THE BANK S BOARD MEETING HELD ON 9 TH FEBRUARY, 2017

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1 [ Circular No.4/2017 Date: TO ALL OFFICERS Dear Comrades, THE BANK S BOARD MEETING HELD ON 9 TH FEBRUARY, 2017 Staff Housing Loans, the facility of concessional rate extended beyond superannuation The Recruitment of Staff for Promotion vacancies for We are glad to share with you that the Board of our Bank is understood to have taken the following decisions that affords lot of comfort, happiness and assurance to all segments of the staff and which shall work as the real motivator particularly in the light of the challenging period ahead and we convey our sincere thanks to our MD & CEO, the two ED's, the GM (HR) and his team for the same. Staff Housing Loans, the facility of concessional rate extended beyond superannuation. We are very glad to inform that the Management has considered the continuation of the concessional interest rate and other terms to Staff Housing Loans beyond superannuation i.e., during the entire tenure of the loan (i.e. 75 years of age or earlier). Friends! The above gesture of the bank, that too coming in the midst of the present challenging scenario is really commendable and it only shows the ability and vision of our Management to identify the opportunity amidst the challenges and the due recognition of the welfare aspect of the Staff. Thus, the long pending demand of the Federation has been considered and in fact it is the culmination of several improvements the Team Federation could secure for the past 4 years in the issue of Staff Housing Loans like The extension of the limit from Rs.20 lacs to Rs.40 lacs and subsequently to Rs.50 lacs (Rs.60 lacs to Scale V and above). The extension of the limit for repairs to Rs.8 lacs from Rs.5 lacs. The extension of the loan facility to the spouse employees in the bank and for the consolidated limit of their combined eligibility. The extension of repayment period till the age of 75 years. The increase in the eligibility quantum in respect of substitution clause doing away with the restriction to the liability of the existing loan. The facility of loan for the second dwelling unit within the overall limit. Getting some positive clarifications and relaxations in the implementation guidelines. 1

2 Now comes, the latest improvement that will ensure that the employees can in real afford to avail the loans in terms of their full eligibility as they are spared from the burden of the public rate of interest post retirement. This aspect highlights the gesture of the bank in it s true perspective and it is time we feel grateful and reciprocate by rededicating ourselves in the cause of the growth and progress of our great institution that only ensure the continuation / improvements of all such measures of welfare. Please await the HO circular for the detailed guidelines and implementation. The Recruitment of Staff for : The recruitment is approved as follows Officers including 150 officers from Manipal trainees Clerks including 200 Agricultural Clerks. Promotion vacancies for : The vacancies are approved as follows - Clerical to JM-I : 550 JM I to MM II : 774 MM II to MM III : 332 MM III to SM IV : 165 SM IV to SM V : 70 SM V to TE VI : 26 TE VI to TE-VII : 12 Promotion test likely to be in the second fortnight of the April, We also understand that a relaxation of 15 months is being considered in respect of promotions to Scale V and upwards to ensure the minimum ratio of Zone of consideration. We also understand that since there is sufficient number of available employees in respect of all the other scales up to Scale IV and as such, no relaxation may be considered. There were no changes in other promotion policy guidelines and you may please await the detailed HO circular in this regard for further update. Please await the HO circular for the detailed guidelines and implementation. HIGHLIGHTS OF THE BANK S WORKING RESULTS FOR DECEMBER, 2016 The Net Rs Cr, an increase of 65% over the corresponding Year The Operating profit grew by 6.0% on y-o-y basis from Rs.2787 Cr to Rs.2954 Cr The Gross NPA ratio is 11.88% (Dec'16) as compared to 7% (Dec'15) The Net NPA ratio is 6.98% (Dec'16) as compared to 3.89% (Dec'15) Total Business grew by 8.8% - from Rs.3,05,770 Cr to Rs.3,32,630 Cr The performance of the bank considering the present scenario is fairly moderate and by and large on par with the performance of the peer banks. It is to the credit of the Management of our Bank who have been guiding the bank in the present challenging environment on a growth path overcoming the after effects of the demonetarization 2

3 process which may have hampered our recovery performance in the retail segment even as the menace of the addition of the corporate NPA is looming large which has only resulted in the spurt of NPA. In spite of the above aspects thanks to the efficient Treasury operations and increase in non-interest income coupled with the reduction in cost of funds etc has made it possible for our bank to be able to show the net profit. Thus, in the remaining period of less than 50 days of countdown to the March 2017, the staff shall make some sincere extra efforts in all the areas of priority like retail recovery, CASA, RAM segment of retail advances and insurance products and other areas of noninterest income etc., - as per the direction of the top management and ensure that we continue to show the improved performance for March, 2017 which could well be the defining point in the very existence and future of the Nationalized banks in general and that of our bank in particular which is destined towards the completion of the journey of a century of years of glorious existence by the year CORRESPONDENCE WITH MANAGEMENT A small note for continuation of concessional terms beyond Superannuation under Staff Housing Loan Scheme Delinking of CODST & Vehicle loans to Staff from MCLR Request for communication of clarification on online purchase of Residential Furniture items Suggested Modifications in Promotion Policy for JM-I to MM-II and our View point We furnish hereunder the correspondence with our Management on the following issues for your information. With greetings, Yours Affectionately, Text of our Note submitted to Management vide our Lr.No.1/3/2017 dated A SMALL NOTE FOR CONTINUATION OF CONCESSIONAL TERMS BEYOND SUPERANNUATION UNDER STAFF HOUSING LOAN SCHEME The Present scenario 1. General Public Interest rate for Housing loan is 8.65% in our Bank. 2. In our Bank, due to the application of public rate beyond retirement not many officers are inclined to avail the higher limit which also entitles the acquisition of the second house. 3. The enhancement of Housing Loan to Rs.20 lacs is done during January, 2011 and thereafter it has been increased to Rs.40 lacs during July, 2015 along with the facility of continuation of repayment beyond retirement and thereafter the limit has been enhanced to Rs.50 lacs during May, 2016 but still the same could not be availed by several officers particularly in the age group of 50 years and above only on account of the post retirement compounding rate of interest. 4. The present thrust of the Government and the banks on housing loans and also the reducing interest rate scenario. 3

4 5. The prevailing scenario of falling rate of cost of funds and deposits and extension of the benefit of the same to the borrowers on account of the present policy directives from Govt./RBI. 6. The present down trend in the real estate sector which could last for some more time and which could be ideal time for acquiring the own houses. 7. The need for continuation of the concessional terms to staff beyond retirement, apart from having a great impact on welfare front is more justified considering that The income of the officer falls below 50% (Pension) This facility shall help the retired officer to get immense income tax relief as the officers post retirement cannot afford to have any other investment options as part of their tax planning. The burden of medical expenses for self/spouse post retirement gets enhanced which take away a considerable portion of their income where the repayment on public terms will be burdensome. Several Banks have already extended the same for their staff - The relevant circulars from Allahabad Bank, Corporation Bank, Dena Bank, Canara Bank, Syndicate Bank, BOI, BOB, PNB & Vijaya Bank are also being enclosed. The above list is apart from SBI and it s five Associate Banks. The above will serve as a great measure of welfare and it shall also provide a great opportunity for the officers to reap the full benefit of the extension Ref.No.28/3/2017 Date: The General Manager (HR), Andhra Bank, Head Office, Hyderabad. Dear Sir, Sub: Delinking of CODST & Vehicle loans to Staff from MCLR. *** Following the adoption of MCLR as the bench mark interest rate for all rupee loans sanctioned and credit limits renewed w.e.f our Bank has also applied the same to all the loans sanctioned or renewed on or after vide the HO Circular No.2/2016 dated fixing the 9.60% per one year tenor. Accordingly, the bank has also fixed the same for the staff one year MCLR % i.e., = 10.25% for CODST from 7 th May, 2016 replacing the existing concept of Base Rate spread. Similarly, the rate of interest for staff vehicle loans also been % simple w.e.f replacing the earlier concept. In this regard, we wish to submit that the MCLR mode has been recommended by RBI being a far superior and effective method of calculation of interest rate mechanism and the MCLR will comprise of the following aspects - Marginal Cost of Funds Negative Carry on account of CRR Operating Costs Tenor Premium It is also to be noted that accordingly the Banks shall publish the internal bench mark for the various tenor of maturity like Overnight MCLR, One month MCLR, Three month MCLR, Six month MCLR and one year MCLR etc. The RBI circular /273 dated 17 th December, 2015 also suggest that the "Advances to banks - own employees including retired employees" can be priced without being linked to MCLR as the bench mark for determining interest rates". 4

5 We also understand that as far as the staff loans are concerned, the Government / RBI is more concerned about the cost of funds etc., and the interest pricing cannot go below the same and several banks have been adopting the same. But, we noticed that following the linkage of the staff loans to that of MCLR as applicable to general public including the concept of spread etc., has become burdensome to the staff. Further, it is also to be noted that since the tenor of MCLR for all staff loans is fixed at one year, the staff are also being denied the benefit of the falling rate of interest as applicable to general public who enjoy a much lower and flexible reset of overnight, one month, three month and six month tenor of maturity. A recent case in point being the HO Circular No.379 dated wherein the benefit of revision (Reduction in MCLR by 80 basis points) of the MCLRs w.e.f is not being extended to the existing staff accounts due to the above linkage to the one year fixed tenor of MCLR thereby denying the staff the benefit of falling rate of MCLR consequent to the reduction of the relevant cost factors. It is also to be noted that the benefit of a similar reduction of 5 basis points vide HO Circular No.139 dated or that of 10 basis points vide HO Circular No.274 dated has also been denied to the staff. We also believe that you will also appreciate the fact that the trend is more likely to continue for a considerable period in future considering the falling trend of all the indices as mentioned above that comprise the evolution of MCLR. Hence, in the circumstances, we request you to kindly take steps to delink the MCLR for reckoning the interest rates for staff loans under CODST and Vehicle loans and link the same to the cost of funds plus a minimum spread applicable if any and till such time please consider to extend the benefit of reduction of 95 basis points since the introduction of the concept in April, (i.e =8.65 %) Thanking you, Yours sincerely, Sd/-, Ref.No.27/3/2017 Date: The General Manager (HR), Andhra Bank, Head Office, Hyderabad. Dear Sir, Sub: Request for communication of clarification on online purchase of Residential Furniture items. *** With reference to the above, even though the bank has agreed to consider the online purchase of residential items of furniture during our 64 th JCC meeting, we understand that some Zonal Offices are not accepting the application for purchase of Furniture items online (E-purchase) even though the printout of price quotations along with the proof of payment is sent along with the application by stating that there is no prior sanction is obtained for such a purchase. While you may appreciate that many of even the branded items of furniture is available for online sale at much competitive and lower rates compared to showroom prices where the establishment expenses are also will be loaded but the fact remains that these offer prices are relevant within the offer period which is generally very short and sometimes may be valid for a day or two. It is to be appreciated that the proof of payment for online sale can be easily established through Credit Card or RTGS etc., and the relative Bill/Receipt along with the extension of value added facilities like Guarantee/Warranty can also be obtained. 5

6 Hence, we request you to kindly send the required clarification to the Zonal Offices to permit the reimbursement of such furniture items purchased on line subject to other eligibility criteria and the overall limit against the printout of price quotations and the proof of payment sent along with the application instead of insisting on prior sanction / permission. Thanking you, Yours sincerely, Sd/-, Ref No.29/3/2017 Date: The General Manager (HR), Andhra Bank, Head Office, Hyderabad. Dear Sir, Sub: Suggested Modifications in Promotion Policy for JM-I to MM-II and our View point. *** With reference to the above subject, further to the deliberations we had on 25 th January, 2017 and our interaction with the cross sections of officers - we wish to present our view point for your kind perusal and appreciation. At present, in respect of promotions from JM-I to MM-II there are two channels - one is the Normal / Seniority Channel and the other being the Merit / Fast Track Channel with segregation of 35% and 65% between the two. As far as the Seniority Channel is concerned, we feel that the existing Matrix shall be continued and the officers in the Zone of consideration need not be subjected to any Test/Examination. It is also to be appreciated that even though it is called Normal/Seniority Channel, going by our experience it has been only the relatively younger set of officers who are coming through this channel as the norm of 5 years of completed service in JM-I is attracting officers in the age group of 28 to 59 years. Hence, the continuation of the interview process has become necessary. With respect to the Merit/Fast Track Channel also doing away with the interview even though a welcome initiative from the bank requires some more feedback as to it s impact on certain sections of officers who are relatively seniors and particularly the Branch Managers who may find it difficult to compete and qualify only on the basis of academic evaluation even with the help of some improvements in qualifying Matrix of marks. Our feedback in the matter has been that there are apprehensions in the minds of officers belonging to certain social segments who are also our constituents and it may take some more time to allay their fears and as such we also believe that the bank may kindly defer the proposal for doing away with the Interview in the forthcoming promotion exercise Hence, we feel the continuation of the interview process has become necessary under the Merit Channel also for the time being. Thanking you, Yours sincerely, Sd/-, 6