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Outstanding Performance in MSE Lending
By D. Sarkar, Executive Director, Allahabad Bank

Indian economy has been undergoing a consolidated and broad-based recovery process and domestic drivers of growth are robust. The Reserve Bank of India, in its mid quarter monetary policy review announced on 17.3.2011, has projected the GDP growth at 8.6% with an upside bias. Anticipating an improved performance in the farm sector and better performance of the service sector, Indian economy is all set to step into the next fiscal.

Global Financial Scenario
The global economic scenario is an admixture of reviving growth in emerging market economies (EMEs) and Inflationary pressures in EMEs, especially in the Euro zone and the UK. The process of monetary tightening from the accommodative monetary stance has come to the fore in the advanced economies. However, the turmoil in the Middle East and North Africa has led to sharp increase in oil prices and has endangered inflation concerns causing uncertainty to the pace of global recovery. Of late, the natural disaster in Japan may put further pressure on petroleum prices.

As low interest rates still persist in the West, money flows towards the East in search of higher returns causing asset bubbles and resultant inflation in the East. To absorb inflows, countries should deepen and broaden their financial markets. That should be a long-term aim across Asia as it also helps economies switch from export-led to domestic-driven growth.

Domestic Financial Scenario
The measures taken in the series of monetary policy statements in India were in line with the domestic and international developments that have taken place in the economy in general and banking industry in particular. These policy measures, more or less, have been prepared with the common agenda of sustaining the anti-inflationary drive keeping the ongoing growth process undisturbed which is reflected in the gradual hike in reverse repo and repo rates from 5.00% to 6.75% and Reverse Repo from 3.50% to 5.75% signaling towards further tightening of the economy and giving a sense of assurance that policy makers would not tinker with the key policy rates.

For March 2011, the RBI, in its mid quarter monetary policy, has raised the inflation estimate to 8% from 7% targeted earlier.

The credit Off-take has gathered momentum despite increase in loan rates. As per RBI data, non-food credit grew by 23% in February. During the past few months, credit has grown at the rate of 20 per cent on average. Deposit growth rate was 15.9% as against 17.2% of last year and RBI projection of 18%. Therefore, wider gap between the credit and deposit rates of banks may potentially lead to liquidity crunch in the banking system due to higher lending by the banks vis a vis lower deposits.
The lagged effects of policy tightening may have an adverse effect on the investment cycle. While the real estate and services sectors could be growth drivers in FY12, the manufacturing sector may face adverse impact from rising costs and domestic substitution. Indian Banks are hiking their deposit and lending rates in view of the persistent liquidity crunch being faced by them.

Monetary transmission is increasingly visible as banks continue to raise their lending rates. At the same time, strong domestic demand may have some positive impact on the industrial production having positive note on credit demand from Banks.

Where does Allahabad Bank Stand
Total Business of the Bank increased to Rs 2,07,785 cr. as on 31.12.2010 as against Rs1,59,843 cr. in previous year showing a YOY growth of 30 %. Deposits went up to Rs1,20,948 cr. as on 31.12.2010 from Rs 94,164 cr. as on 31.12.2009 growing by 28.44%. Gross Credit surged to Rs 86,837 cr. as on 31.12.2010 as against Rs 65,680 cr. last year increasing by 32.21%. Credit Deposit Ratio rose to 72.12 % as at December 2010 end as against 70.29%.  Operating Profit of the Bank surged to Rs 2,274.54 cr. growing by 20.31 % while Net Profit rose to Rs1,165.51 cr. as on 31.12.2010 showing a growth of 18.71%. 

Priority sector credit
Our bank has always been achieving the target in this sector. Quantum of credit to this sector grew from Rs 22,462 cr. as on 31.12.2009 to Rs 27,455 cr. as on 31.12.2010 registering an absolute Y-O-Y growth of Rs 4,993 cr. (22.23%).  During the same period, agriculture credit increased from Rs 10,980 cr. to Rs 12,172 cr. showing an absolute Y-O-Y growth of 1,192 cr. (10.86%).

Our bank has extended credit to the Micro & Small Enterprises (MSE) to the extent of Rs 9,974 cr. as on 31.12.2010 as against the budget of Rs 9907 cr. It grew from Rs 7,204 cr. as on 31.12.2009 registering an absolute YoY raise of Rs 2,770 cr. (38.45%). Side by side, credit to Micro, Small and Medium Enterprises (MSME) grew from Rs 8,402 cr. to Rs12,368 cr. during the period registering a growth of 47.20%.

The outstanding performance in MSE lending of Allahabad Bank was highly appreciated by the Ministry of MSME, Govt. of India and the Bank has been conferred the First Rank based on the outstanding performance in MSE Lending during the year 2009-10 and received the First Award under “National Awards for Excellence in MSE Lending” in the National Awards Function on 31st August 2010 at Vigyan Bhawan, New Delhi from the President of India, Smt. Pratibhadevi Singh Patil.

The Bank has already implemented its Financial Inclusion Plan in 315 villages and opened a Rural Branch at Gadaipur, New Delhi under the Plan.

Retail Credit

Total Disbursement under Retail Credit of the Bank upto December 2010 surged to Rs 2,701 cr. as against Rs 2,049 cr. during the corresponding period last year registering a growth of 32%.
Total Outstanding under Retail Credit as on 31.12.2010 stood at Rs 11,913 cr. as against Rs 9,285 cr. as on 31.12. 2009, constituting 13.71% of Gross Credit of the Bank.
The Bank has extended Festival Bonanza discount on Select Retail Loan Schemes upto 31.03.2011, under which Rebate upto 1.00 % in Interest Rate and 50% in applicable Processing Charges have been allowed. Loans amounting to ‘500 cr. have been disbursed upto 31.12.2010 with Festival Bonanza Discount.
The Bank has entered into a Tie-Up arrangement with M/S Hyundai Motors Ltd for financing their vehicles for personal use under Bank’s Car Loan Scheme for employees.
The Bank has financed 7,500 vehicles for commercial use under its Commercial Vehicle Finance Scheme during the last one year amounting to Rs 217 cr.
The Bank has dedicated Delivery Channels for Retail Lending through its 27 Centralized     Retail Banking Boutiques (CRBB) with on-line application facility and 75 Retail Banking Boutiques (RRB) across the country, besides other Branches authorized to sanction / disburse Retail Loans.


Over 24 million Customers of the Bank can now avail Banking facilities through any of Bank’s 2400 + Branches nation-wide.
One more ATM installed at Dumka in the Mobile Banking Van taking the total number of the Bank’s ATMs to 213.
The Bank issued more than 8.74 lacs ATM-cum-Debit Cards including 2.70 lac Instant ATM Cards to Customers.
Along with the Internet Banking for individuals, The Bank has introduced Internet Banking facility for its Corporate Customers also.
On-Line Payment Gateway Services launched by the Bank for its Customers to make real time on-line payment at the Billers’ Site with instant debit from their accounts.
Central Processing Hub (CPH), made live in Bangalore, is handling Inward and Outward Clearing Transactions of Branches.
Cash Management System is running live with 1 HUB and 32 SPOKES in which fast Remittance facility is provided to Clients by bulk RTGS/NEFT facilility
Online payment of Direct Taxes (CBDT) and Indirect Taxes (CBEC) provided through Internet Banking Channel for the Customers on 24X7 basis.

Fresh Initiatives
As many as 116 Branches have been opened including upgradation of 55 Extension Counters into full-fledged Branches during the Nine months ending December 2010 taking the total number of Branches to 2402.

The Bank has engaged Integra Micro Systems P Ltd for providing end-to-end solution for implementation of Bank’s Financial Inclusion Plan in 500 villages. Another 480 villages will be attached to 96 Branches in the 2nd phase on Pilot basis. The Project is being implemented in West Bengal, Jharkhand, UP and MP.

The Bank being the SLBC Convenor in the State of Jharkhand, has launched its First Mobile Banking Van fitted with ATM through CDMA VPN connectivity in Ranchi for its Lead District Dumka, State Jharkhand under Financial Inclusion Plan for catering Banking services in 12 villages in the District including Financial Literacy.

Housing Finance Scheme for NRI/PIO” introduced for granting Housing Finance to NRI/PIOs. Premium Housing Finance Scheme introduced for High Net-worth Individuals (HNIs).

The Bank has entered into Tie-Up arrangement with a number of Country’s renowned Vehicle Manufacturers to sell their Vehicles to the Bank’s Customers.

Bank has entered into a Tie-Up arrangement with the Life Insurance Corporation of India for opening of their Current Account with the Bank’s Branches.

Universal Sompo General Insurance Company Ltd (USGICL) has launched a Unique Health Insurance Scheme viz. “Sampoorna Swasthya Kavach” exclusively for the Customers of Allahabad Bank.

The Bank has entered into Tie-Up arrangement with “Unique Identification Authority of India Ltd” with a view to allot Unique Identification Number to every Customer of the Bank nation-wide.

Future Strategy of Allahabad Bank

The Bank has planned to achieve Rs 2,20,000 cr. in Total Business and to increase the     number of Branches to 2,425 within 31st March 2011.
The Bank has envisaged to cross Rs 4.00 lac crore in Total Business, to increase the number of Branches to 3,000 and to open 2000 ATMs within next 3 year- horizon.
Out of total 18,167 villages allotted to the Bank, Financial Inclusion Plan will be implemented covering 2,618 villages with population above 2000 within 31.03.2012 through Business Correspondents and 200 Biometric Rural ATMs and 15,549 villages with population of less than 2000 will be covered within 31.03.2014.
The Bank has plans to open more Branches Overseas which include one at Singapore, Shanghai, Dhaka (Bangladesh) and Kowloon (Hong Kong) for which ground work is in progress.
Scheme of 1% interest subvention on Housing Loans upto 10 lacs announced by the Hon’ble Union Finance Minister is being implemented by the Bank.
The Central Scheme to provide Interest Subsidy for the period of moratorium on     Educational Loans taken by Students from Economically Weaker Sections (EWS) from Scheduled Banks under the Educational Loan Scheme of the Department of Education, Ministry of Human Resources and Govt. of India to pursue technical/professional education in India is in the process of implementation.
CBS implementation in the Bank’s sponsored 2 Regional Rural Banks will be complete by September 2011.
As a Registrar to UIDAI, enrollment and     issuance of “AADHAR” Unique Identification Numbers to 80% of the Residents of all areas allotted to the Bank under Financial Inclusion Plan will be completed.
UID enabled Micro Payments System will be introduced to No-Frill Account-holders with Micro ATM technology to obviate last mile collection problem.
As per the directions of the RBI, implementation of Cheque Truncation System (CTS) in Chennai Grid will be completed within the targeted schedule.
With a view to enhancing NFNI, Bank is in the process of introducing PRE-PAID CARDS in the market.

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