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Home >> Annual Reports
 
Annual Reports
 
   
 
CANARA BANK
(A Govt of India Undertaking)
[Head Office: Bangalore
 
DIRECTORS’ REPORT 2006-07
 
The Board of Directors have pleasure in presenting the 38th Annual Report together with the Balance Sheet as on 31st March, 2007 and Profit and Loss Account for the financial year ended March 31, 2007.
 
MANAGEMENT DISCUSSION AND ANALYSIS

  1. ECONOMIC ENVIRONMENT

    Indian economy continued its growth momentum during 2006-07. As per the revised estimates released by the Central Statistical Organization (CSO), the Indian economy is estimated to have grown by 9.4% in 2006-07 vis-à-vis a 9% growth in the previous fiscal. The acceleration in growth during 2006-07 was driven by the continued buoyancy in the services and manufacturing sectors, recording double-digit growth. Agriculture and allied activities are likely to have recorded a moderate growth rate at 2.7% compared to 6% growth in 2005-06. While industry, as a whole, is estimated to record a robust growth at 11% compared to 8% a year ago, growth in the manufacturing sector is estimated at 12.3% (9.1%), electricity, gas and water supply at 7.4% (5.3%) and mining and quarrying at 5.1% (3.6%). Services sector continued to post double-digit growth of 11% compared to 10.3% a year ago. In the services segments, construction sector growth is expected to have moderated to 10.7% from 14.2% in 2005-06, while trade, hotels, transport and communication registered a surge from 10.4% in 2005-06 to 13% in 2006-07. Finance, insurance, real estate and business services growth is estimated at 10.6% as against 10.9% in the previous year. Corporate sector performance continued to remain buoyant, supported by favourable domestic and export demand conditions. Overall, economic growth in 2006-07 was robust as well as broad based, with concern in the agricultural sector.

    India 's external trade continued its uptrend during 2006-07 as well. As per the provisional figures released by the Ministry of Commerce and Industry, merchandise exports of India increased to US $125 billion, recording a y-o-y growth of 23.9% during 2006-07. Imports showed an increase of 29.3% y-o-y growth to reach US $ 181 billion, with oil imports growing by 30.3% and non-oil import growth placed at 24.7%. Trade deficit for the year is estimated at US $ 56.7 billion, higher than US $ 39.6 billion in 2005-06, reflecting the buoyancy in economic activities. Foreign Exchange Reserves recorded an increase of US$ 47.6 billion during 2006-07 to reach a level of US $199.2 billion by end-March 2007.

    Sound macro fundamentals, progressive fiscal position and a favourable investment climate led to the country's improved stature in the global arena as a frontline emerging economy. Upgradation of India 's sovereign rating as ‘Investment Grade' corroborates the same.

    Economic Environment in Karnataka

    In line with the rapid macroeconomic growth of the Indian economy, the economy of Karnataka is estimated to have grown at 8% during 2006-07. While industry and services sectors are expected to grow by 9.9% and 9.2% respectively in 2006-07, agriculture and allied activities with a growth rate of 2% causes concern. The process of fiscal corrections, thrust on agro-processing industries, watershed development, horticulture, etc. augurs well for the economy of Karnataka. It is important to pursue the path of growth with distributive equity for all-round development of Karnataka.

  2. MONETARY AND BANKING DEVELOPMENTS

    The acceleration in real activity propelled a sizeable expansion in monetary and banking aggregates during 2006-07. Money Supply (M3) growth, on year-on-year basis, increased by 20.8% during 2006-07, higher than the projected growth of 15% by the RBI during its annual policy announcement at the beginning of the year. Non-food credit extended by SCBs increased by 28% on top of 31.8% growth in the previous year. However, credit growth during 2006-07 featured some noteworthy variations compared to 2005-06. Aggregate incremental non-food credit deposit ratio edged down to 84.6% from 109.3% in the previous financial. As regards sectoral credit pattern, there were some evening out of the skew towards the retail and services sector. Highest growth in credit was observed in the industrial sector, a reflection of the policy focus on asset rebalancing efforts. Aggregate deposits of scheduled commercial banks increased by 23% during 2006-07 as against 18.1% recorded in 2005-06. A major cause for concern was rising inflationary pressures, triggered by supply side deficiencies as also the spurt in money supply. The year-on-year WPI inflation was 5.7% in end-March 2007 after moderating from an intra-year peak of 6.7% in end-January 2007 but higher than 4.1% at end-March 2006. Concerns on money supply and inflation prompted the RBI to revise key policy rates and prudential norms on number of occasions during the year.

    The year 2006-07 saw the following key policy measures announced by the RBI.

    • To counter the pressures on inflation front, RBI resorted to hikes in Cash Reserve Ratio (CRR) and Repo rate. While Bank Rate was kept unchanged at 6%, CRR was hiked from 5% to 6.5%, in three phases.

    • Repo rate was increased five times during the year by 25 basis points on each occasion to 7.75%.Reverse repo rate was raised from 5.5% to 6% in phases.

    • An ordinance to empower RBI to eliminate the floor for SLR was approved. The ordinance has since received the assent of the President and became effective from January 23, 2007 . With this measure, the RBI has greater operational flexibility in the conduct of monetary policy.

    • Consequent to the amendment to RBI Act 1934, the Reserve Bank removed the floor and ceiling rates in respect of CRR. Furthermore, it was indicated that no interest will be payable on CRR balances with effect from fortnight beginning March 31, 2007 .

    • Subsequent to the policy developments, the benchmark Prime Lending Rates (PLR) of PSU banks witnessed an increase from 10.25-11.25% during the previous year to a range of 12.25-12.75%.

    • Term deposit rate of over one year maturity of PSU banks also featured an uptrend from 5.75-7.25% in April 2006 to 7.25-9.50% in March 2007.

    • As a prudential measure for credit rebalancing, risk weights for exposure to NBFCs were increased to 125% from 100% and the provisioning requirement hiked to 2% from 0.4%.
    • Provisioning requirements were increased to 2% for standard assets in the real estate sector, outstanding credit card receivables, loans and advances qualifying as capital market exposure and personal loans (excluding residential housing loans).

    • For switchover to Basel II norms, RBI extended the timeline to March 2008 for banks with foreign presence and March 2009 for banks operating only in India .

    Outlook for 2007-08

    The global growth outlook, featuring a moderately downward bias, is likely to decelerate from 5.4% in 2006 to 4.9% in 2007 and 2008, as per the projection by the IMF in its World Economic Outlook . Financial risks have increased notably as a result of the continued volatility in oil prices, US housing market slump, global imbalances, large leveraged positions in financial markets and possible emergence of inflationary pressures.

    For the Indian Economy, real GDP growth for 2007-08 is projected at 8.5% by the RBI. The RBI also envisages containing money supply (M3) at around 17-17.5% during 2007-08 in consonance with the outlook on growth and inflation. In order to promote housing loans up to Rs.20 lakh, the RBI has reduced the risk weight to 50% from the existing 75% along with reduction of risk weight to 50% on loans up to Rs.1 lakh against gold and silver ornaments for all categories. While incremental growth in aggregate deposits during 2007-08 is projected at around Rs.4,90,000 crore with a y-o-y growth of 19%, non-food credit is projected to increase in the range of 24-25%, reflecting a graduated deceleration from the average of 29.8% over 2004-2007. For 2007-08, the annual policy endeavours to contain inflation at a benign level of 5%, with a medium term goal of 4-4.5%, without compromising on the growth impulse at present.

  3. CANARA BANK IN 2006-07

    FINANCIAL PERFORMANCE

    Net Profit at Rs.1421 Crore

    Highest Ever since Inception


    Profits and Profitability

    Year 2006-07 saw the Bank sustain a robust all-round growth as evident from a strong growth in business coupled with gains under profits and profitability. Continued buoyancy in the Bank's core business operations, containment of operating cost, thrust on risk management and close monitoring of asset quality, among others, were some of the key factors for augmenting the Bank's earnings profile during 2006-07.

    The Bank's net profit reached an all time high of Rs.1421 crore as compared with a net profit level of Rs.1343 crore for 2005-06. Notwithstanding depressed treasury earnings, the operating profit for the year recorded over 14% y-o-y growth to reach Rs.2912 crore as against Rs.2550 crore posted for 2005-06.

    Under profits and profitability parameters, return on average assets of the Bank stood at 0.98%, despite a 25% growth in total assets. The ratio of total operating expenses to average working funds also featured a decline from 1.97% in 2005-06 to 1.77% in 2006-07. Consequently, profit per employee, moved up to Rs.3.24 lakh compared to Rs.3.02 lakh in 2005-06.

    All Time High Dividend of 70%




    The Bank's performance under ‘Return to Shareholders' was reflected in a consistent uptrend in its Book Value and Earnings per Share. While book value increased to Rs.197.83 as at March 2007 as compared with Rs.171.19 recorded for previous financial, Earnings per Share further rose from Rs.32.76 a year ago to Rs.34.65 for the year ended March 2007. A dividend of 70%, amounting to Rs.287 crore, was declared by the Board of Directors of the Bank, as against 66% (Rs.270.60 crore) paid in the preceding year.

    Key Financial Ratios (%) March.2006 March.2007
    Yield on Advances 8.24 8.95
    Yield on Investments 7.86 7.74
    Cost of Deposits 4.69 5.46
    Spread as a % to AWF 3.01 2.78
    Net Interest Margin (NIM) 3.36 3.15
    Establishment Cost as % to AWF 1.27 1.11
    Other Operating Expenses as % to AWF 0.70 0.66
    Return on Avg. Assets (RoA) 1.13 0.98
    Business per Employee (Rs. in Crore) 4.42 5.49
    Profit per Employee (Rs. in Lakh) 3.02 3.24
    Book Value (Rs.) 171.19 197.83
    Earning per Share (Rs.) 32.76 34.65
    AWF: Average Working Funds

    Income and Expenditure



    With continued buoyancy in the core operations, the Bank's interest income registered a robust y-o-y growth of 30.5% to reach Rs.11365 crore compared to Rs.8712 crore recorded during the previous financial. Growth in interest income was driven by interest on loans/advances, growing by 36.8% and accounting for 59% of total income. Non-interest income registered a growth of 10.3% as compared with a decline of 14.8% last year, despite continued slackeness in treasury earnings.



    Rise in interest rates across the board was a factor secularly observed across the industry. Interest expenditure of the Bank increased to Rs.7338 crore as against Rs.5130 crore during the previous year, registering a y-o-y growth of 43%. As a result, cost of deposits rose higher by 77 basis points to 5.46% compared to a 71 basis points increase in the yield on advances to 8.95%. The higher pace of increase in cost of funds resulted in narrowing down of interest spread to 2.78% for the financial year ended March 2007.

    Capital and Reserves

    Networth of the Bank, as at March 2007, stood at Rs.8111 crore compared to Rs.7019 crore as at March 2006. With the paid-up capital at Rs.410 crore, reserves increased to Rs.9944 crore, with accretion during the year amounting to Rs.3222 crore.

    (Rs. in Crore)
    Composition of Capital March 2006 March 2007
    Risk Weighted Assets 86237 109478
    Tier I Capital 6738 7850
    CRAR (%)(Tier I) 7.81 7.17
    Tier II Capital 2940 6925
    CRAR (%)(Tier II) 3.41 6.33
    Total Capital 9677 14775
    CRAR (%) 11.22 13.50


    During the year, the Bank raised lower/upper Tier II capital worth Rs.1975 crore from the domestic market and US $250 million overseas by way of a medium term note programme. The rationale behind capital augmentation was to be in tune with the growth in assets size and to ensure compliance with the ensuing Basel II norms. As at March 2007, Capital to Risk Weighted Assets Ratio (CRAR) of the Bank stood comfortably at 13.50% vis-à-vis the 9% benchmark. The medium term objective of the Bank is to maintain the CRAR ratio above 12%.

    BUSINESS


    Business Volumes Cross Rs.2.4 lakh Crore


    Deposits



    Aggregate deposits of the Bank grew by 21.9% to Rs.142381 crore over the previous year’s level of Rs.116803 crore. Aggregate deposits comprised 8.7% of current deposits, 22.8% of savings deposits and 68.5% of term deposits. While deposit per branch stood at Rs.55.23 crore, deposits per employee moved up to Rs.3.24 crore. Deposit accounts of the Bank, as at March 2007, stood at 25.53 million.

    Advances

    Continued buoyancy in the real sectors of the economy helped the Bank sustain the credit growth during 2006-07. The Bank's advances (net) rose to a level of Rs.98506 crore, registering a y-o-y growth of 24% over Rs.79426 crore recorded during the preceding financial. The number of borrowal accounts, as at March 2007, stood at 3.82 million.

    Clientele Base At 29.35 million


    The Bank's credit to deposit ratio improved from 68% to 69.18% between March 2006 and March 2007. Credit growth was fairly broad based with due diligence in the sphere of exposure to sensitive sectors. As much as 75% of the incremental credit was deployed in productive sectors, such as, agriculture, SME, industries, infrastructure and services sectors. While overall advances level grew by 24%, growth in credit to productive sectors worked out to over 33%, conforming to the policy focus on rebalancing of credit portfolio.

    Aggregate business, comprising deposits and advances, recorded a y-o-y growth of 22.8% to move up from Rs.196229 crore to Rs.240887 crore as at the end of March 2007. The Bank could maintain its coveted Number One position among the Nationalized Banks in aggregate business as at March 2007.

    Spurred by 22.8% growth in aggregate business, productivity, as measured by business per employee, increased by 24.2% to Rs.5.49 crore from Rs.4.42 crore a year ago.

    Retail Lending Operations

    Disbursals made under retail lending during 2006-07 amounted to Rs.7447 crore, taking the outstanding retail portfolio to Rs.17485 crore, recording a y-o-y growth of 20%. Retail portfolio as a proportion of net credit was brought down to 17.84%, in tune with the policy focus on rebalancing the credit portfolio.

    Under retail segments, advances to housing finance (direct) recorded 17.4% growth to reach Rs.6575 crore. Direct housing loan formed 37.6% of retail portfolio out of which 81% were under the priority ambit, reflecting the Bank's continued concern for the common masses. While advances to retail trade increased to Rs.3584 crore, loans to other personal segments grew by 30% to Rs.7326 crore.

TREASURY AND INTERNATIONAL OPERATIONS


Aggregate investments of the Bank, as at March 2007, were of the order of Rs.45226 crore. In view of the volatility and uptrend in interest rate, the modified duration of the investment portfolio in the Available for Sale (AFS) category has been brought down considerably from 3.65% to 2.23% as a conscious management decision. The advantage of having higher volumes under the AFS category duly reflects that the stated value of the portfolio is truly realizable. Continued uptrend in interest rate cycle impacted the Bank's trading profit, which was, to a large extent, compensated by earnings from core operations. Trading profit, during the year, stood at Rs.134 crore.



The Bank continued to be one of the major players in the country for financing and facilitating the foreign trade through its 16 foreign departments and 128 designated branches across the country. Foreign Business Turnover of the Bank, as at 31 st March 2007 , aggregated to Rs.130083 crore, registering a robust 32% growth over the previous year. Foreign business turnover comprised Rs.49307 crore under exports, Rs.31705 crore under imports and Rs.49071 crore under remittances. Outstanding export credit rose to Rs.7896 crore from Rs.7136 crore recorded at the end of the previous year.

Bank’s 2nd foreign Branch was inaugurated by Shri P Chidambaram, Hon’ble Union Finance Minister of India at Hong Kong


The financial year under review witnessed significant initiatives aimed at realizing the Bank's global aspirations. The second foreign branch of the Bank was inaugurated by Shri P Chidambaram, Hon'ble Finance Minister of India , at Hong Kong during March 2007. With the commissioning of a branch at Hong Kong, the Bank's international presence now covers one branch each at London and Hong Kong, a representative office at Shanghai and a joint venture bank, namely, Commercial Bank of India LLC at Moscow in association with State Bank of India. Canara Bank has also an Offshore Banking Unit at Special Economic Zone (SEZ) at NOIDA, Uttar Pradesh.

To expand the Bank's outreach in the global arena, 21 prominent centres have been identified worldwide for commissioning new outfits. With the preliminary moves underway, the Bank's Representative Office at Shanghai is being converted into a full fledged branch.

These apart, the Bank's growing international operations are supported by a network of 540 Correspondent Banks, spread over 94 Countries for facilitating international transactions. The Bank is also managing two Exchange Houses in the Gulf viz., Al Razouki International Exchange Co., Dubai and Eastern Exchange Est., Qatar , under secondment/management agreement. Besides, the Bank has rupee drawing arrangement with 19 Exchange Houses and 18 banks in the Middle East for facilitating remittances by expatriates.

OTHER SERVICES


The Bank's Merchant Banking Division handled 16 assignments during the year as Lead Manager/Co-Book Running Lead Manager/Co-Manager & Advisor, covering 5 Public Issues, 9 Private Placement Issues, one Rights Issue and one assignment of Delisting of Equity. The Bank handled 22 ‘Bankers to the Issue' assignments as Escrow Bankers/Collecting Bankers with total float funds amounting to Rs.4360 crore.

The Bank has tie-up arrangements in both life and non-life insurance segments under its ‘ bancassurance' arm. Under tie-up arrangement with M/s AVIVA Life Insurance Company India Pvt Ltd, the Bank has collected premium amounting to Rs.318 crore (sum assured) during the year. Bank has tied-up with M/s United India Insurance Company Limited for undertaking Non-Life Insurance business.

Under Cross-Selling of Mutual Fund products of Canbank Mutual Fund and HDFC Mutual Fund, the Bank mobilized a sum of Rs.945 crore during the year.

Corporate Cash Management Services (CCMS) network of the Bank, covering 94 Operating Centres and 683 Pooling Branches, provides services related to local and upcountry cheque collection, bulk cheques collection and zero balance account facility. An aggregate turnover amounting to Rs.2650 crore was achieved under the scheme.

The Bank has taken several initiatives to enhance the Bank's Credit Card (under visa/master affiliations) and ATM-cum-Debit cards clientele base during the year, by offering life time free cards and cash back and other such facilities as bonus/discounts from time to time. With the addition of over 5 lakh cards during the year, the Bank's ATM-cum-Debit cards base increased to 22.68 lakh .

Debt syndication, as an emerging niche segment, has been gaining prominence of late. The Bank, with its expertise in project appraisal, debt participation and underwriting, has launched the Debt Syndication Services since October 2006, with an aim of extending value added fee based services to its corporate clients. The Bank has placed debts amounting to Rs.1158 crore, involving project cost of Rs.1653 crore during 2006-07.

Executor, Trustee and Taxation Services outfit of the Bank provides services, like, Debenture Trusteeship, Will and Executorship, Trusteeship, Personal Tax Assistance and Power of Attorney Services. During the year under review, it secured 10 new bonds/security trusteeship issues, amounting to Rs.4098 crore.

Under Government Business , comprising direct and indirect tax (excise and customs), departmentalized Ministry accounts, postal transactions and treasury, the Bank achieved a total turnover of Rs.28378 crore during the year under review. The Bank also received appreciation from RBI and Ministry of Finance on implementation of Online Tax Accounting System (OLTAS).

Agricultural Consultancy Services (ACS) outfit of the Bank handled 55 assignments during the year 2006-07, involving an aggregate outlay of Rs.355 crore. Important assignments handled during the year include appraisal/viability studies of projects under various segments including cold storage, rural godowns, dairy, poultry farming, floriculture, composite horticulture, sericulture, aquaculture, plantation, food processing and other area specific schemes.

ASSET QUALITY AND RISK MANAGEMENT


Net NPA Ratio Slides to 0.94%
All Time High Cash Recovery at Rs.1025 crore


Performance under settlements and recovery front was also quite significant during the year. 7687 Recovery Meets were conducted by the Bank, resulting in the recovery of Rs.183 crore. Under cash recovery, the Bank achieved an all time high Rs.972 crore, compared to Rs.869 crore for the preceding year. Recovery through SARFAESI Act 2002 touched Rs.205 crore during the year, taking the cumulative recovery under the Act to Rs.443 crore.

Asset Quality

Continuous focus on quality of assets, aided by a prudent risk management mechanism, has facilitated progressive improvement in the Bank's assets quality. Prompt and timely steps coupled with enhanced credit supervision and monitoring during the year have also resulted in further containment of the impaired assets portfolio.

In absolute terms, the Bank's gross Non Performing Assets (NPAs) level declined from Rs.1793 crore last year to Rs.1493 crore as at March 2007, with gross NPA to gross advances ratio declining by 74 basis points from 2.25% to 1.51%. With a net NPA level of Rs.927 crore, net NPA to net advances ratio also came down to 0.94% as at March 2007 from 1.12% a year ago.

During the year, Bank's performance under settlements and recovery was quite noteworthy. 6530 Recovery Meets were conducted by the Bank, resulting in the recovery of Rs.178 crore and ensured closure of 16,212 accounts. Under cash recovery, the Bank achieved an all time high Rs.1025 crore, compared to Rs.972 crore for the preceding year.

Risk Management

Fully Geared up for a Smooth Transition to Basel II


A robust risk management architecture has been put in place by the Bank to adopt global best practices and effective implementation of risk management initiatives in conformity with the Basel II framework and RBI guidelines. The overarching objective of the Bank in the process is to move from capital adequacy to capital efficiency in the medium term.

The Bank's Board has been steering the varied policy initiatives and putting appropriate strategies in place for effectively managing the Credit, Market and Operational risks. Top Executive Risk Management Committees, headed by the Chairman & Managing Director, are in place to effectively address all issues related to the management and mitigation of various business/control risks.

Preparedness to Switchover to Basel II

During the financial year, the Bank has initiated implementation of parallel run of new capital adequacy framework under Basel II norms and computed Capital to Risk Weighted Assets Ratio periodically, by adopting Standardized Approach for credit risk, Basic Indicator Approach for operational risk and Standardized Modified Duration Approach for market risk, as stipulated by the RBI. Steps have also been initiated to move towards advanced approaches in risk management. In addition to reviewing existing risk management policies, the Bank has adopted various new policies, such as, Compliance Policy, Disclosure Policy, Group Risk Management Policy and Outsourcing Policy covering the entire gamut of risk management functions. These policies are comprehensive and focus on, among others, risk appetite, processes involved in identification, assessment, measurement, monitoring and mitigation of various risks.

The Bank has been compiling 'Risk Profile' on a quarterly basis based on the 'risk templates' and effectively reviewing the level and direction of various business/control risks as prescribed under risk based supervision framework by the RBI.

Besides, the Bank has also put in place an effective loan review mechanism to ensure ongoing monitoring of borrowal accounts and to enhance the credit quality. A well defined credit risk rating framework is also in place to ensure risk rating of all exposures and periodical conduct of migration analysis to ensure the quality of the loan portfolio.

Asset Liability Management (ALM)

The Bank has put in place an effective Asset Liability Management system. The Board of Directors of the Bank has constituted an Asset Liability Committee (ALCO) to oversee ALM functions, including fixation of interest rates for various components of assets and liabilities. A comprehensive software solution for the ALM system has been installed for quantifying risks with the aid of scientific tools, such as, Maturity Gap Method, Sensitivity Analysis and Simulation exercises.

ALCO meets regularly to discuss various issues pertaining to the maturity profile of assets and liabilities, takes stock of the dynamic interest rate scenario, discusses at length the economic and financial parameters, which have a direct or indirect bearing on the banking industry and focuses on the impact of all these factors on the business profile of the Bank.

NATIONAL PRIORITIES


Reaching New High in National Priorities


Priority Sector Advances

As a key player in the domestic banking sector, Canara Bank's relentless pursuit of varied goals under national priorities has been well recognized. Progress during 2006-07 has further reaffirmed the Bank's commitment to the large and growing productive segment of the economy, including agriculture, SMEs, weaker sections and marginal farmers.

Outstanding Priority Sector advances of the Bank as at March 2007 increased by Rs.6907 crore to Rs.37844 crore, covering 28 lakh borrowers, recording a y-o-y growth of 22%. Priority Sector advances formed 40.21% of the Bank's net credit as against the 40% norm. Incremental growth in priority credit during 2006-07 constituted around 36% of the accretion to credit growth.

Conforming to the much needed focus on agri-resurgence, the Bank's outstanding advances under agriculture rose by Rs.3489 crore to reach Rs.15521 crore, registering a 29% y-o-y growth and covering 3.26 lakh new farmers during the financial under review. Agricultural disbursements touched Rs.9404 crore in 2006-07 as against the level of Rs.4103 crore during 2003-04, registering more than doubling of agricultural credit in three years. Similarly, outstanding agricultural advances increased from a level of Rs.6545 crore as at March 2004 to Rs.15521 crore as at March 2007, signifying a 137% growth. Notably, disbursement under agriculture during the year has been 30.4% higher than the level of disbursement for the previous financial.

Under Kisan Credit Card Scheme , the Bank issued 3.60 lakh cards during the year, with credit coverage of Rs.2134 crore. As at March 2007, the cumulative number of Kisan Credit Cards reached 21.59 lakh, involving a credit coverage of Rs.7517 crore.

Advances outstanding to Small and Medium Enterprises (SMEs) recorded an increase of Rs.2626 crore during the financial to reach Rs.14245 crore, registering a growth of 22.6% y-o-y. Outstanding advances to SSI sector touched Rs.9852 crore, recording a robust 49.5% growth over the previous year. During the financial, a total of 22,901 new SME clients have been rendered finance in the Bank's urban and semi-urban branches, working out to 10 SME accounts per branch as against the stipulated norm of 5 new accounts per branch. The Bank received an amount of Rs.1 crore from the Ministry of SSI, Government of India during the year as a Nodal Agency for Technology Upgradation of SSI units under CLCSS and amount utilized for the same stood at Rs.11.89 lakh.

The Bank has also extended financial assistance to Other Priority Sectors , such as, retail traders, professional and self-employed persons and small businesses. As at March 2007, outstanding advances to these sectors reached a level of Rs.12472 crore.

Continuing its commitment to help aspiring students, the Bank's outstanding advances under its Vidyasagar Education Loan scheme reached Rs.1252 crore, covering 92579 students as at March 2007. With over 31% growth in education loan, Canara Bank is placed first among nationalized banks in funding higher education.

The Bank has also actively participated in various Government Sponsored Schemes, such as, SGSY, SJSRY, SLRS and PMRY. As at 31 st March 2007 , the cumulative outstanding under these schemes aggregated to Rs.501crore, involving 1.27 lakh beneficiaries.

(As at March 2007)

Name of the Scheme

No. of Accounts

Amt in Rs. Crore

PMRY

76111

343

SGSY

31517

112

SJSRY

13335

35

SLRS

1284

3

IRDP/SUME

4819

7

Total

127066

501



In support of the underprivileged sections of the society, the Bank's outstanding advances to SC/ST beneficiaries reached Rs.1659 crore as at March 2007. The recovery percentage of lending to SC/ST borrowers was 50.98% as compared with an overall recovery of 53.42% under various Government sponsored schemes during the year. The Bank's recovery percentage under the entire priority sector advances stood at 84.92% for 2006-07. As at March 2007, outstanding advances to weaker sections aggregated to Rs.5613 crore. Advances outstanding under DIR scheme stood at Rs.65 crore as at March 2007.

Canara Bank is one of the pioneers in forming and credit linking Self Help Groups (SHGs) across the country. During the year, an additional 37507 SHGs were formed by the Bank, cumulatively taking the number of SHGs to over 1.5 lakh, with a credit linkage of 1.2 lakh as at March 2007.

1639 Villages Covered under Total Financial Inclusion


Canara Bank has been playing a lead role in furtherance of the financial inclusion movement in the country. As at March 2007, the Bank has covered 1639 villages under Total Financial Inclusion campaign across the country, involving 9.53 lakh families. Two of the Bank's lead districts, namely, Palakkad in Kerala and Davangere in Karnataka, acquired the status of 100% financially included, with Palakkad being the first district in India to achieve the distinction.

CanSaral, a no-frills savings deposit scheme, specially devised for the campaign under financial inclusion, featured around 3.4 lakh accounts as at March 2007. The Bank has launched a programme to achieve total financial inclusion in 23 lead districts and initiated a campaign to mobilize one million no-frill accounts during 2007-08.

Entrepreneurship Development among Women

Centre for Entrepreneurship Development for Women has been functioning in the Bank since 1988. Apart from its presence at Head Office, 30 such Centres are functional at various Circles of the Bank. Towards providing exclusive banking service to women, the Bank has 3 Mahila Banking Branches and 6 Mahila Banking Divisions operational at select centres. During the year 2006-07, besides providing counselling to 1,05,805 women, the Bank conducted 743 awareness programmes and 943 skill development training programmes, benefiting 52,493 and 54,200 women respectively. As at March 2007, aggregate outstanding advances to women stood at Rs.6046 crore, forming 6.42% of the net Bank credit vis-à-vis the 5% norm stipulated by RBI. The number of women beneficiaries covered during the year crossed 8 lakhs.

Lead Bank Scheme

Canara Bank has lead bank responsibilities in 23 districts in the country viz., seven in Karnataka, six in Tamil Nadu, five in Kerala, four in Uttar Pradesh and one in Bihar . The Bank is also acting as the convenor of the State Level Bankers' Committee in the State of Kerala .

CORPORATE SOCIAL RESPONSIBILITY


Attaining New Frontiers in Corporate Social Responsibility


As a responsible corporate social citizen, Canara Bank has been committed to serve the common man since its inception and as part of its core founding principles. The Bank today epitomizes a fine blend of commercially sound and socially responsive banking. This is evident from a slew of initiatives the Bank has been taking over the years to help counter poverty and unemployment among rural youth, address poor drinking water and inadequate medical facilities in the countryside.

Rural Development

Canara Bank has sponsored several self-employment training institutes across India . Rural Development and Self-Employment Training Institutes (RUDSETIs), co-sponsored by the Bank, have been engaged in providing training to rural youth to pursue various self-employment activities. RUDSETIs, numbering 20 across India , have so far trained 1.87 lakh unemployed youth, with a settlement rate of 67%. The Bank, under Canara Bank Centenary Rural Development Trust, has also promoted 14 self-employment training institutes. These institutes have so far trained 56,561 unemployed youth, accounting for 57% of women, with an impressive settlement rate of 72%. The Trust has also extended its support to Society for the Educational and Economic Development (SEED), a voluntary organization working for the welfare of socially marginalized children and Abhayam, a NGO engaged in providing basic necessities to the poor and destitute.

The Bank's ‘Rural Clinic Services' scheme rendered assistance to doctors in opening 21 additional clinics during 2006-07, taking the total of such clinics to 493 across rural India. Under ‘Jalayoga', a scheme for facilitating availability of safe drinking water in rural areas, the Bank has completed 35 projects so far. In another rural centric venture, the Bank has been encouraging the spirit of voluntarism among its employees under the Rural Service Volunteer Scheme. The Scheme has assisted 500 villages, benefiting over 2 lakh families since its inception in 1985.

During the year, the Bank has donated hi-tech and solar powered ‘Mobile Sales Van' to assist women entrepreneurs, SHGs and artisans in their entrepreneurial ventures.

During the year, the Bank conducted over 2000 social service activities, benefiting over 3 lakh people across India . These activities include organization of blood donation camps, helping physically and mentally challenged persons, assisting NGOs working for welfare of the society, helping poor students, honouring teachers and assisting best Government Schools.

As part of the Bank's Centenary Celebration, a series of measures were announced during 2005-06. Towards fulfilling its commitment to rural infrastructure, the Bank provided 91 Government Schools with Rs.1,00,000 each for infrastructure development during the year. It also adopted 23 villages, earmarking Rs.20 lakh each for infrastructure development. As a special centenary measure, the Bank undertook construction of a Super-Specialty Block at Sevakshethra Hospital , Bangalore . This Block is nearing completion .

Visits by Parliamentary Committees

During the year, the Parliamentary Committees on Finance, Welfare of SC/STs and Government Assurances visited the Bank. The Committees had interaction with Top Executives and SC/STs Employees Welfare Association of the Bank on matters relating to funding of Self-Help Groups (SHGs), services and credit facilities provided to SC/STs and loans provided to small and medium farmers. The Committees appreciated the progress of the Bank as a socially responsible institution.

Centenary Valedictory Function

Your Bank has, over the years, won the trust and confidence of the public to a remarkable degree. No wonder it has become the largest amongst the nationalized banks.’ Dr Manmohan Singh, Honb’le Prime Minister of India


Year 2006-07 was of special significance as the curtains were drawn on the centenary celebrations of the Bank on June 30, 2006 . The valedictory function for the centenary was graced, among others, by Dr. Manmohan Singh, Hon'ble Prime Minister of India, Shri P Chidambaram, Hon'ble Union Finance Minister and a galaxy of distinguished guests and dignitaries. While the Bank's century long feats were widely acclaimed by the dignitaries, quite fitting to the occasion, the Bank crossed the coveted Rs.2 lakh crore mark under aggregate business at the end of June 2006.

'Larger public interest lies in building world size and world class banks. Canara Bank, among all nationalized banks, is poised to become a world size and world class bank.' Shri P Chidambaram, Honb’le Union Finance Minister.


ORGANISATION AND SUPPORT SERVICES


From a Pan India Presence to Expanded Global Outreach


Branch Network

The Bank has a strong and formidable domestic presence with branches, well spread across India . During 2006-07, the Bank added 29 new branches and upgraded 16 of its Extension Counters into full-fledged branches. As at March 2007, the number of branches in India moved up to 2575, covering 728 in rural, 656 in semi-urban, 591 in urban and 600 in metro locations. Pursuing the global expansion drive, the Bank commissioned its second branch at Hong Kong, apart from its overseas presence at London (Flagship Branch), Moscow (Joint Venture Bank) and Shanghai (Representative Office) in the Eastern Hemisphere . The Bank has also an Offshore Banking Unit at Special Economic Zone (SEZ), NOIDA, Uttar Pradesh.

The number of branches offering specialized services stood at 121, comprising 13 Savings Bank, 38 SMEs, 18 Overseas, 10 Agri-Finance, 9 NRI, 8 Industrial Finance, 7 Asset Recovery Management, 5 Stock Exchange, 4 Corporate Service, 3 Capital Market, 3 Mahila Banking, one each in Consumer Finance and Housing Finance and a branch for physically challenged persons.

InfoTech Progress

Commissioned 125 ATMs 0n a Single Day, Providing Access to Customers over 14000 ATMs across India


Several initiatives were undertaken by the Bank in the InfoTech arena during the year. The tally of Core Banking Solution (CBS) branches, commissioned in 2005-06, reached 330 as at March 2007. CBS comes with a lot of add-ons like Interactive Voice Response System (IVRS), Internet & Mobile Banking (IMB) and Centralized Credit Appraisal. During the year, the Bank set up a state-of-the-art Data Centre with Disaster Recovery Centre. The Bank also implemented Centralized Online Tax Accounting System (Government Business module) in 100 branches and Excise and Service Tax modules in 58 branches, under CBS setup. The Bank has a well-designed and secured Corporate Network, covering 2246 Branches/Offices for rolling out network-based delivery channels.

Another significant development during the year related to substantial enhancement of the Bank's tech-enabled delivery channels. Bank's ATM strength increased to 1132 as at March 2007 from 815 as at March 2006. In a noteworthy initiative, as many as 125 ATMs spread across the country were commissioned on a single day in March 2007, with Shri V Leeladhar, Deputy Governor, Reserve Bank of India , inaugurating the function at Bangalore . The Bank also entered into an agreement to share its ATM network with SBI and joined the National Financial Switch (NFS), providing access to the ATM network of 23 other banks. In all, customers of Canara Bank now have increased access to over 14000 ATMs across the country. To significantly enhance strength of ATMs, the Bank has already secured the regulatory approval to commission 689 off-site ATMs (of which 141 ATMs were opened during the year) and 225 ATMs at Railway Stations for customers' convenience.

The number of branches, providing ‘Internet and Mobile Banking' and ‘Anywhere Banking' services rose to 1156 and 1550 respectively as at March 2007. While the number of customer Terminals increased to 1721, the number of Remote Customer Terminals substantially increased to 23,655 as at March 2007. The advanced payment system of the Bank has also been expanded to cover Structured Financial Messaging System (SFMS) in 1506 branches as at March 2007 compared to 541 as at March 2006. The Bank also implemented Real Time Gross Settlement (RTGS) and National Electronic Funds Transfer (NEFT) in 1506 branches, apart from popularizing Electronic Clearing Service. The Bank is also fully prepared to participate in the pilot Cheque Truncation System Project, scheduled to be unveiled by the Reserve Bank of India at National Capital Region, Delhi .

The Bank has taken several initiatives to design and develop various software applications in-house, taking care of its internal requirements. During the year, the Bank developed a web portal for monitoring the financial progress under Sarva Shiksha Abhiyan Project of the Ministry of HRD, Government of India. The project has been implemented in all the districts of Andhra Pradesh and Karnataka. In another noteworthy initiative during the year, the Bank supported the setting up of the Cyber Lab at Bangalore in association with NASSCOM and Police Department, Government of Karnataka.

As an innovative step towards speeding up the management information and decision support system, blackberry mailing system has been provided to the Top Management of the Bank, making it the first of its kind among nationalized banks. The Bank has a trained and highly motivated IT workforce, capable of dealing with developing and implementing IT-driven products to match with the increasing customer expectations.

Manpower Profile

As at March 31, 2007 , the Bank had 46359 employees on its rolls, comprising 16,806 Officers, 18,989 Clerks and 10,564 under Sub-staff category. A total of 3443 personnel were promoted to various cadres during the year.

During the year, the Bank recruited 86 persons belonging to the Scheduled Caste (SC) and Scheduled Tribe (ST) categories. As at March 2007, the number of SC and ST employees on the Bank's rolls stood at 9352 and 2457respectively, together forming 25.47% of the Bank's total staff strength.

The Number of women employees stood at 9732, constituting 21% of the total staff of the Bank.

62 ex-servicemen were recruited in various cadres during the year, taking the total number of ex-servicemen in the Bank's rolls to 2723. Total number of employees with disabilities, as at March 2007, stood at 821.

Training / Human Resource Development

New Dimensions under HRD- Crossed One Lakh under Training/Re-skilling


The Bank continued its overriding emphasis on HRD initiatives and improving training effectiveness. Close on the heels of achieving the one lakh mark in training/re-skilling during its centenary year, 2006-07 featured the tally moving up further to 1,09,661 covering a wide range of functional areas and including some of the new training programmes like CBS (FCC) Corporate, CBS (MIS), CDCRM and KYC Norms.

Out of the trained staff, 21,514 personnel belonged to Scheduled Caste category and 6,053 personnel received training under Scheduled Tribe category.

The Bank also adopted a fast track promotion policy and implemented cash incentive scheme for high performers during the year. Canara Bank is also the only Bank in the country to have formed ‘Club2020', a young think-tank, to spearhead strategic changes in the fast changing banking environment.

Focus on building specialized expertise led to recruitment of 541 officers through campus and direct recruitment in diverse areas like marketing, financial analysis and risk management.

Other HRD concepts like Quality Circles, Brain Storming Sessions, Staff Meetings and Study Circles have also been invigorated for effective team building and achieving collective excellence. During the year, many of the Bank's Quality Circles took part in various competitive events at national and international levels. Two of the Quality Circles participated at the International Convention on Quality Circles held at Bali , Indonesia .

Continued focus on quality drive enhanced the number of ISO 9001 Certified Branches and Administrative Offices to 805 and 14 respectively as at March 2007.

Changes in the Organizational Setup

During the year, the Bank effected a major organizational restructuring exercise for greater business focus and expeditious decision making, apart from moves to decentralize operational activities. Under the de-layering exercise, a total of 30 Circle Offices were carved out of the 13 Circles earlier, bringing 1783 branches under the three tier administrative structure, comprising Corporate Office, Circle Offices and Branches. The Bank has 30 Circle Offices, 17 Regional Offices and 2575 domestic branches, apart from its Corporate Office at Bangalore and the International Division at Mumbai.

Customer Orientation

The Bank, during the year, introduced several new measures towards further improving customer centricity and service quality to match the competitive market conditions and customer expectations. In a noteworthy initiative, the Bank implemented ‘Six Sigma' project for enhancing the knowledge base of its frontline staff on products and services. During the year, a customer survey from a sample of 25 branches each in five metros, viz., Bangalore , Chennai, Delhi , Kolkata and Hyderabad , covering 10000 customers was conducted by a consultant of repute. The survey findings revealed a ‘good' rating in overall customer service and provided requisite feedback to further improve the same. As a member of Banking Codes and Standards Board of India (BCSBI), set up by RBI, the Bank has brought out a booklet on “Code of Commitment to Customers” to create awareness among customers as well as staff about the Uniform Fair Practice Code used as benchmark standard by all banks in India.

Systems and Procedures

A systematic review of the systems and procedures was also undertaken during the year, resulting in further simplification of some of the procedural norms, including documentation of housing finance, for the customers as well as for the staff at operational outfits. Various measures were also adopted towards further strengthening the systems and procedures, from the fraud prevention viewpoint.

During the year under review, 1888 branches of the Bank were subjected to regular inspection, with more than 96% of branches coming under ‘satisfactory grade'. Besides, 581 branches were also subjected to Revenue Audit, including 415 branches for Concurrent Audit. Risk Based Internal Audit was conducted for 1281 branches, 12 Foreign Departments, 28 Accounts Sections and 5 Administrative Units. More importantly, Information System Audit was also conducted for all TBC/Core Banking branches to ensure strict control over Information System to prevent unauthorized disclosure of information and electronic frauds.

The Bank has taken a host of measures to comply with best practices in the realm of Know Your Customer (KYC) and Anti-Money Laundering (AML). During the year, it implemented the guidelines for timely submission of Cash Transaction Report (CTR) and Suspicious Transaction Report (STR), with adequate software support at operational units.

Vigilance Setup

The Bank's Vigilance Wing at its Corporate Office is headed by Chief Vigilance Officer in the rank of General Manager, supported by Vigilance Officers at all Circles, Bank's International Division, RRBs and most of the Bank's Subsidiaries. During the year under review, special efforts were made to enhance awareness across the operational units with a view to prevent frauds/malpractices. The guidelines, on review, reporting and monitoring of frauds were issued and also adopted into a Fraud Risk Management Policy. All reported frauds were reviewed from the adequacy of the existing systems and procedures angle so as to formulate appropriate preventive measures.

Security Arrangements

Security environment in the Bank remained, by and large, normal, with number of incidents and amount involved brought down considerably during 2006-07. Advanced security system, such as, Passive Infra-red Sensors and Torch and Tool Resistant Safes were introduced towards further strengthening the security arrangements during the year. Security officers were also imparted training relating to the physical aspects of the IT security through programmes conducted in-house and at the Institute for Development and Research in Banking Technology (IDRBT), Hyderabad .

Right to Information

During 2005-06, under the Right to Information Act, 2005, the Bank set up an exclusive Right to Information Act outfit to provide information and bring transparency. During the year under review, the Bank dealt with all the applications received as per the provision of the Act.

Implementation of Official Language

The Bank made noteworthy progress under the implementation of official language and won many prizes at various levels during the year under review. It won fourth prize in region "B" under the Rajbhasha Shield Yojana sponsored by the Reserve Bank of India . The Town Official Language Implementation Committees at Coimbatore and Trivandrum , have been honoured with First and Third prize respectively by the Government of India. Apart from this, many Circles/Regional Offices and branches have received awards from Official Language Department, Government of India and the respective Town Official Language Committees.

In addition to the attractive percentage of trained employees as at March 2007, the Bank has notified 1985 of its branches under Rule 10(4) of Official Languages Act, 1976. Official Language Implementation Committees have been constituted at 2430 branches to motivate and guide the employees towards effective implementation of Official Language policy of the Government of India.

In the sphere of using Information Technology in the Official Language, the Bank has furthered the use of Shabdaratna and Akruthi packages for word processing, usage of Bankscript package for Data processing, and also made provision in ATM screens of the Bank for carrying transaction in Hindi and English, apart from regional language like Tamil, Telugu, Malayalam, Kannada, and Marathi. Telebanking facility has also been provided in Hindi and English and other major regional languages.

Promotion of Sports

53 sports persons of outstanding calibre in various disciplines were on the Bank's roll as at March 2007. During the financial, many of the sports persons have participated in the events organized at the national and international levels. The Bank's Cricket Team, Women Athletic Team and Shuttle Badminton Team emerged champions in the 5 th Banks' Olympiad held during the year at Mumbai. Smt. H M Jyothi represented India in the Asian Games held at Doha and Shri Bharat Chetri represented India both in the Asian Games and in the Mens World Cup Hockey Tournament at Germany . Notably, Shri Venkatesh Prasad was nominated as Bowling Coach for Indian Cricket Team while Smt. Sudha Shah is currently serving as the Coach for Indian Women Cricket Team.

ORGANISATION AND SUPPORT SERVICES

Subsidiaries, Sponsored Entities and Joint Ventures

MoUs with Globally Reputed Majors for Setting up JVs in Insurance and Asset Management Segments


Canara Bank functions as a ‘ Financial Supermarket ' with as many as nine subsidiaries, sponsored institutions and joint ventures active in diversified areas. With the recently entered MoUs with global majors for starting joint ventures in insurance and asset management business, the Bank has taken a significant step to further strengthen its status as an emerging Financial Supermarket/Conglomerate in India . The performance of the Bank's seven subsidiaries, one sponsored entity and one joint venture exhibited satisfactory results during the financial.

Indo-Hong Kong International Finance Limited (IHIFL)

IHIFL, a wholly owned overseas subsidiary of the Bank at Hong Kong, posted a profit after tax of USD 3.52 million for the financial year ended March 2007 over USD 2.68 million during the previous financial, registering a y-o-y growth of over 31%. The IHIFL has since been converted into a full-fledged branch of the Bank during March 2007.

Commercial Bank of India LLC (CBIL)

CBIL, a joint venture of Canara Bank and State Bank of India , has been operational since April 2004 at Moscow , Russia . The Company earned a profit after tax of USD 1.02 million for 2006-07, registering a growth of 38% compared to USD 0.74 million during 2005-06.

Canbank Venture Capital Fund Limited (CVCFL)

CVCFL, the Trustee and Manager of Canbank Venture Capital Fund (CVCF), is a wholly owned Subsidiary of the Bank. CVCFL is currently managing 4 Funds, with a corpus of Rs.117 crore. Under the Bharath Nirman Fund, the fourth Fund, the Company has mobilized a corpus of Rs.60 crore from seven PSU banks and SIDBI, out of which Rs.30 crore has been drawn as at March 2007. During the year, CVCFL extended its financial assistance to 84 ventures, aggregating to Rs.74.43 crore. The Company recorded a profit after tax of Rs.20 lakh for 2006-07 and distributed a dividend of 40%.

Can Fin Homes Limited (CFHL)

CFHL, a sponsored entity of Canara Bank, is one of the premier housing finance entities in the country. The Company sanctioned and disbursed loans amounting to Rs.417 crore and Rs.453 crore respectively, taking cumulative sanctions to Rs.4899 crore and disbursement to Rs.4234 crore as at March 2007. The Company posted a profit after tax of Rs.30 crore for the financial under review.

Canbank Investment Management Services Limited (CIMS)

CIMS, a wholly owned subsidiary of the Bank, has been acting as the investment manager for all schemes floated by Canbank Mutual Fund. CIMS, with combined net assets of Rs.2185 crore, is managing 18 Schemes. The Company floated two schemes, namely, Can Multi Cap and Canfixed Maturity Plan during 2006-07. For the financial, the Company's profit after tax stood at Rs.4 crore. Recently signed MoU with Robeco Groep N. V, for divesting 49% of equity of CIMS to commission a joint venture in asset management, is expected to boost the Bank's asset management arm, with sophisticated and professionally managed products to its clientele.

Canbank Factors Limited (CFL)

Canbank Factors Limited has been a factoring major, with a total business turnover of Rs.3396 crore as at March 2007. During the year, CFL posted a profit after tax of Rs.14 crore and proposed a 15% dividend.

Canbank Computer Services Limited (CCSL)

CCSL is primarily engaged in IT and software development services, training/consultancy and Registrar and Share Transfer Agency Services. CCSL is a member of the NASSCOM and registered as a Software Solution Provider for World Bank projects. During the year, the Company bagged several key contracts and strengthened its networth base from Rs.4.71 crore to Rs.6.02 crore as at March 2007, with a profit after tax of Rs.1.30 crore for the financial.

Gilt Securities Trading Corporation Limited (GSTCL)

GSTCL, a Primary Dealer and a wholly owned subsidiary of the Bank, transacted a total business of Rs.71702 crore, comprising Rs.18547 crore under Primary Market Operations, Rs.31507 crore under Secondary Market Operations, Rs.20508 crore under Repo transactions and Rs.1139 crore under non-government securities. GSTCL posted a profit after tax of Rs.10.60 crore and paid a dividend of 10%.

Primary dealer functions of GSTCL have since been taken over by Canara Bank from February 2007. The Company is diversifying its activities into the areas of equity broking and trading.

Canbank Financial Services Limited (Canfina)

Canfina confined its activities to legal matters arising out of past transactions in securities, besides concentrating on collection of lease rentals and recovery of dues under decreed accounts. During the year, Canfina recorded a profit after tax of Rs.24.23 crore.

Regional Rural Banks (RRBs)

With the amalgamation of 4 RRBs sponsored by the Bank in Karnataka to form ‘ Pragati Gramin Bank ' during the previous financial, the Bank pursued the consolidation drive similarly for the 3 RRBs sponsored by it in the State of Uttar Pradesh, culminating in the formation of ‘ Shreyas Gramin Bank '. As at March 2007, Canara Bank had 3 sponsored RRBs, one each functioning in the States of Karnataka, Uttar Pradesh and Kerala.

All RRBs sponsored by Canara Bank were profit making as at March 2007, with a combined operating profit level at Rs.86.75 crore and profit after tax of Rs.59 crore. Aggregate business level of these RRBs touched Rs.9282 crore, comprising deposits of Rs.4715 crore and advances of Rs.4567 crore as at March 2007. Reflecting improvement in asset quality, gross NPAs of these RRBs stood at Rs.212.54 crore, forming 4.65% of gross advances, with net NPA ratio down to 2.46% from 2.57% a year ago. In tune with policy focus to double the credit flow to agriculture sector, Bank's sponsored RRBs disbursed an amount of Rs.2555 crore, recording a y-o-y growth of 28% during the year under review.

ORGANISATION AND SUPPORT SERVICES


During the year, the Bank entered into a MoU with HSBC Holdings (Asia Pacific), a global major, as the foreign partner and the domestic partner, Oriental Bank of Commerce, for creating an Insurance Joint Venture , with a majority 51% stake holding. With the domain expertise of global major as associate and combined outreach of both the PSU banks across India , the joint venture promises to unlock the huge potential in the life insurance market.

Recognizing the potential of Asset Management business in the emerging financial setup, creation of the insurance joint venture was followed up with a similar venture in asset management.

Canara Bank signed a MoU with internationally reputed, Robeco Groep N. V , for starting a Joint Venture in Asset Management business with 51% shareholding. The domain expertise of the Robeco Groep N. V will enable the Bank to offer world class and tech-enabled sophisticated services to its vast clientele base.

Fierce competitive pressures, coupled with changing customer expectations and advent of advanced technology, have necessitated a new approach in business and related strategies. Towards such a goal, Canara Bank took up the exercise of a comprehensive Corporate Business Strategy formulation, aided by the expertise of renowned consultants. The main objective of the exercise is to chart out a Roadmap for addressing key strategic and organizational issues concerning the Bank. These issues broadly encompass strategies relating to Marketing and Customer Acquisition, Product Portfolio and Process Redesign and Organizational Structure and Human Resources.

Canara Bank over the past 100 years has been maintaining its pre-eminent position among the comity of Indian banks. The Bank's ‘Brand Equity', built over a century, is a reflection of its adaptation to changing environments and varying customer preferences. With the fast changing banking scenario experienced in the last few years, the Bank has undertaken a robust ‘ Brand Building ' exercise to position as a strong customer oriented bank, catering to all segments. Strategies have been formulated to further intensify the brand image of the Bank with an overall objective of responding steadfastly to the changing times, customer preferences and also towards fulfilling its long term growth objectives.

NEW PRODUCTS/SERVICES


The Bank introduced several deposit products during FY07. CanTaxSaver , a term deposit scheme, was introduced under the Kamadhenu and fixed deposit mode with tax benefit under Section 80C. CanChamp - an exclusive SB deposit product was launched for aspiring children upto the age of 12 years for inculcating the habit of savings as well as making them eligible for education loans. A term deposit scheme, namely, Canara Centenary Deposit was also introduced during the year, offering attractive rate of interest for the depositors. During the year, the Bank also launched a SB-Gold deposit scheme, targeting the HNI clients.

In the sphere of new loan products, the Bank introduced ‘ Kisan Tatkal ' for enabling farmers to meet emergent requirements and ‘ Kisan Mitra ' scheme for funding tenant farmers. Gramin Vikas Vahini , a vehicle for inclusive growth in rural areas was also introduced during the year. To promote SME sector, the Bank launched SME Gold Card and a Term Loan Scheme for reimbursement of their capital expenditure.

With the competitive pressure gaining further ground, the Bank's R&D has been intensified to drive product proliferation to suit customer expectation. With gradual implementation of CBS, the Bank is well placed to leverage its IT capability to harness gains both in business and effectiveness of service delivery. The marketing and brand building efforts have been strengthened to address niche segments and achieve improved visibility of the Bank. Organizational restructuring and revamp of systems and procedures have also been undertaken to facilitate faster decision making and hassle-free banking without any compromise on due diligence related to KYC/AML.

AWARDS/ACCOLADES


Rated ‘Best Public Sector Bank’ in India by ‘Financial Express-Ernst and Young’


During the year under review, the Bank received many awards/accolades for its outstanding achievements in several endeavours.

  • Adjudged the ‘Best Public Sector Bank' in India under ‘Best Banks Survey' conducted by ‘Financial Express-Ernst and Young' for 2005-06.

  • Conferred with ‘Employer Branding Awards 2007' by Indiatimes Mindscape and ITM Business School , for excellence in human resources. Canara Bank was the first Public Sector Bank to bag this award.

  • Won the maiden award of ‘Best Performing Bank' under solar water heater finance for the year 2005-06, instituted by the Ministry of New and Renewable Energy, Govt. of India.

  • Received Niryat Bandhu Gold Trophy for outstanding performance under export finance.

  • Two schemes under Canbank Mutual Fund viz., CANFLOATING RATE and CANBALANCE-II also won the Gold Award (ICRA Mutual Funds Awards 2007) and Best Fund Award (at the Lipper Awards India 2007) respectively.

  • Shreyas', the Bank's House Magazine won Internal Magazine Awards and Best Photography Awards, Instituted by ABCI.


CHANGES IN THE BOARD OF DIRECTORS


Year 2006-07 saw changes in the composition of the Board of Directors of the Bank.

On attainment of superannuation, the term of Shri A N Balasubramanian as Workman employee Director, ended on 31 st May 2006 .

Shri Ajay Mathur, Chartered Accountant, New Delhi , was nominated as part-time Non-Official Director under Chartered Accountant Category from 13 th October 2006 .

With completion of the tenure of Shri G C Chaturvedi, Director, representing Government of India on 30 th October 2006 , Shri Amitabh Verma, Joint Secretary (BOA), Ministry of Finance, Government of India, was nominated as Director, representing Government of India with effect from 31 st October 2006 .

Terms of Dr. Sone Lal and Shri M P Mehrotra, as Shareholder Directors, ended on 19 th February 2007 consequent to notification of the Nationalized Banks (Management and Miscellaneous Provisions) (Amendment) Scheme, 2007.

With the tenure of Shri G Srinivasan, Director, representing Reserve Bank of India ending on 26 th February 2007 , Smt. Vani J. Sharma was nominated as Director, representing Reserve Bank of India with effect from 27 th February 2007 .

Shri S K Kohli was nominated as Officer Employee Director with effect from 8 th March 2007 , in place of Shri R K Avasthi, whose term ended on 7 th March 2007 .

DIRECTORS’ RESPONSIBILITY STATEMENT


The Directors, in preparation of the annual accounts for the year ended March 31, 2007 , confirm the following:

  • That in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures.

  • That they had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Bank at the end of the financial year and of the profit or loss of the Bank for the period.

  • That they had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of applicable laws governing banks in India for safeguarding the assets of the Bank and for preventing and detecting fraud and other irregularities.
That they had prepared the annual accounts on a going concern basis.

ACKNOWLEDGEMENT


The Board wishes to place on record its sincere appreciation to the significant contribution made by the Directors on the Bank's Board who completed their tenure during the financial year under review, to customers for their patronage, to the shareholders for their support, to the Government and the RBI for their valuable guidance and support, to the Bank's correspondents inland and abroad for their cooperation and goodwill and to all the staff members, without whose unstinted commitment and contribution, the Bank would not have sustained its growth momentum during 2006-07.

M. B. N. RAO
CHAIRMAN & MANAGING DIRECTOR


 
   
   
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