DIRECTORS’ REPORT 2018-19
automating charges which has yielded results. It is noteworthy
The Board of Directors have pleasure in presenting the Annual
Report together with Audited Balance Sheet and Profit & Loss
Account of the Bank for the year ended 31st March, 2019.
Global Business Performance
Global growth is projected at 3.3% in 2019 and 3.4% in 2020,
with downside risks continuing to build. High policy uncertainty,
ongoing trade tensions, and a further erosion of business and
consumer confidence are all contributing to the slowdown.
Global trade growth has slowed sharply and new orders
continue to decline in many countries. The trade restrictions
introduced last year are a drag on growth, investment and living
standards, particularly for low-income households.
GDP growth in India has eased, but is projected to be around
7¼ per cent in FY 2019 and FY 2020. Business confidence
and investment remain strong, and activity should benefit from
easing financial conditions, accommodative fiscal policy and
recent structural reforms.
The Bank continued its efforts towards rebalancing its Balance
Sheet under the current year. The focus was laid on to improve
the RAM portfolio with a view to mitigate the risk and improve
capital efficiency. The Bank further reduced the concentration of
Bulk deposits and improved the share of low cost deposits. The
Global Business level stood at Rs. 3,74,530 crores as on 31st
March 2019 against Rs. 3,67,831 crores as on 31st March 2018.
The global deposits and gross advances stood at Rs. 2,22,534
crores and Rs. 1,51,996 crores respectively as on 31st March
2019 against Rs. 2,16,832 crores and Rs. 1,50,999 crores
respectively as on 31st March 2018.
Financial Performance
The efforts during the current year were aimed at sustaining the
higher operational efficiency levels as the operating environment
remained firm. The right sizing of balance sheet had its impact
felt on the revenue streams substantially which was cautiously
balanced with optimising the expenses. Focused attention was
laid to improve the other income sources which helped the Bank
to report substantial improvement in its operational efficiency.
As a result, the Bank improved its operating profit which ended
at Rs.5,034 crores in FY 2018-19 compared to Rs. 3,629 crores
recorded in previous year.
Focused attention was laid on Gross NPA reduction which
decreased and ended at Rs. 33,398 crores for FY 2018-19 as
against Rs. 38,180 crores in FY 2017-18. The higher provision
requirements of Rs.8772 crores during the year forced the Bank
to report a Net Loss of Rs.3738 crores for the year. The Bank
had reported Rs. 6,299 crores of loss during 2017-18.
Income and Expenditure Analysis
The rebalancing of asset side of the Balance sheet had major
impact on the revenues of the Bank. Even though, the Bank
got benefit from its focused attention on low cost deposit with
a favorable Cost of Deposits, the marginal easing under NPA
levels & Capital constraints restricted the growth opportunities
to improve the income level. Maximum effort was laid on towards
33
improving the Non interest income with higher thrust given on
to mention that the Non Interest Income recorded a growth of
12.28% to end at Rs. 4,206 crores as against Rs. 3,746 crores
recorded in FY 2017-18.
The domestic CASA deposits stood at Rs. 84,394 crores as on
31st March 2019 as against Rs. 78,739 crores as on 31st March
2018. The CASA% stood higher at 38.72% as on 31st March
2019 as against 37.43% as on 31st Mar 2018.
The higher level of CASA and reduction of the bulk deposits
helped the Bank to reduce the domestic Cost of deposits which
ended at 5.49% for FY 2018-19 as against 5.62% in FY 2017-18.
The yield on domestic advances came down to 7.41% for FY
2018-19 as against 7.91% in the previous year.
The domestic yield on investments stood at 6.97% for the whole
year 2018-19 compared to 7.77% in FY 2017-18. The Bank
was able to maintain the global Net interest margin at 2.08%
in 2018-19 as against 2.19%.The Bank maintained a Provision
Coverage Ratio of 71.39% for FY 2018-19 as against 59.45% for
FY 2017-18.
Capital Raised during 2018-19
Capital Infusion by Government of India
The Bank issued 137,30,10,821 equity shares of Rs.10/-
each for cash at issue price of Rs. 15.71 per equity share
(including premium of Rs.5.71 per equity share) aggregating to
Rs. 2,157 crores to Government of India on Preferential Basis
on 12th November 2018 for the capital infusion received from
Government of India on 23rd July 2018 and 269,54,67,422
equity shares of Rs.10/- each for cash at issue price of 14.12
per equity share (including premium of Rs.4.12 per equity
share) aggregating to Rs.3,806 crores to Government of India
on Preferential Basis on 28th March 2019 for the capital infusion
received from Government of India on 21st February 2019.
Employee Stock Purchase Scheme
The Bank’s ESPS was launched for subscription on 31st
December 2018 and the Issue was closed on 21st January
2019 as scheduled. The Bank issued and allotted 18,24,00,000
equity shares to its employees at a discounted price of Rs.
11.90 per share. In this process the Bank augmented its capital
funds to the extent of Rs. 261 crores. IOB has scripted history
by becoming the first Public Sector Bank to record 100%
subscription to ESPS. Disclosures required under SEBI (Share
Based Employee Benefits) Regulations, 2014 read with SEBI
circular no. CIR/CFD/POLICYCELL/2/2015 dated June 16, 2015
are available on the Bank’s website https://www.iob.in/Investor-
cell. The IOB ESPS 2018 Scheme is in compliance with the SEBI
(Share Based Employee Benefits) Regulations, 2014.
During the year under review, the shareholding of Government
of India, has increased from Rs. 4,389.08 crores (89.74%) to
Rs. 8,457.56 crores (92.52%) and the Public shareholding
stands at Rs.684.09 crores (presently 7.48%). The paid-up
capital of the Bank has increased from Rs. 4890.77 crores to
Rs. 9141.65 crores.
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34
Raising of Tier II Bonds
During the quarter ended December 2018, the Bank had raised
Basel III Compliant Tier II bonds aggregating Rs. 300 crore on
private placement basis at a coupon rate of 11.70% with tenor
of 10 years from the date of allotment and with call option at the
end of the 5th year or on any coupon payment date thereafter.
M/s. CRISIL and M/s. ICRA have assigned ratings of CRISIL A+/
Stable and [ICRA] A+(hyb)/ Negative for the Tier II Bonds Issue
of the Bank.
Authorized Capital
As on 31st March 2019, the Authorized Capital of the Bank is
Rs. 10,000 crores.
Capital Adequacy Ratio
The Bank’s capital adequacy ratio as on 31st March 2019 stood
at 10.21 % as per Basel III norms.
Branch Network
The Bank has 3,280 domestic branches as on 31st March 2019
as against 3,332 branches as on 31st March 2018, comprising
of 914 rural branches (27.87%), 965 Semi Urban branches
(29.42%), 669 Urban branches (20.40%) and 732 Metropolitan
branches (22.32%). The Bank also has 7 Zonal Offices, 48
Regional Offices, 3 Extension Counters, 2 Satellite Offices, 3
City Back Offices and 6 Zonal Audit Offices. During the year
under review, the Bank has closed 53 branches and opened
one branch.
Corporate Governance
Corporate Governance reflects the built in value system of the
Bank in conducting its day to day affairs. The Bank recognizes
the critical importance of effective Corporate Governance for the
safe and sound functioning of the Bank and lays emphasis on
ensuring that structures, processes and systems are put in place
to establish strategic objectives to serve the interest of the Bank
and its stakeholders with a view to facilitate effective monitoring.
IOB – Code of Conduct for Prohibition of Insider Trading,
2019
Pursuant to Regulation 9 of Securities and Exchange Board of
India (Prohibition of Insider Trading) Regulations, 2015, the Bank
had formulated IOB Code of Conduct for Prohibition of Insider
Trading, 2015, to regulate, monitor and report trading by the
Directors, employees and other connected persons of the Bank
with a view to comply with the provisions of the Regulations.
In view of the amendments vide SEBI (Prohibition of Insider
Trading) (Amendment) Regulations, 2018, the Bank has now
formulated IOB Code of Conduct for Prohibition of Insider
Trading, 2019 effective from 1st April 2019. The new Code is
prescribed to regulate, monitor and report trading by ‘Insiders’
limited to only ‘Designated Persons’.
SEBI (Listing Obligations and Disclosure Requirements
Regulations), 2015 (LODR)
As per SEBI (LODR),
¾ The Bank is providing remote e-voting facility to
its shareholders, in all Annual General Meetings/
Extraordinary General Meetings.
35
¾ The Code of Conduct is applicable to all members of
the Board and the Senior Management (i.e., General
Managers of the Bank).
¾ The Bank is submitting a quarterly compliance report
on Corporate Governance to the Audit Committee of the
Board and to BSE & NSE, where the shares of the Bank
are listed.
¾ The Bank is also submitting Quarterly Investor Grievance
Report to BSE & NSE.
Investor Education & Protection Fund (IEPF)
As per the guidelines of Ministry of Corporate Affairs (MCA),
Government of India, the Bank transferred Unpaid Dividend
amount pertaining to the year 2010-11 to IEPF on 7th September
2018. The unpaid dividend data pertaining to the years 2011-
12 to 2013-14 is ported in MCA website and is also available
at www.iob.in. Accordingly, the Bank has complied with the
guidelines of Government of India in respect of transfer of
unpaid dividend to IEPF.
Bank is complying with all guidelines/regulations laid down by
the Regulatory Authorities and Government of India from time to
time. The Bank redresses the shareholders grievances without
any delay.
Board of Directors
Shri Vishnukumar Bansal, Additional Director, two years’
term ended on 7th August 2018 and Shri Sivaraman Anant
Narayan, Non-Official Director, resigned from the Board on 15th
November 2018.
Acknowledgement
The Board of Directors are grateful for the valuable guidance
and support received from the Government of India, Reserve
Bank of India, Securities and Exchange Board of India (SEBI),
Stock Exchanges, State Governments, Financial Institutions and
all Overseas Regulators. The Board of Directors acknowledge
with thanks the valued Customers, Employees Union, Officers
Association, domestic and international banking group, the
shareholders & other stake holders for their valued support and
continued patronage with the Bank.
The Board also wishes to place on record its profound
appreciation for the valuable contribution of the Bank’s Staff at
all levels and looks forward to their continued involvement with
commitment towards achieving the future goals.
For and on behalf of the Board of Directors
Chennai R Subramaniakumar
9th May, 2019 Managing Director & Chief Executive Officer