable to be rejected.
The stockinvest instrument should be used by the Purchaserwithin 10 days from the date of the issue of the instrument, failingwhich such applications are liable to be rejected. For the purposeof calculating the 10 days, the last date for use of the stockinvestfor submitting the Application Form to the Bank is indicated onthe face of the stockinvest with a notation “to be usedbefore_________.
No refund order will be issued to the applicants using stockinvestfor payment of application money. In case of non-allotment ofequity shares, the cancelled stockinvest instruments will bereturned to the applicant, within 10 weeks of closure ofsubscription list by Registered Post/Speed Post. The applicant will
15
have to approach the issuing Bank branch for lifting the lien. Thecurrency of the stockinvest is four months.
Registrars to the Issue have been authorised by the Bank (throughResolution of the Board of Directors passed at its meeting heldon 18.07.2003 to sign the stockinvests on behalf of the Bank, torealise the proceeds of the stockinvest from the issuing Bank, orto affix non-allotment advice on the instrument, or to cancel thestockinvest(s) of the non-allottee or partially successful alloteeswho have enclosed more than one stockinvest. Such cancelledstockinvest(s) shall be sent back by the Registrars directly tothe investors.
Reserve Bank of India, vide its circular DBOD No. FSC.BC.100/24.47.001/94 dated 2.9.1994, has restricted the use ofstockinvest(s) to individual investors and Mutual Funds only.Brokers, Corporate Bodies, Banks and Financial Institutions arenot allowed to invest through stockinvest(s). A ceiling of Rs.50,000/- per individual per stockinvest by Banks has beenimposed. The above ceiling is not applicable to Mutual Funds.
In the interest of the investors, to avoid rejection of applicationson technical grounds, it is suggested that the applicant shouldensure that:
� The date of issue of the stockinvest by the issuing bank isclearly mentioned on the instrument.
� The instrument is duly signed by the authorised officer ofthe bank giving his code number.
� The instrument bears the code number and the address ofthe issuing bank branch.
� Any correction/alteration in the date of issue, amount, thename of the issuer, etc. should be attested by an authorisedofficer of the issuing bank.
� The applicant has clearly written the name of the Issuer, theamount and signed the instrument.
� Amount written in the Application Form to be deposited andthe amount of the instrument accompanying the applicationform should be the same.
Note: The above information is given for the benefit of investorsand the Bank is not liable for any modification in the terms of thestockinvest or procedure thereof by the issuing bank.
PARTICULARS OF BANK ACCOUNT
All the applicants, including applicants with stockinvest, shouldmention particulars relating to Savings Bank/Current Accountnumber and the name of the bank and branch with whom suchaccount is held in the appropriate place in the application form toenable Registrars to print the said details in the refund ordersafter the name of the payee. Please note that it is mandatoryto provide the aforementioned details. Applications withoutthese details would be treated as incomplete andapplications are liable to be rejected.
Note
1. Applicants are requested to write the application serial numberon the reverse of the instruments by which the paymentsare being made to avoid misuse of instruments submittedalong with the applications for equity shares.
2. Applications by NRIs/OCBs/FIIs on non-repatriation basis canbe made using the Form meant for public out of the funds
held in Non Resident (Ordinary) Account (NRO)/NREAccount. The relevant bank certificate must accompany suchforms. Such applications will be treated at par with theapplications made by the public. For further instructions,please read the Application Form carefully.
NRIs can obtain the Application Form from: IOB, Esplanadebranch, Chennai.
INSTRUCTIONS FOR APPLICATIONS BY NRIs, OCBs ANDFIIs ON REPATRIATION BASIS
1. The Bank has received permission from RBI for (a) Issuingequity shares in the Issue to NRIs, OCBs and FIIs withrepatriation benefits to the extent of 10% of the Issue (b)Acquisition of shares by NRIs/OCBs/FIIs*. (c) For export ofshares to NRIs/OCBs/FIIs to their respective countries ofresidence/place of incorporation, if so desired by them.
* Hence it will not be necessary for these investors to seekseparate permission from the RBI.
2. Bids must be made in the names of Individuals, Societiesand Other Corporate Bodies owned predominantly (at least60%) by NRIs, or in the names of FIIs but not in the namesof minors, firms or partnerships, foreign nationals or theirnominees. Bids by Societies, Overseas Limited Companiesand Other Corporate Bodies owned predominantly (at least60%) by Non-Resident Indians must be accompanied by acertificate in the prescribed form OAC or OAC1 fromOverseas Auditor or Chartered Accountant or a CertifiedPublic Accountant.
3. The allotment/transfer of the shares to NRIs, OCBs or FIIsshall be subject to RBI guidelines/other approvals, as maybe necessary. Sale proceeds of such investments in equityshares will be allowed to be repatriated along with the incomethereon subject to the permission of the RBI and subject tothe Indian tax laws and regulations and any other applicablelaws. Refunds, dividends and other distributions, if any, willbe payable in Indian rupees only and net of bank charges/and or commission.
4. In case of Bids by NRIs/OCBs applying on repatriation basis,the payments must be made through Indian rupee draftspurchased abroad or cheques or bank drafts orstockinvests, for the amount payable on application remittedthrough normal banking channels or out of funds held in Non-Resident External (NRE) Accounts or Foreign Currency Non-Resident (FCNR) Accounts, maintained with banksauthorised to deal in foreign exchange in India, along withdocumentary evidence in support of the remittance. Paymentwill not be accepted out of Non-Resident Ordinary (NRO)Account of Non-Resident Subscribers applying on arepatriation basis. Payment by drafts should be accompaniedby bank certificate confirming that the draft has been issuedby debiting to NRE or FCNR account.
5. In case of Bids by FIIs, the payment should be made out offunds held in Special Non-Resident Rupee Account along withdocumentary evidence in support of the remittance likecertificates such as FIRC, bank certificate etc. from theauthorised dealer. Payment by drafts should be accompaniedby bank certificate confirming that the draft has been issuedby debiting to Special Rupee Loan Account.
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REJECTION OF APPLICATIONS
The Board of Directors of the Bank reserves in its absolutediscretion the right to accept or reject any application in full or inpart. The various reasons for rejections could be, but not limitedto following: incomplete or illegible applications, number of sharesapplied for less than minimum required number, no informationabout PAN/GIR in case of applications of value over Rs. 50,000,non-adherence to instructions as mentioned under para ‘Paymentby Stockinvests’ for stockinvest applications, applicationsaccompanied by cash of more than Rs. 20,000. Applicants arealso advised to refer para ‘General Instructions’ to understandvarious other reasons for rejection of applications.
DISPOSAL OF APPLICATIONS AND APPLICATION MONEY
The Bank reserves, in its own, absolute and uncontrolleddiscretion and without assigning any reason, the right to acceptin whole or in part or reject any application. If an application isrejected in full, the entire application money received will berefunded to the applicant. If the application is rejected in part,excess of the application money received will be refunded to theapplicant within 30 (thirty) days from the date of closure of theIssue. No interest will be payable on the application money sorefunded. Refund will be made by cheques or demand draftsdrawn in favour of the sole/first applicant (including the details ofhis/her savings/current account number and the name of the bankwith whom the account is held) to the Issue and will be despatchedby Registered Post for amounts above Rs.1,500 and by Certificateof Posting otherwise. Such refund orders will be payable at par atspecified centres.
The subscription received in respect of Public Issue will be keptin a separate bank account and the Bank shall not have accessto such funds unless approvals for dealing from all the StockExchanges, where listing has been proposed and approval of theStock Exchange, Mumbai for utilisation has been obtained.
The Bank has undertaken to make adequate funds available tothe Registrars to the Issue for complying with the requirementsof despatch of Allotment Letters/Refund Orders by RegisteredPost.
BASIS OF ALLOTMENT
In the event of the present issue of equity shares beingoversubscribed, the allotment will be made on a proportionatebasis and the Basis of Allotment will be finalised in consultationwith the Stock Exchange, Mumbai (the Designated StockExchange).
The drawal of lots (where required) to finalise the basis ofallotment, shall be done in the presence of a Public Representativeon the governing board of the Designated Stock Exchange. TheExecutive Director/Managing Director of the Designated StockExchange along with the post-issue Lead Manager and theRegistrars to the Issue shall be responsible to ensure that theBasis of Allotment is finalised in a fair and proper manner inaccordance with the SEBI Guidelines.
The allotment shall be on proportionate basis under thereservation for Employees’ category as well as under the netpublic offer category, subject to allotment of shares in marketablelots, and the basis of allotment would be arrived at as explainedbelow:
1. Applicants will be categorised according to the number ofshares applied for.
2. The total number of shares to be allotted to each categoryas a whole shall be arrived at on a proportionate basis i.e.the total number of shares applied for in that category(number of applicants in the category x number of sharesapplied for) multiplied by the inverse of the oversubscriptionratio.
3. Number of shares to be allotted to the successful allotteeswill be arrived at on a proportionate basis i.e. total number ofshares applied for by each applicant in that category multipliedby the inverse of the oversubscription ratio.
4. In all the applications where the proportionate allotment worksout to less than 100 shares per applicant, the allotment shallbe made as follows:
a. Each successful applicant shall be allotted a minimumof 100 shares.
b. The successful applicant out of the total applicants forthat category shall be determined by draw of lots in sucha manner that the total number of shares allotted in thatcategory is equal to the number of shares worked outas per 2 above.
5. If the proportionate allotment to an applicant works out to anumber that is more than 100 but is not a multiple of 100, itwould be rounded off to the higher multiple of 100 if thatnumber is 50 or higher. If that number is lower than 50, itwould be rounded off to the lower multiple of 100. Allapplicants in such categories would be allotted shares arrivedat after such rounding off.
6. If the shares allotted on a proportionate basis to any categoryare more than the shares allotted to the applicants in thatcategory, the balance available shares for allotment shall befirst adjusted against any other category where the allocatedshares are not sufficient for proportionate allotment to thesuccessful applicants in that category. The balance shares,if any, remaining after such adjustment will be added to thecategory comprising of applicants applying for minimumnumber of shares.
7. A minimum 50% of the net offer of equity shares to the publicwill be made available for allotment in favour of thoseindividual applicants who have applied for not more than Rs.50,000 worth of shares. This percentage may be increasedin consultation with BSE depending on the extent of responseto the Issue from investors in this category. The balance ofthe net offer of equity shares to the public shall be madeavailable for allotment to investors, including BodiesCorporate, Institutions and individual applicants who applyfor more than Rs. 50,000 worth of shares. The unsubscribedportion of the net offer to any one of the above two categoriesshall be made available to the applicants in the other category,if so required and allotment made on a proportionate basisas per the relevant SEBI guidelines. The market lot forcategorisation of applications for allotment purposes wouldbe 100 shares.
The Stock Exchange, Mumbai reserves the right to modify theabove stated basis of allotment within the overall conformity tothe extant regulations in this regard.
INTEREST ON EXCESS APPLICATION MONEY
Payment of interest at the rate of 15% per annum on excessapplication will be made to the applicants for the delayed period,
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if any, where allotment of equity shares and issuance of RefundOrders takes place beyond 30 days from the date of closure ofthe Issue
DISPUTES
Any disputes arising out of this Issue will be subject to thejurisdiction of appropriate court(s)
DEMATERIALISATION
The equity shares of the Bank have been admitted fordematerialisation by National Securities Depository Limited(NSDL), vide a tripartite agreement dated 14.03.2000 signedbetween the Bank, NSDL and the Registrar to the Issue, CameoCorporate Services Limited to enable all shareholders of the Bankto have their shareholding in electronic form. The Bank has alsoentered into a tripartite agreement with Central DepositoryServices (India) Ltd. (CDSL) and the Registrar to the Issue fordematerialisation of its shares vide a tripartite agreement dated03.03.2000.
� An applicant has the option of seeking allotment of equityshares in electronic or in physical mode.
� Separate applications for electronic and physical shares bythe same applicant shall be considered as multipleapplications.
� The applicant seeking allotment of shares in the electronicform must necessarily fill in the details (including thebeneficiary account no. and Depository Participant’s ID no.)appearing under the heading ‘Request for Shares inElectronic Form’
� An applicant who wishes to apply for shares in the electronicform must have at least one beneficiary account with any ofthe Depository Participants (DPs) of NSDL or of CDSL,registered with SEBI, prior to making the application
� Shares allotted to an applicant in the electronic account willbe credited directly to the respective beneficiary accounts(with the DP)
� For subscription in electronic form, names in the shareapplication form should be identical to those appearing in theaccount details in the depository. In case of joint holders, thenames should necessarily be in the same sequence as theyappear in the account details in the depository
� Non-transferable allotment letters/refund orders will bedirectly sent to the applicant by the Registrar to this Issue.
� Incomplete/incorrect details given under the heading ‘Requestfor shares in electronic form’ in the application form will beassumed as an application for shareholding in physical form.
� The applicant is responsible for the correctness of theapplicant’s demographic details given in the application formvis-à-vis those with his/her DP.
� It may be noted that the electronic shares can be tradedonly on the Stock Exchanges having electronic connectivitywith NSDL and CDSL.
� One time cost of dematerialisation of shares would be borneby the Bank. The one time cost refers to the demat chargesfor the shares opted for in this issue by an investor inelectronic form. Subsequent charges for dematerialisation ofphysical shares held by the investors would have to be borneby the investor.
� In case of partial allotment, allotment will be done in dematoption for the shares sought in demat form and balance, ifany, will be allotted in physical form.
In case of allotment of shares in physical form, the Bank mayissue certificates of appropriate denomination or may issueconsolidated certificates. The Bank has obtained approval fromSEBI vide letter CFD/DIL/SNB/15889/2003 dated 21.08.2003 formaking allotment in physical certificates in the present issue.
INVESTORS MAY NOTE THAT, ALTHOUGH THE APPLICATIONMAY BE MADE FOR PHYSICAL/DEMAT SHARES AT THEOPTION OF INVESTORS, AS PER EXTANT SEBI GUIDELINES,TRADING IN THE SECURITIES SHALL BE INDEMATERIALISED FORM ONLY.
UNDERTAKING BY THE BANK
The Bank undertakes
a) to attend to the complaints received in respect of the Issueexpeditiously and satisfactorily;
b) to take all steps for completion of necessary formalities forlisting and commencement of trading at all stock exchangeswhere the securities are to be listed within 7 working daysof finalisation of Basis of Allotment;
c) to apply in advance for the listing of equities
d) that the funds required for dispatch of refund orders/allotmentletters/certificates by registered post shall be made availableto the Registrar to the Issue by the issuer Bank;
e) that the certificates of the securities/refund orders to the Non-Resident Indians shall be dispatched within specified time.
f) that no further issue of securities shall be made till thesecurities offered through this Prospectus are listed or tillthe application monies are refunded on account of non-listing,under subscription.
UTILISATION OF ISSUE PROCEEDS
The Board of Directors undertake that:
a. all monies received out of issue of shares to public shall betransferred to separate bank accounts other than the bankaccount referred to in sub-section (3) of section 73 of theCompanies Act, 1956;
b. details of all monies utilised out of the issue referred to insub-item (a) shall be disclosed under an appropriate separatehead in the balance sheet of the Bank indicating the purposefor which such monies had been utilised
c. details of all unutilised monies out of the issue of shares, ifany, referred to in sub-item (a) shall be disclosed under anappropriate separate head in the balance sheet of the Bankindicating the form in which such unutilised monies have beeninvested.
d. the utilization of monies received under reservations shallbe disclosed under an appropriate head in the balance sheetof the Bank indicating the purpose for which such monieshave been utilised
e. details of all unutilised monies out of funds received underreservations shall be disclosed under an appropriate separatehead in the balance sheet of the Bank indicating the form inwhich such unutilised monies have been invested.
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IV. TAX BENEFITS
Padmanabhan Prakash & Co., Chartered Accountants, one of theAuditors of the Bank, have advised the Bank vide their reportdated 14.07.2003 that following tax benefits would be available tothe Bank and its shareholders under the provisions of currentDirect Laws.
A. To the Bank – Under the Income Tax Act 1961.
❖ Interest income accruing to the Bank on Long-termfinance (i.e. repayable after minimum 5 years) extendedto enterprises engaged in the infrastructure business(including telecommunications services) and approvedby the Central Government will be exempt from tax,subject to conditions prescribed by section 10(23G) ofthe Income-tax Act, 1961 (referred to as “IT Act”hereafter under the heading ‘Tax Benefits’).
❖ Long term capital gains accruing to the Bank from saleof Debentures of enterprises engaged in theinfrastructure business (including telecommunicationsservices) will be exempt from tax, subject to conditionsprescribed by section 10(23G) of the IT Act.
❖ In accordance with and subject to the provisions of sec.35, the Bank would be entitled to deduction in respectof expenditure laid out or expended on ScientificResearch related to the business.
❖ By virtue of Sec. 10(34) of the IT Act, dividend incomereferred to in section 115-O of the Act is exempt fromtax in the hands of the Bank.
❖ By virtue of Sec. 10(35) of the IT Act, the followingincome shall be exempt in the hands of the Bank :
a) income received in respect of the units of a MutualFund specified under clause (23D); or
b) income received in respect of units from theAdministrator of the specified undertaking ; or
c) income received in respect of units from thespecified company:
Provided that this exemption does not apply to anyincome arising from transfer of units of the Administratorof the specified undertaking or of the specified companyor of a mutual fund, as the case may be. For thepurposes:
a) “Administrator” means the Administrator as referredto in clause (a) of section 2 of the Unit Trust ofIndia (Transfer of Undertaking and Repeal) Act,2002;
b) “Specified Company” means a company asreferred to in clause (h) of section 2 of the UnitTrust of India (Transfer of Undertaking and Repeal)Act, 2002;
❖ Under sec. 54EC of the IT Act, and subject to theconditions and to the extent specified therein, long termcapital gains (not covered u/s 10(36) of the Act) arisingon transfer of a capital asset of the Bank will be exemptfrom capital gains tax if the capital gains are investedwithin a period of 6 months after the date of such transferfor a period of 3 years in bonds issued by:
a) National Bank for Agriculture and RuralDevelopment established u/s 3 of the NationalBank for Agriculture and Rural Development Act,1981;
b) National Highway Authority of India constituted u/s3 of National Highway Authority of India Act 1988;
c) Rural Electrification Corporation Limited, thecompany formed and registered under theCompanies Act 1956;
d) National Housing Bank established u/s 3(1) of theNational Housing Bank Act 1987; and
e) Small Industries Development Bank of Indiaestablished u/s 3(1) of the Small IndustriesDevelopment Bank of India Act , 1989.
❖ Under section 112 of the IT Act and other relevantprovisions of the Act long-term capital gains (not coveredu/s 10(36) of the Act) arising on transfer of a long termcapital asset, shall be taxed @ 20% (plus applicablesurcharge) (after indexation as provided in secondproviso to sec.48); or at 10% (plus applicable surcharge)(without indexation) at the option of the Bank.
❖ Under sec. 36(1)(viia) of the IT Act, in respect of anyprovision for Bad and Doubtful Debts the Bank is entitled:
i) to a deduction up to 7.5% of the Gross Total Income(computed before making any deduction under thesaid clause and Chapter VIA) ; and
ii) to a deduction up to 10% of the aggregate averageadvances made by the rural branches ;
OR
i) instead of the claim referred to in item (i) and (ii)above, the Bank has the option to claim in theassessment of any of the five years commencingon or after 1
st April 2000, and ending before 1
st April
2005, a deduction in respect of any provision madefor assets classified as doubtful assets or lossassets in accordance with RBI guidelines but thededuction is restricted to an amount equal to 10%of the amount of such assets as appearing in thebooks of the Bank on the last day of the previousyear.
However, whichever option is claimed, the deduction u/s 36(1)(viia) shall not exceed the actual amount ofprovision for bad and doubtful debts made in the books.
Apart from the deduction available u/s 36(1)(viia) of theIT Act, the Bank is entitled to claim a deduction u/s36(1)(vii) of the IT Act, for the amount of bad debtswritten off in its books of accounts as irrecoverable andwhich debts represent money lent in the ordinary courseof business of banking. The deduction is limited to theamount of such debts or part thereof, which exceed thebalance in the provision for bad and doubtful debtsaccount made u/s 36(1)(viia). Provisions of section36(2)(v) is to be complied with.
B. To the Members of the Bank – Under the Income-taxAct, 1961.
1. Resident Members
❖ In terms of section 10(23D) of the IT Act, all MutualFunds set up by the Public Sector Banks or Public
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Financial Institutions or Mutual Funds registered underthe Securities and Exchange Board of India orauthorised by the Reserve Bank of India, subject to theconditions specified therein are eligible for exemptionfrom income tax on all their income, including incomefrom investment in the shares of the Bank.
❖ By virtue of Sec. 10(34) of the IT Act, dividend incomereferred to in section 115-O of the Act is exempt fromtax in the hands of the shareholders.
❖ By virtue of section 10(36) of the IT Act, any long termcapital gain arising to the shareholder from the transferof a long term capital asset being an eligible equity sharein a company purchased on or after 1
st day of March
2003 and before 1st day of March 2004 and held for a
period of 12 months or more would not be liable to taxin the hands of the shareholder.
For this purpose “eligible equity share” means –
a) an equity share in a company being a constituentof BSE–500 index of the Stock Exchange, Mumbaias on 01.03.2003 listed in a recognised stockexchange in India and the transaction of purchaseand sale of equity share are entered into on arecognised stock exchange in India ; or
b) an equity share in a company allotted through apublic issue on or after 01.03.2003 and listed in arecognised stock exchange in India before01.03.2004 and the transaction of sale of suchshares is entered into on a recognised stockexchange in India.
❖ Under sec. 54EC of the IT Act, and subject to theconditions and to the extent specified therein, long termcapital gains (not covered u/s 10(36) of the IT Act)arising on transfer of a capital asset of the Bank will beexempt from capital gains tax if the capital gains areinvested within a period of 6 months after the date ofsuch transfer for a period of 3 years in bonds issuedby:
a) National Bank for Agriculture and RuralDevelopment established u/s 3 of the NationalBank for Agriculture and Rural Development Act,1981;
b) National Highway Authority of India constituted u/s3 of National Highway Authority of India Act 1988;
c) Rural Electrification Corporation Limited, thecompany formed and registered under theCompanies Act, 1956;
d) National Housing Bank established u/s 3(1) of theNational Housing Bank Act 1987 ; and
e) Small Industries Development Bank of Indiaestablished u/s 3(1) of the Small IndustriesDevelopment Bank of India Act, 1989.
❖ U/s 54ED of the IT Act, and subject to the conditionsand to the extent specified therein long term capital gains(in cases not covered u/s 10(36) of the Act) on thetransfer of shares of the Bank, as and when it is listedwill be exempt from capital gains tax if the capital gainsare invested in shares of an Indian company formingpart of a eligible public issue within a period of 6 monthsafter the date of such transfer.
❖ U/s 54F of the IT Act, long term capital gains (in casesnot covered u/s 10(36) of the Act) arising to an individualor Hindu undivided family (HUF) on the transfer ofshares of the Bank will be exempt from capital gainstax subject to other conditions, if the sale proceeds fromsuch shares are used for the purchase of residentialhouse property within a period of one year before andtwo years after the date on which the transfer took placeor for construction of residential house property withina period of three years after the date of transfer.
❖ Under section 112 of the IT Act and other relevantprovisions of the Act long-term capital gains arising (notcovered u/s 10(36) of the Act) i.e. if shares are held fora period exceeding 12 months on transfer of shares inthe Bank as and when it is listed, shall be taxed @ 20%(plus applicable surcharge) (after indexation as providedin second proviso to sec. 48); or at 10% (plus applicablesurcharge) (without indexation) at the option of theshareholder.
2. Non-Resident Indians/Non-resident Members (Otherthan FIIs and Foreign venture capital investors)
❖ By virtue of Sec. 10(34) of the IT Act, dividend incomereferred to in section 115-O of the Act is exempt fromtax in the hands of the shareholders.
❖ By virtue of section 10(36) of the IT Act, any long termcapital gain arising to the shareholder from the transferof a long term capital asset being an eligible equity sharein a company purchased on or after 1
st day of March
2003 and before 1st day of March 2004 and held for a
period of 12 months or more would not be liable to taxin the hands of the shareholder.
For this purpose “eligible equity share” means –
a) an equity share in a company being a constituentof BSE – 500 index of the Stock Exchange, Mumbaias on 1.3.2003 listed in a recognised stockexchange in India and the transaction of purchaseand sale of equity share are entered into on arecognised stock exchange in India ; or
b) an equity share in a company allotted through apublic issue on or after 1.3.2003 and listed in arecognised stock exchange in India before 1.3.2004and the transaction of sale of such shares isentered into on a recognised stock exchange inIndia.
❖ A Non-Resident Indian (i.e., an Individual being a citizenof India or person of Indian origin) has an option to begoverned by the provisions of Chapter XII-A of the ITAct, viz., “Special Provisions relating to certain incomeof Non-Residents”.
� U/s 115E of the IT Act, where shares in the Bankare subscribed for in convertible Foreign exchangeby a NRI, capital gains arising to the Non-Residenton transfer of shares held for a period exceeding12 months shall (in cases not covered u/s 10(36)of the IT Act) be concessionally taxed at the flatrate of 10% (without indexation benefit andprotection against foreign exchange fluctuation) plusapplicable surcharge.
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� U/s 115F of the IT Act, long term capital gains (incases not covered u/s 10(36) of the IT Act) arisingto the Non-Resident Indian from the transfer ofshares of the Bank subscribed to in convertibleforeign exchange shall be exempt from Income tax,if the net consideration is reinvested in specifiedassets within six months of the date of transfer. Ifonly a part of the net consideration is so reinvested,the exemption shall be proportionately reduced. Theamount so exempted shall be chargeable to taxsubsequently, if the specified assets are transferredor converted within three years from the date oftheir acquisition.
� Under provisions of section 115G of the IT Act, itshall not be necessary for an NRI to furnish hisreturn of income if his only source of income isinvestment income or long term capital gains or botharising out of assets acquired, purchased orsubscribed in convertible foreign exchange and taxdeductible at source has been deducted therefrom.
� U/s 115-I of the IT Act, a NRI may elect not to begoverned by the provisions of Chapter XII-A forany assessment year by furnishing his Return ofIncome u/s 139 of the IT Act, declaring therein thatthe provisions of the Chapter shall not apply to himfor that assessment year and if he does so theprovisions of this Chapter shall not apply to himinstead the other provisions of the Act shall apply.
� Under the first proviso to sec. 48 of the IT Act,1961, in case of Non-Resident in computing thecapital gains arising from the transfer of shares ofthe Bank, acquired in convertible foreign exchange(as per exchange control regulations) protectionis provided from fluctuations in the value of theRupee in terms of foreign currency in which theoriginal investment is made. Cost indexation benefitswill not be available in such a case.
❖ Under sec. 54EC of the IT Act, and subject to theconditions and to the extent specified therein, long termcapital gains (not covered u/s 10(36) of the IT Act)arising on transfer of a capital asset of the Bank will beexempt from capital gains tax if the capital gains areinvested within a period of 6 months after the date ofsuch transfer for a period of 3 years in bonds issuedby:
a) National Bank for Agriculture and RuralDevelopment established u/s 3 of the NationalBank for Agriculture and Rural Development Act,1981;
b) National Highway Authority of India constituted u/s3 of National Highway Authority of India Act, 1988;
c) Rural Electrification Corporation Limited, thecompany formed and registered under theCompanies Act, 1956;
d) National Housing Bank established u/s 3(1) of theNational Housing Bank Act, 1987; and
e) Small Industries Development Bank of Indiaestablished u/s 3(1) of the Small IndustriesDevelopment Bank of India Act, 1989.
❖ U/s 54ED of the IT Act, and subject to the conditionsand to the extent specified therein long term capital gains
(in cases not covered u/s 10(36) of the Act) on thetransfer of shares of the Bank, as and when it is listedwill be exempt from capital gains tax if the capital gainsare invested in shares of an Indian company formingpart of a eligible public issue within a period of 6 monthsafter the date of such transfer.
❖ U/s 54F of the IT Act, long term capital gains (in casesnot covered u/s 10(36) of the Act) arising to an individualor Hindu undivided family (HUF) on the transfer ofshares of the Bank will be exempt from capital gainstax subject to other conditions, if the sale proceeds fromsuch shares are used for the purchase of residentialhouse property within a period of one year before andtwo years after the date on which the transfer took placeor for construction of residential house property withina period of three years after the date of transfer.
❖ Under section 112 of the IT Act and other relevantprovisions of the Act long-term capital gains arising (notcovered u/s 10(36) of the Act) arising on transfer ofshares of the Bank as and when it is listed i.e., if sharesare held for a period exceeding 12 months, shall betaxed @ 20% (plus applicable surcharge) (afterindexation as provided in second proviso to sec. 48);(indexation not available if investments made in foreigncurrency as per the first proviso of sec. 48 statedabove,) or at 10% (plus applicable surcharge) (withoutindexation) at the option of the shareholder.
3. To the Foreign Institutional Investors – Under theIncome Tax Act 1961.
❖ By virtue of Sec. 10(34) of the IT Act, dividend incomereferred to in section 115-O of the Act is exempt fromtax in the hands of the shareholders.
❖ By virtue of section 10(36) of the IT Act, any long termcapital gain arising to the shareholder from the transferof a long term capital asset being an eligible equity sharein a company purchased on or after 1
st day of March
2003 and before 1st day of March 2004 and held for a
period of 12 months or more would not be liable to taxin the hands of the shareholder.
For this purpose “eligible equity share” means –
a) An equity share in a company being a constituentof BSE–500 index of the Stock Exchange, Mumbaias on 01.03.2003 listed in a recognised stockexchange in India and the transaction of purchaseand sale of equity share are entered into on arecognised stock exchange in India; or
b) An equity share in a company allotted through apublic issue on or after 01.03.2003 and listed in arecognised stock exchange in India before 1.3.2004and the transaction of sale of such shares isentered into on a recognised stock exchange inIndia.
❖ The income by way of short term capital gains or longterm capital gains (not covered u/s 10(36) of the IT Act)realised by FIIs on sale of shares in the company wouldbe taxed at the following rates as per section 115AD ofthe Act.
21
� Short term capital gains – 30% (plus applicablesurcharge)
� Long term capital gains – 10% (plus applicablesurcharge)
(Shares held in the Bank would be considered as long-term capital asset provided they are held for a periodexceeding 12 months).
❖ Under sec. 54EC of the IT Act, and subject to theconditions and to the extent specified therein, long termcapital gains (not covered u/s 10(36) of the Act) arisingon transfer of a capital asset of the Bank will be exemptfrom capital gains tax if the capital gains are investedwithin a period of 6 months after the date of such transferfor a period of 3 years in bonds issued by:
a) National Bank for Agriculture and RuralDevelopment established u/s 3 of the NationalBank for Agriculture and Rural Development Act,1981;
b) National Highway Authority of India constituted u/s3 of National Highway Authority of India Act, 1988;
c) Rural Electrification Corporation Limited, thecompany formed and registered under theCompanies Act, 1956;
d) National Housing Bank established u/s 3(1) of theNational Housing Bank Act 1987; and
e) Small Industries Development Bank of Indiaestablished u/s 3(1) of The Small IndustriesDevelopment Bank of India Act, 1989.
❖ U/s 54ED of the IT Act, and subject to the conditionsand to the extent specified therein long term capital gains(in cases not covered u/s 10(36) of the IT Act) on thetransfer of shares of the Bank, as and when it is listedwill be exempt from capital gains tax if the capital gainsare invested in shares of an Indian company formingpart of a eligible public issue within a period of 6 monthsafter the date of such transfer.
B. Benefits to the Shareholder under the Wealth Tax Act,1957
❖ Shares of the Bank held by the shareholder will not betreated as an asset within the meaning of Section 2(ea)of the Wealth Tax 1957. Hence Wealth Tax Act will notbe applicable.
Notes:
� All the above benefits are as per current tax laws asamended by the Finance Act 2003, and will be available onlyto the sole/first named holder in case the shares are held byjoint holders.
� In respect of Non-Residents, the tax rates and theconsequent taxation mentioned above shall be further subjectto any benefits available under the Double Taxation AvoidanceAgreements, if any, between India and the country in whichthe non-resident has fiscal domicile.
� In view of the individual nature of tax consequences, eachinvestor is advised to consult his/her own tax advisor withrespect to specific tax consequences of his /her participationin the scheme.
22
V. PARTICULARS OF THE ISSUE
OBJECTS OF THE ISSUE
The present issue of equity shares is being made:
1. To augment the capital base of the Bank to meet its futurecapital adequacy requirements
2. To augment the long-term resources of the Bank
3. To list the new issue of shares of the Bank on BSE, MSEand NSE.
4. To meet the expenses of the Issue
The proceeds of this Issue after meeting all expenses of the Issuewill be used by the Bank for its regular business activities.
Capital adequacy position of the Bank
The Capital Adequacy Ratio (“CAR”) of the Bank as on 31.03.2003was 11.30%, as against the RBI stipulation of 9.0%. Details ofcapital vis-à-vis risk weighted assets are as under -
(Rs. in crores)
Particulars (As on March 31) 2001 2002 2003
Capital FundsTier I Capital
Paid up Equity Capital 444.80 444.80 444.80Less: investment in subsidiary 0.00 0.00 0.00Reserves & Surplus 296.64 464.91 579.09
Total Tier I Capital 741.44 909.71 1023.89Tier II Capital
Revaluation Reserve 76.83 75.56 71.58General Provisions 122.23 139.61 151.89Subordinated Debt 347.74 416.19 479.64Investment Fluctuation Reserve 18.45 53.95 256.14
Total Tier II Capital 565.25 685.31 959.25Total Capital fund 1306.69 1595.02 1983.14Risk Weighted Assets 12753.80 14746.84 17553.56Capital Adequacy Ratio (%) 10.24 10.82 11.30
Summary of Capital adequacy position of the Bank for thelast 5 years
(Rs. in crores)
As on March 31’ 1999 2000 2001 2002 2003
Total Tier I Capital 523.72 558.51 741.44 909.71 1023.89Total Tier II Capital 437.52 432.07 565.25 685.31 959.25Total Capital fund 961.24 990.58 1306.69 1595.02 1983.14Risk Weighted Assets 9472.4410831.4612753.8014746.8417553.56Capital AdequacyRatio (%) 10.15 9.15 10.24 10.82 11.30
Requirement of enhancement of Capital
The Bank expects to post a growth in business in the years tocome. As a result, Risk weighted assets of the Bank are alsoexpected to increase over the years. Increase in Tier I capitalthrough retained earnings alone may not be sufficient to enablethe Bank to maintain an adequate capital adequacy ratio. In viewof the likely expansion of loan assets, the Bank proposes toaugment its net worth in order to sustain a healthy CAR. Theproceeds of the Issue would be utilised for the regular businessactivities of the Bank, in line with the estimated growth in RiskWeighted Assets. The issue expenses would be met out of theproceeds.
The Bank came out with a public issue in September 2000, detailsof which are given elsewhere in the Prospectus. The Bank hasalso raised Tier II Capital by way of Private Placement ofunsecured, redeemable bonds in the nature of Promissory Notesto augment Capital adequacy as under:
Issue Date of Allotment Size Tenor Ratings Coupon Redemption(Rs in (In Months) (%) Date
crores)
1 18.01.1999 150 60 Unrated 13.75 17.01.2004
2 08.03.2001 125 67 AA 11.45 07.10.2006
3 31.12.2001 150 67 AA 09.40 30.07.2007
4 31.10.2002 175 78 AA 07.45 30.04.2009
23
VI. BANK AND MANAGEMENT
BRIEF HISTORY AND BACKGROUND
The Bank was founded on 10.02.1937, simultaneously setting updomestic and overseas branches on the same day: a befittingdescription of the name of the Bank. Shri. M.Ct.M. ChidambaramChettiar, a pioneer in industry, banking and insurance was thefounder of the Bank.
At the time of India’s independence, the Bank had 38 branches inIndia and 7 branches abroad. Deposits amounted to Rs.6.64crores and Advances Rs.3.23 crores. During the 1960s IndianBanking witnessed strong wave of mergers of weak private sectorbanks with stronger institutions. IOB itself took five banks into itsfold, which helped the Bank widen its reach.
The Bank has been attending to the needs of small industry andagriculture since long. Personal loans were given by the Bankright in the early 1950s when the concept was new to the bankingindustry. Customer service was given top priority by the Bankever since inception. The Bank also gave importance tomechanisation for improving customer service as early as in the1960s.
For 32 years, the Bank grew globally and by the end of 1969 ithad Rs.146 crores of business transacted through 213 branches.The Bank was nationalised under the Banking Companies(Acquisition and Transfer of Undertaking) Act, 1970. During theperiod of nationalisation, the Bank made rapid strides in all themajor business parameters. In the 1990s, consolidation has beenreceiving greater attention. Since 1970, the volume of businesshas grown by 245 times, handled by over 1,400 branches. TheBank is one among the first few banks that were accordedautonomous status in 1997.
The Bank has sponsored three regional rural banks, viz. PandyanGrama Bank in Tamil Nadu, Puri Gramya Bank and DhenkanalGramya Bank in Orissa. It also has a wholly owned subsidiaryby the name of IOB Properties Pte., Singapore. As on 31.03.2003,the Bank had 1,427 branches and 243 extension counters in Indiaand 6 overseas branches.
The banking scenario has undergone a major change in the lastfew years. With the traditional business of banks coming underpressure, retail and other fee-based revenues are in focus. Acustomer-oriented workforce, proper networking and use oftechnology are essential for operations. In view of this, the Bankhas set up a Computer Policy & Planning Department (CPPD) atthe central office. Besides developing in-house software for routinebanking operations, other customer support products such asAny Branch Banking (ABB), Home Utility Banking Service (HUBS)and Speedy Transfer and Realisation Services (STARS) have beendeveloped. The CPPD of the Bank has also been rectified underthe upgraded ISO 9001:2000 standards.
The business indicators are given below:
(Rs. in crores)
Year ended March 31 1999 2000 2001 2002 2003
Deposits (Global) 21,914.32 24,317.75 27,414.16 31,808.48 36,698.59
Advances (Gross) 10,820.42 12,310.62 13,809.33 16,023.37 18,431.27
Branches(Excl. extension counters) 1,396 1,419 1,429 1,441 1,427
With a view to improve profitability, the Bank had reduced thenumber of branches, by either merging or closing some of theloss making branches.
Market Share in the Domestic Banking Industry
Distribution of deposits and advances among the variouscategories of banks in India as on the last reporting Friday intheyear ended 31.03.2002 is outlined below:
Deposits Advances(in %) (in %)
Public Sector Banks 75.1 72.3Foreign Banks 5.0 7.3Regional Rural Banks 3.9 2.9Other Scheduled Commercial Banks 16.0 17.5Total 100.0 100.0
(Source: Deposits and Advance: BSR 2002, published by RBI)
The break-up of Income for the year ended 31.03.2002 is asfollows:
Income (in %)
Public Sector Banks 77.63Old Private Sector Banks 7.25New Private Sector Banks 6.54Foreign Banks 8.58Total 100.0
(Source: RBI Report on Trend and Progress of Banking in India)
The Bank’s share of deposits, advances and income for FY2002is given below:
Deposits Advances Income
As a % of all Banks(March 2002) 2.69 2.43 2.36
Present Status
As on 31.03.2003, the Bank had 1,427 branches in India,comprising 558 rural, 346 semi-urban, 301 urban and 222metropolitan/port town centres apart from 6 overseas branches.The branches include 52 specialised branches (i.e.1 Commercialand Institutional Credit Branch, 1 Treasury Branch, 1 ForeignExchange Branch, 1 Hi Tech Agro Branch, 1 Industrial FinanceBranch, 1 Large Advance Branch, 2 SSI Branches, 1 AssetRecovery Branch, 11 Clearing Offices, 18 Currency Chests, and14 Quick Collection Branches). The Bank has 243 ExtensionCounters.
The Bank has been entrusted with State Level Bankers’ Committee(SLBC) convenorship in Tamilnadu. The Bank is continuing itsendeavour for economic upliftment of the state through its variousdevelopmental programmes. The Bank has lead responsibility in
24
12 districts in Tamil Nadu and one district in Kerala. As convenorof SLBC in Tamilnadu, the Bank had convened three meetings ofthe SLBC committee and one State Level meeting. The Bank alsoorganised a Special Bankers’ Review meeting in Tindivanam inMarch 2003 to review performance of Banks in Tamilnadu underPriority sector credit in general and the performance undergovernment schemes in particular.
Branch computerisation
The Bank reached a milestone during the year with thecomputerisation in all the 1,427 branches and 243 ExtensionCounters. As at the end of March 2003, 544 branches were underTotal Branch Automation (TBA) and 883 branches had beenpartially computerised.
The number of installed ATMs was doubled from 50 to 100 duringthe year. Of these, 15 ATMs were set up in off-site locations forthe convenience of customers. The mobile banking facility wasextended to the metropolitan centres of New Delhi, Mumbai,Chennai and Kolkata, using SMS technology. E-See Banking(Internet Banking) was implemented in 190 branches inmetropolitan centres. The Any Branch Banking (ABB) network hasbeen expanded to 24 more centres. The facility is now availablein 42 centres covering 293 branches.
The TBA software for fully computerised branches has beenimproved to include multi-currency option. This will pave the wayfor introducing the in-house software in the overseas branches.The Bank-level server for Structured Financial Messaging System(SFMS) has been installed in Hyderabad, as required by theReserve Bank of India, and functionality has been tested fromfive branches in Chennai and Hyderabad. The QualityManagement System of the Bank’s Computer Policy & PlanningDepartment has been re-certified under the upgraded ISO 9001:2000 standards. Added to this, the prestigious IDRBT award for“Innovative Banking Applications on INFINET” was also receivedby the Bank. The proof of this technological leap may be the 100Insta cash ATM outlets we have across the country and ABBfacility extended to 304 branches across 42 centres. TheInformation System Security Policy of the Bank has beenformulated with M/s CMC Ltd. as consultants. M/s PricewaterhouseCoopers (P) Ltd have conducted System Security Audit of 2 fullycomputerised branches.
VII. OVERVIEW OF THE BANKING SECTOR
The formal banking system in India comprises the Reserve Bankof India, commercial banks, regional rural banks and the co-operative banks. In the recent past, private non-banking financecompanies also have been active in the financial system, andare being regulated by the RBI.
Scheduled Commercial Banks (SCBs)
The scheduled commercial banks (SCBs) comprise:
Public Sector Banks (PSBs): The banking sector in India has beencharacterized by the predominance of PSBs. The PSBs had46,118 branches (SBI & Associates: 13,434; nationalised banks:32,684) as on 30.06.2002. The aggregate assets of all PSBs stoodat Rs 11,55,736.77 crores at end FY02 accounting for 75.27% ofassets of all SCBs in India. The PSBs’ large network of branchesenables them to fund themselves out of low-cost deposits.
Private Sector Banks: In July 1993, as part of the banking sectorreform process and as a measure to induce competition in thebanking sector, the RBI permitted entry by the private sector intothe banking system. This resulted in the introduction of 9 privatesector banks. These banks are collectively known as the ‘new’private sector banks, and operated through 803 branches at end
FY01. There are nine ‘new’ private sector banks at present. Atend FY02, the total assets of private sector banks aggregatedRs. 2,67,679 crore and accounted for 17.43% of the total assetsof all SCBs. Although the share of private sector banks in totalassets has increased from 12.61% at end FY01, new privatesector banks have accounted for most of the gain. The new privatesector banks’ share of assets of all private sector banks increasedfrom 27.5% at end-FY97 (2.4% of assets of SCBs) to 65.17% atend-FY02 (11.36% of assets of SCBs). The share of old privatesector banks (in total assets of SCBs) has decreased marginally(from 6.4% at end FY97 to 6.07% at end FY02), as well as theirshare in total assets of private sector banks has declined from72.5% at end FY97 to 34.82% at end FY02.
Foreign Banks: Presently, there are 40 foreign banks operating inIndia with 203 branches. While 4 banks have 10 or more branches,18 banks were operating with only one branch each. Some foreignbanks have also set up representative offices in India. Thus, ason 30.06.2002, 63 banks had their presence in India, including 23banks from 12 countries, which have only their representativeoffices here.
At end-FY02, the total assets of foreign banks aggregated Rs.1,12,096 crore and accounted for 7.3% of the total assets of allSCBs. The primary activity of most foreign banks in India hasbeen in the corporate segment. However, in recent years, someof the larger foreign banks have started making consumerfinancing a larger part of their portfolios, based on the growthopportunities in this area in India. These banks also offer productssuch as automobile finance, home loans, credit cards andhousehold consumer finance.
The salient features in the evolution of Indian banking are asfollows:
The number of banks (including regional rural banks (RRBs) hasincreased from 89 in 1969 to 293 in 2002. The population perbranch has declined significantly, from 75,000 in 1950 to 16,000in 2002. With the nationalization of banks in 1969, the number ofbank branches (including Regional Rural Banks) increased from8,262 in 1969 to 66,186 in 2002. Most of the expansion has beenin the rural and semi-urban areas.
Since 1950, the credit-deposit ratio of SCBs has declined to reach62.3% as on 31.03.2002, with a corresponding increase in theinvestment-deposit ratio. The change has been largely due to theGovernment regulations regarding the statutory liquidity ratio(SLR), and the preference for Government securities (as a resultof the increase in the Government borrowing programme and thelow risk-high return nature of the instrument).
Priority sector lending increased from Rs 14,834 crore in 1984 toRs.2, 10,308 crore in 2002. (Credit to the agricultural sector andsmall-scale sector was one of the key objectives of thenationalization of banks.)
Performance of Banking Industry
On the funding side, during 2002-03 (up to 4.10.2002), aggregatedeposits recorded a growth of 12.6% (Rs.1, 38,806 crore) ascompared with 9.4% (Rs.90,554 crore) in the correspondingperiod of the previous year. During FY02, the aggregate depositsof SCBs increased to Rs. 1,12,340 crore as on 29.03.2002reflecting an increase of 13.60% (year on year), as comparedwith 16.20% during FY01. Deposit mobilization was higher duringFY01 because of Rs. 25,700 crore raised through India MillenniumDeposits (IMD).
On the assets side, bank credit to the commercial sectorincreased at a slower rate than the growth in bank deposits. Bankcredit increased to Rs. 6,04,500 crore as on 29.03.2002, reflecting
25
an increase of 14.20% (yoy), compared with 16.60% (yoy) duringFY01. The slower growth in bank credit was primarily because ofthe industrial slowdown. Non-food credit increased to Rs. 4,89,500crore as on 29.03.2002, showing an increase of 12.40% (yoy).By contrast, food credit of SCBs increased 37.10% (yoy) to Rs.54,500 crore as on 29.03.2002, in response to the increase inthe quantum as well as the price of food grains procured. Theinvestments made by SCBs in government and approvedsecurities increased 19.50% (yoy) to Rs. 4,38,900 crore as on29.03.2002, compared with a growth of 17.80% (yoy) on30.03.2001. As of end FY01, banks’ holding of SLR securitiesamounted to Rs. 1,06,000 crore over and above the SLRrequirement and was substantially higher than the net annualborrowings of the Central Government.
Following the announcement of policy measures during FY02,there has been a decline in SCBs’ lending and deposit rates. ThePLRs of major PSBs, which varied between 11% to 13% p.a. atend of FY01, declined to a range of 10% to 12% p.a. at end ofFY02. Some PSBs reduced their PLRs by 25 to 100 basis pointsat the end of October 2002. The implicit yield on 91-day T-billsdeclined from 8.50% p.a. as on 23.03. 2001 to 7.04% p.a. as on4.07.2001 and further to 6.05% p.a. on 20.03.2002. Reflecting thecomfortable liquidity condition, deposit rates of PSBs, which wereranging from 4.00% to 10.50% in March 2001, softened to 4.25%to 8.25% by October 2002 in all maturities except for a marginalincrease of 25 basis points at the short end of 15-day deposits.Long-term domestic deposit rates of PSBs declined to 8.0% to8.75% by March 2002 from 9.5% to 10.50% in March 2001. Duringthe current financial year (up to October 2002), deposit rates ofPSBs for maturity periods up to one year have remained in therange of 4.25% to 6.75%. For longer maturities, as compared toMarch 2002, the rates for deposits of maturity over 1 year to 3years declined by 75 basis points, while those for over 3 yearmaturity period declined by 50 to 100 basis points.
Recent Trends in Banking Industry
In recent years, the banking industry has been undergoing rapidchanges, reflecting number of underlying developments. The mostsignificant has been enactment of the NPA Act to tackle highincidence on Non-Performing Assets. The Securitisation andReconstruction of Financial Assets and Enforcement of SecurityInterest (SARFAESI) (Bill) 2002 was passed by Lok Sabha inNovember 2002. It seeks to deal with Securitisation of assets,setting up of asset reconstruction company (ARCs), andenforcement of security interest. After the ordinance onSecuritisation, Banks have been issuing notice to their defaultersfor recovering money. Banks have issued more than 1100 notices,amounting to more than Rs. 10,000 crores (around 9-10% of theestimated gross NPAs of the scheduled commercial banks and
developmental financial institutions. Under the SARFAESI Act,1879 notices have been issued by the Bank till 30.06.2003involving an amount of Rs 509.87 crores.
The first asset reconstruction company called AssetReconstruction Company of India Limited (ARCIL) has beenincorporated and the major shareholders are ICICI Bank,Industrial Development Bank of India, State Bank of India eachholding 24.5% in ARCIL. HDFC Bank owns 10% and remainingshareholding is held by IDBI Bank and UTI Bank.
The retail loan market has grown at a CAGR of 34% over thelast four years to reach about Rs. 45,000 crores. Housing andCar Finance segment account for nearly 80% of the retail financesegment.
Absorption of technology and upgradation of technologicalinfrastructure, which have accelerated and broadeneddissemination of financial information while lowering the costs ofmany financial activities. This has also led to transparency ininformation to the public on deposits and advances and interestrate structures.
The fiscal year 2002-03 for the Commercial Banks was by andlarge characterised by soft interest rates regime with flexibleinterest rate structures. There has also been a good inflow offoreign exchange in the country, with taking the forex reserves ofthe country to all time high. There has been a comfortableresources growth with higher credit growth. Treasury operationsof Banks have been offering handsome opportunities of gains.
The stance of the Monetary Policy in recent years has been tomaintain adequate liquidity in the market with a preference for softinterest rates. With a view to having a vibrant and resilientcompetitive financial sector for sustenance of the reform processin the real sector of the economy, the focus has been on thestructural and regulatory measures to strengthen the financialsystem. These measures have been guided by the objectives ofincreasing operational efficacy of the Monetary policy, redefiningthe regulatory goal of Reserve Bank of India, strengtheningprudential norms.
These developments have manifold consequences for theinstitutional and systemic structure of the financial sector ingeneral and banking in particular. The business profile of financialinstitutions is also undergoing change. Mergers and take-oversof smaller institutions have led to the emergence of transnationalconglomerates, offering services ranging from traditionalcommercial banking to investment banking and insurance.
(Source: Published Banking Sector Reports, RBI Statistical data andother publicly available sources)
Structure of Indian Banking Industry
26
VIII. BANK AND MANAGEMENT
Main Object of The Bank
The main object and business of the Bank, as laid down in theBank Nationalisation Act is as under:
The main object of the Banking Companies (Acquisition andTransfer of Undertakings) Act, 1970 under which the undertakingof the Bank was taken over by the Central Government is asunder: “An Act to provide for the acquisition and transfer of theundertakings of certain Banking Companies, having regard to theirsize, resources, coverage and organisation, in order to controlthe heights of the economy and to meet progressively, and servebetter, the needs of the development of the economy, in conformitywith national policy and objectives and for matters connectedtherewith or incidental thereto”.
The Main Object of the Bank enables it to undertake the activitiesfor which the funds are being raised and the activities, which ithas been carrying on till date.
Business of the Bank
The Bank shall carry on and transact the business of Banking asdefined in Clause (b) of Section 5 of the Banking Regulation Act,1949, and may engage in one or more of the other forms ofbusiness specified in Sub-Section (1) of Section 6 of that Act.
Clause (b) of Section 5 of the Banking Regulation Act, 1949defines Banking as “the accepting for the purpose of lending orinvestment, of deposits of money from the public, repayable ondemand or otherwise, and withdrawable by cheque, draft, orderor otherwise.”
The Bank is also involved in Marketing, Sale and Distribution ofInsurance products of Life Insurance Corporation of India (LIC)and National Insurance Company Ltd (NICL) as permitted by theGOI and Licensed by IRDA.
Other Business that the Bank may undertake Section 3 (7)
Sections 3 (7) of Chapter II of the Banking Companies (Acquisition)Act 1970 provides for the Bank to act as Agent of Reserve Bank(Section 3 (7))
1. The Bank shall, if so required by the Reserve Bank of India,act as agent of the Reserve Bank at all places in India whereit has a branch for:
� Paying, receiving, collecting and remitting money, bullionand securities on behalf of the Government of India
� Undertaking and transacting any other business whichthe Reserve Bank may from time to time entrust to it
2. The terms and conditions on which any such agencybusiness shall be carried on by the corresponding new Bankon behalf of the Reserve Bank shall be such as may beagreed upon
3. If no agreement can be reached on any matter referred to inClause (2) above, or if a dispute arises between the
corresponding new Bank and the Reserve Bank as to theinterpretation of any agreement between them, the mattershall be referred to the Central Government and the decisionof the Central Government, thereon, shall be final.
4. The corresponding new Bank may transact any business orperform any function entrusted to it under Clause (1) by itselfor through any agent approved by the Reserve Bank.
Business and Activities of the Bank
Corporate Vision: To emerge as the most competitive bank inthe industry
Corporate Mission: To become the most competitive bank in theindustry in the country during the next two years. For beingcompetitive, the Bank would need to be responsive to thechallenges of the market force. In this process, it would alsoemerge as the most profitable bank by cutting the cost andincreasing the revenue.
Corporate Focus: The Corporate focus of the Bank ismaximisation of shareholders wealth, corporate excellence throughsound corporate governance and achievement of Rs. 3 lacs profitper employee.
Competitive Strengths: Many new generation banks, both privateand foreign, have entered the banking industry and offer newproducts at competitive rates. In this scenario, the Bank hasdefined its competitive advantage as:
� Vast branch network spread all over India and in certainoverseas trading business centres to enable resourcesmobilisation at Low cost
� Advancement in technological up gradation
� Well trained personnel in key fields to handle specialisedproducts
Corporate Strategy: In the years to come the profit margins wouldbe under increasing pressure. To overcome such a trend theBank’s corporate strategy is:
� To build business volume through penetrating retail segmentswith innovative products
� To use technology for better customer comfor t andsatisfaction coupled with reduction in operating expenses
� To provide most efficient and speedy customer service
� Increased emphasis for fee and commission based products
Branch Network of the Bank
The Bank has 38 Regional Offices, controlling 1,427 branchesand 243 Extension Counters as on 31.03.2003, including 52specialised branches. Apart from this the Bank has 6 overseasBranches also.
Distribution of Branch network
The population group wise break up of branches In India is asfollows:
27
Population Group No. % share
to Total
Rural 558 39.10Semi-Urban 346 24.25Urban 301 21.09Metropolitan 222 15.56
Total 1,427 100.00
Geographical Distribution of Branches is as under:
State/Union Territory No. % share of Total
Andhra Pradesh 113 7.92Assam 15 1.05Bihar 10 0.70Chattisgarh 1 0.07Delhi 31 2.17Goa 11 0.77Gujarat 52 3.64Haryana 16 1.12Himachal Pradesh 4 0.28Jammu& Kashmir 2 0.14Jharkand 13 0.91Karnataka 60 4.20Kerala 114 7.99Madhya Pradesh 9 0.63Maharashtra 62 4.34Manipur 1 0.07Meghalaya 1 0.07Orissa 77 5.40Punjab 46 3.22Rajasthan 12 0.84Tamilnadu 614 43.03Tripura 1 0.07Uttar Pradesh 67 4.70Uttranchal 14 0.98West Bengal 69 4.84UNION TERRITORIESAndaman & Nicobar 1 0.07Chandigarh 2 0.14Pondicherry 9 0.63
Total 1427 100.00
Specialised Branches
For customer satisfaction and to increase the business, the Bankhas given thrust to single window service by opening thespecialised branches. The Bank has 52 specialised branches as
on 31.03.2003 that are engaged in financing its corporateborrowers, small-scale industries, specialised trading etc. Thedetails are as given below:
Specialised Branches No. of branches
Asset recovery branch 1Central Clearing offices 11Commercial & Institutional credit 1Currency chests 18Hi Tech agro 1Industrial Finance 1International Business 1Large advances 1Quick collection services 14SSI branch 2Treasury 1Total 52
Products and Services of the Bank
Other than the offering traditional banking products such ascorporate loans, the Bank has made its presence felt byintroducing certain new products and value added services whilecontinuing to popularise the existing products.
Brief description of the Bank’s retail schemes is as under:
Sr. Scheme Details
1 Subha Gruha/Home Home loans with easyLoan to NRI instalments and cheaper
interest rates2 Home improvement Loan for improvement/repairs/
schemes renovation of the home3 Home décor scheme Loans to meet the requirements
of furnishing the home4 Liquirent Loan against rent receivables5 Pushpaka Loan for buying new/used cars
at attractive rates6 Vidyajothi Loan to students to continue
higher studies in India andabroad.
7 Sahayika To meet the expenditure ofsalaried class for socialobligation/wedding
8 Vardhan Deposit scheme for seniorcitizens
9 Floating Interest Rate Deposits are accepted for a Min.Deposit amount of Rs 15 Lakhs for a
period of 5 years. Interest islinked to anchor rate which isthe 5 year fixed rate of interest.
10 IOB Akshay Loan against LIC/Private sectorinsurance companies asapproved by IRDA.
11 Chiranjeevi Bima Yojana Value addition to the customerscovering their Life at a Lowpremium.
12. Sanjeevini scheme Loan to Medical Practitioners forsetting up the hospitals.
28
IOB STARS (SPEEDY TRANSFER AND REALISATIONSERVICES)
The scheme IOB STARS was launched on 09.12.1998 with twinobjectives extending efficient customer services by levying servicecharges and increase Non Interest Income of the Bank. Thereare 14 star centers in operation now. The scheme is now extendedto existing valuable clients whose turnover of outstation collectionsin the previous financial year was Rs. 2 crores in the case ofmetro centres and Rs 1 crore in the case of other centres. Theturnover under STARS grew by 32% in 2002-2003. The Bank alsotook up Cash Management Services in respect of majorcorporates and established correspondent banking relationshipsfor mutual benefits.
Forex Collection Services: Foreign exchange turnover of theBank amounted to Rs.18,494 Crores in 2002-2003 as comparedto Rs 15,244 crores during 2001-2002, a growth of 21%. Highergrowth has been achieved despite appreciation of the rupee, globalrecession, volatile gold prices in the international market.
Agri Business Consultancy: Agri Business ConsultancyServices (ABCS) has been making steady progress in offeringconsultancy services in hi-tech agricultural projects with a specialthrust n projects for waste land development, dry land horticulture,herbal, medicinal plants cultivation, food processing etc., Theobjective of the Agri Business Consultancy Services is to providequality consulting to entrepreneurs who venture into hi-techagriculture, tissue culture, horticultural development schemes,herbal and medicinal plant cultivation, waste land development etc.The Bank has so for handled 62 projects involving a total outlayof Rs. 115.70 crores.
Credit Cards Business: Credit card cash credit facility atbranches is to be made available subject to certain norms toenable cardholders to make deferred payments of their card duesover a period of 6 months.
Other Products/Services
Composite Corporate Agency: The Bank has tied up with LICand National Insurance for Marketing, sale and distribution of Lifeand Non Life products respectively. RBI/IRDA have permitted/licensed the Bank to act as a Composite Corporate Agent.
The Bank has also launched a new service called IOB ChiranjeeviBima Yojana to provide group insurance facility for all individualdeposit account holders at a very low rate in tie up with LIC.
Details of Sources of Funds Deposits (Global)(Rs. in crores)
As on March 31 1999 2000 2001 2002 2003
Deposits (Global) 21914.32 24317.75 27414.16 31808.48 36698.59Annual Growth – Amount 2585.82 2403.43 3096.41 4394.32 4890.11
– Percent 13.38 10.97 12.73 16.03 15.37
Cost of Deposits (Global) (%) 8.16 7.84 7.52 7.25 6.50
Total global deposits of the Bank grew by 15.37% to Rs. 36,698.59crores as on 31.03.2003 from Rs. 31,808.48 as on 31.03.2002.The share of low-cost deposits (Current Account and Savingsbank accounts) in total deposits was 32.15% as on 31.03.2003.Improved customer services have resulted in increase in theshare of low cost deposits in the overall deposit mix. Mobilisationof low cost resources remained at the focus of attention of theBank. Cost of Deposits declined to 6.50% during 2002-03 from7.25% during 2001-02.
The category-wise break-up of total Global deposits during last 5years is presented below:
(Rs. in crores)
Year ended March 31 1999 2000 2001 2002 2003
Current Deposits 2,830.45 2,607.69 2,720.32 2,658.60 3,636.38
Savings Bank Deposits 4,331.23 5,211.71 5,931.04 6,878.37 8,162.75
Term Deposits 14,752.64 16,498.35 18,762.80 22,271.51 24,899.46
Total 21,914.32 24,317.75 27,414.16 31,808.48 36,698.59
The category-wise break-up of average cost of deposits duringlast 5 years is presented below:
`(in %)
Year ended March 31 1999 2000 2001 2002 2003
Current Deposits 2.51 1.25 0.86 0.70 0.76
Savings Bank Deposits 3.69 3.79 3.35 3.70 3.57
Term Deposits 10.39 9.82 9.60 9.08 8.14
Total 8.16 7.84 7.52 7.25 6.50
Maturity Profile of Term deposits(Global) in the last three years isas under:
(Rs. in crores)
Year ended 31st March 2001 % 2002 % 2003 %
Upto 1 year 4,225.22 22.52 5,500.54 24.70 4,536.61 18.22
1 Year to 3Years 12,730.6 67.85 15706 70.52 2,542.43 10.21
3 years to 5 Years 366.61 1.95 612.46 2.75 246.04 0.99
over 5 years 1,440.40 7.68 452.56 2.03 17,574.4 70.58
Total term depostis 18,762.80 100.00 22,271.5 100.00 24,899.5 100.00
Distribution of Deposits
Deposits from Rural & Semi-Urban populace
The share of rural & semi-urban branches of IOB is 28.89%. TheBank is focusing in rural and semi-urban areas for retail finance.The population group-wise break-up of aggregate Domesticdeposits for the last five years is as given in the table below:
The distribution of deposits in terms of types of centres is asfollows:
Year Ended 1999 2000 2001 2002 2003
(Rs crs.) % (Rs crs.) % (Rs crs.) % (Rs crs.) % (Rs crs.) %
Rural 2249 10.66 2651 11.22 3044 11.40 3427 11.07 3850 10.77Semi Urban 3766 17.86 4334 18.35 4916 18.42 5684 18.37 6475 18.12Urban 5038 23.89 5921 25.07 6943 26.01 8003 25.86 9109 25.51Metro 9863 47.59 10427 45.36 11433 44.17 13452 44.70 15981 45.60Total 20916 100.00 23333 100.00 26336 100.00 30566 100.00 35415 100.00
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The figures given above represent Domestic Deposits and thesame is inclusive of NRI deposits .The figures relating to overseasbranches are not included in the above category.
Non-Resident deposits
The total NRI deposits of the Bank as on 31.03.2003 were Rs.5,786.94 crores. The details of NRI deposits during the last 3 yearsare as under:
(Rs. in crore)
As on March 31 2001 2002 2003
FCNR (B) 1,348.59 1,436.40 1,395.50NRE 1,620.79 1,907.32 3,398.67NRONR 2,126.53 2,213.27 986.18OTHERS 7.67 6.11 6.59Total 5,103.58 5,563.10 5,786.94
Region-wise distribution of deposits (In India)
The region-wise distribution of deposits (In India) (as per RBI’sregion classification) in figures as well as a percentage ofaggregate Domestic deposits of the Bank is given below:
(Rs in crores)
Year endedMarch 31 1999 2000 2001 2002 2003
Northern 3668 4250 5017 6197 6779
North eastern 199 228 260 277 299
Eastern 2133 2472 2916 3561 3973
Central 1549 1898 2122 2458 2679
Western 4416 4170 4249 4728 5852
Southern 8951 10315 11772 13345 15833
Total 20916 23333 26336 30566 35415
(in %)
Region 1999 2000 2001 2002 2003
Northern 17.39 18.00 18.79 20.03 18.99North-Eastern 0.96 0.97 0.98 0.89 0.83Eastern 10.11 10.47 10.92 11.50 11.12Central 7.34 8.04 7.95 7.96 7.50Western 20.93 17.65 15.92 15.27 16.38Southern 43.27 44.87 45.44 40.35 45.18
Total 100.00 100.00 100.00 100.00 100.00
Borrowings
As on 31.03.2003, the borrowings of the Bank are as follows:
(Rs. in crores)
Particulars of Borrowings from Amount
Institutions & Agencies 314.07Unsecured Redeemable Bonds 600.00Borrowings Outside India 41.90
The unsecured redeemable bonds (Tier II bonds) of Rs 600crores are included under Other Liabilities and Provisions in the
Balance Sheet as per the guidelines of Reserve Bank of India.The rates of interest in respect of these Bonds vary between7.45% to 13.75%. The details are as under:
Tier II Series I for Rs.150 crores @ 13.75%
Tier II Series II for Rs.125 crores @ 11.45%
Tier II Series III for Rs.150 crores @ 9.40%
Tier II Series IV for Rs.175 crores @ 7.45%
Details of Unsecured Loans other than unsecured redeemablebonds aggregating Rs.314.07 and Rs.41.90 crores i.e. Rs.355.97crores:
Rs.201.64 crores availed @ 6.25%
Rs.98.64 crores availed at rates varying between 6.50% to17.25%
Rs.13.25 crores availed @ 2.47%
Rs.0.44 crores availed @ 13.50%
Rs.0.07 crores availed @ 7.75%
Rs.0.03 crores availed @ 9.50%
Rs.41.90 crores availed @ 1.67%
Some details in respect of outstanding unsecured loan as on31.03.2003 are as follows:
(Rs. in crores)
Sr. Name of the Amount Repayment Schedule Rate ofNo. Lender Date Amount interest
1 NABARD 98.64 From July 2003- In 24 installments 6.50% toto Jan 2015 aggregating 17.25% *
Rs.98.64 crs.
2 MIDL 13.25 From May 2003 – In 5 installments 2.47% to May 2005 aggregating
Rs.13.25 crs.
3 Local Banks in 0.19 No fixedOverseas Centre repayment
4 Overseas Foreign 39.01 No fixedCorrespondents repayment
5 Others 2.79 No fixedrepayment
* The wide band of interest rates in respect of borrowings fromNABARD is on account of the fluctuating rates of interestprevailing at various points of times for different maturities.
The above borrowings are all unsecured. No directors have givenany personal guarantee for collaterally securing the borrowings.None of the lenders is an affiliate/associate of the Bank. The Bankhas not defaulted in repayment/redemption of any of theborrowings. RBI’s nominee director is on the Board of the Bank,the details of which are shown under the section “Board ofDirectors”.
Covenants governing the major borrowings
The borrowings from NABARD are against term loans toAgriculture and SSI respectively.
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Details of top 10 borrowings of the Bank (as on 31st March
2003)
S. No. Party Outstanding InterestBalance Rate (%)
(Rs. in crores)
1 NABARD 98.64 8.502 SIDBI 201.64 6.253 IDBI 0.44 13.504 MID loan 13.25 2.475. EXIM 0.07 7.756. NHB 0.03 9.507. Outside India 41.90 1.67
List of Top 25 borrowings (including Deposits) made as of31st March 2003
Name of the Lender Form of Amnt. Int. rate MaturityBorrowing (Rs.) (%)
1 Small Industries Development Refinance 201.64 6.25 8/26/03Bank of India
2 Indus Ind Bank Ltd IBPC 100.00 5.00 6/16/033 World Bank-Modernisation and
Infrastructure Dev.Loan Term Loan 13.24 2.47 5/15/054 M T N L Term Dep 256.89 6.00 5/21/035 L I C Term Dep 100.00 7.15 4/30/046 Nuclear Power corpn Term Dep 90.00 6.55 5/26/037 West Bengal Infrastructure Term Dep 88.34 6.50 3/28/068 Airport Authority of India Term Dep 80.00 10.00 8/12/039 V S N L Term Dep 45.00 6.55 6/16/0310 Board of trustees Term Dep 40.57 6.25 12/17/0311 Delhi development Authority Term Dep 36.00 6.00 1/22/0412 Custodian, Special Court Term Dep 31.55 9.75 7/25/0413 Mumbai Metropolitan Regional Term Dep 30.45 6.50 1/6/0414 Brihan Mumbai Mahanagar Palika Term Dep 30.09 6.85 2/25/0515 Credit Guarntee Fund Trust Term Dep 29.60 9.53 8/31/0416 B M C - M C G M Term Dep 26.53 8.05 8/2/0417 National Housing Bank Term Dep 25.15 6.75 2/28/0418 Kribhco Term Dep 25.00 6.00 3/4/0419 N J P C Term Dep 22.69 8.00 4/30/0320 Employees’ State Insurance Term Dep 22.00 11.00 3/8/0421 Prime MinistersRelief Fund Term Dep 20.00 10.00 8/2/0422 Air Force Group Insurance Term Dep 19.00 10.00 7/24/0423 M H A D A Term Dep 16.09 6.60 3/23/0424 National Creche Fund Term Dep 16.00 10.00 7/6/0425 Container Corpn Of India Term Dep 9.00 6.00 11/2/03
All the above borrowing is unsecured. None of the lenders areaffiliates/associates of the Bank. The directors have not given anypersonal guarantee for collaterally securing these borrowings.
There has not been any default in repayment/redemption and noneof the borrowings has been rolled over. Deposits are normallyrolled over at the request of the depositor. There are no covenantsin any of the borrowings restricting the Bank in any manner forissue of capital, change in management, making further borrowingsetc. None of the lenders/trustees have appointed nomineedirectors in the Board.
Fixed and floating rate liabilities of the Bank
The break-up of fixed and floating rate liabilities of the Bank ason 31.03.2003 is furnished in the following table: (Rs. in crore)
Fixed rate liabilitiesFixed deposits 24,899.46Borrowings 355.97Tier II 600.00
Floating rate liabilitiesBalance in savings bank account 8,162.75Subordinated debt 132.74
The amount of Tier II bonds and the Subordinated Debt in thetable above are shown under OtherLiabilities and Provisions inBalance Sheet against Subordinated Debt. The fixed and floatingrate liabilities of the Bank represent only the interest bearingliabilities. For non interest bearing liabilities, kindly refer to theBalance Sheet.
Details of Deployment of Funds
Details of Advances
Population group wise classification of Gross Advances
The population groupwise classification of the Bank’s Grossadvances is as under:
In India
(Rs. in crores)
Gross Bank Credit 2000 2001 2002 2003
Rural 1,252 1,358 1,476 1,721Semi-urban 1,194 1,189 1,658 2,025Urban 2,396 3,249 3,467 4,178Metropolitan 5,954 6,699 7,925 9,014Total (Domestic) 10,796 12,495 14,526 16,938Overseas 1,515 1,314 1,497 1,493
TOTAL 12,311 13,809 16,023 18,431
Growth of Advances
The growth of the Bank’s Gross advances during the past fiveyears, both in India and overseas is as follows:
(Rs. in crores)
Year Ended March 31 Gross Credit AnnualIncrease (%)
1999 10,820.42 15.352000 12,310.62 13.772001 13,809.33 12.172002 16,023.37 16.032003 18,431.27 15.03
Details of Advances given above represent the Gross Advances.The amount of Advances shown in Balance Sheet indicate NetAdvances. There are no Loans and Advances in which theDirectors of the Bank are interested.
Region wise credit exposure
The region wise credit exposure of the Bank’s Gross Creditportfolio as on 31.03.2003 is given below.
31
(Rs. in crores)
Region Amount % of grosscredit
East 1,612 8.75West 2,189 11.88North 2,992 16.23South 9,424 51.13North eastern 166 0.90Central 555 3.01Overseas 1,493 8.10Total 18,431 100.00
Sector wise credit portfolio (Domestic)
The sector-wise credit portfolio of the Bank (In India) as on lastreporting Friday of March 2003 is as under: (Rs. in crores)
Industry Amount Exposure to grossbank credit (%)
Gross Bank Credit
1 Food Credit 1584 9.35
2 Non Food Credit: 15354 90.65
2 a Medium & Large Scale Industry 4809 28.39
2 b Wholesale Trade 1671 9.87
2 c Priority Sector 6184 36.51
2 d Other Sectors incl.export credit 2690 15.88
Industry-wise Classification
The Bank has a diversified industry-wise portfolio since adherenceto exposure limits is followed. The industry-wise break-up of creditportfolio is furnished below:
Industry Exposure as a %of Gross Credit
DOMESTIC
Food credit 9.35Non food credit: 90.65Medium and Large scale 28.39Whole sale trade 9.87Other sectors incl., Priority, Export 52.39Total 100.00
Industrywise Deployment of Gross Bank Credit as on31/03/03
(Rs in crores)
Industry Total Total Total outstanding outstanding in outstanding of the top Ten
Rs. crores of the top ten companies as acompanies percentage of the
total exposureto the industry.
Coal and mining 127 10.06 8%
Iron &Steel 481 360.75 75%
Other Metal & Metalproducts 155 12.40 8%
All Engineering includingElectronics 514 138.78 27%
Infrastructure(Power+Telcom+roads+ports) 1111 644.38 58%
Textiles(cotton,Jute) 892 276.52 31%
Sugar,Tea,Food proceeing&Veg oil 356 163.76 46%
Tobaco & Tobaco products 160 136.00 85%
Paper & Paper products 138 91.08 66%
Rubber & Leather 114 42.18 37%
Chemicals,Dyes,paints,drugs&pharma fertiliser and Petro 643 450.01 70%chemicals
Cement 78 72.54 93%
Construction 212 188.68 89%
Petroleum 159 79.50 50%
Automobiles(including truck) 318 257.60 81%
Computer software 26 20.80 80%
Others 1151 529.46 46%
Total Industrial Crtedit O/S 6635 3474.50 52%
The top 25 borrowers of the Bank have the followingindustry-wise classification in respect of advances of theBank as on 31.03.2003:
(Rs. in crores)
Industry Outstanding to % exposure to Outstanding to thethe Industry the gross top 10 borrowers
Industrial credit of as a % of totalthe Bank outstanding to
the industry
Coal and Mining 127 1.91 8Iron and steel 481 7.25 75Other Metal 155 2.34 8All Engg. 514 7.75 27Infrastructure 1,111 16.74 58Textiles 892 13.44 31Sugar Tea etc., 356 5.37 46Tobacco 160 2.41 85Paper 138 2.08 66Rubber 114 1.72 37Chemicals 643 9.69 70Cement 78 1.17 93Construction 212 3.20 89Petroleum 159 2.40 50Automobiles 318 4.79 81Computer Software 26 0.39 80Other industries 1,151 17.35 46Total 6,635 100.00 15
Exposure to top ten companies of the portfolio
Account Name Industry Outstanding % of Gross Asset quality(Rs. In Crores) advances
Borrower A Infrastructure 226.94 1.23 Standard
Borrower B Fertiliser 223.00 1.21 Standard
Borrower C ElectricityGeneration 209.90 1.14 Standard& Distribution
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Borrower D Trade 184.50 1.00 Standard
Borrower E Electricity Generation &Distribution 165.00 0.90 Standard
Borrower F Iron & Steel 140.08 0.76 Standard
Borrower G Electricity 116.23 0.63 Standard
Borrower H Infrastructure 111.84 0.61 Standard
Borrower I Infrastructure 108.97 0.59 Standard
Borrower J Heavy Engg. Machinery 102.16 0.55 Standard
Note: In the table above as compared to the Industrywiseclassification given earlier, the Borrower B falls under grouping of‘Chemicals’, Borrowers C, E & G fall under the grouping of ‘OtherIndustries’, Borrower J falls under grouping of ‘All EngineeringIndustry’ and Advances to Borrower D being in the nature of Tradecredit are not included.
Exposure to top five business groups
Name of borrower Outstanding % of Gross Amount (Rs. in crores) Advances
Group A 339.49 1.84Group B 234.80 1.27Group C 138.94 0.75Group D 131.27 0.71Group E 122.98 0.67Total 967.48 5.24
Average Balances and Interest Rates
The following table shows Average balances and Interest Ratesof interest earning assets and interest bearing liabilities for thelast three financial years:
Year ended 2001 2002 2003
Average Interest Average Average Interest Average Average Interest AverageBalance Rate Balance Rate Balance Rate
Average interest 26123 2793 10.69 30504 3171 10.40 35379 3486 9.85earning assetsAverage interest 25174 1913 7.60 29762 2201 7.40 34342 2264 6.59bearing liabilities
Average interest 22714 1862 8.20 27432 2167 7.90 31892 2168 6.80bearing Rupee liabilities
Sanctions & Disbursements
The following table provides a summary of the total sanctions and disbursements for the last three years:
(Rs. in crores)
Year ended March 31 2001 2002 2003
Sanctioned 3,522 4,495 5,737
Disbursed 2,672 3,641 4,802
Category-wise summary of Approvals & Disbursements on the basis of Financing activity of the Bank in the last fivefinancial Years:
(Rs in Crores)
1999 2000 2001 2002 2003
Sector Approval Disburse Approval Disburse Approval Disburse Approval Disburse Approval Disbursement ment ment ment ment
Agriculture 790 754 739 705 764 574 1025 874 1264 1087
SSI 244 222 209 205 190 147 346 285 464 385
Other Priority Sector 187 156 350 321 425 310 579 437 685 573
Total Priority Sector 1221 1132 1298 1231 1379 1031 1950 1596 2413 2045
Industry(M&L) 918 849 962 797 1081 787 1208 934 1868 1530
Whole Sale Trade 420 408 374 361 383 303 495 393 548 441
Other Sectors 529 525 700 682 679 551 842 718 908 786
Grand Total 3088 2914 3334 3071 3522 2672 4495 3641 5737 4802
Of Which Export Credit 300 294 314 305 434 419 507 480 623 612
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Fixed and floating rate assets of the Bank
The break-up of fixed and floating rate assets of the Bank as on31.03.2003 is furnished in the following table (Rs. in crores):
Domestic Global
Fixed rate assets 28,544.00 28,544.00Floating rate assets 6,622.00 9,496.64Total 35,166.00 38,040.64
Export Credit
The export credit as at the end of 31.03.2003 was Rs.1,159.70crores. The bank, in order to improve the export credit hasreduced the interest rate on Pre-shipment and Post shipment,provided additional concessions of 0.5% in post shipment creditto exporters achieving annual export turnover of Rs.200 croresand extension of Line of credit to established exporters. ExportCredit given here forms part of Gross Advances.
Year ended March 31’ 1999 2000 2001 2002 2003
Target 1,127 1,283 1,497 1,750 2,038Achieved 909 988 959 1,030 1,160% of Export Credit toNet Credit 9.68 9.24 7.69 7.06 6.83
Foreign Currency Loans:
Details of the Foreign Currency Loans portfolio for the last 5 yearsis as follows:
1999 2000 2001 2002 2003
Foreign Currency Loans(USD mln.) 34.8 69.7 72.7 84.1 134.1Foreign Currency Loans(EURO mln.) Nil Nil 0.2 0.2 NilForeign Currency Loans(CHF mln.) 1.5 0.6 0.5 0.4 0.3Foreign Currency Loans(JPY mln.) Nil Nil 205 380 380Foreign Currency Loans(Total in Rs. crs.) 154.2 303.1 352.8 430.0 674.0
(CHF: Swiss Franc, JPY: Japanese Yen)
Priority Sector Lending
As per RBI norms, the Public Sector Banks’ credit to the PrioritySector should be 40% of the Net Bank Credit and that foragriculture should be 18% of the Net Bank Credit. The policy ofthe Bank with regard to financing to the Priority Sector is basedupon the norms stipulated by Reserve Bank of India. As on March2003, the Priority Sector credit stood at 42.57% of the Net BankCredit and Agricultural credit stood at 16.29% of the Net BankCredit.
The Bank has disbursed Rs 1,439.01 crores to agricultural sectoran increase of 19.06% over the previous year. During the year1,45,116 Kisan credit cards were issued and cumulatively theBank so far issued 4,12,169 Kisan Credit cards. Credit linking ofSelf Help Groups is another thrust area of IOB rural lending.During the year 13,802 self-help groups were credit linked andas at the end of March 2003, the Bank has cumulatively creditlinked 30,899 Self-help groups.
The Bank’s advances under direct and Indirect Housing financeamounted Rs.657.49 crores as against the RBI Norms of Rs 125
crores. Specialised Housing finance divisions functioning in 41select branches across the country gave a fillip to our bank’scredit flow to housing sector.
In tune with the national agenda of Education to all, the Bank hasso far disbursed loans amounting Rs.142.97 crores benefiting7,021 students, under our Vidya Jyothi Educational Loan scheme.
During the year the Bank has launched a novel scheme Sanjeevni,for the benefit of the doctors to establish Nursing home, purchaseof equipments etc.,
The Bank has recently introduced two novel credit schemes SishuVihar Yojana (For setting up of creches) and IOB Kisan GreenCard Scheme.
Details of Sector-wise distribution of Gross Priority SectorAdvances for the last five years is given below (Rs. in crores):
Year ended 1999 2000 2001 2002 2003March 31
Agriculture 1399.20 1487.50 1631.50 1995.93 2367.44
Small Scale Industry 1242.60 1364.30 1449.77 1616.24 1826.03
Other Priority SectorAdvances 570.60 823.40 1213.57 1543.65 1990.87*
Gross Priority SectorAdvances 3212.40 3675.20 4294.84 5155.82 6184.34*
% To Net Bank Credit 41.60 44.90 47.61 47.24 42.57
Targets (%) 40.00 40.00 40.00 40.00 40.00
* Advances to other Priority sector and Gross priority sector advancesare after netting off Inter Bank Participation certificate amount ofRs. 100 Crores. Gross Bank Credit represents Gross Advances ofthe Bank. Net Bank Credit is arrived at after deducting FCNR(B) andNRNR deposits as these are eligible for deductions while calculatingthe Net Bank Credit for the purpose of priority sector advances inline with RBI Circular No. RPCD.BC.147/11.01.01/94-95 dated April21,1995. The calculation of Net Domestic Bank Credit is shown below
(Rs. in crores):
Gross Domestic Bank Credit 16938Less: NRNR deposits 986Less: FCNR deposits 1325Less: Participation certificates 100Net Domestic Bank Credit 14527
Lead Districts
As required by the GoI/RBI, the Bank has been assigned the roleof lead bank in 13 districts in 2 states, which are Tamil Nadu (12Districts) and Kerala (One District). The assigned lead bankresponsibilities are discharged by maintaining Inter-institutionalcoordination in the preparation and implementation of variousdevelopment programmes in each district.
The role functions of a Lead Bank are as under:
� Development of banking facilities particularly in Rural andBackward areas.
� Removal of un employment and under employment throughchannelising banks’ advances for Regional Development.
� Ensuring appreciable rise in the standard of living of thepoorest sections of the population by providing credit fortaking up self-employment ventures by them and also forsome of their basic needs.
34
� Bringing about greater understanding and cooperationbetween banks and government departments /agencies inimplementing various programmes/schemes.
� Identifying major constraints impeding the development of thedistrict’s economy and inducing the appropriate agencies totake remedial measures.
� Formulation of Annual District Credit Plan and its implemen-tation.
� Monitoring and review of the progress made by Banks incredit deployment in general and in Priority section advancesin particular and under Government sponsored Creditprogrammes.
Details of branch network, resources mobilised and advancesmade in the lead districts are as under (Rs. in crores):
State No. of lead No. of Total Total Advances Percentagedistricts branches deposits advances to priority to total
sector advances(A) (B) (B/A)
Tamil Nadu 12 296 3,163.16 1,255.50 700.50 55.80
Kerala 1 8 224.17 42.58 14.69 34.50
Total 13 304 3,387.33 1,298.08 715.19 55.10
Loan Policy
The Bank has come out with a Loan Policy called Loan PolicyDocument 2003 and the objective of the Loan Policy being to:
� comply with Government and RBI regulations on CapitalAdequacy, Credit Deposit ratio, prudential norms, assetclassification
� achieve targets fixed for priority sector advances incl.exports, housing etc.,
� reduce NPA portfolio
� deploy funds in a profitable manner
� avail refinance whenever necessary
� take quick decisions in extending credit
� have effective post disbursement follow up
� have a diversified loan portfolio
The loan policy is being used as a tool by the Bank for valuing itsactions with the policies framed and for initiating correctivemeasures required, if any.
Credit Approval Authority and Procedures
The Bank adopts stringent standards of appraisal for its advances.Various levels of authorities are vested with discretionary powersto sanction credit limits. Detailed guidelines have been formulatedto appraise, sanction and monitor the credit proposals. The officersof the Bank are well trained to appraise the credit proposals in anefficient and skilful manner. The Bank is continuously toning upthe skills of the officers in credit appraisals by giving training bothin house and outside agencies by NIBM, BTC. Etc.,
The credit limits sanctioned by one layer of authority is beingreviewed by the next higher layer authority and any comments/observations of higher authority are taken up for rectification.
Amounts sanctioned by the Bank (Category-wise) in the FY2003are as follows :
(Rs. in crores)
Sanctioning No of Fund Non-FundAuthority accounts
Mgmt Committee 79 1,146.16 834.82Chairman & Mg. Director 87 586.02 504.68Executive Director 12 49.90 31.38G M’s Committee 86 394.24 163.79General Manager 416 468.68 36.55TOTAL 680 2,645.00 1,571.22
(Rs. in crores)
Sanctioning Authority Power for Limits
Management Committee of Full (Subject to prudentialthe Board consisting of norms like single borrower
1. CMD exposure norms, group
2. ED borrower exposure norms etc).
3. Three Directors
Chairman & Managing Director 30.00*
Executive Director 22.50*
GM’s Committee, Consisting of 17.50*
1. Five GMs of the five Territories
2. GM Credit Support Services
Dept
General Manager 10.00*
Regional Manager 10.00*Headed by GM (Delhi)
Headed by DGM/CRM 5.00*
Headed by AGM/SRM 2.50*
Branch Manager-Branch 2.50*Headed by AGM
Headed by Scale-1V 1.00*
Headed by Scale-111 0.40*
Headed by Scale-11 0.10*
Headed by Scale-1 0.05*
* Both fund based and non fund based put together
Investments
Investment portfolio
The investment portfolio of the Bank stands at Rs. 18,700.32crores mark as on 31.03.2003.The details are as furnished below.
(Rs. in crores)
Government Securities 15,702.95Other Approved Securities 401.81Shares 133.83Debentures & Bonds 2,183.00Subsidiaries & Joint Ventures 47.52Others 231.21Total Gross investments 18,700.32
35
The investment figures given in the above table represent theGross Investments while the Net Investment figures afterdeducting depreciation/provisions are given in the Balance Sheet.
With the introduction of prudential norms, deregulation of interestrates and capital adequacy measures, there has been a gradualshift of focus to investment activities. Accordingly, the investmentportfolio of the Bank has increased steadily over the years. Alarge proportion (more than 86.12%) of the Bank’s total investmentis held in Government and other approved securities.
The Bank has been able to maintain a fairly consistent portfolioyield by changing portfolio mix by regular churning withoutchanging the portfolio risk.
Investment strategy
i) Portfolio analysis
Domestic portfolio position as on 31.3.2003 shows anincrease of,
a) Terminal book value by Rs.3,390 crs. or 22.72% over earlieryear
b) Average book value by Rs.2,970 crs. or 22.03% over earlieryear
c) Investment income (incl. Profit) by Rs.193.33 crs. or 13.22%over earlier year
� Current yield on Investments (which is measured bydividing interest income by the book value ofinvestments) or Return on Investments stands at10.09% as against 11.16% as of March 2002 fordomestic investments. The drop in market yield levelsduring this period was approx. 1.29%. Principal reasonsfor a drop in Interest income during the year was,
a) non-receipt of any dividend on investments in UTIUS 64
b) Bank’s inability to recognize any interest on Non-performing bonds/debentures.
� Duration of the Central Government portfolio, whichshows the average time in which the investments couldbe realised after reckoning the prevailing yield forreinvestment of coupon income, remains at 5.90 years.Though this is under control and within the parametersfixed in the Investment policy (7 years for entireportfolio), this could rise with the tenor of Govt.securities offered in the primary market as part of thisyear’s Government borrowing programme.
Valuation of the “Available for Sale” segment as per RBI norms/FIMMDA rates shows the following surplus positions:-
a) Government securities Rs. 1700.80 crs.
b) Other SLR securities Rs. 59.62 crs.
c) Bonds and Debentures Rs. 123.81 crs.
d) Shares Rs. Rs. 46.65 crs.
Mutual Funds is the only portfolio which suffered depreciationof approximately Rs.4.89 crs.
� As against the above surplus in the Govt. securitiesbasket, the premium element on securities remains atRs. 931.19 crs. or 7.21% of the face value, as against
6.36% last year. Premium in absolute terms last yearwas Rs.305 crs.
� The surplus in the Share basket does not includevaluation of Bharat Overseas Bank Ltd., which hassince been transferred to “Held to Maturity” segmentand valued at cost.
� As against a diminution of Rs.4.89 crs. in the MutualFund valuation, provision already held is Rs.5.66 cr. Thedepreciation has occurred mainly in the Equity-orientedand Balanced fund units, which the Bank has beenselectively offloading depending upon market conditions.
As the Bank’s investments in UTI-US 64 are already held in “Heldto Maturity” and the excess of cost over face value of these unitsis being amortized at Rs.2.50 crs. per month since Jan. 2002,these do not form part of Mutual fund valuation.
Valuation of Trading Segment of Rs.55 crs. as of 31st March 2003
resulted in a loss of Rs. 35 lacs.
� Profit on Sale of Securities or Trading profit for the year wasRs.243.93 crs., as against Rs. 257.39 crs. during 2001-02.While sale out of Held to Maturity segment and consequentprofit of app Rs. 57 crs. was taken to Capital Reserve lastyear, no such sale was made during 2002-03.
� Secondary Market Turnover for the year reached Rs.79117crs. (excluding Inter-bank Repo transactions) during the year,as against Rs.41921 crs. last year. This formed 6.10% ofthe total secondary market turnover (excluding Repotransactions).
� Overseas Investments: The entire portfolio is marked tomarket.
II) Strategy for 2003-2004:
� RBI guidelines on classification and valuation of investmentspermit transfer between Held to Maturity and any othersegment only once at the beginning of each financial year.Thus, the present formation of strategy reckons thesetransfers also.
� The potential risk is in the form of Interest Rate Risk, againstwhich the portfolio needs to be immunized as far as possible.So far, the approach towards Duration of the portfolio hasbeen reactive rather than proactive for the following reasons:-
� Issue of Dated Central Govt. securities during the yearwere towards medium/long term. Even secondary markettrading centered around the long term securities
� State Development Loans were, as is usually the case,issued for a standard 10 year maturity
� Non-SLR securities, which are issued in all tenors, wereless in number and thus its effect on the duration wasnot significant during the year.
The main objective is to preserve the Current yield ona few securities, while utilising the upward movement inprices in a few other securities.
A volatile yield on Govt. securities has had a sobering effect onNon-SLR portfolio, as the risk premium levels, which were almostnon-existent at one stage, have started rising. The predominantplayers have come to recognize the importance of rating and theeffect of lack of rating on liquidity and valuation.
36
Investments by the Bank (Rs. in crore)
As on March 31 1999 2000 2001 2002 2003
Gross investments 8,153 10,081 11,505 14,758 18,228(domestic)
SLR investments 5,649 7,049 8,460 11,402 14,593
Held Till Maturity (HTM) 707 678 2,571 2,327 2,874
Available For Sale 7446 9403 8,812 12,431 15,291
Held For Trading 00 00 122 0 63
% of HTM to entire portfolio 8.67 6.72 10.22 6.42 7.88
As on March 31 2001 2002 2003
Gross Investments 11,504.69 14,758.06 18,228.03
SLR Investments 8,459.61 11,402.25 14,593.51
Permanent Investments 1,059.88 825.29 1,188.54
Current Investments 7,399.73 10,576.96 13,404.86
Current invesments toSLR Investments (%) 87.47 92.76 91.86
Overseas 298.62 358.52 472.29
The break up of investments for a period of five years (Global) isgiven in table below:
(Rs. in crores)
Security Details 1998-99 1999-00 2000-01 2001-02 2002-03
Government Securities 6436.96 8408.05 9368.30 12360.91 15702.95
Other Approved 627.46 524.92 503.46 485.83 401.81Securities
Shares 95.77 96.51 102.67 114.81 133.83
Debentures & Bonds 894.74 962.22 1510.15 1929.76 2183.00
Subsidiaries & 45.25 46.12 46.61 47.32 47.52Joint Ventures
Others 227.47 229.79 272.12 177.95 231.21
Total 8327.65 10267.61 11803.31 15116.58 18700.32
The Net Investment figure shown in the Balance Sheet is obtainedafter deducting depreciation from the figure of Gross Investmentsshown above.
Yield on Investments
The yield on investments (%) for the last five years is given below:
As on March 31. 1999 2000 2001 2002 2003Yield including profiton sale of investments (%) 12.19 12.37 12.10 13.09 11.56Yield excluding profit onsale of investments (%) 11.91 11.76 11.68 10.95 9.88
IX. ASSET CLASSIFICATION, INCOMERECOGNITION & PROVISIONING
Regulatory position
In keeping with RBI guidelines on asset classification, incomerecognition and provisioning, the Bank has adopted the systemof classifying the advances under 4 categories:
Category Classification1. Performing
Standard Asset An asset which has not posedany problem and which does notcarry more than the normalbusiness risk
2. Non-Performinga) Sub-standard Asset An asset which has been non-
performing for a period less thanor equal to eighteen months
b) Doubtful Asset An asset, which has been non-performing for a period exceedingeighteen months.
c) Loss Asset Asset where loss has beenidentified by the Bank or auditors/RBI .The value of security is lessthan 10%.
For this purpose, all advances are segregated into performingassets (standard assets) and Non-Performing assets. A borrowalaccount is classified as Non Performing Assets (NPA) wheninterest and/or instalment is due for more than 180 days. Borrowalaccounts treated as NPA for not exceeding one and half yearsare classified as sub standard assets and borrowal accountstreated as NPA for more than one and half years are treated asdoubtful assets. NPAs where securities are less than 10% andwhich are considered as irrecoverable are treated as loss assets.
When an account is classified as NPA, interest already debited tothe account but not realised, is de-recognised and further interestaccrued is collected on cash basis.
Provisions are arrived on all outstanding NPAs, as under:
1. Sub Standard Assets at 10% of the outstanding
2. Doubtful Assets at 20% or 30% or 50% of the securedportion based on the number of years the account remainedas “Doubtful Asset” (i.e. up to one year, one to three yearsand more than three years respectively) and at 100% of theunsecured portion of the outstanding after netting retainableor realisable amount of the guarantee claims alreadyreceived/lodged with DICGC/ECGC, if any.
3. Loss Assets at 100% of the outstanding after nettingretainable amount of the guarantee claims already received/lodged with DICGC/ECGC, if any.
Asset Classification of Performing and Non-Performingassets for the last 5 years is given below:
Classification ofassets as onMarch 31 1999 2000 2001 2002 2003
Standard Assets 9,379 10,688 12,178 14,204 16,535Sub Standard 469 610 410 512 540Doubtful 826 848 1,102 1,185 1,267Loss 146 165 119 122 89Gross NPAs 1,441 1,623 1,631 1,819 1,896Gross Advances 10,820 12,311 13,809 16,023 18,431
37
Advances given above are Gross Advances while the BalanceSheet indicates Net Advances after setting off provisions, InterestSuspense etc: Gross Advances – (Provisions, Interest Suspenceand DICGC & ECGC claims) = Net Advances i.e. 18,431- (1,896- 912) = 17,447 (Rs. in crores).
Asset classification of Performing and Non-Performingassets for the last 5 years is given below: (as a % of GrossAdvances)
Classification ofassets (%) as onMarch 31 1999 2000 2001 2002 2003
Standard Assets 86.69 86.82 88.19 88.65 89.71Sub Standard 4.33 4.96 2.97 3.20 2.93Doubtful 7.63 6.88 7.98 7.39 6.88Loss 1.35 1.34 0.86 0.76 0.48Total 100.00 100.00 100.00 100.00 100.00
Classification of assets as Amounton 30
th June 2003 (Rs. in crores)
Standard Assets 17318.39Sub Standard 499.06Doubtful 1291.11Loss 91.34Gross NPAs 1881.51Gross Advances 19199.90
The asset quality of the Bank has improved considerably duringthe last 2 years. Gross NPA to Gross Advances dropped from11.35% in FY02 to 10.29% in FY03 while Net NPA to NetAdvances fell from 6.32% in FY02 to 5.23% in FY03.
All disclosures regarding NPAs confirm to RBI norms.
General data on Non-Performing assets
The details of Non-Performing Assets of the Bank are furnishedin various tables below.
(Rs. in crores)
PARTICULARS 2001 2002 2003(As on March 31)
Gross NPA at the beginn- 1,622.79 1,631.39 1,818.54ing of the yearAddition during the year 364.88 547.52 603.56
Reduction during the year 356.28 360.37 525.62
Upgradation 20.04 48.44 125.10
Cash Recovery 161.18 205.81 236.88
CompromiseWrite-off 175.06 106.12 163.64
Gross NPA at the end 1,631.39 1,818.54 1,896.48of the year
Provision 623.17 783.03 854.85
Interest Suspense 62.35 61.47 84.35
DICGC & ECGC Balance 28.29 16.53 45.07
Net NPA at the end of the year 917.58 957.51 912.21
The provision of Rs. 854.85 crores has been netted in the BalanceSheet. Closing Balance of provision of Non Performing Assets as
on March 31, 2003 is Rs.854.85 which has been deducted fromthe Gross Advances figure to arrive at the Net Advances figureas given in the Balance Sheet. Out of Rs.854.85, Provisions madeduring the year amount to Rs. 235.33 crores. This figure of Rs.235.33 crore has been included in the Provisions andContingencies figure, which has been charged to the Profit & LossA/c.As on March 31, 1999 2000 2001 2002 2003Gross Advances 10,820.42 12,310.62 13,809.33 16,023.37 18,431.27
Gross NPAs 1,441.49 1,622.79 1,631.39 1,818.54 1,896.48
Gross NPAs to GrossAdvances (%) 13.31 13.18 11.81 11.35 10.29
Net Advances 10,117.47 11,573.20 13,095.51 15,162.34 17,447.00
Net NPAs 738.57 885.37 917.58 957.51 912.21
Net NPA to NetAdvances (%) 7.30 7.65 7.01 6.32 5.23
The slab-wise details of the current NPA accounts (Global)as on March 31 2003 are indicated below:
(Rs. in crores)
Particular No. of Gross NPA Interestaccounts amount de-recognised
Below Rs.25000/- 2,13,663 118.41 84.35Rs.25000/- & above 29,947 1,778.07Total 2,43,605 1,896.48
Industry-wise classification of Non-Performing Assets
The industry classification of the top ten NPAs (borrower-wiseclassification) of the Bank as at 31.03.2003 is given hereunder
Industry Amount % of the Asset quality(Rs. in total gross as on Marchcrores) advances 31 2002
1. Tobacco 55.65 0.30 Sub standard
2. Automobile 53.18 0.29 Sub Standard
3. Power 52.42 0.28 Sub Standard
4. Construction 42.65 0.23 Doubtful
5. Automobile 37.82 0.21 Doubtful
6. Tobacco 33.63 0.18 Sub Standard
7. Electrical 31.81 0.17 Sub Standard
8. Chemicals 28.45 0.15 Doubtful
9. Telecommunication 26.22 0.14 Doubtful
10. Textiles 24.68 0.13 Sub Standard
38
Industry wise top 10 NPAs as on 31.03.2003
S.No. Industry NPA % of % ofAmount Exposure Exposure
of the to the of theBorrower Industry Industry
(Rs. in to totalcrores) Advances
1. Tobacco 55.65 34.69 0.872. Automobile 53.18 18.92 1.533 Power 52.42 17.24 1.654 Construction 42.65 11.10 2.095 Automobile 37.82 13.45 1.536 Tobacco 33.63 20.97 0.877 Electrical 31.81 7.34 2.358 Chemicals 28.45 4.53 3.419 Telecommunication 26.22 34.03 0.4210 Textile 24.68 2.69 4.97
The details of top 10 NPAs in different industry sectors ason 31-03-2003 are as under.
(Rs. in crores)
Industry Total Top ten Top 10 NPAsAdvances NPA Amount as a % of
to the in the Advancesindustry (A) industry (B) given to
industry (B/A)
Textile/Garments 913.03 251.35 27.52Iron & Steel 475.14 79.83 16.80Other Metal 86.47 1.70 1.97Electronics 122.95 53.94 43.87Pharmaceutical 101.56 17.48 17.21Chemical 232.55 20.41 8.78Cement 78.88 1.51 1.91Food &Oil 212.68 17.52 8.28Jute 2.84 — —Tea 7.82 — —Gem & Jewellery 53.53 1.75 3.27Fertiliser 245.36 22.15 9.03Cold Storage — — —Others 15898.46 1429.46 8.99TOTAL 18431.27 1897.10 10.29
TOP TEN IMPAIRED CREDITS
(Rs in crores)
Name of the Loans Contin- Total Risk Loss InterestBorrower and gent Exposure Classifi- Provision in
Advances credit cation held Arrears
Borrower A 64.70 2.48 67.18 Dbt. 38.35 0.00Borrower B 53.18 0.00 53.18 SS 5.31 0.00Borrower C 52.42 1.73 54.15 SS 5.24 0.00Borrower D 37.81 0.00 37.81 Dbt. 20.37 1.39Borrower E 28.55 0.00 28.55 Dbt. 21.62 0.00Borrower F 26.22 0.00 26.22 Dbt. 22.86 0.00Borrower G 24.68 1.20 25.88 Dbt. 7.40 0.00Borrower H 23.43 0.00 23.43 Dbt. 2.34 0.00Borrower I 21.62 0.00 21.62 Dbt. 12.39 0.00Borrower J 19.84 1.56 21.40 Dbt. 5.94 0.03
(Dbt.: Doubtful; SS: Substantial)
Sector wise analysis of Gross Non- Performing Assets
The sector-wise analysis of NPAs for the last three years is asunder.
(Rupees in crores)
Sector 2000-01 2001-02 2002-03GrossGross % Gross Gross % GrossGross %
Adv. NPA Adv. NPA Adv. NPA
Agriculture 1632 178 10.90 1996 176 8.82 2368 189 7.98
SSI 1450 320 22.07 1616 380 23.51 1825 35419.40
Other PSC 1213 133 10.96 1544 141 9.13 1991 146 7.33
Total PSC 4295 631 14.69 5146 697 13.52 6184 689 11.14
Non PSC 9514 1000 10.51 10867 1122 10.32 12247 1207 9.86
Total 13809 1631 11.81 16023 1819 11.35 18431 189610.29
NPA Management Strategy
The NPA cash recovery target for the year 2002-2003 was fixedat Rs.250 crores which has almost been achieved. The Bank isutilising the Securitisation and Reconstruction of Financial Assetsand Enforcement of Security Interest (SARFAESI) Act, 2002 asan effective tool. The Bank has also opened Asset recoverymanagement branches to give necessary impetus to closelymonitor recovery of suit filed cases at DRT and Civil courts. Seniorlevel executives visit the Regions to take decisions on the spotfor One Time Settlement (OTS)/Out-of-court Settlement (OCS).Second Level executives are allotted responsibility for NPArecovery. The Bank has been utilising the revised guidelines ofRBI for OTS/OCS which has now been extended up to30.09.2003.
Asset Liability Management
The maturity profile of global deposits as on March 31, 2003 isas under:
(Rs. in crores)
Residual Maturity Amount
1-14 days 1,49015-28 days 51029 days – 3 months 1,4723-6 months 9706-12 months 1,2381-3 years 4,0373-5 years 9,407Over 5 years 17,574Total 36,698
The maturity profile of Global Deposits in the last three yearsas under:
Year endedMarch 31, 2001 2002 2003
Rs. In crores % Rs. In crores % Rs. In crores %
Up to 1 year 12,876.58 46.97 15,037.51 47.28 5,679.70 15.48
1 Year to 3 Years 12,730.57 46.44 15,705.95 49.38 4,037.69 11.00
3 Year to 5 Years 366.61 1.34 612.46 1.92 9,406.82 25.63
Over 5 Years 1,440.40 5.25 452.56 1.42 17,574.38 47.89
Total 27,414.16 100 31,808.48 100 36,698.59 100
39
Category-wise break up of domestic deposits as on 31.03.2003
(Rs. in crores)
Maturity Retail Wholesale Total
1-14 Days 1,135.12 24.74 1,159.8715-28 Days 380.64 19.87 400.5129 Days-3 Months 743.18 574.92 1,318.103-6 Months 699.87 188.71 888.586-12 Months 588.40 570.61 1,159.011-3 Years 2,909.25 901.02 3,810.273-5 Years 9,375.12 31.12 9,406.25Over 5 Years 17,571.38 3.00 17,574.38Total 33,402.96 2,314.00 35,716.97
Maturity profile of the Asset and Liability as on the last reporting Friday of March 2003
(Rs. in crores)
Maturity 1-14 days 15-28 days 29 days- 3 mths 3 - 6 mths 6 - 12 mths 1 - 3 yrs. 3 – 5 yrs. Over 5 yrs. Total1. Outflows
Capital 0.00 0.00 0.00 0.00 0.00 0.00 0.00 444.80 444.80
Reserve & Surplus 0.00 0.00 0.00 0.00 0.00 0.00 0.00 647.44 647.44
Deposits 1294.00 323.12 1222.63 854.08 1103.78 3405.03 8784.21 17091.91 34078.76
Borrowings 13.00 0.00 101.20 17.75 165.55 386.43 162.13 323.06 1169.12
Other Liability and Provision 25451.96 233.99 630.85 213.37 527.45 166.55 730.78 853.81 28808.76
A: Total Outflows 26758.96 557.11 1954.69 1085.20 1796.79 3958.01 9677.11 19361.02 65148.88
B: Cumulative Outflows 26758.96 27316.07 29270.75 30355.96 32152.74 36110.76 45787.87 65148.88
2.. Inflows
Cash 274.62 0.00 0.00 0.00 0.00 0.00 0.00 0.00 274.62
Balance with RBI 0.00 44.17 52.77 29.16 37.68 116.24 299.86 583.46 1163.33
Balance with other Banks 662.06 53.57 209.53 77.36 78.73 202.39 32.34 31.16 1347.14
Investments 188.38 183.57 214.09 197.18 399.39 2399.64 1780.00 12630.53 17992.79
Advances performing 765.19 313.05 627.61 938.18 1244.78 4208.15 2496.95 4385.16 14979.08
NPAs 0.00 0.00 0.00 0.00 0.00 0.00 492.12 1204.85 1696.97
Fixed Assets 0.00 0.00 0.00 0.00 0.00 0.00 0.00 248.80 248.80
Other Assets 25247.16 164.81 332.40 138.80 32.03 723.90 43.45 121.35 26803.90
C: Total Inflows 27137.41 759.17 1436.39 1380.68 1792.62 7650.32 5144.73 19205.30 64506.62
3. Mismatches
D: Mismatch (C-A) 378.45 202.07 -518.29 295.47 -4.17 3692.31 -4532.38 -155.71 -642.26
E: % Mismatch (D as a % of A) 1.41 36.27 -26.52 27.23 -0.23 93.29 -46.84 -0.80
F: Cum. Mismatch 378.45 580.52 62.23 357.70 353.53 4045.84 -486.55 -642.26
G: % Cum. Mismatch F as % of B 0.01 0.02 0.00 0.01 0.01 0.11 -0.01 -0.01
Maturity profile of the Asset and Liability as on the last reporting Friday of March 2002
(Rs. in crores)
Maturity 1-14 days 15-28 days 29 days- 3 - 6 mths 6 - 12 mths 1 - 3 yrs. 3 - 5 yrs. Over 5 yrs. Total3 mths
1. Outflows
Capital - - - - - - - 44.80 444.80
Reserve & Surplus - - - - - - - 448.24 448.24
Deposits 2821.07 595.73 2713.80 3168.97 4026.43 15593.19 574.88 496.18 29990.25
Borrowings 1.03 0.00 8.02 15.15 14.31 209.92 149.65 298.70 705.78
Other Liability and Provision 22561.97 100.04 205.27 210.62 462.90 223.19 649.80 136.31 24550.10
A: Total Outflows 25393.07 695.77 2927.09 3394.75 4503.63 16026.30 1374.34 1885.71 56200.65
B: Cumulative Outflows 25393.07 26088.84 29015.93 32410.68 36914.32 52940.61 54314.95 56200.65
40
2. Inflows
Cash 237.73 - - - - - - - 237.73
Balance with RBI .00 117.43 137.76 131.91 167.60 649.07 23.93 20.65 1248.36
Balance with other Banks 352.56 88.51 484.28 259.15 59.08 249.92 31.41 23.43 1548.33
Investments 86.35 20.76 90.45 260.29 326.21 1936.22 1859.71 10127.53 14707.52
Advances performing 4708.20 242.38 690.67 741.96 1030.51 1942.54 2309.09 1019.47 12684.83
NPAs - - - - - - 1577.68 83.04 1660.72
Fixed Assets - - - - - - - 242.01 242.01
Other Assets 22636.35 153.32 381.02 162.58 36.70 445.07 58.35 99.61 23972.99
C: Total Inflows 28021.18 622.39 1784.18 1555.89 1620.09 5222.82 5860.18 11615.75 56302.48
3. MismatchesD: Mismatch (C-A) 2628.11 -73.38 -1142.91 -1838.86 -2883.54 -10803.47 4485.84 9730.05 101.83
E: % Mismatch (D as a % of A) 10.35 -10.55 -39.05 -54.17 -64.03 -67.41 326.40 515.99
F: Cum. Mismatch 2628.11 2554.73 1411.82 -427.04 -3310.58 -14114.06 -9628.22 101.83
G. % Cum. Mismatch Fas a % of B 10.35 9.79 4.87 -1.32 -8.97 -26.66 -17.73 0.18
Maturity profile of the Asset and Liability as on the last reporting Friday of March 2001
(Rs. in crores)
Maturity 1-14 days 15-28 days 29 days- 3 - 6 mths 6 - 12 mths 1 - 3 yrs. 3 - 5 yrs. Over Total3 mths 5 yrs.
1. Outflows
Capital - - - - - - - 444.80 444.80
Reserve & Surplus - - - - - - - 361.05 361.05
Deposits 2697.45 405.65 2177.18 2465.62 3777.54 12398.24 357.91 1501.72 25781.31
Borrowings 5.81 0.00 0.04 6.40 10.76 59.27 36.75 481.96 600.99
Other Liability and Provision 17535.51 297.82 408.12 395.65 929.84 21.04 0.00 47.28 19635.26
A: Total Outflows 20238.77 703.47 2585.34 2867.67 4718.14 12478.55 394.66 2836.81 46823.41
B: Cumulative Outflows 20238.77 20942.24 23527.58 26395.25 31113.39 43591.94 43986.60 46823.41 00
2. Inflows
Cash 210.50 - - - - - - - 210.50
Balance with RBI 71.56 177.14 169.61 161.91 248.06 814.17 23.50 98.62 1764.57
Balance with other Banks 448.77 220.91 882.61 276.77 106.85 206.14 33.75 14.65 2190.45
Investments 257.29 65.31 280.83 533.57 470.94 1631.37 1920.68 6603.85 11763.84
Advances performing 3460.32 191.18 630.65 650.10 913.85 1731.51 1981.03 975.25 10533.89
NPAs - - - - - - 1397.50 84.86 1482.36
Fixed Assets - - - - - - - 252.13 252.143
Other Assets 17768.72 - - - - 969.33 - - 18738.05
C: Total Inflows 22217.16 654.54 1963.70 1622.35 1739.70 5352.52 5356.46 8029.36 46935.79
3. Mismatches
D: Mismatch (C-A) 1978.39 -48.93 -621.64 -1245.32 -2978.44 -7126.03 4961.80 5192.55 112.38
E: % Mismatch (D as a % of A) 9.78 -6.96 -24.04 -43.43 -63.13 -57.11 1257.23 183.04
F: Cum. Mismatch 1978.39 1929.46 1307.82 62.50 -2915.94 -10041.97 -5080.17 112.38
G. % Cum. Mismatch Fas a % OF B 9.78 9.21 5.56 0.24 -9.37 -23.04 -11.55 0.24
The following table shows the asset-liability mis-match for the last three years:
(Rs. in crores)Asset Liability Mismatch:
Year 1 to 14 15 to 28 29 days to 3 months to 6 months to 1 year to 3 years to 5 years todays days 3 months 6 months 1 year 3years 5 years & above
2000-2001 2415.48 225.44 -572.73 -1004.51 -2542.98 -7955.48 6003.58 5167.122001-2002 2294.30 -284.21 -568.05 -1996.62 -3275.50 -10358.32 6050.18 9760.442002-2003 4786.99 -49.73 127.38 361.06 449.58 3428.73 -4933.72 -3694.80
41
Structural Liquidity as on 31.03.2001
(Rs. in crores)
Maturity Total Inflows Total Outflows Mismatch
1-14 days 21361.92 18919.60 2442.32
15-28 days 677.63 661.67 15.96
29 days and upto 3 months 2016.49 2751.15 (734.66)
Over 3 months and upto 6 months 1740.07 2805.81 (1065.74)
Over 6 months and upto 1 year 1905.50 4494.89 (2589.39)
Over 1 year and upto 3 years 5052.36 12746.86 (7694.50)
Over 3 years and upto 5 years 5073.07 410.80 4662.27
Over 5 years 7876.39 2818.89 5057.50
TOTAL 45,703.43 45,609.67 93.76
The Structural Liquidity as on 31st March for the last three years is given below:(Rs. in crores)
TOTAL INFLOWS TOTAL OUTFLOWS MISMATCH2001 2002 2003 2001 2002 2003 2001 2002 2003
1-14 days 21694.7 25024.1 27529.6 19279.2 22729.8 22742.6 2415.5 2294.3 4787.015-28 days 1125.0 1014.7 863.6 899.5 1298.9 913.3 225.4 -284.2 -49.729 days and upto 3 months 2522.2 2415.5 2068.3 3094.9 2983.6 1941.0 -572.7 -568.1 127.4Over 3 months and upto 6 months 1979.7 1815.5 1561.6 2984.2 3812.1 1200.5 -1004.5 -1996.6 361.1Over 6 months and upto 1 year 2185.9 1786.1 2426.3 4728.9 5061.6 1976.7 -2543.0 -3275.5 449.6Over 1 year and upto 3 years 5123.7 5592.0 8365.4 13079.2 15950.3 4936.6 -7955.5 -10358.3 3428.7Over 3 years and upto 5 years 6423.1 7489.3 5995.4 419.5 1439.1 10929.1 6003.6 6050.2 -4933.7Over 5 years 7924.7 11897.0 16498.5 2757.6 2136.5 20193.3 5167.1 9760.4 -3694.8Total 48978.9 57034.1 65308.7 47242.9 55411.9 64833.2 1735.9 1622.2 475.5
Maturity Pattern of Assets and Liabilities (as on 31st March 2003):
1-14 15-28 29 Days 3-6 6-12 1-3 3-5 Over TotalDays Days -3 Months Months Months Years Years 5 Years
Loans and Advances 2702.54 471.15 982.37 1067.85 1465.47 5001.25 3147.08 3593.56 18431.27Deposits 1489.60 509.83 1472.57 969.90 1237.80 4037.69 9406.82 17574.38 36698.59Borrowings 20.65 0.00 22.46 17.75 15.55 261.30 12.14 6.12 355.97Foreign Currency Assets 716.91 196.08 753.95 460.46 456.04 624.80 289.96 253.15 3751.35Foreign Currency Liability 868.53 146.28 435.73 364.55 635.26 877.75 72.41 428.97 3829.38
Advances (as on 31st March)
Gross Bank Credit 2000 2001 2002 2003
In IndiaRural 1,252 1,358 1,476 1,721Semi-urban 1,194 1,189 1,658 2,025Urban 2,396 3,249 3,467 4,178Metropolitan 5,954 6,699 7,925 9,014Sub total 10,796 12,495 14,526 16,938Outside India 1,515 1,314 1,497 1,493Total 12,311 13,809 16,023 18,431
ALM Strategy of the Bank
ALM system of the Bank has been strengthened with full computerisation towards the close of the year. During the year, the Bankcould cover 98% of the Bank’s business under ALM.
43
of GM overseas credit need to be routed through ApprovalGrid at CO. Proposals seeking enhancement above Rs 5 crorealso need be routed through Approval Grid. In addition to thisa multi layered discretionary power structure /delegatedpowers (financial) is already in place.
� For constantly evaluating the quality of Loan Book and tobring about qualitative improvement in credit administration,Loan Review Mechanism has been put in place. Loan ReviewCommittees have been constituted both at RO and CO levelto review the accounts over a cut off point.
� A sophisticated risk assessment model (RAM), developedby CRISIL, which takes into account diverse risk factors andrates credit proposals/accounts on a ten point scale is inplace for risk rating the industrial borrowers with fund basedlimit of Rs. 4 crore and above.
� Portfolio/Relationship managers have been appointed byterritories for monitoring high value customers enjoying fund-based limit of Rs. 20 crore and above.
Credit Risk Supervision & its PreparednessThe Bank is strengthening its MIS to capture historical data forcalculating probability of default and loss given default andexposure at default towards implementation of risk basedsupervision as well as to assess the adequacy of provisions. TheBank is also planning to introduce the revised inspection systembased on degree of risk involved in the operation of branchesand controlling offices. Knowledge and skill of risk managementis being updated through in-house training systemCredit Risk Assessment ProcedureTo identify, measure, monitor and minimise the Credit risk, a CreditRisk Management Cell (CRMC) has been formed at Central Office.To formulate clear policies for presentation of credit proposals,financial covenants, rating standards and bench marks, assetconcentration, etc a Credit Policy Committee (CPC) has beenconstituted which is headed by Executive Director with thefollowing Executives as members1. General Manager-Southern Territory2. General Manager-Northern Territory3. General Manager-Priority Credit4. General Manager-Treasury5. General Manager-Credit Support/CRMC6. Chief Economist (proposed incumbent)In conformity with RBI guidelines on Credit Risk Management, amulti-tiered credit approval system namely “Approval grid” hasbeen constituted both at Central Office level and Regional Officelevel. While fresh proposals over the powers of SRM/CRM/GM(Heading the region) up to the powers of GMs’ Committee haveto be routed through Approval grid at RO, all fresh domestic creditproposals above the powers of GMs’ Committee and OverseasCredit proposals above the powers of GM overseas credit needto be routed through Approval Grid at CO. Proposals seekingenhancement above Rs. 5 crore also need be routed throughApproval Grid. In addition to this a multi layered discretionary powerstructure /delegated powers (Financial) is already in place.For constantly evaluating the quality of Loan Book and to bringabout qualitative improvement in credit administration, LoanReview Mechanism has been put in place. Loan ReviewCommittees have been constituted both at RO and CO level toreview the accounts over a cut off point.A sophisticated risk assessment model (RAM), developed byCRISIL, which takes into account diverse risk factors and ratescredit proposals /accounts on a ten point scale is in place forrisk rating the industrial borrowers with fund based limit of Rs. 4crore and above.Portfolio/Relationship managers have been appointed by Territoriesfor monitoring high value customers enjoying fund based limit ofRs. 20 crores and above.2. Project Finance Procedure
Consequent upon deregulation and liberalisation, the Bank,in order to increase market share and profit, has been
extending finance by way of term loans and DPGs to largesized projects, infrastructure projects and other industrialprojects. These term loans/DPGs either wholly or partiallyare considered by the Bank either as sole banker, or as abank under multiple banking or as a consortium leader ormember in a consortium of Banks.2.1. Policies
Detailed policy has been spelt in Bank Loan Policydocument on project financing. Medium term/long term
44
5. Guarantees given by the BankTha Bank gives guarantees to third parties in the normalcourse of business. Providing guarantees is a fee-basedactivity for the Bank. The guarantees issued by the Bankhave been disclosed in the Prospectus under contingentliabilities. These guarantees represent contingent liabilitieswhich are due and payable during the period of guaranteesand the claim period, if any. The issuance of each guaranteeis subject to detailed appraisal of the credit worthiness ofthe party on whose behalf guarantee is issued, the need forthe guarantee from the viewpoint of the party’s business, thebeneficiary of the guarantee, as also an examination of thetext of the guarantee document in order to remove onerousclauses. Depending on the risk perception of the Bank withregard to the transaction, securities by way of cash margin/deposits/any other securities are taken. The issuance ofletters of guarantee is subject to guidelines of Reserve Bankof India issued from time to time.
Non-Financial RiskMarket Risk: The Asset Liability Management committee looksafter the structural liquidity mismatch within the risk parameterslaid down by the bank. The committee also takes care of interestrate risk, liquidity risk, equity risk, maturity mismatch risk and othertype of risks such as foreign exchange rate, equity pricing andcommodity pricing etc.Operational risk: Operational risk is the result of failure ofsystems in the Bank due to certain reasons like fraudulentactivities, natural disaster, human error, commission and sabotageetc. For mitigating and controlling the same, Bank has a strongand established internal control system. Apart from that a separatedepartment formulates and monitors delegation of duties andresponsibilities.Risk Based Supervision By RBI: The Reserve Bank of Indiahas announced its intention to switch over to Risk basedSupervision (RBS) of banks. The Bank has been selected as oneof the Banks for the pilot scheme being undertaken by ReserveBank of India. Our bank has initiated necessary steps in thisdirection.Internal Control System in the BankInternal InspectionBranches/offices of the Bank are subjected to Regular Inspectionby internal inspecting Officials at periodical intervals of 12/18months. The Inspection Reports of branches/offices under thejurisdiction of Regional Offices are scrutinised and the broad thrustareas are taken up with the ROs concerned for speedyrectification. In respect of Branches rated ‘Unsatisfactory’, a briefsummary is placed before the higher authorities, and theobservations of the higher authorities are taken up with thebranches for compliance. Similar is the case with Special Reports,which the Inspecting Officials submit from the spot itself in caseof some serious type of irregularity observed during the courseof inspection, for which urgent remedial steps are warranted toprotect the interest of the Bank. Moreover, the progress towardsupgradation of ‘Unsatisfactory Branches’ is placed before the AuditCommittee of executives and observations/suggestions arepromptly taken up for implementation.In order to strengthen the internal inspections, the Bank has setup 2 regional inspectorates in Delhi and Mumbai during the year2002-2003.System AuditAll branches are subjected to system audit every year by theregional office concerned, to ensure that Bank’s laid downsystems and procedures in vital operational areas are dulyfollowed. Internal Inspectors/Concurrent Auditors also point out ifany deficiency is observed on this score during the course oftheir inspection of branches/offices, so that prompt remedialmeasures are taken.
Concurrent AuditDuring the period ended 31.03.2003 the concurrent audit covered247 branches accounting for 56.10% of deposit portfolio and59.20% of advances portfolio as against RBI stipulation of 50%against each category.Revenue AuditDuring the period ended 31.03. 2003 Revenue audit was carriedout in 790 branches, test check audit in 42 branches and stockaudit in 99 accounts.E.D.P. AuditDuring the year 2002-03 inspection has been conducted in 1042branches along with EDP Audit to ensure safety, security andintegrity of data, so as to achieve the organisational goalseffectively and efficiently.Dealing Room Inspection: Dealing rooms are inspected eachquarter to ensure that systems and procedures & riskmanagement tools prescribed by the management are adheredto.Other Special InvestigationWhenever warranted, Special Investigation is also conducted atthe Branch/Office concerned, to unearth any fraud/forgery etc.and plug the loophole.Vigilance MechanismThe Bank has a well-organised vigilance set-up to take care ofthe vigilance issues efficiently and effectively. Vigilancemechanism pursued by the Bank to contain fraud/forgery andmalpractices in the Bank has been quite effective. The guidelinesissued by Central Vigilance Commission/RBI/GoI in respect ofvigilance matters are promptly implemented and adhered to.Special emphasis is given to expeditious completion of disciplinarycases. Special emphasis is also laid on Preventive Vigilance andEducative Vigilance so as to ensure observance of the prescribedsystems and procedures at field level and augment awarenessabout the need and implication of Preventive Vigilance among therank and file. Training programmes for the employees on internalcontrol and preventive vigilance are regularly held at the Bank’straining centre. Periodicals on vigilance are brought out. Apart fromroutine inspection/audit, surprise vigilance Inspection of branchesis conducted on an ongoing basis.HousekeepingHousekeeping, which includes balancing of books, is constantlymonitored and is generally satisfactory. Inter-branch reconciliationwas given focussed attention during the year and the lead-timewas maintained at less than three months. The Bank hasestablished systems and procedures for balancing of books ofaccounts for which specific guidelines have been provided to thefield functionaries for proper house keeping. At present about0.35% of the branches are carrying arrears in balancing of booksfor rectification measures are being taken. The Bank hascentralised system of data processing and reconciliation of inter-branch transaction. Now with the decentralised process, the datacreation for inter-branch transaction is done at regional level.Matching reconciliation is done on a monthly/quarterly basisthrough IBR software at its Head Office.
XI. SUBSIDIARIES AND REGIONAL RURAL BANKSSPONSORED BY IOB
Subsidiary CompaniesIOB Properties Pte Limited, Singapore is the only fully ownedsubsidiary of IOB. It is not listed on any stock exchange.IOB PROPERTIES PTE LIMITEDThe Bank promoted a wholly owned subsidiary in the name ofIOB Properties Pte Ltd. in Singapore. It was incorporated on15.04.1983. The purpose was to bid for a parcel of land auctionedby Urban Redevelopment Authority, Singapore for constructing abuilding to house the Bank’s branch as the local laws did not permita foreign bank to own such properties in Singapore. Otherwisethe subsidiarydoes not have any commercial activity. The financialinformation on the subsidiary for the last three-year is givenhereunder:
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(SGD in million, Indian Rs. in crores)
Balance Sheet as on 31st March 2001 2002 2003
In SGD In Rs. In SGD In Rs. In SGD In Rs.Share Capital 20.600 53.25 20.600 54.63 20.600 55.47Accumulated losses -13.070 -33.79 -11.276 -29.91 10.951 -29.49SHAREHOLDERS’ FUND 7.530 19.46 9.324 24.73 9.649 25.98Represented byFixed Assets 34.419 88.97 33.990 90.15 33.562 90.37Deferred Tax — — 1.478 3.92 1.281 3.45CURRENT ASSETSTrade Debtors 0.014 0.04 0.001 — 0.000 0.000Other Debtors 0.008 0.02 0.010 0.03 0.004 0.01Cash & Bank Balances 0.001 — 0.001 — 0.001 —
0.023 0.06 0.012 0.03 0.005 0.01Less: CURRENT LIABILITIESOther Creditors 0.405 1.05 0.437 1.16 0.414 1.11Owing to holding company 18.507 47.84 14.653 38.86 24.752 66.65Term loan - secured 8.000 20.68 11.000 29.17 —- —Income received in advance - - - - 0.001 —Total 26.912 69.57 26.090 69.20 25.167 67.76NET CURRENT LIABILITIES 26.889 69.51 26.078 69.16 25.162 67.75Other Non Current creditors — — 0.066 0.18 0.032 0.09NET ASSETS 7.530 19.46 9.324 24.73 9.649 25.98
PROFIT AND LOSS ACCOUNT 2001 2002 2003In SGD In Rs. In SGD In Rs. In SGD In Rs.
Turnover 2.092 5.41 1.967 5.22 1.962 5.28Other Income 0.005 0.01 0.002 0.01 0.001 —Total Income 2.097 5.42 1.969 5.22 1.963 5.29Interest on borrowings 1.033 2.67 0.816 2.16 0.605 1.63Management Fee 0.052 0.13 0.052 0.14 0.052 0.14Depreciation 0.438 1.13 0.429 1.14 0.429 1.16Audit fee 0.002 0.01 0.002 0.01 0.002 0.01Property tax 0.099 0.26 0.061 0.16 0.054 0.15Other expenses 0.280 0.72 0.293 0.78 0.299 0.81Total expenses 1.904 4.92 1.653 4.38 1.441 3.88Net Profit 0.193 0.50 0.316 0.84 0.522 1.41
(* One SGD = Rs.26.9266 as on 31.03.2003)
Regional Rural Banks sponsored by IOB
The Bank has sponsored three regional rural banks, viz. Pandyan Grama Bank in Tamil Nadu, Puri Gramya Bank and DhenkanalGramya Bank in Orissa. The RRBs together have 325 branches, deposits of Rs. 1190.76 crores and advances of Rs. 866.96 croresas on March 31, 2003. During the financial year 2002-03, the growth of deposits and advances was15.06% and 20.52% respectively.For the year ended March 31, 2003, RRBs sponsored by the Bank have posted combined profit of Rs. 17.11crores (without adjustingfor the combined accumulated losses). All the RRBs are covered under the restructuring programme of the Government of India.
Pandyan Grama Bank
Pandyan Grama Bank established on March 9, 1977 is having its Head office at Virudhunagar. The operational area of the bankcovers six districts viz. Sivagangai, Ramanathapuram, Virudhunagar, Tirunelveli, Tuticorin and Madurai. The bank has a network of162 branches with total staff strength of 885. The bank is making net profit for the last five years. During the year 2002-2003, thebank has earned net profit of Rs. 13.75 crores.
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The audited financial position of Pandyan Grama Bank for thelast five years is as under:
(Rs. in crores)
FY 1999 FY 2000 FY 2001 FY 2002 FY2003
Capital 1.00 1.00 1.00 1.00 1.00
Reserves & Surplus — — 0.33 0.69 5.03
Deposits 272.00 350.09 417.45 493.73 568.29
Advances 166.59 198.68 260.95 339.79 433.60
Priority sector advances 126.11 132.66 169.29 220.39 297.54
Profit/(Loss) 4.25 4.42 5.16 8.16 13.75
Productivity Per Employee 0.49 0.62 0.76 0.94 1.13
Transactions between Pandyan Grama Bank and IOB in the past three years
(Rs. in crores)
Particulars (As on March 31) 2001 2002 2003
Deposit with IOB 187.05 215.49 144.56
Refinance outstanding 21.90 11.52 NIL
Dhenkanal Gramya Bank
Dhenkanal Gramya Bank was established on 12.8.1981 with HeadOffice at Dhenkanal in Orissa. The operational area of the bankcovers two districts viz. Dhenkanal and Angul. The bank has anetwork of 51 branches with total staff strength of 213. The bankis making net profit for the last three years. During the year 2002-2003 the bank has earned net profit of Rs.2.88 crores.
The audited financial position of Dhenkanal Gramya Bank for thelast five years is as under:
(Rs. in crores)
FY 1999 FY 2000 FY 2001 FY 2002 FY2003
Capital 1.00 1.00 1.00 1.00 1.00
Reserves & Surplus — — — — —
Deposits 94.86 122.08 156.16 197.71 234.25
Advances 67.65 86.38 112.89 152.89 174.86
Profit/(Loss) 1.45 1.80 2.81 3.00 2.88
Accumulated losses 9.65 7.85 5.04 2.04 —
Productivity Per Employee 0.76 0.98 1.26 1.65 1.92
Transactions between Dhenkanal Gramya Bank and IOB in thepast three years
Rs. in crores
Particulars (As on March 31) 2000 2001 2002
Deposit with IOB 30.40 33.20 35.80
Refinance outstanding 4.75 4.28 4.42
Puri Gramya Bank
Puri Gramya Bank was established on 25th February 1976 withHead office at Pipli in Puri district in Orissa State. The operationalarea covers 3 districts viz. Puri, Khurda and Nayagarh. The bank
has a network of 112 branches with total staff strength of 624.During the year 2002-03 the bank has earned a net profit ofRs.0.48 crores.
The audited financial position of Puri Gramya Bank for the lastfive years is as under:
(Rs. in crores)
FY 1999 FY 2000 FY 2001 FY 2002 FY2003
Capital 1.00 1.00 1.00 1.00 1.00
Reserves & Surplus — — — — —
Deposits 193.02 253.75 314.07 343.44 388.22
Advances 105.15 151.67 196.46 226.43 258.50
Priority sector advances 66.72 102.60 134.74 174.54 189.03
Profit/(Loss) (5.72) 0.19 (1.49) 0.18 0.48
Productivity Per Employee 0.48 0.65 0.82 0.91 1.03
Transactions between Puri Gramya Bank and IOB in the pastthree years
(Rs. in crores)
Particulars 2000 2001 2002 2003
Deposit with IOB 105.22 84.40 106.37 51.08
Refinance Outstanding 6.30 9.00 9.60 3.00
Contingent liabilities of Regional Rural Banks
As on 31st March 2003, the contingent liabilities of Regional RuralBanks aggregated Rs. 3.99 crore as given in the following table:
(Rs. in crores)
Sl.No Name of the Amount of contingentGramin Bank liability
1. Pandyan Grama Bank 1.99
2. Dhenkanal Gramaya Bank 1.97
3. Puri Gramaya Bank 0.03
Total 3.99
As per the RRB Act, RRBs are exempted from payment of IncomeTax. They have complied with the CRR and SLR requirements.The above contingencies have arisen in the normal course of theRRBs.
ASSOCIATE BANK OF IOB
Bharat Overseas Bank Ltd.
Bharat Overseas Bank Ltd. (BOBL) was established to take overfrom Indian Overseas Bank’s Bangkok branch, in Thailand in 1973.BOBL was incorporated on 22.09.1973 and currently has 79branches. It is the only private bank permitted by the ReserveBank of India to have a branch outside India. It has been jointlypromoted by seven banks with stakes as follows: Indian OverseasBank (30%), The Bank of Rajasthan Ltd. (16%), The INGVysyaBank Ltd. (14.67%), The Federal Bank Ltd. (10.67%), The KarurVysya Bank Ltd. (10.00%), The South Indian Bank Ltd. (10.00%)and The Karnataka Bank Ltd. (8.67%).
47
The brief financial details of BOBL are given below:
(Rs. in crores)
Year Ending as on March 31 2001 2002 2003
Equity Share Capital 15.75 15.75 15.75
Reserves & Surplus 84.42 107.29 124.55
Total Income 182.35 216.60 211.83
PAT 17.50 22.75 28.52
Dividend (%) 12.00 15.00 16.00
Earnings Per Share (Rs.) 11.10 14.40 18.10
Net Asset Value (Rs.) 100.17 123.04 140.30
Transactions of IOB with Bharat Overseas Bank
(Rs. in crores)
Type of transactions 2000-01 2001-02 2002-03
Sale of securities 10.00 50.00 210.00
Purchase of securities Nil 85.00 235.75
Call money/Term money lent Nil 210.00 115.00
Interest received on Nil 0.69 0.02call money lending
Listed Ventures of Promoters
Since the Government of India is the promoter of the Bank, it isnot possible to give details of previous issues of its listed venturesbecause of the large number of such undertakings.
XII. ORGANISATION STRUCTURE & MANAGEMENT
Hierarchy and Responsibilities
The Bank functions under the supervision of the Board ofDirectors consisting of the Chairman and Managing Director, theExecutive Director and other directors as nominated by theGovernment of India and directors elected by shareholders. TheBank has a management structure comprising Head Office, theRegional Offices and the branches, covering major geographicalareas. Within the structure there is also a Field General Managerat Delhi Regional Office.
Board of Directors
Sr. Name, Age (in years), Date of Date of Expiry Residential OtherNo. Qualification and Experience Appointment of Current term Address Directorships
1 Mr. S.C.Gupta (56) 01.05.2001 01.05.2006 Overseas House, Director —M.Com, CAIIB 8,Sterling avenue United India Insurance37 years Nungambakkam Company Limited
Chennai 600 034 (w.e.f. 18.07.2003)
2 Mr. Rohit.M. Desai (58) 14.11.2002 31.07.2004 118, Sterling Road, —B.Com, CAIIB Nungambakkam37 years Chennai 600 034
3 Mr. Pradeep K. Deb (49) 23.05.2003 Until further 33 A /2, Civil Lines —M.Sc (Physics) orders Shamnath Marg26 years from Govt Delhi 110 054GoI Nominee
4 Mr. Anand Sinha (52) 31.07.2003 Until further 12 A, Bank House, —M.Sc. Physics, CAIIB – PART – I orders 156 Back bay26 years from Govt Reclamation,
Mumbai – 400 020.
5 Mr. Sankaran Srinivasan (51) 25.02.2003 24.02.2006 1 C, Quantas Trinity —B.Sc Apartments,28 years 32 West Road,Employees (award) Nominee West CIT Nagar,
Chennai 600 035
6 Mr. K. Ananda Kumar (48) 14.05.2002 14.05.2005 2/2, First main Road, —B.Com, CAIIB, A.C.A. RA Puram21 years Chennai 600 028Employees (Officer) Nominee
7 Mr. Prakash Agrawal (40) 05.11.2001 05.11.2004 B8,First floor —B.Com(H) F.C.A. Gitanjali Enclave17 years New Delhi 110 007GoI Nominee
48
8 Mr. Himmat Singh Singhvi (55) 08.05.2001 08.05.2004 Chabra PO —B.E. (Electrical) Dist. Baran,30 years Rajasthan 325 220GoI Nominee
9 Mr. Kiwalkar Nitin Moreshwar (44) 12.06.2002 12.06.2005 OM,19,Kshipra Vidya Sahakari BankB.Com, M.B.A. Sahanivas Society, Limited, Pune20 years Pune 411 052GoI Nominee
10 Dr. Harsh Mahajan (44) 08.12.2002 08.12.2005 B 20, Safdarjung Mahajan ImagingMBBS, MD (Radiodiagnosis) Enclave, Pvt. Ltd.,16 years New Delhi 110 029 Doon MRI Pvt. Ltd.Shareholders’ Nominee MRI Scans Pvt. Ltd.
11 Mr. Christopher Thomas (72) 08.12.2002 08.12.2005 1C,South Bay Terrace —Kurien 9, First Main RoadM.A., Ph.D, Post Doctoral Research Gandhi Nagar32 years Chennai 600 020Shareholders’ Nominee
12 Mr. S.K. Sehgal (64) 08.12.2002 08.12.2005 M-1 F Green Avenue —B.Sc Amritsar40 yearsShareholders’ Nominee
13 Mr. M.N. Venkatesan (48) 08.12.2002 08.12.2005 19/9, Krishnamachari —B.Com, F.C.A. Road,18 years NungambakkamShareholders’ Nominee Chennai 600 004
The directors of the Bank together hold 4100 shares in the Bank.
The Bank has taken initiatives in furthering corporate governance practices leading to greater transparency and better coordinationbetween the Board and Management and the members of the organisation. The Bank has constituted various committees of theDirectors in keeping with the existing guidelines of the Govt. of India and RBI as follows:
The cumulative expenditure on travelling allowance (TA), hotel/halting expenses (HA) and fees for directors in the last one year is asfollows:
Year ended March 31, 2003 Amount(Rs. in lacs)
Remuneration(Sitting fees paid to Directors) 0.75
TA incurred/paid to Directors 17.98
Hotel Expenses incurred by Directors 6.49
HA (Halting Allowance) paid to Directors 2.02
Total 27.24
Management Committee of the Board of Directors
The Committee exercises delegated authority for sanction of credit proposals, loan compromise/write-off proposals, major capital andrevenue expenses and reviews exercise of delegated authority by the CMD and the Executive Director. The Committee also reviewsthe performance of key areas like investments portfolio, non-performing assets and other important management decisions referredto the Committee by the Board.
Audit Committee of the Board of Directors
The Audit Committee comprises the Executive Director of the Bank, 2 official directors (GOI and RBI nominee) and 2 non-official non-executive directors, at least one of them being a Chartered Accountant. The present members of the committee are Mr. PrakashAgarwal, Director (Chairman of the committee), Mr. Rohit M. Desai (Executive Director), Mr. Pradeep K. Deb (GoI nominee), Mr.Anand Sinha (RBI nominee) and Mr. Nitin M Khivalkar (Director).
Management of the Bank
The overall supervision and control of the Bank’s functions rests with the Board of Directors which consists of the Chairman &Managing Director and Executive Director, both appointed by the GoI, other Directors representing the Government, Reserve Bank
49
of India, Shareholders, Employees and Officers of the Bank. The day-to-day affairs of the Bank are managed by the CMD, the ED, theBank’s General Managers, and Deputy General Managers who are assisted by a team of competent professionals.
Key Managerial Personnel
Name & Qualification Date of Joining Experience in Position Held Functional Responsibilitythe Bank the Industry
Mr. S.C. Gupta As ED On 28.12. 1999 & 37 years Chairman & Chairman & Managing DirectorM.Com, CAIIB CMD w.e.f. 01.05.2001 Managing Director
Mr. Rohit M Desai As ED on 14.11.2002 37 Years Execut ive Director Execut ive DirectorB.Com, CAIIB
Mr. VR. Kumarappan 29.07 .1963 40 Years General Manager Planning, Marketing & Development,M.Com Credit Card
Mr. AL. Chandramouli 29 .12 .1967 36 Years General Manager Merchant Banking, Premises,M.Sc. Insurance, IARD,CSSD
Mr. B. Swaminathan 26.12 .1968 35 Years General Manager Personnel, HRDD, IRD, Staff collegeM.Sc., CAIIB, B.L. & Western Territory, Board Services
Mr. V. Gomathinayagam 29.12 .1967 36 Years General Manager Priori ty CreditM.Com., B.L, CAIIB, Ph.D.
Mr. R. Krishnan 29.12 .1967 36 Years General Manager Southern Terri tory, Public RelationsM.A.
Mr. J.K. Gupta 26.08 .1968 35 Years General Manager Northern Terr i toryB.A.(COM), CAIIB-I
Mr. G. Narayanamurthy 06.12 .2000 39 Years General Manager Vigilance, On Deputation FromB.Sc.(Agri), Prig. Mgt. of Agri. (Chief Vigilance Officer) Canara Bank
Mr. R.K. Agarwal 03.11.1969 34 Years General Manager Legal & South Western Territory, ARDM.Com., CAIIB
Mr. M.K. Chaturvedi 03.11.1969 34 Years General Manager Eastern Territory & OLDM.A.(Lit)., M.A.(His)
Mr. G.S. Mittal 05 .09 .1968 35 Years General Manager RO (New Delhi)B.Sc., CAIIB
Mr. Sivaram Swamy 07.09 .1970 33 Years General Manager Funds, Accounts, Govt. Accounts,M.Sc., CAIIB., D-SA&DP Investors relat ion Cell , Currency
Chests and derivatives.
Mr. AL. Alagappan 05.03 .1966 37 Years General Manager Foreign Exchange, Precious Metals,B.Com., CAIIB Overseas credit, Derivatives
Mr. K.R. Nimbalkar 26 .12 .1968 35 Years General Manager CPPD, MSD, Risk management andM.Sc., M.Sc. (Tech), D-GER IBR
Mr. S.S. Sharma 03.11.1969 34 Years General Manager Inspection, Customer ServiceM.Sc., CAIIB
Note: Except CMD & ED, all key managerial personnel are working in the Bank since the start of their careers and are on the roll ofthe Bank as permanent employees.
The Key Managerial Personnel are entitled to the compensation & benefits as applicable to all the permanent employees of the Bank.All the Key Managerial Personnel are of the General Manager and higher grade and hence their compensation falls in the scale ofRs. 19340-420/2-21080-520/1-20700-600/1-21300 p.m. The other benefits include the festival loan, the housing loan, reimbursementof certain expenses etc. as per employees’ service rules. Other than CMD and ED, the key managerial personnel hold 13,700 sharesof the Bank.
Changes in the Key Managerial Personnel during the last three years (from April 1, 2000) are as under -
Name & Qualification Position Held Reason for change
Mr. R.V. Shastri Chairman & Managing Director Completed the tenure on 30.04.2001
Mr. S.C. Gupta Chairman & Managing Director He was earlier with IOB as ED and then appointedas CMD by the Government of India w.e.f. 01.05.2001.
Mr. R. Natarajan Executive Director He was earlier with IOB as GM and then appointedas ED by the Government of India w.e.f. 01.05.2001.Retired on completion of his tenure on 30.06.2002.
Mr. Rohit M. Desai Executive Director Appointed as ED by the Govt. of India on 01.07.2002
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Mr. R. Venkataramani General Manager Retired w.e.f. 31.10.2001
Mr. A. Subbiah General Manager Retired w.e.f. 30.06.2001
Mr. S.S. Madan General Manager Retired w.e.f. 30.04.2003
Mr. V. Rajagopalan General Manager Retired w.e.f. 30.04.2003
Mr. M. S. Kapur General Manager (Vigilance) Transferred to Punjab & Sind Bank
Mr. G. Narayanamoorthy General Manager (Vigilance) Appointed by the Govt., on Deputationfrom Canara Bank w.e.f. 06.12.2000
Human Resources
The total manpower of the Bank as on March 31, 2003 was24,297 comprising 6,889 officers, 12,999 clerks and 4,409substaff. Regarding recruitment of staff, the Bank had lastrecruited a batch of Probationary Officers in 2000 through BankingService Recruitment Board (BSRB). There has not been anyrecruitment since then, except compassionate appointmentstowards staff members who expired while in service.
The manpower position of the Bank for the last five years is asunder:
As on Officer Clerical Sub-Staff Total numberStaff of Employees
31.03.1999 8,237 14,876 5,029 28,142
31.03.2000 8,532 14,698 4,805 28,035
31.03.2001 7,668 13,324 4,849 25,841
31.03.2002 6,942 12,665 4,899 24,506
31.03.2003 6,889 12,999 4,409 24,297
The business per employee of the Bank has been on theincreasing trend. The position as on 31st March during the lastfive years is depicted in the table below:
(Rs. in lacs)
Y e a r 1999 2000 2001 2002 2003
B u s i n e s s p e r e m p l o y e e 1 0 4 117 1 4 1 1 7 5 2 0 4
Net p ro f i t per employee 0 . 1 7 0 . 1 2 0 . 4 2 0 . 9 1 1 . 9 3
Voluntary Retirement Scheme
In order to bring about rightsizing the manpower, the Bankintroduced the Voluntary Retirement Scheme in the year 2000. Inresponse to the scheme altogether 3,992 applications werereceived, out of which 3,405 were accepted by the Bank. Afterthis reduction of these employees, the operations and theperformance of the Bank have not been affected.
Human Resources Development
The Bank has accorded high importance to top priority to theHuman Resources Development and allied functions in order toupgrade the knowledge, skill and concept at every level in thecontext of the emerging realities.
In view of the new skills required at the changing market place,the Bank has strengthened its training plan, programmes andinfrastructure and has resorted to two-fold strategies to exposeits officers and employees of all strata to training anddevelopmental programmes in an ongoing sequence through sixinternal training institutes and by availing of external erudition, skilland proficiency from within the country and overseas as well.
Training and HR Policy
The HR Policy of the Bank seeks to have the right kind and mixof people at the right place and to develop systems and createan environment/platform wherein the employees realise theirpotential for their own betterment and organisational effectiveness.The Bank helps the human resource development and sharpenstheir skills towards realising the individual and organisationalobjectives and also acquires specialised skills in banking. The staffis given training to acquire required job knowledge for effectivelydischarging their day-to-day duties and also mould them toshoulder higher responsibilities and meet future challenges.
Information Technology
The Bank has made optimal use of technology to improvecustomer satisfaction. The Bank is the first public sector bank tohave computerized all the 1436 branches and 244 extensioncounters. For greater customer convenience the Bank hasprovided any time, anywhere banking through new deliverychannels like ATMs, mobile banking and Internet banking andTelebanking. In addition the Bank is providing remote login facilityto above 600 corporate customers to view their accounts.
The treasury operations, HRDD and inspections have been fullycomputerized. The IOB net connects 333 branches and all 39administrative offices. A wide number of applications are employedon the network like ABB, ATM, Mobile banking, Internet banking,E-mail, Corporate intranet and access to central data warehouse.
The Bank first introduced Any Branch Banking (ABB) in 1998 andMobile banking in 2000. The information systems security policyfor the Bank has been formulated and is being implemented. Auditsoftware is being done by in-house CISA qualified personnel aswell by external agencies.
XIII. SIGNIFICANT REGULATORY MATTERSRELATED TO THE BANK
VERMA COMMITTEE RECOMENDATIONS
The Verma Committee was set up to identify weak andpotentially weak banks in the country and for makingrecommendations for strengthening these banks andreducing systemic risk.
The Verma Committee has suggested seven parameters forassessing a bank’s strength/weakness covering three majorareas namely: 1. Solvency 2. Earning Capacity and 3.Profitability. These parameters are as follows:
Solvency Capital Adequacy Ratio, Coverage Ratio
Earning Capaci ty Return on Assets, Net Interest Margin
Profi tabi l i ty Ratio Ratio of operating profi t to average workingfunds, Ratio of cost to income, Ratio of staff costto net interest income (NII) + all other income.
The above ratios are well known parameters on which banks’performance and sustainability are judged. A study of these ratios
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in respect of a bank, historically or in comparison with its peers,gives a view of its growing strength or weakness over a periodas also its ability to compete against others in the market. Theworking group observed that based on the above analysis, publicsector banks could be classified in terms of their strengths orweakness under three broad categories:
1. Banks where none of the seven parameters are met.
2. Banks where all the parameters are met.
3. Banks where some of the seven parameters are not met.
Indian Overseas Bank has been placed amongst six banks inthe third category for compliance with CAR but non-compliancewith five or six of the remaining efficiency parameters for financialyear 1998 and financial year 1999.
The Working Group of the committee observed that Banksclassified in this category functioned below the required levels ofefficiency in both the years, typifying the persistence of causesthat would eventually manifest in weakness. In the opinion of thegroup these banks showed strong signs of distress and ran ahigh risk of slipping into the category of weak banks. These bankswere vulnerable to sudden changes that could arise in the externalenvironment.
The Bank has put in place the required systems to bring the entireoperations under the purview of Asset Liability Management. TheBank has stepped up the recovery efforts and the net NPA hascome down to 5.23%. The Bank has Risk ManagementDepartment in addition to a Credit Risk Management Cell. TheBank does not envisage impairment to bank’s solvency, earningcapacity or profitability.
Regulatory Supervision of RBI over various aspects of theBank
Reserve Bank of India (RBI) conducts inspection every yearunder section 35 of the Banking Regulation Act, 1949. For thefinancial year ending 31.03.2002 the inspection was completedon 20.08.2002. For the financial year ending 31.03.2003 theinspection is under way.
The following are the major aspects in which RBI concentrates:
� Changes in Management between last inspection and thepresent inspection
� The developments in the bank’s affairs since the last report
� Assessment of the Capital to the Risk Weighted Assets ratio
� Review of the Loan Policy of the Bank that includes:
� The Size and composition of the loan portfolio
� The exercise of the discretionary power by various layerof authority
� Credit appraisal
� Credit supervision
� Systems pertaining the Customer Rating and pricing ofthe Loans
� Review and renewal of credit facilities
� Dispersal of Risk
� Asset classification and provisioning
� Divergence in assessment of Loan Losses
� Staff accountability
� Review of the Investments Loan Policy of the Bank including:
� Size and Composition of the portfolio
� Adherence to the investment policy
� Compliance with the regulatory norms
� Adherence to other regulatory and internal guidelines
� Maturity patterns of the SLR investments and yieldthereon
� Review of the Non Banking Assets of the Bank
� Review of the Management which includes
� Working of the Board
� Functioning of the Management And Audit Committeeof the Board
� Organizational structure and its effectiveness
� Earnings appraisal
� Review of the Expenditure Management
� Impact of Income from para banking activities andsubsidiaries and Joint ventures
� Review of the Asset Liability Management which includes
� Functioning of the Asset Liability Management Committee
� Prudence in raising of the resources and theirdeployment
� Maturity profile of deposits
� Assessment of Liquidity Management
� Review of the Systems and Control which includes:
� Internal Inspection Policy
� Concurrent audit, Revenue Audit, Test Check Audit
� Computerisation and EDP audit
� Implementation of the various committees on inspection
� House Keeping
� Management
� Information systems
� Review of Vigilance mechanisms, customer service andcomplaints
� Foreign Exchange Management including
� Management of Nostro and Vostro
� Working of foreign branches
� Analysis of the areas pertaining to the fee based income
� Compliance review such as maintenance of SLR, CRR,Exposure ceilings etc.,
� Working on the subsidiaries of the bank
Inspection by RBI
RBI conducts an annual inspection of the Bank based on theaudited accounts. Simultaneously, RBI carries out inspection ofbranch/controlling offices on a selective basis. RBI also conductsoffsite surveillance of the branches of the Bank on a quarterlybasis. Discussions with the management of the Bank also form apart of the inspection and surveillance process.
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An inspection of IOB under section 35 of the Banking RegulationAct, 1949 was conducted by the Reserve Bank of India withreference to its position as on 31.03.2002. The Annual InspectionReport of the Reserve Bank of India has identified certainweaknesses in the system, operational irregularities and otherdeficiencies in their internal controls. The inspection of the Bankby RBI is a regular exercise and is carried out periodically for allthe banks and Financial Institutions. The reports of RBI are strictlyconfidential and the Bank has informed the RBI about the actionsalready taken and measures that are under implementation inrespect of observations made by RBI. The issues raised by RBIin the aforesaid report have been replied to by the Bank.
XIV. STOCK MARKET DATA
The Bank’s shares were listed with the Madras Stock ExchangeLimited, The Stock Exchange, Mumbai and National StockExchange of India Ltd. in Dec. 2000 after the maiden public issue.The shares of the Bank are not actively traded at the MadrasStock Exchange Limited . Hence the stock market data recordedat the Stock Exchange, Mumbai and National Stock Exchange ofIndia Ltd. is shown below.
a. High, Low and Average market prices of the share of the Bankduring the preceding three years:
31.03.2001 31.03.2002 31.03.2003BSE NSE BSE NSE BSE NSE
High 11.85 10.75 10.75 10.05 20.00 20.20
L o w 7.25 7.20 7.05 7.10 8.65 8.00
Average 9.28 8.96 8.63 8.64 14.67 14.77
b. Monthly High and Low prices for the last six months
MONTH BSE NSE
2003 High Low Avg. High Low Avg.
Feb 19.00 15.75 17.37 18.90 15.80 17.35
Mar 16.90 14.70 15.80 16.90 14.10 15.50
Apr 21.90 15.60 18.75 22.00 15.50 18.75
May 29.25 19.30 24.27 29.25 19.15 24.20
Jun 28.30 21.55 24.92 28.20 21.50 24.85
July 29.35 21.85 25.60 29.35 22.00 25.67
c. Number of shares traded on the days when the High and Low prices are recorded
NSE HIGH LOWDate Volume Rs. in Lacs Date Volume Rs. in Lacs
Dec.2000 to
Mar 2001 13.12.2000 1,80,712 18.24 20.03.2001 16,133 1.25
Apr 2001 to Mar 2002 18.02.2002 3,58,683 36.43 27.12.2001 12,700 0.91
Apr 2002 to Mar 2003 22.01.2003 12,76,815 246.70 01.04.2002 37,826 3.35
Feb 2003 04.02.2003 4,28,068 79.33 14.02.2003 3,06,147 48.90
Mar 2003 03.03.2003 2,29,978 38.28 25.03.2003 1,07,213 16.42
Apr 2003 09.04.2003 12,53,087 261.77 01.04.2003 89,776 14.20
May 2003 29.05.2003 34,43,096 954.97 02.05.2003 6,15,718 120.71
June 2003 05.06.2003 12,67,957 339.45 24.06.2003 3,60,163 79.38
July 2003 21.07.2003 29,13,780 836.29 02.07.2003 3,85,890 85.4
The closing market price immediately after the date on which the resolution of the Board of Directors approving the issue wasapproved i.e. on 24.02.2003 was Rs. 17.35 (NSE) and Rs. 17.30 (BSE)
d. The volume of securities traded in the last six months
Month No. of Shares
BSE NSE
Feb 03 16,62,375 59,33,036
Mar 03 8,02,209 29,64,442
Apr 03 28,95,675 1,02,08,559
May 03 92,40,765 2,76,63,358
Jun 03 46,61,528 17,51,1176
July 03 89,30,582 2,65,48,031
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XV. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL PERFORMANCE
Financial Highlights of the Bank for the last three financial years as per the audited balance sheets of the Bank are as given in thefollowing table:
Rs. in crores
Year ended March 31st 2001 2002 2003 % change from % change from2001 to 2002 2002 to 2003
Total Income 3095.83 3701.49 4005.81 19.56% 8.22%
Interest Income 2793.42 3170.69 3485.91 13.51% 9.94%
Other Income 302.41 530.80 519.90 75.66% (2.14%)
Expenditure 2789.23 3085.13 3211.68 10.62% 4.10%
Interest Expenditure 1912.67 2200.62 2264.44 15.05% 2.90%
Operating Expenditure 876.56 884.51 947.24 1.00% 7.03%
Profit before provisions & contingencies 306.60 616.36 794.13 101.02% 28.83%
Provisions & Contingencies 190.67 386.15 378.03 102.52% (2.11%)
Net Profit 115.93 230.21 416.10 98.56% 80.75%
Significant items of income and expenditure during 2002-03 (Comparison of financials for the year ended March 2003with March 2002)
Net Profit: Net Profit of the Bank increased from Rs.230.21 crorein 2001-02 to Rs. 416.10 crore in 2002-03 showing a growth of80.75%.
Interest Income: Total interest income increased fromRs.3,170.69 crore to Rs.3,485.91 crore. Of the components ofinterest income, income on advances improved from Rs.1,534.01crore in 2001-02 to Rs. 1,720.77 crore in 2002-03. Global NetAdvances of the Bank increased by 15.07% from Rs 15,162.34crore as on 31.03.2002 to Rs. 17,447.00 crore as on 31.03.2003.
Other Income: In view of increasing pressure on interest spread,the Bank considers income from non-fund/non interest businessequally important for generating additional income to improveprofitability. Other income of the Bank comprises income fromcommission, exchange and brokerage, income from investmenttrading and forex operations, dividend income and miscellaneousincome. These incomes are earned in the normal course ofbusiness of the Bank.
While the components of other income like commission and profiton exchange transactions showed rise, the total other income ofthe Bank showed decline mainly on account of amortisation ofthe premium on securities under held to maturity category andlower profit on sale of investments when compared to thepreceding year. This amortisation of premium on securities wasthe major reason for increase in loss on revaluation ofinvestments (by Rs.23.10 crore). Similarly profit on sale ofinvestments during 2002-03 was lower at Rs.244.32 crore asagainst Rs.257.38 crore in the previous year.
However, as mentioned earlier, among the individual componentsof the Bank’s other income, commission, exchange and brokerageshowed a rise by Rs.18.38 crore in 2002-03. Profit on exchangetransactions (net) increased by Rs.3.44 crore. Miscellaneous andother non-interest income also improved by Rs.3.43 crore.
Interest Expenses: Interest paid on deposits increased from Rs2,116.44 crore in 2001-02 to Rs 2,172.06 crore in 2002-03 withthe growth in global deposits from Rs 31,808.48 crore as on31.03.2002 to Rs 36,698.59 crore as on 31.03.2003.
Operating Expenses: During the year the Bank charged to Profit& Loss Account the entire amount of retirement benefits of leaveencashment under AS 15, issued by Institute of CharteredAccountants of India, aggregating to Rs.62.73 crore. However,the total staff cost increased only by Rs.59.93 crore. Non-staffoperating expenses marginally went up by Rs.2.80 crore. Thusthe total operating expenditure went up by Rs.62.73 crore.
Total Income: Total income of the Bank went up by Rs.304.32crore from Rs.3,701.49 crore in 2001-02 to Rs.4,005.81 crore in2002-03.
Total Expenditure: While the total income of the Bank went upby Rs.304.32 crore, the total expenditure of the Bank increasedonly by Rs.126.55 crore or from Rs. 3,085.13 crore to Rs.3,211.68crore.
Significant items of income and expenditure during 2001-02 (comparison of financials for the year ended March 2002with March 2001)
Net Profit: Net Profit of the Bank increased from Rs 115.93 Crorein 2000-01 to Rs 230.21 crore in 2001-02 showing a growth of98.57%.
Interest Income: Interest income from advances improved fromRs 1350.53 crore in 2000-01 to Rs 1534.02 crore in 2001-02.Gross Advances of the Bank increased by 15.78% from Rs13095.51 Crore as on 31-03-2001 to Rs 15162.34 crore as on31.03.2002.
Gross investments of the Bank increased by 28.02% fromRs 11770.66 Crore as on 31.03.2001 to Rs. 15069.16 crore ason 31.03.2002. Interest earned on investment also went up toRs 1673.74 crore in 2002-03 from Rs.1482.91 crore in 2001-02.
The net interest income of the Bank improved from Rs. 880.75crore in 2000-01 to Rs 970.07- Crore in 2001-02.
Other Income: Commission and exchange income of the Bankincreased from Rs. 178.48 Crore in 2000-01 to Rs. 191.23 in2001-02. Due to an active securities market profit on sale ofinvestments increased from Rs 53.84 crores in 2000-01 toRs. 257.37 crore in 2001-02. Consequently total other income ofthe Bank increased from Rs 302.42 crore in 2000-01 to Rs. 531.26crore in 2001-02. The Bank is aware of the need to increase non-
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fund non-interest income in order to improve overall profitabilityand is exploring various avenues to increase fee-based income.
Interest Expenses: Interest paid on deposits increased fromRs. 1,855.70 crore in 2000-01 to Rs. 2,116.44 crore in 2001-02due to growth in deposits from Rs 27,414.16 crore as on31.03.2001 to Rs 31,808.48 crore as on 31.03.2002.
Operating Expenses
Operating expenses could be contained because of the VRSscheme implemented during 2000-01. Staff cost declined byRs. 9.40 crores while other expenses went up by Rs. 17.40 crores,the rise due to occupancy and infrastructure costs includingdepreciation and insurance.
Other matters relating to the Operations of the Bank
Unusual or Infrequent events and transactions: No unusual orinfrequent events and transactions occurred in the last three years.
Significant economic changes that materially affected or arelikely to affect income from continuing operations: Changesin the interest rate structure that is any upward movement ininterest rate, is going to reduce the value of the investmentportfolio.
Future relationship between costs and revenue: While it isexpected that costs and revenues as a percentage would comedown simultaneously, the margin would be under pressure. Thenet margin may also be affected by increasing operating cost.
Extent of seasonality in the business: Bank’s business is notlikely to be affected by seasonality.
Non-dependence on a few customers: The Bank has adiversified credit portfolio to prevent any concentration inexposures both industry-wise and clientwise. The Bank has anadequately designed credit risk policy to ensure the preventionof excess exposure to few customers.
Competitive conditions: The Bank has 558 rural brancheswhere it has monopoly in business. The large network of ruraland semi-urban branches ensure that a huge captive businessautomatically flows in to the bank. In metro centres, the Bank facesa stiff competition from other Banks. But then, the Bank has beenconsistently achieving higher growth rates than the industry.
Servicing Behaviour: The Bank has been servicing all itsprincipal and interest liabilities on time and there have been nodefaults.
Material Developments
In the opinion of the Directors of the Bank, there have been nomaterial developments after the date of the last financialstatements as disclosed in the Prospectus, which would materiallyand adversely affect or are likely to affect the trading or profitabilityof the Bank or the value of its assets, or its ability to pay its liabilitieswithin the next twelve months, other than what has been alreadyset out elsewhere in this Prospectus.
Particulars Regarding Listed Companies
There is no other listed company under the same management.
XVI. BASIS FOR ISSUE PRICE
Quantitative factors
1. Adjusted Earnings per Share (EPS)#
Financial Year EPS (Rs.) Weight used
2000-01 2.45 1
2001-02 5.02 2
2002-03 10.61 3
Weighted Average 7.39
# After extraordinary items.
Based on the above Weighted Average EPS is: Rs.7.39
2. Price/Earning Ratio (P/E Ratio) in relation to theIssue price
Offer Price 24
Weighted Average EPS 7.39
P/E based on weighted average EPS 3.25
P/E based on EPS of 2002-03 2.26
Industry P/E Highest * 7.5
Industry P/E Lowest * 2.6
Industry P/E Average * 5.3
* Based on “Capital Market” Volume XVIII/II dated17.08.2003.
Adjusted Average Return on Net Worth (RoNW)#
Year RONW (%) Weight
2000-01 16.66 1
2001-02 26.60 2
2002-03 41.98 3
# After extraordinary items
Based on the above, Weighted Average RoNW is32.63%.
Minimum Return on increased Net Worth requiredto maintain pre-issue EPS
(Rs. in crores)
Offer Price (Rs.) 24
Adjusted Net Worth as on 31.03.2003 1,309.65
Issue Proceeds (Rs. in crores) 240
Post Issue Net Worth (Rs. in crores) 1,549.65
Post Issue EPS (Rs.) 03 8.66
Min RONW required to maintain 37.30Pre-issue EPS (%)
Adjusted Net Asset Value (NAV) per share
NAV as at 31.03.2003 (Rs.) Rs. 29.44
NAV after the issue (Rs.) Rs. 28.07
Offer Price (Rs.) Rs. 24
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Comparison of all accounting ratios of the Bank with industryaverage and accounting ratios of peer companies:
Company EPS P/E R O N W NAV
Syndicate Bank* 7.1 3.7 26.7 29.2
Andhra Bank* 9.8 3.6 40.3 27.9
Oriental Bank of 23.2 7.5 24.5 109.6Commerce*
Vi jaya Bank* 5.9 4.6 29.2 22.5
Allahabad Bank* 4.7 4.1 19.7 27.1
Industry Average** 10.1 4.7 28.1 43.3
Indian Overseas Bank 10.6 2.58 @ 41.98 29.4
* Based on “Capital Market” Volume XVIII/II dated 17.08.2003 withfinancial results of FY 2003.
@ Based on IOB’s closing market price of Rs. 27.35 at the BSEon 21.08.2003.
** Industry Average is a simple average of above multiples.
The information in respect of all the banks stated is sourced from“Capital Market”, and the methodology of computing the resultsgiven above for all the banks other than IOB by Capital Marketmay be different from the basis used in the case of IOB. The datafor IOB has been sourced from the Auditors Report and not fromthe Capital Market.
Qualitative factors
� Bank with 66 years of existence.
� The Bank is professionally managed with a track record ofprofitability
� The Bank has a large network of branches spreadthroughout the country that may enable it to raise fundscompetitively. The domestic network of the Bank stood at1670 offices as on March 31, 2003, which included 1427branches and 243 extension counters.
� The Bank has also opened specialised branches to cater tothe needs of industrial finance, trade finance personalbanking, international banking, NRIs and small-scaleindustries.
� Capital Adequacy Ratio of 11.30 % as on 31.03.2003 isabove minimum of 9% prescribed by RBI.
� The Bank’s training infrastructure consists of a Staff College,9 Staff Training centres and a Rural Banking Training Centre.
� Product portfolio includes trade finance, consumer loans, agri-business consultancy services, insurance marketingservices, demat services, credit cards, kisan cards etc.
� Consistent Deposits growth – Deposits have grown by aCAGR of 13.75% during the last 5 years.
� Consistent Advances growth – Gross Advances have grownby a CAGR of 14.24% during the last 5 years.
The Lead Managers believe that the issue price of Rs.24 isjustified in view of the above qualitative and quantitativeparameters. The investors may also want to peruse the RisksEnvisaged by Management and the financials of the Bankincluding important profitability and return ratios, as set outin the Auditors Report in Part II of the Prospectus to have amore informed view about the investment proposition.
XVII. OUTSTANDING LITIGATION, DEFAULTS AND MATERIAL DEVELOPMENTS
The litigation in which the Bank and or its subsidiaries and sponsored institutions involved are classified into 3 categories:
1. Cases filed against the bank
2. Cases filed against the Bank’s subsidiaries and sponsored institutions
3. Disputed Tax Liabilities
The details of the cases filed against the Bank as on 18.08.2003 and which are outstanding as on date:
There are 611 cases against the Bank with monitory relief amounting to Rs.11.40 crores claimed therein against the Bank. Theamount claimed does not exceed Rs.1 crore, except in 7 cases. The details of the case where the amount involved is more thanRs. 1 crore is as below:
DETAILS OF THE CASE REMARKS
Branch: Defence Colony The suit was filed by the borrower to recover damages for non-sanctionUttam Singh Duggal & Company, June 1989 of additional credit facilities to them. The Bank has also filed recoveryCase No. CS 517/91 suit for Rs.104.14 crores against the borrower on behalf of IOB, EximClaimed amount : Rs.171.88 crores Bank and United Bank of India on 01.10.1991. The trial of both these
cases before DRT Kolkata has been ordered. Records have beentransferred from High Court to DRT, Kolkata.
Branch: Malda The borrower filed counter suit for damages for non-sanction of requiredKadambini Cycle Industries, August 1996 credit facilities by the Bank in retaliation to banks recovery suit filedCase No. MS 37/96 before DRT, Kolkata on 04.04.1996 for Rs.17.63 lakhs.Amount Involved: Rs.1.96 crores
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Branch:Agartala The suit for damages for non-sanctioning of required credit facilities byBD Pipes: November 1997 the Bank has been filed by the borrower as a counter to the bank’sCase No. MS 162/97 recovery suit for Rs 27.32 lakhs filed in July 1996. The suit is in theAmount Involved: Rs.4.00 crores stage of arguments.
Branch: Kalbadevi Road, Mumbai Case for excess debits made in the account and certain credits notWeld Equipment : April 1997 given in the account during 1976-1986. The Bank has filed written suitCase No. 1440/91 in the suit and it is yet to come up for trial.Claimed Amount: Rs.1.20 crores
Branch: Free School Street, Kolkata The party has claimed damages for non-sanctioning of the requiredMB Developers Pvt. Ltd., July 1999 credit facility by the Bank. The suit is in summons stage. The BankCase No. 45/99 holds a recovery certificate issued by the DRT, Kolkata for recoveryAmount Involved: Rs. 1.05 crores of its loan dues of Rs. 35.62 lakhs.
Case No. 60 Purchase of 11.5% 2009 GoI security for Rs. 50 crores from CanaraClaim from the Custodian Appointed under Bank with contracted rate Rs.100.35 and Delivery Rate ofSpecial Courts (Torts) Act 1992 101.55.Difference Rs.60 lakhs paid in excess by the Bank wasTotal amount claimed from the Bank Rs. 60 lakhs received through Andhra Bank Payment order which is claimed by theplus interest from 1991 @ 15% p.a. custodian but not admitted by the bank. Custodian’saggregating Rs.168 lakhs. claim since dismissed by the Special court, Mumbai.
Case No. 27 Purchase of 11.5% 2006 GoI security for Rs.20 crores from CanaraClaim from the Custodian Appointed under Bank with Contracted rate of Rs.98.51 and Delivery Rate of Rs. 101.05.Special Courts (Torts) Act 1992. Total claimed Difference Rs.50.80 lacs paid in excess by the Bank was receivedfrom the Bank Rs. 50.80 lakhs plus interest from through Andhra Bank Payment order which is claimed by the custodian.1991 @ 15% p.a. aggregating Rs. 140 lakhs. Custodian’s claim since dismissed by the Special Court, Mumbai.
2. Cases filed against the Bank’s subsidiaries andsponsored institutions
Cases Against Bharat Overseas Bank Ltd
There are 34 cases of claims /suits filed against the Bank andthe amount involved as on 31.03.2003 is Rs. 12.04 crores. Asper the information provided to us by BOBL, only one case isabove Rs. 1 crore.
DETAILS OF REMARKSTHE CASE
Transchem Ltd; The company defaulted in repaying theSuit amount term loan installments and the borrowerRs. 10 crores was advised to regularize the same. TheDate of suit: borrower did not regularize the term loan29.11.1999 and did not avail the export facilities. ThePending before borrower filed a case against the bank inthe High Court Nov.1999 contending that since the bankof Bombay did not release the export facilities they
suffered the loss and claimed thedamages of Rs. 10 crores and the sameis pending. The borrower during 2002approached the consortium banks andoffered one time settlement and the samehas been approved by the banks also. TheNRI investor has to sign an MoU with theborrower and once this is complete a jointmemo will be filed before the DRT,Mumbai. One of the terms of the one timesettlement is that the claim against thebank would be with drawn.
IOB Properties Pte Ltd., Singapore
There are no cases involving criminal offences, securities related
offences, civil offences, statutory and other offences, and otherlitigations pending against the company as per the informationreceived from them.
Regional Rural Banks
There are no cases involving criminal offences, securities relatedoffences, civil offences, statutory and other offences, and otherlitigations pending against the three RRBs as per the informationreceived from them.
3 Disputed Tax Liability
Income Tax: The aggregate amount of tax involved in allcases filed against the Bank by the Income Tax authoritiesrelating to tax matter is Rs.74.14 crores. The major groundof appeal relates to the assessment years 1971-1972 to1997-1998. The major ground of appeal relates to taxing/disallowance of appreciation on investments the tax impactof which is estimated at Rs. 71.17 crores.
The appeals mentioned above filed by the Income Taxdepartment against the Bank have been taken up for hearingon various dates and are pending with the Income Tax tribunalat Chennai. Appeals filed by the Income Tax department forthe assessment years 1971-1972 to 1979-1980 are pendingbefore the High Court of Chennai for an amount of Rs.0.70crores which is included in the aggregate amount of Rs. 74.14crores mentioned above. The Bank is of the view that only alimited liability may arise on this account.
Interest Tax: The aggregate amount of tax involved in all theappeals filed against the Bank by the Income Tax authoritiesrelating to the Interest tax is Rs. 37.71 crores. These appealsrelate to assessments 1992-1993 to 1998-1999. The majorground of appeal relates to taxing of interest received onGovernment securities, the tax impact of which is estimated
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at Rs. 31.30 crores. The above mentioned appeals filed bythe Income Tax department against the Bank have been takenup for hearing on various dates and are pending with theIncome Tax Tribunal at Chennai.
Except as mentioned above:
No proceedings have been launched against the Bank forany of the offences under any enactment, irrespective ofwhether specified in Paragraph 1 of Part I of Schedule XIIIto the Companies Act. No such litigation or disputes arepending as on today and there are no defaults or outstandingstatutory dues.
There are no pending proceedings initiated for economicoffences. There are no penalties imposed by authorities. Nodisciplinary action/investigation has been taken by theSecurities and Exchange Board of India/Stock Exchangeagainst the Bank and its Directors.
The Bank has not defaulted in meeting statutory dues,Institutional dues and has made all payments/refunds ondebentures/fixed deposits. It has not defaulted on dues toholders of other debt instruments and preferenceshareholders.
There are no small-scale undertakings/creditors to which theBank owes any sum exceeding one lakh where payment isoutstanding for a period of more than 30 days.
Servicing Behaviour
There has been no default in meeting statutory dues,institutional dues and dues towards payment of interest orprincipal on due dates to holders of Bonds and FixedDeposits.
AGAINST THE DIRECTORS OF THE BANK
There are no outstanding litigations, disputes or penaltiesagainst the Directors of the Bank, including tax liabilities,economic offences, criminal or civil prosecution for anyoffence, irrespective of whether specified under anyenactment in Paragraph 1 of Part I of Schedule XIII, of theCompanies Act, 1956 or any other liability in their personalcapacities or as Director/Partner/Sole Proprietor in theCompany or any other company/firm.
There are no litigations against the Directors involvingviolation of statutory regulations or criminal offences. Nodisciplinary action has ever been taken by the Securities andExchange Board of India or Stock Exchanges and no penaltyhas been imposed by any authority. There is no suit pendingagainst the Directors in capacity as director or partner orsole proprietor in any other company/firm.
Other than as stated above, there are no disputes/litigationstowards tax liabilities or any criminal or civil prosecutionsagainst the Bank for any offence – economic or otherwise.No criminal proceedings have been launched against theBank under any of the enactment irrespective of whether ornot specified in paragraph 1 of part I of Schedule XIII of theCompanies Act.
Interest of Directors of the Bank
The directors of the Bank are interested to the extent ofshares held by them and/or by their friends and relatives orwhich may be subscribed by them and/or allotted to themby the Bank.
The directors of the Bank are interested to the extent of fees,if any, payable to them for attending meetings of the Boardor Committee and reimbursement of travelling and otherincidental expenses, if any, for such attendance as per theArticles of Association of the Bank.
The directors of the Bank are not interested in theappointment of or acting as Underwriters, Registrars andBankers to the Issue or any such intermediary registeredwith SEBI.
The directors of the Bank are not interested in any propertyacquired by the Bank within two years of the date ofProspectus or proposed to be acquired by it.
Save as stated above, no amount or benefit has been paidor given to the Bank’s directors or Officers since itsincorporation nor is intended to be paid or given to anyDirectors or Officers of the Bank except the normalremuneration and/or disbursement for services as Directors,Officers or Employees of the Bank.
XVIII. INVESTOR GRIEVANCE & REDRESSALSYSTEM
The Shareholder Grievances Committee consists of threemembers, two independent directors and the ExecutiveDirector. The committee is headed by a non-executiveindependent director elected by the shareholders. GeneralManager (Board section) is the secretary to the committee.The committee meets at least once a quarter and reviewsthe shareholders grievances redressal systems. As on31.07.2003, there are 189 complaints pending which are beingattended to. In respect of above, in 153 cases the Bank/Registrar are yet to receive their response/reply from theshareholders for issue of duplicate share certificates. Inrespect of other 27 cases for non-receipt of dividend, demanddrafts in lieu of lost dividend warrants were obtained and thesame had been forwarded to the shareholders.
Share transfers, dividend payment and all other investorrelated activities are attended to and processed at the officeof the Registrar & Transfer agent, M/s. Cameo CorporateServices Ltd. The Bank has also put in place the InvestorRelations Cell at its Head Office to look after the servicesneeded by the shareholders. Any communication,documents, complaints can also be sent to the followingaddress for redressal: Investor Relations Cell, IndianOverseas Bank, Central Office, 763, Anna Salai, Chennai-600 002.
The details of the Compliance Officer of the Bank are asfollows:
Mr. Sivaram Swamy
General Manager (Funds & Accounts),
Indian Overseas Bank
Head Office: 763 Anna Salai, Chennai 600 002
Tel: (044) 2841 9419, Fax: (044) 2852 3372
The investors can also contact the Registrars to the Issue,Cameo Corporate Services Ltd., (IOB Unit), Vth Floor,Subramaniam Building, 1, Club House Road,Chennai - 600 002 in case of queries/complaints, if any,regarding this issue.
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XIX. RISKS ENVISAGED BY MANAGEMENT &MANAGEMENT PROPOSALS (MP) TOADDRESS THE RISKS
Following are certain issues for the investors to considerbefore taking an investment decision in the offer. In someof the risks, reference page numbers have been provided,which can be used to obtain more details about the saidrisk.
Internal Risks
1. Contingent Liabilities
As on March 31, 2003 the contingent liabilities of the Bankwere at Rs.7,001.29 crores comprising claims against theBank not acknowledged as debts (Rs.7.36 crores), liabilityon account of outstanding forward exchange contracts(Rs.2,612.30 crores), guarantees on behalf of constituents(Rs.1,782.74 crores), acceptances, endorsements and otherobligations (Rs.2,329.61 crores) and others (Rs.269.28crores).
MP: The contingent liabilities have arisen in the normal courseof business of the Bank and are according to the prudentialnorms prescribed by RBI.
2. Various proceedings against the Bank relating to Income Taxamounting to Rs. 138.11 crores (including cases filed againstthe Bank by the IT authorities to the tune of Rs.74.14 crores)and Interest Tax amounting to Rs. 37.71 crores are pendingin appeal with the Income Tax authorities. The Bank has notmade any provision in this regard and adverse ruling, if any,shall affect the financials of the Bank.
MP: Appeals have been referred to concerned Tax authoritiesin respect of the above.
3. Profits of the Bank
The growth in Net Profits of the Bank from Rs.223.46 crorein FY 2002 to Rs.471.75 crore in FY 2003 (111.11%) canbe mainly attributed to treasury profits, which may not besustainable in future. The Bank made a profit of Rs. 244.32crores from sale of investments (treasury income) duringFY03.
MP: It may be noted that operating profit of the Bank hascome from diversified income streams comprising NetInterest Income, Profit on Sale of Securities and OtherIncome which account for 70%, 14% and 16% of the totaloperating profit respectively. Hence, a substantial part of thegrowth in operating profits is accounted for by Net Interestincome.
4. Non Performing Assets (NPAs)
As on 31.03.2003, the net NPAs of the Bank stood at 5.23%of its net advances amounting to Rs. 912.21 crores inabsolute terms. In the event of non-recovery of these assets,the Bank may have to provide for these NPAs in future, whichmight affect the profitability of the Bank in future. For details,investors are advised to refer to para ‘Asset Classification,Income Recognition & Provisioning’ on page 36 of theProspectus.
MP: The Net NPAs of the Bank have consistently beendeclining in percentage terms, from 6.32% as on 31.03.2002to 5.23% as on 31.03.2003 and the Bank has provided for
its NPAs in conformity with RBI guidelines. The Bank is takingsteps to reduce the proportion of non-performing assetsthrough aggressive recovery drives combined with improvedrisk management practices. Further, there have beensubstantial changes in the legislative and operatingenvironment enabling FIs and Banks to pursue recovery ofoverdues. Besides Debt Recovery Tribunal (DRT) set up forfaster settlement of recovery litigation, GoI has enacted ‘TheSecuritisation and Reconstruction of Financial Assets andEnforcement of Security Interest Act, 2002’ enabling FIs andBanks to securitise and reconstruct financial assets andenforce security more effectively. Reserve Bank of India hasformulated detailed guidelines for operation of the scheme.The Bank has issued notices under the Act to 1,830 parties/borrowers and recovered Rs.23.74 Crores from thoseborrowers. Thus, the Bank has been taking recourse to allthe available methods to recover its over dues from theborrowers.
5. Decline in return ratios
Yield on Investment of the Bank (excluding profit on sale ofinvestments) has shown a declining trend from 11.91% inFY1999 to 11.76% in FY2000, 11.68% in FY2001, 10.95% in2002 and 9.88% in FY2003. The Yield on Advances of theBank has decreased from 10.64% to 10.13% during the sameperiod. Average rate of interest earned on interest earningassets has fallen from 10.69% in 2001 to 9.85% in 2003.
MP: Yield on Investments and average rate of interest earnedhas come down because of the interest rate in generalcoming down. The continuous downward trend in the interestrates over last one year has been the major reason for declinein Yield on Investment of the Bank. For example, the yield on10 year GoI security, which was 11.2% as on 31.03.1999has fallen to 6.26% on 31.03.2003. As compared to this,decline of 494 bps (or 4.94%), the yield on investment(domestic) for the Bank has fallen by 203 bps (or 2.03%).
6. Asset Concentration
The top 5 industries (non-food) account for 19.80% of thegross credit exposure of the Bank as on 31.03.2003. Also,the top ten borrowers of the Bank account for about 8.61%of the gross total advances of the Bank as on 31.03.2003.The borrower specific and industry specific behaviour maypotentially affect the overall asset quality of the Bank. Anyadverse global trends on these industries will haveimplications on the financials of the Bank.
MP: The Bank has put in place a credit monitoringmechanism to monitor the performance of its borrowers,regularly perform appraisal and do the requisite follow up.The top ten borrowers of the Bank as mentioned above areStandard Assets as on 31.03.2003. As regards the industryconcentration, it has been the policy of the Bank to diversifythe assistance over different industry/promoter groups witha prudential cap of 10% to a single industry. Investors areadvised to refer to para ‘Industry-wise Classification’ on page31 of the Prospectus.
7. Credit Risk
The Bank’s main business of lending carries an inherentcredit risk, which involves inability or unwillingness of acustomer or counterparty to meet commitments in relation
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to lending, trading, hedging, settlement and other financialtransactions.
MP: The Bank takes adequate care to minimise such risksby having a well-diversified loan portfolio. The Bank alsofollows a comprehensive project/credit appraisal system andlending norms, which govern industry/client exposure. TheBank has put in place a credit rating system under whichthe borrowal accounts of Rs 2 lacs and above are rated onseveral parameters and the risk is priced with a suitablemark-up over PLR based on the credit rating. The Bank hasalso implemented an active Risk Management Policy aimedat mitigating various credit related risks. For other details onthe credit risk management process in the Bank, theinvestors may refer to the para ‘Risk Management’ on page42 of the Prospectus.
8. Outstanding Litigations against the Bank
There are 611 cases against the Bank with monitory reliefamounting to Rs.11.40 crores claimed therein against theBank. There are 7 cases in which the amount claimedexceeds Rs. 1 crore. For details, please refer to the para onLitigation on page 55.
9. Litigation against the Bank’s subsidiaries andsponsored institutions
Cases Against Bharat Overseas Bank Ltd: There are 34cases of claims/suits filed against the Bank and the amountinvolved as on 31.03.2003 is Rs. 12.04 crores. For details,please refer to the para on Litigation on page 55.
10. Regional concentration of the Bank
Indian Overseas Bank has a regional concentration insouthern and eastern parts of the country accounting forapproximately 75.27% of all branches in terms of numbers.The regional presence of the Bank may compromise itscompetitive position vis-à-vis its national level competitors.
MP: The regional presence of the Bank may not be ahindrance to its growth prospects. The Global deposits ofthe Bank have grown at a CAGR of 13.75% to Rs. 36,698.59crores and the Global Net advances have grown at a CAGRof 14.24% to Rs.17,447.00 crores during the past 5 years.The Bank has 1,427 branches and 243 extension countersas on 31.03.2003 with presence in all the states and also 6branches overseas. The Bank is endeavouring to increaseits presence in other parts of the country. Also, the Bankproposes to effectively utilise technology to increase its reachand presence. For details of geographical distribution ofbranches, investors are advised to refer to para‘Geographical Distribution of Branches’ on page 27 of theProspectus.
11. Asset Liability Position
A large portion of the funding of the Bank is in the form ofshort and medium term deposits. The asset liability positionof the Bank could be affected if the depositors do not rollover the deposits
MP: As per the normal behavioural pattern and pastexperience, a large portion of the deposits gets rolled over.The Bank feels that in the event of these deposits not beingrolled over, the fresh accretion of deposits would take careof the Asset Liability mismatches. In addition, the Bank hasthe cushion of Investments of Rs.12,825.94 crore in the long-
term (over 5 years) category, which can be utilized to correctany medium term mismatches. Moreover, the Bank has anAsset Liability Management system in place to activelymonitor and manage the duration and liquidity mismatches.For more details on the Asset Liability position refer to thepara ‘Asset Liability Management’ on page 38 of theProspectus.
12. RBI’s Annual Financial Inspection Report
The Annual Inspection Report of RBI on the financial positionof the Bank as on 31.03.2002 has identified certainweaknesses in the system, operational irregularities and otherdeficiencies in the internal controls.
MP: The Bank would like to clarify that the inspection of theBank by RBI is a regular exercise and is carried outperiodically by RBI for all the banks and financial institutions.The reports of RBI are strictly confidential and the Bank is indialogue with RBI in respect of observations made by RBI intheir report for previous years. RBI does not allow disclosureof its inspection report and that all the disclosures in theProspectus are on the basis of management and audit reportsof the Bank.
13. Contingent Liabilities of RRBs sponsored by the Bank
As on 31.03.2003, contingent liabilities of RRBs sponsoredby the Bank aggregated Rs.3.99 crores.
MP: The above contingent liabilities have arisen in the normalcourse of business of the RRBs.
14. Verma Committee Recommendations
The Verma Committee, which carried out a study of thebanking sector in 1998 and 1999, had suggested sevenparameters for assessing a bank’s strength/weaknesscovering three major areas namely, solvency, earningcapacity and profitability. Based on the above, IndianOverseas Bank was classified in the third category of banks,which complied with the Capital Adequacy requirement butdid not meet five or six of the remaining parameters for theyears 1998 and 1999. For an understanding of what thecategorisation signifies, investors may refer to para ‘VermaCommittee Recommendations’ on page 50 of the Prospectus.
MP: The Bank has put in place the required systems to bringthe entire operations under the purview of Asset LiabilityManagement. The Bank has stepped up the recovery effortsand the Net NPA as a % of Advances has come down to5.23%. The Bank has Risk Management Department inaddition to a Credit Risk Management Cell. The Bank doesnot envisage impairment to bank’s solvency, earning capacityor profitability.
15. Export Credit Target
The Bank has not met export credit target (12% of net credit)for the last five years. For more details, refer to para ‘ExportCredit’ on page 33 of the Prospectus.
MP: The non-achievement of this target has no negativeimpact on the working results of the Bank. RBI has not takenany punitive action against the Bank for non-achievement ofthe targets.
16. The number of branches of the Bank has reduced from 1,441in FY02 to 1,427 in FY03.
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MP:The Bank had reduced the number of branches by eithermerging or closing some of the loss making branches with aview to improve profitability
17. Tier I capital as a percentage of total risk weighted assethas come down from 6.16% in 2002 to 5.83% in 2003.
MP: Percentage of Tier-I capital has come down because asubstantial portion of the retained profit is allocated toInvestment Fluctuation Reserve, which is being treated asTier-II capital as per RBI guidelines.
18. The interest outgo on account of unsecured loans taken bythe Bank at high interest rates may adversely affect theBank’s future profitability.
MP: High cost borrowings could not be repaid as there is noforeclosure clause available. The percentage of high costborrowings to total liablities is less than 1% and as such itseffect on future profitability would be minimal. Further, theBank is also hedging its high cost liabilities through derivativesto reduce the cost thereof.
19. Risk in overseas operations
MP: The Bank has decades of experience overseas andhas put in place systems, procedures and policies tostreamline the operations of its overseas branches and towithstand any risk arising out of changes in policies of foreigngovernments, exchange rate fluctuations etc.
20. Utilisation of Funds
The utilisation of the funds proposed to be raised throughthe public issue is entirely at the discretion of the Bank andno monitoring agency has been appointed to monitor thedeployment of funds.
MP: The funds raised through the public issue are not meantfor any specific project and hence a monitoring agency maynot be required. The Bank is managed by professionalsunder the supervision of its Board of Directors. Further, theBank is subject to a number of regulatory checks andbalances as stipulated in its regulatory environment.Therefore, the management believes that the funds raisedthrough the public issue would be utilised only towardssatisfactory fulfilment of the ‘Objects of the Issue’ as statedon page 22 of the Prospectus.
21. The shares of the Bank are not actively traded at the MadrasStock Exchange .
MP: The Bank’s shares are listed on BSE and NSE besidesbeing listed on the Madras Stock Exchange. The shares ofthe Bank are regularly traded on BSE and NSE.
22. Any future offering by the Bank or its existing shareholdersmay dilute the holdings of the allottees of the present publicissue or may affect the market price of the shares of theBank adversely.
23. Prices of equity sharers of the Bank may fluctuate as a resultof several factors, including:
� Volatility in the Indian and Global Securities market.
� Results of operation and performance.
� Market for investment in the Banking sector.
� Performance in Indian economy.
� Significant development in India’s economic liberalization
and deregulation policies, specifically those related tothe Banking sector.
� Significant development in India’s fiscal andenvironmental regulations.
External Risks
1. Regulatory restrictions on the Bank and limitations ofthe powers of shareholders of the Bank
There are a number of restrictions as per the BankNationalisation Act and Banking Regulations Act,1949(Amended), which impede flexibility of the Bank’soperations and affect/restrict investors’ right. These are asunder:
i. The Banks can carry on business/activities as specifiedin the Act. There is no flexibility to pursue profitableavenues if they arise, in contrast with companies underthe Companies Act, where shareholders can amend theObjects Clause by a special resolution.
ii. In terms of Rule 8 of The Banking Regulation Act, 1949,the Bank is prohibited from doing trading activity, whichmay act as an operational constraint.
iii. In terms of Rule 17(1) of The Banking Regulation Act,1949, every banking company shall create a ReserveFund and shall, out of the balance of profit of each yearas disclosed in the Profit & Loss a/c prepared underSection 29 and before any dividend is declared, transferto the Reserve Fund a sum equivalent to not less thantwenty five percent of such profit.
iv. In terms of Rule 19 of The Banking Regulation Act, 1949there are some restrictions on the banking companiesregarding opening of subsidiaries which may deny theBank from exploiting emerging business opportunities.
v. In terms of Rule 23 of The Banking Regulation Act, 1949there are certain restrictions on the banking companiesregarding opening of new place of business and transferof existing place of business, which may hamper theoperational flexibility of the Bank.
vi. In terms of Rule 25 of The Banking Regulation Act, 1949each banking company has to maintain assets in Indiawhich is not less than 75% of its demand and timeliabilities in India which in turn may prohibit the Bank fromcreating overseas assets and exploiting overseasbusiness opportunities.
vii. There are restrictions in the Banking Regulation Actregarding,
a) Management of a bank including appointment ofdirectors.
b) Borrowings and creation of floating charge therebyhampering leverage.
c) Expansion of business, as the branches need tobe licensed.
d) Disclosures in the profit & loss account and balancesheet.
e) Production of documents and availability of recordsfor inspection by shareholders.
f) Reconstruction of banks through amalgamation.
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g) Further issues of capital including issue of bonusshares/rights shares for which prior MoF approvalis required.
viii. The financial disclosures in the Prospectus may not beavailable to the investors after listing on a continuousbasis.
ix. Various rights/powers of shareholders available underthe Companies Act in this regard are not available tothe shareholders of the banks. These rights includerights such as calling for general meetings, inspectionof minutes and other material records, application forrelief in cases of oppression and mismanagement,voluntary winding up, right to receive dividend within 42days etc.
x. As per Section 3 (2E) of the Bank Nationalisation Act,“no shareholder other than Central Government shallbe entitled to exercise voting rights in respect of anyequity shares held by him/her in excess of one per centof the total voting rights of all the shareholders of theBank”.
No banking company shall pay any dividend on its sharesuntil all its capitalised expenses (including preliminary,organisational expenses, share selling commission,brokerage, amounts of losses and any other itemrepresented by tangible assets) have been completelywritten off. The Bank has received an exemption from GoI,Ministry of Finance, Department of Economic Affairs (BankingDivision) vide gazette notification ref. F. No. 11/4/2003-BOAdated 22.07.2003 from the provisions of the said Section15(1) relating to the payment of dividend, for a period of fiveyears from the date of the notification.
2. Sensitivity to the economy and extraneous factors
The Bank’s performance is highly correlated to theperformance of the economy and the financial markets. Thehealth of the economy and the financial markets in turndepends on the domestic economic growth, state of theglobal economy and business and consumer confidence,among other factors. Any event disturbing the dynamicbalance of these diverse factors would directly or indirectlyaffect the performance of the Bank including the quality andgrowth of its assets.
3. Competition from existing and new commercial banks
Competition in the financial sector has increased with theentry of new players and is likely to increase further as aresult of further deregulation in the financial sector. The Bankmay face competition both in raising resources and indeploying them.
MP: The Bank has an established broad-based presence andhas been taking steps to enhance customer satisfaction byupgrading skills, systems and technology to meet suchchallenges. The Bank is attempting to add quality assets oncompetitive terms. The Bank is also taking steps to broadbase its product bouquet with a special emphasis onenhancement in the non-fund based income. On theresource-raising front, the Bank is actively endeavouring tobroaden its reach and raise resources through its widedistribution network of 1,427 branches and 243 extensioncounters and 6 branches outside India. For more details on
the business environment of the Bank, investors are advisedto refer to the para ‘Management Discussion and Analysisof Financial Results’ on page 53 of the Prospectus.
4. Changes in regulatory Policies
Major changes in Government/RBI policies relating tobanking sector may have an impact on the operations of theBank.
MP: The policy changes may provide both opportunities andchallenges for the Bank. The Bank has a long presence inthe banking sector, for more than 66 years and does notperceive policy changes to be a major threat.
5. Disintermediation in the financial markets:
Development of capital markets may result indisintermediation by current and potential borrowers wherebymany companies may access the markets directly, therebyreducing their dependence on the banking system.
MP: The Bank has, in recent years, launched several retaillending schemes and value added products so as to broadenits borrower base. Further, disintermediation brings with it theopportunity for the Bank to expand its fee-based activities.The Bank has been endeavouring to develop a presence inseveral financial services to earn fee based income byfocussing on businesses such as foreign exchange,treasury, investments, cash management, insurance,depository, debenture trustee etc., thus taking advantage ofthe disintermediation phenomenon.
6. Forex risk
Exchange Rate fluctuations may have an impact on theBank’s financial performance.
MP: As per RBI guidelines, banks are not allowed to keepopen position on their foreign exchange transactions beyondprescribed limits on a daily basis. Foreign exchangetransactions beyond such limits, if any, must be squared offat the end of each day. Hence, the risk from exchange ratefluctuations is minimised. The Board of Directors of the Bankhas also prescribed limits for gaps or mismatches inmaturities of Bank’s foreign currency assets and liabilitiesand forward transactions in foreign exchange. The Bankoperates within the limits fixed for gaps or mismatches inmaturities of Bank’s foreign currency assets and liabilitiesand forward transactions in foreign exchange, thus minimisingthe risks of mismatches in maturities and interest rates.
7. Interest rate risk
Interest rate volatility exposes the Bank to an interest raterisk or market risk. Such interest rate risk has a potentialimpact on net interest income or net interest margin as wellas on the market value of the fixed income securities heldby the Bank in its investment portfolio.
MP: These risks are inherent in the banking business.However, the Bank has put in place a system of regularreview of lending and deposit rates in order to minimise theinterest rate risk. The Asset Liability Management Committeesof the Bank reviews the risk on a regular basis. ContinuousRisk Management measures are initiated depending upon themovement in the market interest rates. The movement in theinterest rates is closely monitored for appropriate action. Formore details on the Risk Management procedures, investors
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are advised to refer to para ‘Risk Management’ on page 42of the Prospectus.
8. Operational Risk
Operational risk is a result of failure of operating system in abank due to certain reasons like computer break-downs,power disruptions, fraudulent activities, natural disaster,human error or omission or sabotage.
MP: For managing operational risk, the Bank has laid downwell-defined systems and procedures. The Bank has set upa separate department to improve the systems andprocedures to suit the changing environment. The Bank hasalso in place a strong internal inspection and audit system.For managing IT related risks, the Information SystemsSecurity Policy is in place. The Bank has an effective HRDdepartment, which formulates and monitors delegation ofduties and responsibilities at different levels.
9. Financial Statements in the Prospectus
The financial statements and derived ratios therefromcontained in the Prospectus are prepared/computed as perthe permissible accounting practices. While due care hasbeen taken to reflect the true economic reality regarding thefinancials of the Bank as far as possible, the investors maywant to make their own adjustments to the same beforearriving at an investment decision in the Issue.
MP: The financial statements and the derived ratios havebeen prepared in conformity to the extant guidelines and thesame have been certified by the statutory auditors of theBank. The Bank is also governed by the prudential norms ofRBI for income recognition, NPA provisioning etc.
NOTES TO RISK FACTORS
� Net worth (excluding revaluation reserves) of the Bank ason 31.03.2003 is Rs.1,300.52 crores.
� The present public issue of the Bank inclusive of premiumaggregates Rs. 240 crores at the price of Rs. 24/- per share
� The Book Value of the share as on March 31, 2003 isRs. 29.44 (face value of Rs. 10/-)
� Cost per share of the Bank to the Government of India isRs.10.
� During FY 1996-97, the Bank had adjusted accumulatedlosses of Rs. 1,000.00 crores, from its paid-up capital as on31.03.1997 by setting off the same against the paid-up capitalof the Bank
� Section 3(2B)(c) of the Bank Nationalisation Act provides thatthe paid-up capital may, from time to time, be increased bysuch amounts as the Board of Directors of the Bank may,after consultation with the RBI and with the previous sanctionof the Central Government, raise by Public Issue of equityshares as may be prescribed, so however, that the Central
Government, at all times, holds not less than fifty-one percent of the paid-up capital of each of the Corresponding NewBank. The Banking Companies (Acquisition & Transfer ofUndertakings) and Financial Institutions’ laws (AmendmentBill 2000) propose to reduce the minimum stake of theGovernment from 51% to 33%.
� The shareholders of the Bank do not have a right to receivedividend within 42 days as is available to companies underthe Companies Act.
� IOB Properties Pte, a subsidiary of Indian Overseas Bankhas entered into the following transactions with IndianOverseas Bank during the last three years:
a. IOB Properties Pte is availing of following limits fromIndian Overseas Bank.
(Rs. in crores)
Particulars Outstandingbalance
as on 31st March
2001 2002 2003
Cash Credit Limit 59.80 44.20 65.00
Outstanding48.11 38.02 64.33
b. The following are other transactions between IndianOverseas Bank and IOB Properties Pte. (Rs. in crores)
Year ended March 31st
2001 2002 2003
Rent paid by the Bank toIOB Properties Pte Ltd. 2.82 2.82 2.82
� For details of transactions between Indian Overseas Bankand the Regional Rural Banks (RRBs) sponsored by it, theinvestors are advised to refer to the para ’Regional RuralBanks’ on page 45 of the Prospectus.
� The financial information as contained in PART II under paraI to para IX including the notes to accounts, significantaccounting policies as well as auditors’ qualifications has beenduly certified by the statutory auditors of the Bank. As far aspossible, these audited numbers have been used forcomputation or derivation of other financial informationcontained in the Prospectus. However, such other financialinformation contained in the Prospectus except as containedin PART II under para I to para IX has been certified by themanagement of the Bank.
� In terms of recommendations of RBI Working Group on‘Consolidated Accounting and Other Quantitative Methods toFacilitate Consolidated Supervision’ (December 2001), allbanks, whether listed or unlisted, should prepare and discloseConsolidated Financial Statement (CFS) from the financialyear commencing from 01.04.2002 in addition to solo financialstatements at present.
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PART II
A. GENERAL INFORMATION
Consents
Consents in writing of the Lead Managers to the Issue, Directors,Auditors, Legal Advisor, Compliance Officer, Co-Managers to theIssue and Registrars to the Issue to act in their respectivecapacities have been obtained and filed, along with a copy of theProspectus with the Stock Exchange, Mumbai (the DesignatedStock Exchange), and such consents have not been withdrawnup to the time of delivery of the Prospectus with the said StockExchange.
The Auditors of the Bank have given their written consent to theinclusion of their Report in the form and context in which theyappear in the Prospectus. The consent of the Auditor for disclosingthe tax benefits available to the Bank and its Shareholders hasbeen obtained. Such consents and reports have not beenwithdrawn up to the time of delivery of the Prospectus.
Expert Opinion
Save as stated else where in the Prospectus, the Bank has notobtained any other expert opinion.
Changes In Directors during the last three years
The changes that have taken place in the Board of Directorssince April 1, 2000 are as follows:
Name of Director Reasons For Change Date ofand Position Held Change
R.V. Shastri Demitted Office as Chairmanand Managing Director 30.04.2001
S.C. Gupta Relinquished as ExecutiveDirector due to appointmentas Chairman andManaging Director 30.04.2001
Assumed Office as Chairmanand Managing Director 01.05.2001
R. Natarajan Appointed as Executive Director 01.05.2001
Usha Thorat Ceased as Director 24.07.2000
K.Kanagasabapathi Appointed as Director 24.07.2000
Arun Chandra Ceased to be a Director 01.01.2001
Ram Mohan Appointed as Director 01.01.2001
Himmat Singh Singhvi Appointed as Director 08.05.2001
Rammohan Ceased to be Director 19.03.2002
Usha Mathur Appointed as Director 20.03.2002
K.Kanagasabapathy Ceased to be a Director 26.12.2001
R. Gandhi Appointed as Director 27.12.2001
Prakash Agarwal Appointed as Director 05.11.2001
R. Natarajan Ceased to be ED 30.06.2002
Rohit M Desai Appointed as ED 14.11.2002
R.Gandhi Ceased to be a Director 10.06.2002
B. Ghosh Appointed as Director 11.06.2002
K. Nagappan Ceased to be a Director 24.02.2003
S. Srinivasan Appointed as Director 25.02.2003
K. Anandakumar Appointed as Director 14.05.2002
Nitin M Kiwalkar Appointed as Director 12.06.2002
Dr. Harsh Mahajan Elected as Director 08.12.2002
Christopher ThomasKurien Elected as Director 08.12.2002
S .K. Sehgal Elected as Director 08.12.2002
M.N Venkatesan Elected as Director 08.12.2002
Usha Mathur Ceased to be a Director 22 .05.2003
Pradeep K. Deb Appointed as Director 23.05.2003
B. Ghosh Ceased to be a Director 30.07.2003
Anand Sinha Appointed as Director 31.07.2003
Changes In Auditors
Given below are the changes in the Bank’s Auditors during thepast three years. Since the RBI appoints Auditors each year, thesechanges have been effected as per RBI’s approval.
Year Added/ Name of the ReasonRetired Auditor
2000-01 Retirement H.K. Chaudhary & Co. Completion of Term
Retirement J.L. Sengupta & Co. Completion of Term
Retirement S.N. Mukherjee & Co. Completion of Term
Appointment Bansal & Co.
Appointment Gupta & Co.
Appointment Bubber & Jindal & Co.
2002-03 Retirement S.N. Guha & Co. Completion of Term
Retirement Vardhaman & Co. Completion of Term
Appointment Amit Ray & Co.
Appointment Ved & Co.
Authority for the Present Issue
The issue of equity shares is being made pursuant to the sanctionof Government of India (GoI) in consultation with the ReserveBank of India (RBI) vide their letters no. F. No. 11/4/2003-BOAdated 30.05.2003, under Section 3(2B)(c) of the BankingCompanies (Acquisition and Transfer of Undertakings) Act 1970,as amended, the Resolution passed at the meeting of the Boardof Directors of the Bank (the Board), held on 22.02.2003 and theResolution passed by the shareholders on 18.07.2003.
It is to be distinctly understood that the sanction/approval of theGoI and RBI should not in any way, be deemed or construed thatthe Prospectus has been cleared or approved by them nor dothey take any responsibility either for the financial soundness ofthe Bank or the correctness of the statements made or opinionsexpressed in the Prospectus.
The Bank can undertake the activities proposed by it in view ofthe present approvals, and no further approvals from anyGovernment authority are required by the Bank to undertake theproposed activities.
Disposal of Applications And Application Money
The Board of Directors reserves in its full, unqualified and absolutediscretion without giving any reason, the right to accept or rejectany application in whole or in part. If any application is rejected infull, the whole of the application money received will be refundedto the applicant and where an application is rejected in part, theexcess application money received would be refunded to theapplicants by registered post/speed post (Refund orders up toRs.1500/- will be sent under certificate of posting) as far aspossible within 30 days from the date of closing of the subscriptionlist. Any delay in despatch beyond 30 days will entail payment ofinterest at 15% per annum.
Name of Director Reasons For Change Date ofand Position Held Change
64
The subscription received in respect of Public Issue will be keptin a separate bank account and the Bank shall not have accessto such funds unless approvals for dealing from all the StockExchanges, where listing has been proposed and approval of theChennai Stock Exchange for allotment has been obtained.
No separate receipt will be issued for the application money.However, the nominated branches of the Bankers to the Issue orthe Collection centres receiving the application form willacknowledge receipt of application by stamping and returning theacknowledgement slip given at the foot of each application form.
Procedure and Time Schedule for Allotment/Refund
In the event of oversubscription, allotment will be on aproportionate basis and made in consultation with the StockExchange, Mumbai which is the Designated Stock Exchange.
The Bank shall as far as possible complete allotment of sharesoffered to the public within 30 days of the closure of the Issue. Ifallotment is not made and/or the refund orders have not beendespatched to the investors within 30 days from the date of closureof the Issue, the Bank will pay interest @ 15% per annum for anydelay beyond 30 days till the date of allotment/despatch of refundorders. The Bank will despatch refund orders in excess ofRs.1500/-, by Registered Post/Speed Post at the applicant’s solerisk. Refund orders up to Rs.1500/- will be sent under certificateof posting, at the sole risk of the applicant. The Bank will provideadequate funds to the Registrars to the Issue for this purpose.The Bank shall despatch the share certificates/refund orders /cancelled stockinvests and complete demat credit within 2 workingdays of finalisation of the basis of allotment. The Bank shall submitlisting documents to the Stock Exchange within 7 working daysof finalisation of the basis of allotment. It shall despatch the letter(s)of allotment/letter(s) of regret/cancelled stockinvests/sharecertificates or refunds by Registered Post within 10 weeks ofclosure of subscription list.
In case of joint applications, refund/pay orders, if any, will be madeout in the first name and all communications will be addressed tothe person whose name appears first in the Application Form.
Allotment/Refund in Case of Applications made byStockinvest
The procedure for disposal of Applications made in cash/cheques/stockinvests/Bank drafts will apply, mutatis mutandis, except thefollowing:
In case of non-allotment, the Registrars to the Issue shall returnthe stockinvest directly to the investors.
On allotment/partial allotment, Registrars to the Issue shall fill inthe amount, which would be less than or equal to the amountfilled in by the investor before presenting the stockinvest to therespective issuing Bank for payment to the extent of allotment.
The Registrars to the Issue, pursuant to a Resolution of the Boardof the Bank on 18.07.2003 have been authorised to sign on behalfof the Bank for realising the proceeds of stockinvest of theallottees from the issuing Bank or to cancel the stockinvests ofthe non/partial allottees. The Registrars shall return the cancelledinstruments with non-allotment advice to the investors directly byregistered post within 10 weeks of the date of closing of thesubscription lists.
Multiple applications received with a single stockinvest are liableto be rejected.
Over-subscription and Basis of Allotment
In the event of the present issue of equity shares beingoversubscribed, the allotment will be made on a proportionatebasis and the basis of allotment will be finalised in consultationwith the Stock Exchange, Mumbai (the Designated StockExchange).
The drawal of lots (where required) to finalise the basis ofallotment, shall be done in the presence of a Public Representativeon the governing board of the DesignatedStock Exchange. TheExecutive Director/Managing Director of the Designated StockExchange along with the post-issue Lead Managers and theRegistrars to the Issue shall be responsible to ensure that thebasis of allotment is finalised in a fair and proper manner inaccordance with the SEBI Guidelines.
The allotment shall be on proportionate basis under thereservation for employees’ category as well as under the netpublic offer category, subject to allotment of Shares in marketablelots, and the basis of allotment would be arrived at as explainedbelow:
Applicants will be categorised according to the number of sharesapplied for.
The total number of shares to be allotted to each category as awhole shall be arrived at on a proportionate basis i.e. the totalnumber of shares applied for in that category (number ofapplicants in the category x number of shares applied for)multiplied by the inverse of the over-subscription ratio.
Number of shares to be allotted to the successful allottees will bearrived at on a proportionate basis i.e. total number of sharesapplied for by each applicant in that category multiplied by theinverse of the over-subscription ratio.
In all the applications where the proportionate allotment works outto less than 100 shares per applicant, the allotment shall be madeas follows:
Each successful applicant shall be allotted a minimum of 100shares.
The successful applicant out of the total applicants for thatcategory shall be determined by draw of lots in such a mannerthat the total number of shares allotted in that category is equalto the number of shares worked out as above.
If the proportionate allotment to an applicant works out to a numberthat is more than 100 but is not a multiple of 100 would be roundedoff to the higher multiple of 100 if that number is 50 or higher. Ifthat number is lower than 50, it would be rounded off to the lowermultiple of 100. All applicants in such categories would be allottedshares arrived at after such rounding off.
If the shares allocated on a proportionate basis to any categoryare more than the shares allotted to the applicants in that category,the balance available shares for allotment shall be first adjustedagainst any other category where the allocated shares are notsufficient for proportionate allotment to the successful applicantsin that category. The balance shares, if any, remaining after suchadjustment will be added to the category comprising of applicantsapplying for minimum number of shares.
A minimum 50% of the net offer of equity shares to the public willbe made available for allotment in favour of those individualapplicants who have applied for not more than Rs. 50,000 worth
65
of shares. This percentage may be increased in consultation withthe Stock Exchange, Mumbai depending on the extent ofresponse to the Issue from investors in this category. The balanceof the net offer of equity shares to the public shall be madeavailable for allotment to investors, including Corporate Bodies,Institutions and individual applicants who apply for more than Rs.50,000 worth of shares. The unsubscribed portion of the net offerto any one of the above two categories shall be made availableto the applicants in the other category, if so required and allotmentmade on a proportionate basis as per the relevant SEBIguidelines.
In the event of oversubscription, in the process of rounding off toensure allotment in marketable lots, the Bank will makeadjustments in the basis of allotment as may be necessary inconsultation with the Designated Stock Exchange (BSE), suchthat the Issue size does not exceed 10.8 crore equity shares.
The Designated Stock Exchange reserves the right to modify theabove stated Basis of Allotment within the overall conformity tothe extant regulations in this regard.
Interest on excess Application money
Payment of interest at the rate of 15% per annum on the excessapplication money, after adjusting the amount due on allotmentwill be made to the applicants, if the refund orders are notdespatched within 30 days from the date of closure of thesubscription list as per the Guidelines issued by the Governmentof India, Ministry of Finance vide their letter No. F-8/6/SE/79 dated21
st July 1983 and as amended vide their letter F/14/SE/85 dated
27th September 1985 addressed to the Stock Exchanges and as
further modified by SEBI’s circular SMD/RCG/33/1819/96 dated15
th May 1996.
Share Certificates
Share Certificates will be issued in market lots of 100 shares ofFace Value of Rs. 10 each and despatched through RegisteredPost within 10 weeks from the closure of the issue. Investors whoopt for shares in electronic mode will be intimated regardingallotment of shares and their respective accounts with theirDepository Participants (DPs) will be credited.
ISSUE MANAGEMENT TEAM
LEAD MANAGERS TO THE ISSUE
SBI CAPITAL MARKETS LIMITED202, Maker Tower ‘E’Cuffe Parade, Mumbai – 400 005Tel: (022) 218 9166, Fax: (022) 218 8332Email: [email protected]
DSP MERRILL LYNCH LIMITEDMafatlal Centre, 10
th Floor
Nariman PointMumbai – 400 021Tel. : (022) 5632 8000, Fax: (022) 2282 5103Email : [email protected]
KOTAK MAHINDRA CAPITAL COMPANY LIMITEDCeebros Centre Ist Floor39, Montieth Road, EgmoreChennai - 600 008Tel. : (044) 2857 2477, Fax: (044) 2858 9279Email : [email protected]
ALLIANZ SECURITIES LIMITEDC-2, Green Park ExtensionNew Delhi – 110 016Tel. : (011) 2696 0587, Fax: (011) 2656 2693Email : [email protected]
AK CAPITAL SERVICES LIMITEDFlat No. 5, Sagar Apartments6, Tilak MargNew Delhi – 110 001Tel. : (011) 2338 5704, Fax: (011) 2338 5189Email : [email protected]
CO-MANAGERS TO THE ISSUE
RR FINANCIAL CONSULTANTS LIMITED412-422, Indra Prakash Building21, Barakhamba RoadNew Delhi – 110 001Tel. : (011) 2335 2496, Fax: (011) 2335 3703Email : [email protected]
CENTRUM FINANCE LIMITED10
th Floor, Eucharistic Congress Building III
Convent Street, ColabaMumbai – 400 039Tel. : (022) 2202 3838, Fax: (022) 2204 6096Email : [email protected]
ASHIKA CAPITAL LIMITED7, Bipin Behari Ganguly Street4
th Floor, Kolkata – 700 012
Tel. : (033) 2215 9418, Fax: (033) 22159418Email : [email protected]
REGISTRARS TO THE ISSUE
CAMEO CORPORATE SERVICES LIMITEDSubramanian Building, No.1Club House Road, Chennai – 600 002Tel. : (044) 2846 0390, Fax: (044) 2846 0129Email : [email protected]
BANKERS TO THE ISSUE
INDIAN OVERSEAS BANKCentral Office, 763 Anna SalaiChennai - 600 002Tel. : (044) 2851 9438/2841 5702, Fax: (044) 2852 3372Email : [email protected]
LEGAL ADVISOR TO THE ISSUE
T. RAGHAVANAdvocateOld No.25, Mowbrays RoadAlwarpet, Chennai - 600 018Tel. : (044) 2499 1458 Fax: (044) 2499 6598
COMPLIANCE OFFICER
Mr. Sivaram SwamyGeneral Manager, Indian Overseas BankCentral Office, 763, Anna SalaiChennai – 600 002Tel. : (044) 2851 9419, Fax: (044) 2852 3372E-mail : [email protected]
66
AUDITORS TO THE ISSUE
PADMANABHAN PRAKASH & COChartered Accountants5, Smith Road, II FloorNorth Wing, Chennai - 600 002Tel. : (044) 2852 3905
GUPTA & COChartered Accountants53 A, Mirza Ghalib StreetKolkata – 700 016Tel. : (033) 2229 2638/6241, Fax: (033) 2229 1859
BUBBER JINDAL & COChartered Accountants3072, Pratap StreetGola Market, DaryaganjNew Delhi – 110 002Tel. : (011) 2327 2880, Fax: (011) 2328 4562
BANSAL & COChartered AccountantsE-95, Himalaya House23, Kasturba Gandhi MargNew Delhi – 110 001Tel. : (011) 2331 0579, Fax: (011) 2372 0213
AMIT RAY & COChartered Accountants5-B, Sardar Patel MargAllahabad – 211 001Tel. : (0532) 601 763, Fax: (0532) 466 154
VED & COChartered AccountantsAjanta Building, G.T. RoadGhaziabad – 201 001 (U.P.)Tel. : (0120) 2850 481, Fax: (0120) 2852 319
BROKERS TO THE ISSUE
All Brokers who are members of recognised Stock Exchangescan act as Brokers to the Issue.
67
B. FINANCIAL INFORMATION
AUDITORS’ REPORT
The Board of DirectorsIndian Overseas BankHead Office763, Anna SalaiChennai - 600 002.
Dear Sirs,
In terms of our appointment for the purpose of certification of the statement of accounts to be incorporated in the Prospectus proposedto be issued by the Bank in connection with the Public Offer of Equity Shares, we state as follows:
1. We have examined the Audited accounts of the Bank for the five consecutive financial years ended on 31.03.2003 being the lastdate up to which the accounts of the Bank have been made up and audited by the Auditors of the Bank of those respectiveyears.
2. We further report as follows:
a) The statement of Profit & Loss Account of the Bank for the five consecutive financial years ended on 31.03.2003 is as setout in Part I.
b) The statement of Assets and Liabilities of the Bank for the five consecutive financial years ended on 31.03.2003 are as setout in Part II.
c) The aforesaid Statement of Profit & Loss and Assets & Liabilities
i) read together with Significant Accounting Policies and Significant Changes in Accounting Policies as set out in Part III,Material Notes on Accounts and Notes on Adjustments as set out in Part IV and subject to Auditors’ qualification forwhich no adjustment could be carried out, as set out in Part V, have been drawn up after giving effect to adjustmentsand regrouping as and where, in our opinion, considered appropriate and
ii) have been prepared by the Bank in accordance with the guidelines issued by Reserve Bank of India from time to timeand subject to the limitations of disclosures required under the Banking Companies (Acquisition and Transfer ofUndertakings) Act, 1970.
3. a) The following is the subsidiary company of the bank:
S.No. Name of the Subsidiary Bank’s Holding (%)
1. IOB Properties Pte. Ltd. 100%
b) The statement of Profit & Loss, Assets & Liabilities of the above subsidiary company for each of the five consecutivefinancial years ended on 31st March 2003 read together with the Significant Accounting Policies and Notes on Accounts asexamined by the auditors of the subsidiary, together with the Auditors’ Report are annexed in Part VI for subsidiary company.
4. We further report that in respect of the five consecutive financial years ended 31st March 2003, the amount of dividend paid/
declared to the shareholders is given in Part VII.
5. We have also examined the accompanying statement of Key Accounting Ratios set out in Part VIII for the five consecutivefinancial years ended 31st March 2003 and the Statement of Capitalisation, Tax Shelter and Net Worth set out in Part IX andreport that in our opinion they have been correctly computed subject to consequential effect for non adjustment of qualificationsas detailed in Part V.
For and on behalf of
PADMANABHAN PRAKASH & CO. GUPTA & CO. BUBER JINDAL & CO.
Chartered Accountants Chartered Accountants Chartered AccountantsG. Padmanabhan M.K. Gupta S. Narayanan
Partner Partner Partner
BANSAL & CO AMIT RAY & CO VED & COChartered Accountants Chartered Accountants Chartered AccountantsRajendra Sharma Basudeb Bannerjee Rakesh K. Singhal
Partner Partner Partner
Place : ChennaiDated : July 05, 2003
68
PART – I STATEMENT OF PROFIT AND LOSS FOR YEARS ENDED 31ST MARCH
(Rs. in crores)
Particulars 1999 2000 2001 2002 2003
Income1 Interest Earned
1.1 Interest and Discount on Advances 1109.90 1200.78 1350.53 1534.01 1720.771.2 Income on Investments 907.66 1038.06 1232.78 1468.63 1654.631.3 Interest on Balances with RBI and other inter-bank lending 252.57 245.97 195.82 153.76 98.881.4 Interest on income tax 9.64 3.29 NIL NIL 2.511.5 Others NIL NIL NIL NIL NIL
2 Other Income2.1 Commission, Exchange & Brokerage 125.47 154.89 178.47 191.23 209.612.2 Profit on Exchange Transactions (Net) 72.87 41.06 42.41 51.96 55.402.3 Profit on Sale of Investments 22.02 45.09 53.10 257.38 244.322.4 Profit on Sale of Land, Building & Other Assets (Net) 0.66 0.47 0.45 0.70 1.402.5 Profit/Loss on revaluation of investments NIL NIL 0.74 -0.46 -23.552.6 Income from Dividends 19.19 16.46 14.29 14.28 9.122.7 Income from Bullion trading 11.50 5.97 2.99 2.84 0.962.8 Miscellaneous Income 18.36 18.72 24.25 27.15 31.76
Total Income 2549.84 2770.76 3095.83 3701.48 4005.81
Expenditure
1 Interest Expended1.1 On Deposits 1674.02 1771.08 1855.70 2116.44 2172.061.2 On RBI/Inter-Bank Borrowings 52.18 18.89 16.97 17.51 23.781.3 On Others 7.07 36.29 40.00 66.67 68.60Operating Expenses
2 Payments to and Provisions for employees 508.60 577.42 631.09 590.35 650.283 Amortisation of VRS expenditure NIL NIL 38.05 69.30 69.304 Rent, Taxes & Lighting 49.49 57.64 60.11 62.43 65.655 Insurance 12.84 14.14 14.92 17.75 20.026 Printing & Stationery 7.28 7.35 8.51 8.57 8.897 Advertisement 1.76 1.65 1.99 1.38 1.808 Postage, Telegrams, Telephones etc. 6.85 4.59 5.79 4.30 0.629 Repairs & Maintenance 2.22 3.25 3.00 3.99 4.2310 Law Charges 1.43 0.87 0.74 0.90 0.6311 Directors’ Fees, Allowances, Expenses 0.18 0.12 0.05 0.13 0.2712 Auditors Fees & Expenses (Including Branch Auditors) 3.71 3.92 4.09 6.36 5.9813 Other Expenditure 55.02 58.96 67.27 74.80 79.2814 Depreciation on Bank’s Properties 24.23 26.36 40.95 44.24 40.29
Total Expenditure 2406.88 2582.53 2789.23 3085.12 3211.68
Particulars 1999 2000 2001 2002 2003
Gross Profit before provision for tax & extraordinary items 142.96 188.23 306.60 616.36 794.13Less:Extraordinary items NIL NIL NIL NIL NILGross Profit before provision for tax 142.96 188.23 306.60 616.36 794.13Provisions and Contingencies ** 87.62 147.89 190.67 386.15 378.03
Net Profit for the year 55.34 40.34 115.93 230.21 416.10 Balance of Profit/(Loss) Brought forward NIL NIL NIL NIL NIL Less: Loss Adjusted against Bank’s Capital
(in terms of Govt. of India approval) NIL NIL NIL NIL NIL Prior Period Adjustment NIL NIL NIL NIL NIL Profit Available for Appropriations 55.34 40.34 115.93 230.21 416.10
69
(Rs. in crores)
Particulars 1999 2000 2001 2002 2003
APPROPRIATIONS Transfer to Statutory Reserve 16.60 12.10 34.78 59.85 124.83 Transfer to Revenue & Other Reserve 32.17 22.69 39.08 1.60 NIL
Transfer to Capital Reserve NIL NIL NIL 79.88 8.78 Transfer to/from Investment Fluctuation Reserve 1.07 NIL NIL 35.50 202.20 Dividends to Central Govt. 5.00 5.00 33.36 40.03 53.38
Dividends to Public NIL NIL 4.82 13.35 17.79Dividend Tax 0.50 0.55 3.89 NIL 9.12
Balance carried to Balance Sheet NIL NIL NIL NIL NIL
PART - II STATEMENT OF ASSETS AND LIABILITIES
(Rs. in crores)
AS AT 31ST MARCH 1999 2000 2001 2002 2003
A Assets
1 Cash in hand 216.92 238.29 235.44 288.05 309.842 Balances with RBI 2648.98 2683.42 2105.40 1924.49 2378.103 Balances with Bank in India 105.80 542.24 858.08 304.33 188.60
Balances with Bank outside India 2081.11 1217.93 760.92 746.05 410.904 Money at Call & Short Notice 6.71 7.00 126.41 361.70 306.705 Investments in India 8151.36 10078.91 11495.06 14737.08 18166.01
Investments outside India 164.70 171.55 275.60 332.09 437.00 Total Investments 8316.06 10250.46 11770.66 15069.17 18603.01 Advances
6 Advances in India 8865.07 10169.92 11857.43 13786.94 16068.11 Advances outside India 1252.40 1403.28 1238.08 1375.40 1378.89 Total Advances 10117.47 11573.20 13095.51 15162.34 17447.00
7 Fixed Assets 101.59 118.64 119.23 128.70 133.458 Other Assets 690.93 816.83 1052.10 1288.38 1218.05
Total (A ) 24285.57 27448.01 30123.75 35273.21 40995.65
B. Liabilities
1 Demand Deposits From Banks 19.95 28.97 74.18 52.90 90.57 From Others 2810.50 2578.72 2646.14 2605.70 3545.81
2 Savings Deposits 4331.23 5211.71 5931.04 6878.37 8162.753 Term Deposits
From Banks 335.54 286.54 278.50 341.38 239.71 From Others 14417.10 16211.81 18484.30 21930.13 24659.75
Total Deposits (1+2+3) 21914.32 24317.75 27414.16 31808.48 36698.59
4 Borrowings In India 140.89 125.46 128.93 130.73 314.07 Outside India 21.57 171.60 16.96 20.18 41.90 Total Borrowings 162.46 297.06 145.89 150.91 355.97
5 Other Liabilities & ProvisionsOther Liabilities & Prov. 1383.89 1973.51 1393.94 1791.36 1907.83
Subordinate Debts 282.74 282.74 407.74 557.74 732.74
Sub-total 1666.63 2256.25 1801.68 2349.10 2640.57
Total ( B ) 23743.41 26871.06 29361.73 34308.49 39695.13
C. Net Assets ( C = A - B) 542.16 576.95 762.02 964.72 1300.52
70
(Rs. in crores)
AS AT 31ST MARCH 1999 2000 2001 2002 2003
Represented by :D. Share Capital 333.60 333.60 444.80 444.80 444.80E. Reserves & Surplus 1. Statutory Reserve 66.88 78.98 113.76 173.61 298.44
2. Capital Reserve 0.36 0.36 0.36 80.24 89.02 3. Investment Fluctuation Reserve 18.45 18.45 18.45 53.95 256.14 4. Revenue & Other Reserves 122.87 145.56 184.65 212.12 212.12 5. Balance of Profit & Loss Account (Adjusted) NIL NIL NIL NIL NIL
Total ( E ) 208.56 243.35 317.22 519.92 855.72
F. Total ( D + E ) 542.16 576.95 762.02 964.72 1300.52
1999 2000 2001 2002 2003
G. Contingent LiabilitiesClaims against the Bank not acknowledge as Debts. 8.89 11.28 8.99 9.00 7.36Disputed income tax demand under appeal/references etc 64.82 147.82 79.55 121.84 138.11Liability for partly paid Investments 0.12 0.12 0.12 0.12 0.12Liability on account of outstandingForward Exchange Contracts 1175.86 1739.65 2238.62 1993.08 2612.30Guarantees given on behalf of constituents 1503.43 1373.03 1469.38 1516.84 1782.74Acceptance, endorsements and other obligations 913.28 1146.16 1272.32 1720.73 2329.61Other items for which the Bank is contingently liable 35.86 17.12 22.11 25.20 131.05
Total (G) 3702.26 4435.18 5091.09 5386.81 7001.29
BILLS FOR COLLECTION 976.60 1152.69 1309.88 1152.43 1357.13
** Details of Provisions & Contingencies (Rs. in crores)
Particulars (Year ended 31st March) 1999 2000 2001 2002 2003
1 Bad & Doubtful Debts 60.15 91.88 155.77 264.51 235.332 Depreciation on Investment/(Written Back) 1.67 5.30 14.97 14.44 52.593 Gratuity NIL NIL NIL NIL NIL4 Legal Expenses NIL NIL NIL NIL NIL5 Stationery Wastage NIL NIL NIL NIL NIL6 Fraud & Forgery 1.30 0.35 7.17 5.81 8.617 Wealth Tax 0.05 0.05 0.01 0.05 0.058 Intangible Assets NIL NIL NIL NIL NIL9 Debit Note Receivable NIL NIL NIL NIL NIL10 Pension NIL NIL NIL NIL NIL11 Interest Tax 18.00 18.30 -3.22 NIL 1.0212 Income Tax 4.34 6.23 9.91 19.42 48.4313 Deferred Tax Asset NIL NIL NIL NIL -30.4214 Deferred Tax Liability NIL NIL NIL 35.79 NIL15 Revenue Suspense NIL NIL NIL NIL NIL16 Standard Advances NIL 25.78 4.40 4.94 9.0117 Staggered provision on Standard assets NIL NIL NIL 9.05 10.0018 Staff Welfare Fund 1.50 NIL 1.00 2.40 5.0019 General Provisions 0.61 NIL NIL NIL NIL20 Other assets NIL NIL 0.66 22.03 25.7421 R & D Fund NIL NIL NIL 0.50 0.5022 Wage Arrears NIL NIL NIL NIL 12.0023 Restructured accounts NIL NIL NIL 7.21 0.17
Total: 87.62 147.89 190.67 386.15 378.03
71
PART – III: SIGNIFICANT ACCOUNTING POLICIES
1. General
The financial statements have been prepared on historicalcost basis unless otherwise stated and further on theassumption of going concern concept.
2. Recognition of Income and Expenditure
2.1 Income is recognised on accrual basis on performingassets and on realisation basis in respect of non-performing assets as per the prudential normsprescribed by RBI. Recovery in NPAs is first appropriatedtowards interest and the balance, if any, towardsprincipal except in the case of Suit Filed Accounts.
2.2 Interest on bills purchased is accounted for at the timeof recovery.
2.3 Commission & Exchange (other than on Letter ofguarantee and Government transactions) and LockerRent are recognised on realisation basis.
2.4 Income from consignment sale of precious metals(wholesale and retail) is accounted for as Other Incomeafter the sale is complete.
2.5 In respect of foreign branches, Income & Expenditureare recognized/accounted for as per local laws of therespective countries.
2.6 Expenditure is accounted for on accrual basis.
2.7 In case of Matured Term Deposits, interest is accountedfor as and when deposits are renewed.
3. Foreign exchange Transactions of Indian Operations
3.1 In the Balance Sheet, balances in NOSTRO accountsare stated at closing rate. FCNR/EEFC/RFC/FCA (allforeign currency deposits) and PCFC/WCFC/TLFC/FCL(all foreign currency lending) are stated at notional rates.Other Assets, Liabilities and Outstanding ForwardContracts denominated in foreign currencies are statedat the rates on the date of transaction.
Profit/Loss on valuation of all assets, liabilities andoutstanding forward exchange contracts at year-endexchange rates advised by FEDAI is taken to revenuewith corresponding net adjustments retained in “OtherLiabilities and Provisions”/“Other Assets Account”except in case of NOSTRO Accounts where theaccounts stand adjusted at the closing rate.
3.2 Acceptances, Endorsements and other obligationsincluding guarantees of Indian operations denominatedin foreign currencies are stated at the rates on the dateof transaction.
3.3 Income and Expenditure items in respect of overseasbranches are translated at the rates on the date oftransactions.
4. Translation of the Financial Statements of ForeignBranches
As per RBI guidelines, all Assets and Liabilities, both monetaryand non-monetary and Income and Expenditure items of theforeign branches are translated at the closing rate. The
resultant net exchange difference on consolidation is shownunder “Other liabilities and Provisions” in case of profit andcharged to Profit and Loss Account in case of loss.
5. Investments
5.1 Investments in India are classified into “Held-for-Trading”, “Available-for-sale” and “Held-to-maturity”categories in line with the guidelines from Reserve Bankof India.
5.2 Investments are classified as follows:
a) Government securities (including StateGovernment Securities)
b) Other Approved securities (such as Local Authorityand Approved PFI Bonds)
c) Shares (including Approved shares)
d) Debentures and Bonds
e) Subsidiaries
f) Others (Commercial Paper, Mutual Funds, etc.)
5.3 Investments in “Held-for-Trading” category are valuedat monthly intervals and any appreciation is ignored whileBook Value is brought in line with market value in caseof depreciation on the Balance Sheet date.
5.4 Investments in “Available for Sale” are marked to marketon a quarterly basis. Market Price/YTM as declared byFixed Income Money Market and DerivativesAssociation of India (FIMMDA)/Primary Dealers’Association of India (PDAI) are adopted for the purposeof valuation. Net depreciation in each of the classificationis provided for and the net appreciation, if any, is ignored.The book value of individual securities do not undergoany change due to valuation. In respect of shares, thelatest quote/Balance Sheet value is taken while NAV/Repurchase price is taken to value investment in MutualFund.
5.5 Investments in “Held to Maturity” category are valuedat cost unless the cost is more than the face value, inwhich case the premium is amortized over the periodremaining to maturity. In cases where the cost is lessthan the redemption value, such difference is ignored.
5.6 Investments in subsidiary/Associates, if any, are valuedas per revised RBI guidelines and any diminution, otherthan temporary nature, is provided for.
5.7 The Bank has followed the prudential norms onInvestments as per RBI guidelines.
5.8 For investments outside India, depreciation/amortisationare made according to the Laws prevailing in therespective countries. Apart from that necessaryprovisions are also made at Head Office.
6. Advances
6.1 Advances have been classified as ‘Standard’, ‘Sub-standard’, ‘Doubtful’ and ‘Loss assets’ and provisions forpossible losses on such advances are made as perprudential norms issued by Reserve Bank of India asunder:
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a. Sub Standard assets - 10%
b. Doubtful assets - 100% of unsecuredportion, plus 20%/30%/50% ofsecured portiondepending on theperiod for which theadvance hasremained doubtful.
c. Loss assets - 100%
6.2 A General provision @ 0.25% on Standard Advancesis made and an additional provision is also made onStandard Advances to meet 90 days norms by 2004.These provisions are shown under “Other Liabilities” asper RBI guidelines.
6.3 Advances are stated net of Provisions except Generalprovisions stated in para 6.2 above.
7. Transactions in Gold
Gold held on consignment, Gold Deposits, Borrowings inGold, Gold on Hand, Gold in transit, Gold with Assayer, GoldAdvances (Demand Loan and Packing Credit in gold) areaccounted at notional rate
8. Fixed Assets
8.1 Fixed Assets except revalue premises are stated athistorical cost.
8.2 Depreciation is provided on straight-line method at therates considered appropriate by the Management asunder :
Premises 2.5%
Furniture 10%
Vehicles and Office Equipments 20%
Computers 33 1/3%
Fire Extinguishers 100%
Depreciation on revalued portion of the fixed assets iswithdrawn from revaluation reserve.
8.3 Depreciation is provided for the full year irrespective ofthe date of acquisition.
8.4 Depreciation is provided on Land and Building as a wholewhere separate costs are not ascertained.
8.5 In respect of leasehold properties, premium is amortisedover the period of lease.
8.6 Depreciation on Fixed Assets of foreign branches isprovided as per the applicable laws prevalent in thosecountries.
9. Staff Benefits
9.1 Provision for gratuity and pension contribution is madeon actuarial basis and contributed to approved Gratuityand Pension Fund. In respect of Overseas branchesgratuity is accounted for as per laws prevailing in therespective countries.
9.2 Provision for encashment of accumulated leave is madeon actuarial valuation at the year-end.
10. Treatment of VRS expenditure
In accordance with the guidelines issued by Reserve Bankof India, the expenditure incurred under Voluntary RetirementScheme including gratuity and pension payable to employeeswho opted for Voluntary Retirement has been treated asDeferred Revenue Expenditure to be written off over a periodof five years starting from the year it is incurred.
11. Net Profit/Loss
Net Profit/Loss disclosed in the Profit and Loss Account isafter:
i) Provision for taxes on income and wealth in accordancewith the statutory requirements
ii) Provision for possible loan losses
iii) Write off of certain non-performing advances
iv) Depreciation/provision on investments
v) Other usual and necessary provisions
vi) General provision for Standard Advances.
Changes in Significant Accounting Policies between April1, 1999 and March 31, 2003.
I Investments
Investments were bifurcated as Permanent and Currentcategories upto 1999-2000. With effect from 2000-01, thebifurcation is “Held-for-Trading”, “Available-for-sale” and“Held-to-maturity” categories in line with the guidelines fromReserve Bank of India. The valuation of investments is donein line with Reserve Bank of India guidelines issued from timeto time.
In respect of investments in Subsidiaries and Associates,the same were valued at carrying cost till 1999-2000. Witheffect from 2000-01, the same are valued as per revisedRBI guidelines and any diminution other than temporarynature is provided for.
II Advances
Bank has been following guidelines issued by Reserve Bankof India in respect of classification and provisioning for NPAs.From 1999-2000, the Bank has been making generalprovision of 0.25% on standard advances which is shownunder “Other Liabilities” in terms of RBI guidelines. With effectfrom 2001-02, the Bank has also been making additionalprovision on standard advances to meet “90 daysDelinquency norms” by 31.3.2004. The amount so providedupto 31.3.2003 aggregating to Rs.19.05 crores is also heldunder “Other Liabilities”.
III Fixed Assets
Depreciation is charged on Fixed Assets excludingcomputers on Straight Line Method as per the ratesdetermined by the Management on the estimated useful lifeof the respective Asset. As per the guidelines of RBI,depreciation is charged on computers @ 33.33% on StraightLine Method with effect from the year 2000-01. In respect ofLeasehold properties, depreciation was charged @ 2.5%.However, with effect from 2002-03, premium on leaseholdproperty is amortised over the period of lease.
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IV Leave Encashment benefit
Leave encashment benefit on retirement which wererecognized on “Pay as you go” method till 2001-2002 isaccounted with effect from 2002-03 on actuarial valuationmethod.
NOTES ON ACCOUNTS
1. Reconciliation
a) The initial matching of entries received up to 31.3.2003at Head office for the purpose of reconciliation underinter branch transactions has been completed.Reconciliation of Inter Branch transactions is inprogress.
b) Reconciliation and adjustments relating to certain pendingitems in Drafts, Sundry Creditors, Suspense, Deposits,Clearing Adjustments and transactions between CentralOffice and branches, including Overseas Branches arein progress.
c) For fixed assets under various heads of accounts, incertain cases reconciliation/adjustments of differencesbetween balances as per fixed assets registers atControlling Offices and Schedules maintained at CentralOffice are in progress.
d) Reconciliation, confirmation and consequentialadjustments are also in progress/pending in case ofbalances with other banks including Nostro Accounts,borrowings from Banks, Financial Institutions andacceptances.
e) The consequential impact, if any, on the accounts dueto the above is not ascertainable.
2. Accounting of Foreign Exchange Transactions andtranslation of Financial Statements of OverseasBranches
a) The Bank has followed the guidelines of the ForeignExchange Dealers Association of India (FEDAI) and RBIin respect of the above in preference to AccountingStandard 11 on the subject issued by the Institute ofChartered Accountants of India.
b) A sum of Rs.47.05 Crores, being the reversal of theamount recognized as income towards the NetExchange Difference arising out of translation ofstatements of Overseas Branches in 1994-95 has beenincluded under “Other Liabilities” in accordance withdirectives of Reserve Bank of India.
3. Investments
(A) Pursuant to RBI guidelines on classification and valuationof Investments,
a) there was no profit on sale of securities from “Heldto Maturity” category during the year and as suchno amount was transferred to Capital Reserve(previous year Rs.70.31 crores).
b) premium of Rs.22.41 crores (previous yearRs.0.46 crores) has been amortized in respect ofsecurities held under “Held to Maturity” category.
c) an amount of Rs. 3.35 crores (previous yearRs 4.10 crores) and Rs. 30 crores (previous year
Rs 7.50 crores) towards depreciation has beendebited to “Provisions and Contingencies” in respectof securities held under “Available for Sale” and“Held to Maturity” category respectively.
d) Further, an amount of Rs.10.38 crores (previousyear Rs 8.30 crores) has been debited to“Provisions and Contingencies” in respect of non-performing investments.
e) The Bank has marked 92.12 % (previous year93.58%) of the total investments to market asagainst a minimum of 75% stipulated by RBI. Thisexcludes investments such as RecapitalisationBonds, investment in subsidiaries not reckoned forthe minimum ceiling stated above.
(B) Investments in India include,
a) securities for Rs 0.042 crores (previous year Rs0.042 crores) lodged with other institutions towardsfacilities availed from them and
b) securities of face value of Rs. 18 crores (previousyear Rs 6 crores, face value Rs 6 crores) are keptwith Clearing Corporation of India Ltd., towards initialmargin money required under the SettlementGuarantee Fund.
c) With the approval of Board of Directors,investments amounting to Rs544.28 crores havebeen shifted from “Held to Maturity” category to “Available for Sale “ category and Rs 317.40 croresfrom “Available for Sale” to “Held to Maturity”.Further, securities for Rs 90.91 crores were shiftedfrom “Available for Sale” to “Held to Maturity” asper the advice of RBI and Rs 1.14 crore from “Heldto Maturity” to “Available for Sale” category on31.3.2003.
d) for arriving at the appropriate yield to maturity inrespect of PSU bonds and debentures, lowest ofthe rating assigned by credit rating agenciesavailable with the Bank has been considered.
(C) Investments outside India:
a) Depreciation of Rs 8.96 crores (previous year Rs2.84 crores) has been debited to “provision forcontingencies” and held in Overseas Branches.
b) “Provisions and Contingencies” includes Rs 4.78crores (previous year Rs.0.25 crores) held in Indiaon behalf of Overseas Branches.
4. Advances
a) The classification of advances, as certified by theBranch Managers has been incorporated, in respect of86 unaudited branches.
b) For provisioning requirements, claims pendingsettlement as well as claims yet to be lodged withGuarantee Institutions (except DICGC) identified by thebranches have been considered on the basis that suchclaims are valid and recoverable.
c) During the year the amount of claims receivable fromDICGC has not been considered for provisioningpurpose.
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d) In assessing the realisability of certain advances, theestimated value of security, Government guarantees andsubsequent conduct have been considered for thepurpose of asset classification and income recognition.
e) Advances secured by book debts have been includedunder the head “Secured by Tangible Assets” inSchedule 9 – Advances, in accordance with guidelinesissued by Reserve Bank of India.
f) Provision of Rs. 9.01 crores has been made in thecurrent year for Standard Advances and cumulativeamount of Rs. 54.13 crores has been shown as “Contingent Provision for Standard Assets” under “OtherLiabilities and Provisions – Others” in Schedule 5 of theBalance Sheet.
g) A sum of Rs. 10 crores has been provided during theyear (cumulative Rs. 19.05 crores up to 31.3.2003) witha view to building up additional provision for switchingover to 90 days norm by 31.3.2004 for identification ofNPA.
h) In respect of Singapore Branch, an estimated additionalprovision of Rs. 7.62 crore (S$ 2.83 Mio) has beencharged to profit and loss account instead of offsettingit against the Special Capital Account.
5. Fixed Assets
a) Pending completion of certain legal and other formalities,title deeds have not been executed/registered in favourof the Bank in respect of five premises amounting toRs. 12.14 Crores (previous year Rs.13.35 crores).
b) Depreciation includes a sum of Rs 0.30 crore (previousyear Rs 0.10 crore) relating to amortisation of leasepremium on account of change of accounting policy onleased assets. Because of change in policy, the profitis lower by Rs 0.20 crore.
6. Other Assets
a) A sum of Rs. 0.07 crore (Rs. 0.88 crore) in BOTSuspense Account representing excess of liabilitiesover assets on account of take over of the erstwhileBank of Tamilnadu Ltd. has been shown under OtherAssets in accordance with the scheme ofamalgamation.
b) Out of a total amount of Rs.80.48 crores towards shortclaim under the FCNR (A) Scheme, a provision ofRs.20.12 crores has been made during the year (uptoMarch 31, 2003 Rs.40.24 crores), pending finalsettlement of the matter by Government of India andRBI. The balance amount, Rs.40.24 crores has beenshown under “Other Assets - Others”.
c) “Other Assets - Others” include an amount of Rs.138.11crores (Rs.107.88 crores) being disputed Income Taxadjusted against refunds.
7. Taxes
a) No provision has been considered necessary in respectof disputed demands of income tax amounting toRs.138.11 crores (Rs. 121.84 crores) after dueconsideration of decisions of Appellate Authorities,judicial pronouncements and the opinion of tax experts.
b) In the opinion of the management/tax consultants of theBank, adequate brought forward losses will be availableto set off the income during the year. However, exactquantification of availability of such losses cannot bemade due to pendency of appeals at various stages.
8. General
In respect of certain branches/offices where informationreceived was inadequate, the data available at Controlling/Head Office was considered.
9. Profit and Loss Account
a) Gratuity liability of branches at Sri Lanka has been madeon actuarial basis as per local laws. An amount of Rs0.08 crore have been provided for in the current yearand Rs.0.29 crore will be provided for in the future years.Retirement gratuity is accounted for on “Pay As You Go”basis in respect of Hongkong and Singapore Branches.
b) The Bank has paid a sum of Rs.190.23 crores towardsEx-gratia, Gratuity and Pension to employees under theSpecial Voluntary Retirement Scheme 2000. This amountis being amortized equally over a period of 5 yearsbeginning from the year 2000-2001, in accordance withguidelines from Reserve Bank of India. A further sum ofRs.156.37 crores was paid towards Ex gratia, Gratuityand Pension based on applicants relieved after April 1,2001 and upto March 31, 2002. This amount is alsobeing amortized over a period of 5 years beginning fromthe year 2001-02 in accordance with Reserve Bank ofIndia’s guidelines. The amount amortised during the yearrelating to such expenditure amounts to Rs.38.03 croresand Rs.31.26 crores respectively. The balancesamounting to Rs.76.07 crores and Rs.93.79 crores tobe amortised, have been included in Schedule 11 to theBalance Sheet under “Other Assets – Others” as ‘VRSI’ & ‘VRS II’ respectively.
c) Leave encashment- Accounting standard 15:
Leave encashment benefits on retirement which wereaccounted on “Pay As You Go” method till last year isrecognised on “Accrual Basis” as per RBI guidelines.The liability in respect thereof upto March 31, 2002 ofRs.55.65 crores and for the current year of Rs.7.08crores has been charged to Profit and Loss Account.
d) Prior period expenses/income- Accounting Standard 5:
Profit and loss account includes expenditure of Rs 55.65crores towards leave encashment. Other items underthis category being less than 1% of total income of theyear are not being separately disclosed.
10. Capital
The Bank raised a sum of Rs.175 crores (previous year Rs.150 crores) by way of Unsecured, Redeemable, Non-Convertible Subordinated Bonds in the nature of PromissoryNotes, during the year in order to augment its Tier II Capital.
11. Additional Disclosures
In accordance with the guidelines issued by Reserve Bankof India, the following additional disclosures are furnishedhereunder:
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(a) Capital Adequacy:
(Rs. in crores)
S. Particulars March 31, March 31,No. 2002 2003
I Capital Adequacy Ratio 10.82% 11.30%
II Capital AdequacyTier I Capital 6.17% 5.83%
III Capital AdequacyTier II Capital 4.65% 5.47%
IV Amount of SubordinatedDebt raised as Tier II Capital 557.74 732.74
V Percentage of shareholdingof Government of India 75% 75%
b) Investments:
(Rs. in crores)
March 31, March 31,2002 2003
Gross Value of Investments
(i) In India 14758.06 18228.03(ii) Outside India 358.52 472.29LESS DepreciationIn India 20.98 62.02Outside India 26.43 35.29Net Value of InvestmentsIn India 14737.08 18166.01Outside India 332.09 437.00
c) Movement of Non Performing Assets (NPAs)
(Rs. in crores)
March 31, March 31,2002 2003
Gross NPA at the beginningof the year 1631.39 1818.54
Additions during the year 547.52 603.56
2178.91 2422.10
LESS Upgradation 48.44 125.10
LESS Recovery 205.81 236.88
LESS Write Off* 106.12 163.64
Gross NPA at the close 1818.54 1896.48of the year
LESS Provisions 783.03 854.85
LESS Interest Suspense 61.47 84.35
LESS DICGC/ECGC Claims 16.53 45.07received and Other margins held
Net NPA at the close of the year 957.51 912.21
*Including Technical Write Off 49.54 3.26
Gross NPA to Gross Advance 11.35% 10.29%
Net NPA to Net Advance 6.32% 5.23%
d) Provisions and Contingencies charged to Profit andLoss Account Comprised the following:
(Rs. in crores)
S . Part iculars March MarchN o . 2002 2003
I Provis ion towards 264.51 235.33Non Performing Assetsmade during the year
II Provision/Depreciation onInvestments
Domestic 11.60 43.63
Overseas 2.84 8.96
III Provision for IncomeTax/Wealth Tax 19.47 49.50
IV Provision for StandardAdvances 4.94 9.01
V Staggered Provision onStandard Advances 9.05 10.00
VI Deferred Tax (Asset)/Liabil i ty 35.79 (30.42)
VII All Others 37.95 52.02
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e) Maturity pattern of Assets and Liabilities as on March 31, 2003
(Rs. in crores)
1-14 15-28 29 days- >3 mths - >6 mths >1 Yr. - >3 Yrs. - >5 Yrs. Totaldays days 3 mths 6 mths 12 mths 3 yrs. 5 yrs.
Deposits 1489.60 509.83 1472.57 969.90 1237.80 4037.69 9406.82 17574.38 36698.59
Advances 2702.54 471.15 982.37 1067.85 1465.47 5001.25 3147.08 3593.56 18431.27
Investments 367.92 111.21 284.66 216.29 735.92 2292.14 1866.24 12825.94 18700.32
Borrowings 20.65 0.00 22.46 17.75 15.55 261.30 12.14 6.12 355.97
Foreign CurrencyAssets 716.91 196.08 753.95 460.46 456.04 624.80 289.96 253.15 3751.35
Foreign CurrencyLiabilities 868.53 146.28 435.73 364.55 635.26 877.65 72.41 428.97 3829.38
f) Information in respect of restructured accounts (AsCertified by Management)
(Rs. in crores)
2001-02 2002-03
Total Amount of loanssubjected to Restructuring 372.44 626.02
Total amount of Standard Assetssubjected to Restructuring 364.33 568.67
Total amount of substandardAssets subjected to Restructuring 8.11 57.35
g) Information on Corporate Debt Restructuring (AsCertified by Management)
(Rs. in crores)
2001-02 2002-03
(1) Total amount of loan assets/Investments subjected tocorporate restructuring NIL 0.88
(2) Total amount of StandardAssets subjected torestructuring NIL 0.88
(3) Total amount of SubStandard Assets subjectedto restructuring NIL NIL
h) Exposure to Sensitive Sectors (As Certified byManagement)
Capital Market Sector(Rs. in crores)
31.3.2002 31.3.2003S. Type of Fund Guaran- Fund Guaran-No. Exposure based t e e s based t e e s
I Individuals 2 .84 — 4.16 —II Share &
StockBrokers 0 .38 20.62 0 .32 0 .88
III Market Makers — — — —IV IPO Financing — — 0.26 —V All other
borrowersagainst thesecurityof shares 10.84 — 12.41 —
VI TotalExposure 14.06 20.62 17.15 0 .88
Real Estate Sector
(Rs. in crores)
31.3.2002 31.3.2003
i Commercial Property 98.44 145.46
i i Land and BuildingDevelopers 95.03 149.63
iii Mortgage other thanindividual housing loans 109.41 110.65
i v Others 245.22 255.82
TOTAL EXPOSURE 548.10 661.56
Commodities Sector
(Rs. in crores)
31.3.2002 31.3.2003
i Cash Crops 96.91 70.17i i Edible Oils 10.04 18.20iii Agricultural Produce 49.80 126.77i v Paddy & Rice 53.71 18.84v Sugar
(excluding khandhasari) 111.24 134.51v i Cotton & Kapas 130.23 108.53v i i Other Sensitive
Commodities 26.87 43.44
TOTAL EXPOSURE 478.80 520.46
Exposure to Equity, Convertible Debentures andEquity Oriented Mutual Funds
(Rs. in crores)
Investments in- Shares 138.09- Convertible Debentures NIL- Equity Oriented Mutual Funds 134.78Total Advances against Shares/debentures/equity oriented mutual funds 14.06The Bank has not extended any f inance for MarginTrading during the year.
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p) Country Risk Exposure (As certified by Management)
(Rs. in crores)
Cate Category Net Funded Net Funded Total Non- Total Percentagegory Maturity Maturity Funded funded Gross of TotalCode <179 >180 Exposure Exposure Exposure Exposure
A 1 InsignificantRisk Category 512.33 734.04 1246.37 390.43 1636.80 48.98
A 2 LowRisk Category 470.18 443.41 913.59 350.73 1264.32 37.83
B 1 ModerateRisk Category 123.60 150.02 273.62 64.43 338.05 10.12
B 2 HighRisk Category 15.38 10.09 25.47 15.72 41.19 1.23
C 1 Very HighRisk Category 14.26 16.38 30.64 28.48 59.12 1.77
C 2 RestrictedCategory 0.00 2.18 2.18 0.00 2.18 0.07
D Off CreditCategory 0.00 0.28 0.28 0.00 0.28 0.01
Grand Total 1135.75 1356.40 2492.15 849.79 3341.94 100.00
In as much as the exposure to any of the country has not exceeded 2% of our Bank’s total assets, no provision is requiredto be made.
q) Related Party Disclosures as per Accounting Standard 18
In compliance of Reserve Bank of India guidelines in respect of Accounting Standard 18 issued by the Institute of CharteredAccountants of India, details as applicable to the Bank pertaining to related parties are as under.
Names of the related parties and their relationship with the bank
1 Parent Indian Overseas Bank2 Subsidiaries IOB Properties Pte Ltd3 Associates Bharat Overseas Bank Ltd
Dhenkanal Gramya BankPuri Gramya BankPandyan Grama Bank
4 Jointly controlled entity None5 Key Management Personnel
S. No. Name Designation Item Period Amount (Rs.)
1 Shri S C Gupta CMD Salary & Emoluments 01.04.02 – 5,64,355.18as per IT Rules 31.03.03
2 Shri Rohit M Desai ED ——— do ———- 14.11.02 – 1,82,643.7131.03.03
3 Shri R. Natarajan (Retd) ED ——— do ———- 01.04.02 – 1,56,705.49
r) Earnings per Share
Basic & Diluted earning per share : Rs. 9.35
s) Consolidated Financial Statements (AS 21)
Basis of preparation of accounts: The Consolidated Financial Statements have been prepared to comply with all materialaspects, with applicable statutory provision, accounting standards and generally accepted accounting principles and practice.
Consolidation Procedure: Consolidated Financial Statements have been prepared on the basis of audited financial statementof IOB (Parent) and the IOB Properties Pte Ltd., Singapore (Subsidiary) and as per provisions of Accounting Standard AS21 as issued by ICAI.
The Investment in the sponsored banks (RRBs) and in Bharat Overseas Bank Ltd., which fall under the classification of‘Associates’ in terms of RBI guidelines/AS 23 is accounted for on the basis of equity method as specified in AS 23 issued byICAI. The carrying cost to the Bank of its investment in the RRBs and Bharat Overseas Bank Ltd. is adjusted suitably (this
79
being the first year of implementation of AS 23) and thecorresponding effect is given in the financial statementsas Good Will/Capital Reserve.
The financial statements of subsidiary company incorporatedoutside India are prepared in accordance with Singapore statementof Accounting Standard (SAS). Additional statutory informationdisclosed in separate financial statements of the parent and thesubsidiary having no bearing on the true and fair view of theconsolidated financial statements and also the informationpertaining to the items which are not material have not beendisclosed in the consolidated financial statement in view of thegeneral clarification issued by the Institute of CharteredAccountants of India (ICAI).
Reserves and Surplus include a sum of Rs.61.22 Crores (net ofgoodwill) being the Capital Reserve arising on the consolidationof associates.
Consolidated Balance Sheet of Indian Overseas Bank andits Subsidiaries as on 31
st March, 2003
(Rupees in crores)
As on As on31.03.2002 31.03.2003
CAPITAL AND LIABILITIES
Capital 444.80 444.80
Reserves and Surplus 654.01 1094.54
Deposits 31808.48 36698.59
Borrowings 180.08 355.96
Other Liabilities and Provisions 2389.29 2641.78
TOTAL 35476.66 41235.67
ASSETS
Cash and Balance with Reserve 2212.54 2687.94Bank of India
Balance with Banks and Money 1412.08 906.20At Call and Short Notice
Investments
Associates (18.89) 15014.54 18656.78
Others (18637.89)
Advances 15162.34 17380.35
Fixed Assets 386.76 382.89
Other Assets 1288.40 1221.51
TOTAL 35476.66 41235.67
Contingent Liabilities 5386.85 7001.33
Consolidated Profit & Loss Account of Indian Overseas Bankand its Subsidiaries for the year ended 31
st March 2003
(Rupees in crores)
For the year For the yearEnded Ended
31.03.2002 31.03.2003
I INCOMEInterest Earned 3170.69 3484.56Other Income 536.02 525.19
TOTAL 3706.71 4009.75
II EXPENDITUREInterest Expended 2202.78 2264.73Operating Expenses 886.73 949.49Provisions & Contingencies 386.15 378.56
TOTAL 3475.66 3592.78
III PROFIT/LOSSNet Profit for the year 231.05 416.97
IV APPROPRIATIONSTransfer to Statutory Reserve 59.85 124.83Transfer to Other Reserves 1.60 NilTransfer to Investment 35.50 202.19Fluctuation ReserveTransfer to Capital Reserve 79.88 8.79Proposed Dividend (including 53.38 80.29Dividend Tax)Balance amount of profit 0.84 0.87carried over
Total 231.05 416.97
i) Name of Subsidiary : IOB Properties Pte Ltd.
ii) Country of incorporation : Singapore
iii) Proportion of ownership interest : 100%
t) Accounting for taxes on Income
The Bank has accounted for net Deferred Tax Asset ofRs57.15 crores for the year 2002-03 (previous year-net deferred tax liability of Rs 26.98 crores). The taximpact of Rs 30.42 crores has been credited to profitand loss account. The major components of DTA/DTLare given as under:
31.03.2003 31.03.2002
DTA DTL DTA DTL
Depreciat ion in Investments — 150.92 — 208.32
VRS Expenditure — 44.99 — 62.54
Provision for loan losses 117.20 — 201.44 —
Provision for leave Encashment 62.73 — — —
Others 73.13 — 42.44 —
Total 253.06 195.91 243.88 270.86
Net DTA/DTL 57.15 — — 26.98
12. Comparative figures
Previous years figures have been regrouped/rearrangedwherever necessary and possible.
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PART IV
A. MATERIAL NOTES ON ACCOUNTS
1. RECONCILIATION
The initial matching of entries received up to 31.03.2003 atHead Office for the purpose of reconciliation under interbranch transactions has been completed. Reconcilation ofinter branch transactions is in progress. Reconcilation andadjustments relating to certain pending items in Drafts,Sundry Creditors, Suspense, Deposits, Fixed Assets,Balances with other banks, Clearing adjustments andtransactions between Central Office and Branches includingOverseas Branches are in progress. The consequentialimpact if any on the accounts due to the above is notascertainable.
2. FOREIGN EXCHANGE TRANSACTIONS /TRANSLATIONOF FINANCIAL STATEMENTS OF FOREIGN BRANCHES
The Bank has followed the guidelines of Foreign ExchangeDealers Association of India (FEDAI) and RBI in respect ofthe above in preference to Accounting Standard 11 on thesubject issued by the Institute of Chartered Accountants ofIndia. A sum of Rs 47.05 crores, being the reversal of theamount recognized as income towards net exchangedifference arising out of translation of financial statements ofoverseas branches in 1994-95 has been included under“Other Liabilities” in accordance with the directives ofReserve Bank of India.
3. INVESTMENTS
Till 1999-2000 investments were being classified intoPermanent and Current categories, as per the guidelines ofReserve Bank of India. Current investments were accordinglyvalued at cost or market value which ever was lower whilepermanent investments were valued at carrying cost.
Pursuant to change in the policy of classification advised byRBI, investments are being classified into following threecategories from the year 2000-01and valued as indicatedthere against :
Category Method of valuation
a. Held to Maturity Valued at cost unless the cost ismore than the face value in whichcase the premium is amortisedover the period remaining tomaturity. In cases where the costis less than the redemption valuesuch difference is ignored.
b. Available for Sale The market price /YTM asdeclared by Fixed Income MoneyMarket and DerivativesAssociation of India (FIMMDA) /Primary Dealers’ Association ofIndia (PDAI) are adopted for thepurpose of valuation. Netdepreciation in each of theclassifications is provided for andthe net appreciation if any isignored. The book value ofindividual securities does notundergo any change due tovaluation.
Category Method of valuation
c. Held for Trading The investments under the “Heldfor Trading” category valued atmonthly intervals and anyappreciation is ignored, while bookvalue is brought in line with marketvalue in case of depreciation onthe balance sheet date.
4. FIXED ASSETS
Pending completion of certain legal and other formalities, titledeeds have not been executed/registered in favour of theBank, in respect of 5 premises amounting to Rs 12.14 crores.
5. FCNR(A) CLAIM
Out of a total amount of Rs 80.48 crores towards short claimunder the FCNR(A) scheme, a provision of Rs. 40.24 croreshas been made up to 31.03.2003, pending settlement byGovernment of India and RBI.The balance amount of Rs.40.24 crores has been shown under “Other Assets-others”.
6. VRS EXPENDITURE
The Bank has paid a sum of Rs 190.23 crores towards ex-gratia, gratuity and pension to employees under the SpecialVoluntary Retirement Scheme 2000.
This amount is being amortised equally over a period of fiveyears beginning from the year 2000-2001, in accordance withthe guidelines from Reserve Bank of India .A further sum ofRs 156.37 crores was paid towards ex-gratia, gratuity andpension based on the applicants relieved after April 1,2001and up to March 31,2002.This amount is also beingamortised over a period of five years beginning form the year2001-02 in accordance with Reserve Bank of India’sguidelines. The amount amortised is Rs 114.16 crores andRs 62.58 crores respectively up to 31/3/2003. The balancesamounting to Rs 76.07 crores and Rs 93.79 crores to beamortised, have been included in Schedule 11 to the BalanceSheet under “Other Assets-others”.
7. LEAVE ENCASHMENT
Leave encashment benefits on retirement, which wereaccounted on “Pay As You Go” method till 31.03.2002 isrecognized on “Actuarial basis” during 2002-03 as per RBIguidelines. The liabil ity in respect there of up to31.03.2002,amounting to Rs 55.65 crores and a sum ofRs 7.08 crores for the year 2002-03 aggregating to Rs 62.73crores has been charged to Profit and Loss Account for theyear ended 31.03.2003.
8. ACCOUNTING FOR TAXES ON INCOME
Accounting Standard (AS) 22, issued by the Institute ofChartered Accountants of India in respect of Accounting fortaxes on income came into effect from the accounting periodscommencing on or after 01.04.2001.Interms of transitionalprovisions in para 33 of the standard necessary adjustmenton account of Deferred Tax Asset was made bycorresponding credit to Reserves and Surplus during theyear 2001-02.Subsequent adjustment for Deferred Tax Asset/Liability has been carried out in the Profit and loss accountof the relative year. However no adjustment is made for thesame on the accounts for the periods prior to 01.04.2001.
81
B. NOTES ON ADJUSTMENTS
Adjustment for qualification in the Auditors’ report on leave encashment benefit on retirement has been made in the adjustedfinancial statements for the five consecutive years ended 31
st March 2003.
Material Notes on Accounts
Adjustments resulting from Audit Qualifications, Material Amounts relating to adjustments for previous years and changes in AccountingPolicies
(Rs. in crores)
Year ended 31st March 1999 2000 2001 2002 2003
Net Profit/(Loss) as per Audited Accounts 55.34 40.34 115.93 230.21 416.10
Adjustments for:
Leave Encashment on retirement -5.83 -6.42 -7.02 -6.75 +26.02
Leave Encashment on retirement upto 31.3.1998debited to Profit & Loss Account in 2002-03 NIL NIL NIL NIL +29.63
Adjusted Profit/(Loss) 49.51 33.92 108.91 223.46 471.75
Appropriations
Transfer to Statutory Reserve 16.60 12.10 34.78 59.85 124.83
Transfer to Revenue & Other Reserves 32.17 22.69 39.08 1.60 0.00
Transfer to Capital Reserve 0.00 0.00 0.00 79.88 8.78
Transfer to Investment Fluctuation Reserve 1.07 0.00 0.00 35.50 202.20
Dividends (incl. Dividend tax) 5.50 5.55 42.07 53.38 80.29
Total 55.34 40.34 115.93 230.21 416.10
Impact on Reserves & Surplus -5.83 -6.42 -7.02 -6.75 +55.65
Adjusted Profit/(Loss) 49.51 33.92 108.91 223.46 471.75
Increase/Decrease in Assets & Liabilities (Cumulative)
Nature of Adjustments
Year ended 31st March 1999 2000 2001 2002 2003
Assets
Increase/decrease in Assets
Liabilities
Provision for Leave Encashment 5.83 12.25 19.27 26.02 -29.63
Reserves & Surplus -5.83 -12.25 -19.27 -26.02 29.63
Increase/decrease in liabilities
82
PART V
AUDITORS’ QUALIFICATIONS FOR WHICHADJUSTMENTS COULD NOT BE CARRIED OUT
1) RECONCILIATION
a) The initial matching of entries received up to 31.3.2003at Head office for the purpose of reconciliation underinter branch transactions has been completed.Reconciliation of Inter Branch transactions is inprogress.
b) Reconciliation and adjustments relating to certain pendingitems in Drafts, Sundry Creditors, Suspense, Deposits,Clearing Adjustments and transactions between CentralOffice and branches, including Overseas Branches arein progress.
c) For fixed assets under various heads of accounts, incertain cases reconciliation/adjustments of differencesbetween balances as per fixed assets registers atControlling Offices and Schedules maintained at CentralOffice are in progress.
d) Reconciliation, confirmation and consequentialadjustments are also in progress/pending in case ofbalances with other banks including Nostro Accounts,borrowings from Banks, Financial Institutions andacceptances.
e) The consequential impact, if any, on the accounts dueto the above is not ascertainable.
2) ACCOUNTING OF FOREIGN EXCHANGE TRANSACTIONS
The Bank has followed the guidelines of the ForeignExchange Dealers Association of India (FEDAI) and RBI asreferred in Accounting policy, no 3 & 4 regarding translation/conversion of Foreign currency balances, in respect of theabove in preference to Accounting Standard 11 on the subjectissued by the Institute of Chartered Accountants of India.The impact of the same, if any, on the accounts has not beenascertained.
3) ADVANCES
For provisioning requirements, claims pending settlement aswell as claims yet to be lodged with Guarantee Institutions
(except DICGC) identified by the branches have beenconsidered. The impact, if any, of the above on the accountswith respect to recoverability is not ascertainable.
4) OTHER ASSETS
Out of a total amount of Rs.80.48 crores towards short claimunder the FCNR(A) Scheme, a provision of Rs.40.24 croreshas been made upto March 31, 2003, pending final settlementof the matter by Government of India and RBI. The balanceamount, Rs.40.24 crores has been shown under “OtherAssets - Others”. We are unable to express an opinion asto the realisability of the amount.
5) RECOGNITION OF INCOME AND EXPENDITURE:
a) Recognition of Income by way of Commission,Exchange, Locker Rent, Interest on Bills purchased andsale of Precious Metal is not in accordance with AS 9Issued by ICAI.
b) Interest is accounted for as and when matured TermDeposits are renewed.
c) In respect of foreign branches income and expenditureare recognised/accounted for as per local laws of therespective countries.
The impact of the above, on the accounts has not beenascertained.
6) FINANCIAL RATIOS
The capital adequacy ratio and other key ratios are subjectto the effect of our observations in para 1 to 5 above.
7) LEASE PREMIUM
The impact of change in accounting policy on account ofchanges relating to amortisation of lease premium is notcarried out, as the amount involved was insignificant.
8) TAXES
In the opinion of the management/tax consultants of the Bank,adequate brought forward losses will be available to set offthe income during the year. However, exact quantification ofavailability of such losses cannot be ascertained due topendency of appeals at various stages.
83
PART – VI
STATEMENT OF ASSETS AND LIABILITIES AS AT 31ST
MARCH
(SGD in million, Indian Rs. in crores)
IOB PROPERTIES PTE LIMITED
1999 2000 2001 2002 2003
In SGD In Rs. In SGD In Rs. In SGD In Rs. In SGD In Rs. In SGD In Rs.
Share capital 20.600 50.57 20.600 52.29 20.600 53.25 20.600 54.63 20.600 55.47
Accumulated Losses -13.546 -33.25 -13.322 -33.82 -13.070 -33.79 -11.276 -29.91 -10.951 -29.49
SHARE HOLDERS’ FUND 7.054 17.32 7.278 18.470 7.530 19.46 9.324 24.73 9.649 25.98
Represented by
FIXED ASSETS 35.295 86.64 34.859 88.48 34.419 88.97 33.990 90.15 33.562 90.37
Deferred Tax 0.000 0.00 0.000 0.00 0.000 0 1.478 3.92 1.281 3.45
CURRENT ASSETS
Trade Debtors 0.000 0.00 0.073 0.19 0.014 0.04 0.001 0.00 0.000 0.00
Other Debtors 0.011 0.02 0.004 0.01 0.008 0.02 0.010 0.03 0.004 0.01
Cash & Bank Balances 0.001 0.01 0.001 0.00 0.001 0.00 0.001 0.00 0.001 0.00
0.012 0.03 0.078 0.20 0.023 0.06 0.012 0.03 0.005 0.01
Less : CURRENT LIABILITIES
Other Creditors 0.360 0.88 0.407 1.03 0.405 1.05 0.437 1.16 0.414 1.11
Owing to Holding Company 19.893 48.83 19.252 48.87 18.507 47.84 14.653 38.86 24.752 66.65
Term Loan - secured 8.000 19.64 8.000 20.31 8.000 20.68 11.000 29.17 0.000 0.00
Income received in advance 0.000 0.00 0.000 0.00 0.000 0.00 0.000 0.00 0.001 0.00
28.253 69.35 27.659 70.21 26.912 69.57 26.090 69.20 25.167 67.76
NET CURRENT LIABILITIES 28.241 69.32 27.581 70.01 26.889 69.51 26.078 69.16 25.162 67.75
Other non-current creditors 0.000 0.00 0.000 0.00 0.000 0.00 0.066 0.18 0.032 0.09
NET ASSETS 7.054 17.32 7.278 18.47 7.530 19.46 9.324 24.73 9.649 25.98
STATEMENT OF PROFIT AND LOSS FOR THE YEAR ENDED 31ST MARCH
1999 2000 2001 2002 2003
In SGD In Rs. In SGD In Rs. In SGD In Rs. In SGD In Rs. In SGD In Rs.
Turnover 2.546 6.25 2.129 5.41 2.092 5.41 1.967 5.22 1.962 5.28
Other income 0.042 0.10 0.037 0.09 0.005 0.01 0.002 0.01 0.001 0.00
Total Income 2.588 6.350 2.166 5.50 2.097 5.42 1.969 5.22 1.963 5.29
Interest on borrowings 1.293 3.17 1.041 2.64 1.033 2.67 0.816 2.16 0.605 1.63
Management Fee 0.052 0.13 0.052 0.13 0.052 0.13 0.052 0.14 0.052 0.14
Depreciation 0.438 1.08 0.436 1.10 0.438 1.13 0.429 1.14 0.429 1.16
Audit Fee 0.002 0.01 0.002 0.01 0.002 0.01 0.002 0.01 0.002 0.01
Property Tax 0.136 0.33 0.136 0.35 0.099 0.26 0.061 0.16 0.054 0.15
Other expenses 0.266 0.65 0.276 0.70 0.280 0.72 0.293 0.78 0.299 0.81
Total Expenses 2.187 5.37 1.943 4.93 1.904 4.92 1.653 4.38 1.441 3.88
Net Profit 0.401 0.98 0.223 0.57 0.193 0.50 0.316 0.84 0.522 1.41
* SGD (1 Singapore Dollar) = Rs.26.9266 as on 31.03.2003
84
PART – VII
STATEMENT OF DIVIDENDS PAID FOR THE LAST FIVE FINANCIAL YEARS ON EQUITY SHARES
(Rs. in crores)
For the year ended 1998-99 1999-00 2000-01 2001-02 2002-03
Dividend to the Government 5.00 5.00 33.36 40.03 53.38
Dividend to the public 0.00 0.00 4.82 13.35 17.79
Dividend Tax 0.50 0.55 3.89 0.00 9.12
Total 5.50 5.55 42.07 53.38 80.29
Dividend rate Lump sum* Lump sum* 10%** 12% 16%
* Lump sum amount paid to the Central Government being the only shareholder.
** The initial Public Issue has been made on 25.10.2000 and the Dividend paid to the new shareholders is on pro-rata basis.
PART - VIII
KEY ACCOUNTING RATIOS
For the year ended 1999 2000 2001 2002 2003
Earnings per Share (EPS) (Rs.) 1.48 1.02 2.45 5.02 10.61
Cash Earnings per Share (Rs.) 2.21 1.81 3.37 6.02 11.51
Return on Net worth (%) 9.63 6.16 16.66 26.60 41.98
Net Asset value per share 16.08 16.93 16.70 21.08 29.44
OTHER RATIOS
Net NPA to Net Advances ratio (%) 7.30 7.65 7.01 6.32 5.23
Interest income/working fund (%) 9.49 9.28 9.47 9.14 8.74
Non-Interest income/working fund (%) 1.04 0.99 1.03 1.53 1.30
Return on Assets (%) 0.21 0.13 0.38 0.67 1.22
Net Profit/working funds (%) 0.21 0.13 0.38 0.67 1.22
Business per employee (Rs. In crs.) 1.04 1.17 1.41 1.75 2.04
Net profit per employee (Rs. In lacs) 0.17 0.12 0.42 0.91 1.93
Capital Adequacy ratio (%)
Tier I 5.53 5.16 5.81 6.17 5.83
Tier II 4.62 3.99 4.43 4.65 5.47
Credit/Deposit Ratio (%) (net) 46.17 47.59 47.77 47.67 47.54
Interest spread /Average working fund (%) 2.39 2.57 3.06 2.90 3.15
Gross profit/Average working fund (%) 0.60 0.71 1.07 1.84 2.05
Yield on advances (%) 11.71 11.40 11.03 10.64 10.13
Yield on investments (%) 11.91 11.76 11.68 10.95 9.88
Cost of deposits (%) 8.16 7.84 7.52 7.25 6.50
Cost of borrowings (%) 27.04 9.49 8.75 11.52 8.49
Gross profit per employee (Rs. in lacs) 0.50 0.67 1.18 2.50 3.24
Business per Branch (Rs. in Crores) 22.84 25.18 28.22 32.46 37.78
Gross profit per Branch (Rs. in lacs) 10.20 13.20 21.36 42.60 55.42
85
Definitions of key ratios:
Earnings per Share (EPS) (Rs.) PAT/No. of equity shares
Cash Earnings per Share (Rs.) (PAT+ Depreciation)/No. of equityshares
Return on Net worth (%) Net profit/Average Equity
Net Asset Value per Share (Rs.) Net worth at year-end/No. ofequity shares
Other Ratios
Net NPA to Net Advances ratio (%) Net NPA/Net Advances
Interest income/working fund (%) Interest Income/Average WorkingFunds
Non-Interest income/working fund (%) Non-interest Income/AverageWorking funds
Return on Assets (%) Net Profit/Average Total Assets
Net Profit/working funds (%) Net Profit/Average WorkingFunds
Business per employee (Rs. In crs.) (Deposits + Advances)/No. ofemployees
Net profit per employee (Rs. In lacs) Net profit/No. of employees
Capital Adequacy ratio (%)
Tier I Tier I Capital/Risk weightedassets
Tier II Tier II Capital/Risk weightedassets
Credit/Deposit Ratio (%) (net) Net advances/Deposits
Interest spread /Average working fund (%) Interest spread/Average WorkingFunds
Gross profit/Average working fund (%) Gross Profit/Average WorkingFunds
Yield on advances (%) Interest Income/AverageAdvances
Yield on investments (%) Income earned on investments/Average investment
Cost of deposits (%) Interest paid on deposits/Average deposits
Cost of borrowings (%) Interest paid on borrowings/Average borrowings
Gross profit per employee (Rs. in lacs) Gross profit/No. of employees
Business per Branch (Rs. in Crores) (Deposits + Advances )/No. ofbranches
Gross profit per Branch (Rs. in lacs) Gross profit/No. of branches
� EPS represents basic earnings per share calculated as NetProfit After Tax before extraordinary items (PAT) divided bynumber of equity shares at the end of the fiscal year.
� Cash EPS represents PAT for the year plus non-cashcharges divided by the number of equity shares at the endof the fiscal year. Non-cash charges comprise depreciation,amortisation of business development expenses, loss on saleof fixed assets and loss on sale of investments.
� Return on Net Worth is arrived at by dividing PAT by totalshareholders’ funds (Net Worth) at the end of the year.
� Net Asset value per share, computed as per net equitymethod, is arrived at as Equity net worth at the end of theyear minus miscellaneous expenses not written off anddivided by the number of equity shares at the end of thefiscal year.
86
PART - IX
CAPITALISATION STATEMENT
(Rs. in crs.)
Pre-issue as at Post Issue31.3.2003
At a price ofRs. 24
BorrowingShort - Term debt 241.90 241.90Long-term debt 114.07 114.07Total Debt 355.97 355.97Shareholders’ fundsShare Capital- Equity 444.80 544.80Less: Calls- in- arrears- PreferenceShare premium 0.00 140.00Reserves & surplus 885.35 885.35Less: Intangibles(Deferred Tax Asset) 20.50 20.50Total Shareholders Funds 1309.65 1549.65Long-term Debt/Equity ratio 0.087 0.076
Note:
Borrowings in the nature of Inter-Bank participation certificate amounting to Rs 100 crores netted against Advances; Capital restructureloan of Rs.132.74 crores and Tier-II Bonds of Rs.600 crores aggregating to Rs. 832.74 crores which were shown under “OtherLiabilities” in the Balance Sheet are not considered as Borrowings in the above statement .
Contingent Liabilities
1. The Bank has following contingent liabilities for which no provisions have been made in the books of accounts of the Bank forthe year ended as at 31
st March 2003.
Sr. Particulars AmountNo (Rs in crores)
1 Claims against the Bank not acknowledged as debts 7.36
2 Liability for partly paid investments 0.11
3 Outstanding forward exchange contracts 2612.30
4 Guarantees given on behalf of constituents
In India 1713.44
Outside India 69.30
5 Acceptances, Endorsements and Other Obligations 2329.61
6 Estimated amounts of contracts remaining to be executed on capital accounts 20.14
7 Disputed Income Tax Liabilities 138.11
8 Others 110.92
Total 7001.29
2. We have examined all the contracts, claims and litigations against the Bank and have analyzed the likely impact of the same asindicated above. We certify that apart from the contingent liabilities indicated above, the Bank does not have any other contingentliabilities.
87
TAX SHELTER STATEMENT
Year ending March 31 1999 2000 2001 2002 2003
Tax Rate 35% 35% + 35% + 35% + 35% +10% 13% 2% 5%s.c. s.c. s.c s.c
Gross Profit 142.95 188.23 306.60 616.36 794.13
Tax at actual rate of profit 50.04 72.47 121.26 220.04 291.84
Adjustments
Permanent Differences:
i) Interest on tax free bonds -2.74 -3.27 -2.75 -2.73 -2.52
ii) Dividends (exempt from tax) -3.80 -16.45 -14.29 -14.28 -9.12
iii) Profit on sale of fixed assets -0.66 -0.47 -0.45 -0.70 -0.50
iv) Others 0.10 0.54 0.55 0.17 0.00
Timing Differences:
i) Diff. Between book depreciation and IT depreciation onFixed Assets -12.04 -7.37 6.30 4.69 5.00
ii) Bad debts written off -81.65 -44.00 -175.06 -106.12 -127.20
iii) Provision for bad debts – deduction u/s 36(1)(viia) -60.15 -117.66 -141.38 -155.70 -187.38
iv) Exemption u/s 10(23G) -11.46 -12.45 -21.87 -12.65 -10.00
v ) VRS 0.00 0.00 -29.10 -33.44 17.44
vi) FCNR(A) 0.00 0.00 0.00 -80.48 0.00
vi) Other adjustments 0.09 0.28 -0.21 -2.35 0.00
Net Adjustments -172.31 -200.85 -378.26 -403.59 -314.28
Tax Shelter -60.31 -77.33 -149.60 -144.08 -115.50
Total Taxation -10.27 -4.86 -28.34 75.96 176.34
Note : Figures for the four financial years ended upto March 31, 2002 have been computed as per the returns filed with the IncomeTax department. For the year ended March 31, 2003, pending filing of return of income, figures are calculated on an estimated basis.
CERTIFICATE REGARDING INVESTMENTS AS ON 31.03.2003 (DOMESTIC)
Details of Investment (Rs. in crores)
Category Held to Maturity Available for Sale Held for Trading Total Provi- Grandsion Total:for Depn. +
Non- Non-Per- Per-
form. form.Book Market Depn. Book Market Depn. *Book Market Depn. Book Market Depn. Invest- Invest-Value Value Value Value Value Value Value Value ments ments
1 Govt.Securities 1056.43 1056.43 0.00 14393.13 16093.75 - 62.65 62.65 0.35 15512.20 17212.83 0.35 0.00
2 OtherapprovedSecurities 192.19 192.19 0.00 209.62 251.38 - - - - 401.81 443.57 0.00 0.00
3 Shares 5.64 5.64 0.00 127.33 175.05 0.62 - - - 132.97 180.69 0.62 8.76
4 Debenturesand Bonds 180.38 180.38 0.00 1769.45 1900.41 0.00 - - - 1949.84 2080.79 0.00 9.92
5 Subsidiaries/Joint Ventures 0.00 0 0.00 0.00 0.00 - - - - 0.00 0.00 0 0.00
6 Others (MF) 115.84 78.34 37.50 115.38 110.51 4.87 - - - 231.22 188.85 42.37 0.00
Total 1550.48 1512.98 37.50 16614.91 18531.10 5.49 62.65 62.65 0.35 18228.04 20106.73 43.34 18.68 62.62
* Book Value for Held for Trading Category is after depreciation
88
CERTIFICATE REGARDING INVESTMENTS AS ON 31.03.2003 (FOREIGN)
(Rs. in crores)
Details of Investment
Held to Maturity Available for Sale Held for Trading Total
Sl. Category Book Market Book Market Book Market Book MarketNo. Value Value Depn. Value Value Depn. Value Value Depn. Value Value Depn.
1 Govt.Securities 190.75 186.29 11.03 190.75 186.29 11.03
2 OtherapprovedSecurities 0.00 0.00 0.00
3 Shares 0.86 0.86 0.13 0.86 0.86 0.13
4 Debenturesand Bonds 233.16 236.63 2.29 233.16 236.63 2.29
5 Subsidiaries/JointVentures 47.52 25.68 21.84 47.52 25.68 21.84
6 Others (MF) 0.00 0.00 0.00
Total 0.00 0.00 0.00 472.29 449.46 35.29 0.00 0.00 0.00 472.29 449.46 35.29
(Rs. in crores)
Details of Investment
Category Held to Maturity Available for Sale Held for Trading Total Provi- Grandsion Total :for Depn.
Non- + Non-Perfor- Per-
ming form.Book Market Depn. Book Market Depn. Book Market Depn. Book Market Depn. Invest- Invest-Value Value Value Value Value Value Value Value ments ments
DOMESTIC 1550.48 1512.98 37.50 16614.91 18531.10 5.49 62.65 62.65 0.35 18228.04 20106.73 43.34 18.68 62.62
FOREIGN 0.00 0.00 0.00 472.29 449.46 35.29 0 0 0 472.29 449.46 35.29 - 35.29
TOTAL 1550.48 1512.98 37.50 17087.20 18980.56 40.78 62.65 62.65 0.35 18700.33 20556.19 78.63 18.68 97.91
All the Notes to the Accounts, Significant Accounting policies and the Auditors’ qualifications have been incorporated in the Prospectus.
89
Minimum Subscription
If the Bank does not receive the minimum subscription of 90% ofthe issue amount, till the date of closure of the Issue, or if thesubscription level falls below 90% after the closure of the Issueon account of cheques having been returned unpaid or withdrawalof application, the Bank shall forthwith refund the entire subscriptionamount received. For delay beyond 78 days, if any, in refund ofsuch subscription, the Bank shall pay interest as per Section 73of the Companies Act, 1956.
Expenses of the Issue
The expenses of the Issue to be borne by the Bank are estimatedto be 5% of the total issue size and include brokerage (1.5%),fees and reimbursement to the Issue Management Team (1.0%),fees and payments to Registrars (0.25%), printing and distribution(1.0%) and publicity and advertising (0.75%), listing fees, stampduty and others (0.5%). These expenses would be met out of theproceeds of the public issue.
Fee payable to the Lead Managers to the issue
The fees payable to the Lead Managers to the Issue is as setout in the relevant documents, copies of which are kept open forinspection at the Head Office of the Bank.
Fee payable to the Co-Managers to the issue
The fees payable to the Co-Managers to the Issue is as set outin the relevant documents, a copy of which is open for inspectionat the Head Office of the Bank.
Fee payable to the Registrars to the issue
The fees payable to the Registrars to the Issue is as set out inthe relevant documents, copies of which are kept open forinspection at the Head Office of the Bank.
Brokerage
As per Section 13 of the Banking Regulation Act 1949, no Bankingcompany can directly or indirectly pay by way of commission,brokerage, discount in any form in respect of any shares issuedby it, any amount exceeding in the aggregate 2.5% of the paid upvalue of the said shares.
The Bank has received exemption from provisions of Sections13 of the Banking Regulation Act, 1949 relating to the payment ofbrokerage, commission and discount vide notification no. F. No.11/4/2003-BOA dated22.07.2003 from Ministry of Finance,Department of Economic Affairs (Banking Division)
Accordingly brokerage would be paid to the Brokers as per Bank’scommunication to BSE, MSE and NSE. The Bank, at its solediscretion, may consider payment of additional incentive in theform of kitty or otherwise to the performing brokers on such termsand mode as may be decided by the Bank. No brokerage ispayable on applications procured from QIBs.
In case of tampering or overstamping of broker codes on theApplication Form, the Bank’s decision to pay brokerage in thisrespect will be final and no further correspondence will beentertained in the matter.
Underwriting commission
Since the Issue is not being underwritten, no underwritingcommission is payable.
C. STATUTORY AND OTHER INFORMATION
PREVIOUS ISSUES BY THE BANK
The Bank went for its maiden equity issue of 11,12,00,000 sharesof Rs. 10/- each, for cash at par aggregating to Rs. 111.20 crores.The issue opened on 25.09.2000 and closed on 29.09.2000. Theissue was oversubscribed by 1.87 times. The shares were allottedon 25.10.2000. The despatch of share certificates and refundorders was completed on 4.12.2000 and 28.10.2000 respectively.The shares have been listed at Madras, Mumbai and NationalStock Exchanges on 04.12.2000, 05.12.2000 and 07.12.2000respectively.
For the year ended 31.03.2001 the Bank declared a dividend of10% and the shareholders were paid the same on a prorata basiseffective from the date of allotment. For the years ended31.03.2002 and 31.03.2003, the Bank declared dividend of 12%and 16% respectively.
The details of funds raised by the Bank through private placementof funds are given in the para ‘Requirement of enhancement ofCapital’ under the para ‘Objects of the Issue’ on page 22.
Commission and Brokerage
The Bank paid Brokerage and incentive of Rs. 40.45 Lakhs forits IPO.
Issues for consideration other than for Cash
The Bank has not offered equity shares other than cash (aftercreation of the corresponding new bank through nationalisationon 19.07.1969) except as mentioned in the para ‘Share CapitalHistory’ in the ‘Notes to Capital Structure’.
Promise Vs Performance
Particulars (Rs. in crores) Year ending 31st March 2001
Projected Actual
INCOME
Interest Earned 2,760 2,779
Other Income 290 317
Total Income 3,050 3,096
EXPENDITURE
Interest Expended 1,960 1,913
Operating Expenses 840 877
Total Expenses 2,800 2,789
OPERATING PROFIT 250 307
Provisions & Contingencies 175 191
NET PROFIT 75 116
As can be seen, the Bank has outperformed in respect of allparameters given in projections.
OPTION TO SUBSCRIBE
Save as otherwise stated in this Prospectus, the Bank has notgiven any person nor does it propose to give any person anyoption to subscribe to the shares of the Bank.
The investor shall have the option to subscribe to securities tobe dealt with in a depository. The investor shall have the option toeither to receive the security certificates or to hold the securitiesin demat form with a depository.
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PURCHASE OF PROPERTY
There is no property which the Bank has purchased or acquiredor proposes to purchase or acquire, which is to be paid for, whollyor partly, out of the proceeds of the present Issue or the purchaseor acquisition of which has not been completed on the date ofissue of this Prospectus, other than:
the contracts for the purchase or acquisition whereof were enteredinto, or may be entered into, in the ordinary course of theCompany’s business, such contracts not being made incontemplation of the Issue or in consequence of the contract; orproperty in respect of which the amount of the purchaseconsideration is not material.
The Bank has not purchased any property in which any of itsdirectors had or have any direct or indirect interest or in respectof any payment thereof. The Bank has no plans, at present, toacquire any running business out of the proceeds of the Issue.
TERMS OF APPOINTMENT OF CHAIRMAN AND MANAGINGDIRECTOR
In exercise of the powers conferred by clause (a) of sub-section(3) of section 9 of the Banking Companies (Acquisition andTransfer of Undertakings) Act, 1970, read with sub-clause (1) ofclause 3, clause 6, clause 7 and sub-clause (1) of clause 8 ofthe Nationalised Banks (Management and MiscellaneousProvisions) Scheme 1970, the Central Government, afterconsultation with RBI, has appointed Mr.S.C. Gupta as Chairmanand Managing Director of the Bank upto 01.05.2006 videnotification F no.9/46/2000-BOI (i) dated 11 04 2001. Hiscompensation details are as follows:
Salary : Rs. 24,050/- per month in the scale ofRs.24,050-650-26000/- with effect from01.05.2001.
Other benefits : Allowances and Perquisites as perGovernment of India guidelines such asdearness allowance, city compensatoryallowance, housing, Leave Travel Allowance,Contribution to Provident Fund, Gratuity,Superannuation, Reimbursement of medicalexpenses, entertainment expenses andothers.
TERMS OF APPOINTMENT OF WHOLETIME DIRECTORS
In exercise of the powers conferred by clause (a) of sub-section(3) of section 9 of the Banking Companies (Acquisition andTransfer of Undertakings) Act, 1970, read with sub-clause (1) ofclause 3 and sub-clause (1) of clause 8 of the Nationalised Banks(Management and Miscellaneous Provisions) Scheme, 1970, theCentral Government, after consultation with RBI, has appointedShri. Rohit M. Desai as Whole time Director (designated asExecutive Director) of the Bank upto 31.07.2004 vide notificationF no.9/17/2002-BOI dated 14.11.2002. His compensation detailsare as follows:
Salary : Rs. 22050/- per month in the scale ofRs. 22050-500-24050/- with effect from14.11.2002.
Other benefits : Perquisites as per Government of Indiaguidelines such as housing, Leave TravelAllowance, Contribution to Provident Fund,Gratuity, Superannuation, Reimbursement of
medical expenses, entertainment expensesand others.
PAYMENT OR BENEFIT TO THE DIRECTORS AND OFFICERSOF THE BANK
Except the benefits as provided under the relevant rules framedby the Government of India from time to time, the directors of theBank are not eligible to any additional benefits upon terminationof employment.
The Key Managerial Personnel are entitled to the Compensation& benefits as applicable to all the permanent employees of theBank. All the Key Managerial Personnel, except the CMD and ED,are of General Manager and higher grade and hence theircompensation falls in the scale of Rs. 19340-420/2-20180-520/1-20700-600/1-21300 p.m. The other benefit includes the festivalloan housing loan reimbursement of certain expenses etc. as peremployees’ service rules.
NATURE AND INTEREST OF DIRECTORS
No Director of the Bank is interested in the appointment of any ofthe Managers, Registrars and Bankers to the Issue. No Directorof the Bank is interested in any property acquired by the Bankwithin two years of the date of the Prospectus or proposed to beacquired by it.
The Directors are not interested in any loan or advance given bythe Bank to any person(s)/Company (ies) nor is any beneficiaryof such loan or advance related to any of the Directors of theBank.
CAPITALISATION OF RESERVES OR PROFITS:
The details of capitalisation of Reserves, since nationalisation ofthe Bank on July 19, 1969 are furnished below:
YEAR AMOUNT (Rs. In crores)
1972 1
1976 2
1977 2
1979 2
1980 2
1982 3
REVALUATION OF ASSETS
The Bank revalued certain immovable properties in India in 1993-1994 in order to augment its Tier II capital. The amount of revisionmade was Rs.191.88 crores and the same was credited toRevaluation Reserve Account. As per the Bank’s policy,depreciation is provided to the extent of revaluation, which is thenset off against the revaluation reserve account. As on 31.03.2003,the revaluation reserve account stood at Rs.159.06 crores. Apartfrom this, there has been no other revaluation of assets in thelast 5 years.
Year Amount (Rs. in crores)
1993-94 191.88
D. MAIN PROVISIONS OF THE BANK NATIONALISATIONACT
Relevant provisions of the Banking Companies (Acquisition andTransfer of Undertakings) Act, 1970/1980 as amended by theBanking Companies (Acquisition and Transfer of Undertakings)
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Amendment Act, 1994 and Banking Companies (Acquisition andTransfer of Undertakings) Amendment Act, 1995 hereinaftercollectively referred to as the Bank Nationalisation Act are:
Authorised Capital
As per the provisions of Section 3 (Sub-section 2A) of the BankingCompanies (Acquisition) Act, 1970 the Authorised Capital of theBank shall be Rupees One Thousand and Five Hundred croresto be divided into One Hundred and Fifty crores of fully paid-upequity shares of Rs.10/- each. Provided that the CentralGovernment may, after consultation with the Reserve Bank ofIndia and by notification in the Official Gazette, increase or reducethe authorised capital as it thinks fit, so however that after suchincrease or reduction, the authorised capital shall not exceed Rs.Three Thousand crores, or be less than Rs. One Thousand andFive Hundred Crores.
Issued Capital
Section 3 (Sub-Section 2B) of the Banking Companies(Acquisition) Act, 1970 provides that the paid-up capital may fromtime to time be increased by
a) Such amounts as the Board of Directors of the correspondingnew Bank may, after consultation with the Reserve Bank ofIndia and with the previous sanction of the CentralGovernment transfer from the reserve fund established bysuch Bank to such paid-up capital;
b) Such amounts as the Central Government may, afterconsultation with the Reserve Bank, contribute to such paid-up capital;
c) Such amounts as the Board of Directors of the correspondingnew Bank may, after consultation with the Reserve Bank andwith the previous sanction of the Central Government, raiseby Public Issue of shares as may be prescribed, so however,that the Central Government shall at all times hold not lessthan 51% of the paid-up capital of each corresponding newBank.
The entire paid-up capital of the corresponding new Bank, exceptthe paid-up capital raised by public Issue under clause (c) of Sub-Section 2B shall stand vested in, and allotted to, the CentralGovernment.
Section 3 (2BB) of Banking Companies (Acquisition) Act, 1970provides that “notwithstanding anything contained in subsection(2), the paid capital of a corresponding new Bank constituted undersubsection (1) may from time to time and before any paid upcapital is raised by Public Issue under clause (c) of sub section(2B) be reduced by
a) the Central Government after consultation with the ReserveBank by cancelling any paid up capital which is lost, or isunrepresented by available assets;
b) the board of directors, after consultation with Reserve Bankand with the previous sanction of the Central Government,by paying off any paid up capital which is in excess of thewants of the corresponding new Bank.......”
(2-BBA) (a) A corresponding new bank may, from time to timeand after any paid-up capital has been raised by public issueunder CL. (c) of sub-section (2-B), by resolution passed at anannual general meeting of the shareholders entitled to vote, votingin person or where proxies are allowed, by proxy, and the votes
cast in favour of the resolution are not less than three times thenumber of the votes, if any, cast against the resolution by theshareholders so entitled and voting, reduce its paid-up capital inany way.
(b) Without prejudice to the generality of the foregoing power,the paid-up capital may be reduced by-
i) extinguishing or reducing the liability on any of its shares inrespect of share capital not paid up;
ii) either with or without extinguishing or reducing liability on anyof its paid-up shares, cancelling any paid-up capital which islost, or is unrepresented by available assets; or
iii) either with or without extinguishing or reducing liability on anyof its paid-up shares, paying off any paid-up share capitalwhich is in excess of the wants of the corresponding newbank.
(2BBB) “Notwithstanding anything contained in sub section (2BB)or sub-sub section (2BBA), the paid up capital of a correspondingnew Bank shall not be reduced at any time so as to render itbelow twenty five percent of the paid up capital of that Bank ason date of commencement of the Banking Companies (Acquisitionand Transfer of Undertakings) Amendment Act, 1995.”
Rights of Equity Shareholders
As to Dividend
Section 10(7): After making provision for bad and doubtful debts,depreciation in assets, contributions to staff and Superannuationfunds and all other matters for which provision is necessary underany law, or which are usually provided for by Banking companies,a corresponding new Bank may, out of its net profits, declare adividend and retain the surplus, if any.
Voting Rights
Section 3(2E): No shareholder of the corresponding new bank,other than the Central Government, shall be entitled to exercisevoting rights in respect of any shares held by him in excess ofone per cent of the total voting rights of all the shareholders ofthe corresponding new Bank.
Meeting of Shareholders
Section 10A: A General Meeting (in this Act referred to as anannual general meeting) of every corresponding new Bank whichhas issued capital under clause (c) of sub-section (2B) of Section3 shall be held at the place of the head office of the Bank in eachyear at such time as shall from time to time be specified by theBoard of Directors:
Provided that such annual general meeting shall be held beforethe expiry of six weeks from the date on which the balance sheettogether with the profit and loss account and auditors’ report isunder sub-section (7A) of section 10, forwarded to the CentralGovernment or to the Reserve Bank, whichever date is earlier.
The shareholders present at an annual general meeting shall beentitled to discuss the balance sheet and the profit and lossaccount of the corresponding new Bank made up to the previous31st day of March, the report of the Board of Directors on theworking and activities of the corresponding new Bank for theperiod covered by the accounts and the Auditor’s Report on thebalance sheet and account.
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finance, law, small scale industry, any other matter the specialknowledge of, and practical experience in which would in theopinion of the Reserve Bank, be useful to the correspondingnew Bank;
b) represent the interest of depositors; or represent the interestsof farmers, workers and artisans.
Removal of Directors
Section 9 (3B): Where the Reserve Bank is of the opinion thatany director of a corresponding new Bank elected under clause(i) of Sub-section (3) does not fulfil the requirements of the Sub-Section (3A), it may, after giving to such director and the Bank areasonable opportunity of being heard, by an order remove suchdirector and on such removal, the Board of Directors shall co-optany other person fulfilling the requirements of sub-section 3(A) inplace of the person so removed till a Director is duly elected bythe shareholders of the corresponding new Bank in the nextAnnual General Meeting and the person so co-opted shall bedeemed to have been duly elected by the shareholders of thecorresponding new Bank as a director.
Powers of Board of Directors
Section 19 : The Board of Directors of a correspondingnew Bank may, after consultation with theReserve Bank and with the previous sanctionof the Central Government by notification inthe Official Gazette make the regulations, notinconsistent with the provisions of this Act orany scheme made thereunder, to provide forall matters for which provision is expedient forthe purpose of giving effect to the provisionsof this Act.
2) In particular, and without prejudice to the generality of theforegoing power, the regulations may provide for all or anyof the following matters, namely:
a) the powers, functions and duties of local boards andrestrictions, conditions or limitations, if any, subject towhich they may be exercised or performed, the formationand constitution of local committees and committees oflocal boards (including the number of members of anysuch committee) the powers, functions and duties ofsuch committees, the holding of meetings of localcommittees and committees of local boards and theconduct of business there at;
b) the manner in which the business of the local boardsshall be transacted and the procedure in connectiontherewith.;
b(a) the nature of shares of the corresponding new Bank,the manner in which and the conditions subject to whichshares may be held and transferred and generally allmatters relating to the rights and duties of shareholders.
b(b) the maintenance of register, and the particulars to beentered in the register in addition to those specified insub-section (2F) of Section 3, the safeguards to beobserved in the maintenance of register on computer,floppies or diskettes, inspection and closure of theregister and all other matters connected therewith.
b(c) the manner in which general meetings shall beconvened, the procedure to be followed thereat and the
manner in which voting rights may be exercised.
b(d) the holding of meetings of shareholders and thebusiness to be transacted thereat.
b(e) the manner in which notices may be served on behalfof the corresponding new Bank upon shareholders orother persons.
b(f) the manner in which the directors nominated underclause (g) of sub-section (3) of Section 9 shall retire.
c) the delegation of powers and functions of the Board ofDirectors of a corresponding new Bank to the generalmanager, director, or other employee of that Bank.
d) the conditions or limitations subject to which thecorresponding new Bank may appoint advisors, officersor other employees and fix their remuneration and otherterms and conditions of service.
e) the duties and conduct of advisors, officers or otheremployees of the corresponding new Bank.
f) the establishment and maintenance of Superannuation,pension, provident or other funds for the benefit ofofficers or other employees of the corresponding newBank or of the dependants of such officers or otheremployees and the granting of Superannuationallowances, annuities and pensions payable out of suchfunds.
g) the conduct and defence of legal proceedings by oragainst the corresponding new Bank and the mannerof signing and pleadings.
h) the provision of a seal for the corresponding new Bankand the manner and effect of its use.
i) the form and manner in which contracts binding on thecorresponding new Bank may be executed.
j) the conditions and the requirements subject to whichloans or advances may be made or bills may bediscounted or purchased by the corresponding newBank.
k) the persons or authorities who shall administer anypension, provident or other fund constituted for thebenefit of officers or other employees of thecorresponding new Bank or their dependants.
l) the preparation and submission of statements ofprogrammes of activities and financial statements of thecorresponding new Bank and the period for which andthe time within which such statements and estimatesare to be prepared and submitted and generally for theefficient conduct of the affairs of the corresponding newBank.
E. MATERIAL CONTRACTS AND DOCUMENTS FORINSPECTION
The contracts referred to below (not being contracts entered intoin the ordinary course of business carried on by the Bank orentered into more than two years prior to the date of theProspectus) which are or may be deemed to be material havebeen entered into by the Bank. Copies of these contracts, togetherwith the copies of the documents referred to below, all of whichhave been attached to a copy of the Prospectus, which has been
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delivered to the Stock Exchanges, may be inspected at the HeadOffice of the Bank between 10.00 A.M. and 12.00 Noon on anyworking day of the Bank from the date of the Prospectus until thedate of closing of the subscription list.
A. Material Contracts
1. Memoranda of Understanding dated 16.07.2003 between theBank and the Lead Managers to the Issue viz. SBI CapitalMarkets Ltd., DSP Merrill Lynch Ltd, Kotak Mahindra CapitalCompany Ltd., A.K. Capital Services Ltd. and AllianzSecurities Ltd. specifying the terms of the engagement
2. Copy of the Inter-se Allocation of Responsibilities betweenthe Lead Managers.
3. Memorandum of Understanding dated 09.07.2003 betweenthe Bank and Registrars to the Issue Cameo CorporateServices Limited, specifying the terms and conditions of theengagement.
4. Letter from Indian Overseas Bank appointing CentrumFinance Ltd., R.R. Financial Consultants Ltd. and AshikaCapital Ltd. as Co-Managers to the issue.
5. Copy of the tripartite agreement between the Bank, Registrarsand NSDL dated 14.03.2000.
6. Copy of the tripartite agreement between the Bank, Registrarsand CDSL dated 03.03.2000.
B. Material Documents
1. Copy of the resolutions passed by the Board of Directors ofthe Bank at the Board Meeting held on 22.02.2003 and theshareholders of the Bank at the AGM held on 18.07.2003.
2. Power of Attorney executed by the Directors of the Bank infavour of Shri S.C. Gupta, Chairman & Managing Director, tosign the Prospectus and complete other activities in relationto the Issue.
3. Copy of the letters no. F. No. 11/4/2003-BOA dated30.05.2003, under Section 3(2B)(c) of the BankingCompanies (Acquisition and Transfer of Undertakings) fromMinistry of Finance (Department of Economic Affairs) inconsultation with the Reserve Bank of India (RBI)
4. Copy of letter F. No. 11/4/2003-BOA dated 30.05.2003 fromMinistry of Finance, Department of Economic Affairs (BankingDivision) exempting the Bank from provisions of Sections 13and15 (1) of the Banking Regulation Act, 1949.
5. Consent dated 05.07.2003 from M/s Padmanabhan Prakash& Co., M/s Gupta& Co., M/s Ved & Co., M/s Bansal & Co,.M/s Amit Ray & Co. and M/s Bubber Jindal & C0. to act asAuditors of the Bank
6. Consent dated 14.07.2003 from M/s Padmanabhan Prakash& Co for inclusion of their report on tax benefits in theProspectus of the Public Issue.
7. Auditor Report dated 05.07.2003 from M/s PadmanabhanPrakash & Co., M/s Gupta& Co., M/s Ved & Co., M/s Bansal& Co, .M/s Amit Ray & Co. and M/s Bubber Jindal & Co.
8. Tax benefit report dated 14.07.2003 from M/s PadmanabhanPrakash & Co.
9. Copies of the Balance Sheet and Profit and Loss Accountsof Indian Overseas Bank for the five years ended March31, 1999, 2000, 2001, 2002 and 2003.
10. Copies of the Balance Sheet and Profit and Loss Accountsof IOB Properties Pte for the five years ended March 31,1999, 2000, 2001,2002 and 2003.
11. Copies of the Balance Sheet and Profit and Loss Account of3 Regional Rural Banks (RRBs) of he Bank for the five yearsended March 31, 1999, 2000, 2001, 2002 and 2003.
12. Consents from the Lead Managers, Co Managers,Registrars, Legal Advisors and Compliance Officer.
13. Copy of Initial Listing Applications dated 24.07.2003,30.07.2003, 30.07.2003 made to the Stock Exchanges atChennai, Mumbai, and the National Stock Exchange for listingof equity shares of the Bank.
14. Government of India, Ministry of Finance, Department ofEconomic Affairs (Banking Division), letter no. F. No. 12/2/96-BOA dated 27.03.1997, permitting the Bank to reduce itspaid-up capital by adjusting accumulated losses Rs. 1000.00crores from its paid-up capital as on 31.03.1997.
15. The GoI, Ministry of Finance, Department of EconomicAffairs (Banking Division) gazette notification ref. 11/4/2003-BOA dated 22.07.2003 declares that the provisions ofsection 13 and, Section 15(1) of the Banking Regulation Act,1949, relating to the payment of dividend, shall not apply fora period of five years from the date of the notification.
16. Copy of the Gazette of India notification no. F. No. 9/46/2000-B.O.I(i) dated 11.04.2001 appointing Shri S.C. Gupta asChairman and Managing Director of Indian Overseas Bank.
17. Copy of the Ministry of Finance letter no. 20/9/99-B.O.I dated29.05.2001 detailing the terms and condition of theappointment of Shri S.C. Gupta as Chairman cum ManagingDirector of Indian Overseas Bank.
18. Copy of the Gazette notification F.No. 9/17/2002-B.O.I dated14.11.2002 appointing Shri Rohit M. Desai as the ExecutiveDirector of Indian Overseas Bank.
19. Copy of the Ministry of Finance letter no. 20/4/2002–B.O.Idated 04.12.2002 detailing the terms and condition of theappointment of Shri Rohit M. Desai as the Executive Directorof Indian Overseas Bank.
20. Copy of the Observation letter no. CFD/DIL/SNB/15801/2003dated 21.08.2003 from Securities & Exchange Board of India
21. Copy of the letters for in-principle permission for listing dated28.07.2003, 08.08.2003 and 13.08.2003 from the MadrasStock Exchange, National Stock Exchange Ltd and the StockExchange, Mumbai.
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PART III
DECLARATION
All relevant provisions of the Banking Companies (Acquisition andTransfer of Undertakings) Act, 1970 and Banking Companies(Acquisition and Transfer of Undertakings) Amendment Act, 1994& Banking Companies (Acquisition and Transfer of Undertakings)Amendment Act, 1995 and Banking Companies (Acquisition andTransfer of Undertakings) Amendment Act, 1996 and theguidelines issued by the Government of India have been compliedwith and no statement made in this Prospectus is contrary to theprovisions of the said Act/Regulations/Guidelines and rules framedthereunder. All the legal requirements applicable till the filing of theProspectus with Stock Exchanges have been complied with.Further it is certified that, all the disclosures made in theProspectus are true and correct.
Mr. Sivaram Swamy (General Manager, Funds & Accounts)
Mr. S.C. Gupta
Mr. Rohit.M. Desai*
Mr. Pradeep K. Deb*
Mr. Anand Sinha*
Mr. Sankaran Srinivasan*
Mr. K. Ananda Kumar*
Mr. Prakash Agarwal*
Mr. Himmat Singh Singhvi*
Mr. Kiwalkar Nitin Moreshwar*
Dr. Harsh Mahajan*
Mr. Christopher Thomas Kurien*
Mr. S.K. Sehgal*
Mr. M.N. Venkatesan*
* Signed by the constituted attorney Mr. S.C. Gupta.
Dated : 21st August 2003
Place : Delhi