SPEECH OF THE CHAIRPERSON AND MANAGING DIRECTOR MRS. V. R. IYER DELIVERED AT THE

SPEECH OF THE CHAIRPERSON AND MANAGING DIRECTOR MRS. V. R. IYER DELIVERED AT THE 17 th ANNUAL GENERAL MEETING OF THE SHAREHOLDERS OF BANK OF INDIA TO BE HELD ON 29.06.2013 --------------------------------------------------------------------------------- Dear Shareholders, Very Good Morning to all of you, It gives me immense pleasure and privilege to extend a warm welcome to each and every one of you to this 17 th Annual General Meeting of your Bank. I trust all of you received the copy of the Bank s Annual Report for the year 2012-13, which includes the report of the Board of Directors as well as the Audited Financial Statements along with consolidated financial statements of the Bank. With your consent, I take them as read. As you are aware, Banking is on the verge of a change. While the economic scenario is challenging, the regulatory and prudential obligations are becoming more stringent. We are operating under constraints over which there is little control and the external environment has become highly volatile and uncertain. Your Bank has shown good growth amidst such challenging times. Global Outlook The global economy had shown subdued growth during major part of the financial year 2012-13. However, there is a renewed surge in U.S and Japan and this has resulted in FIIs pulling out funds from emerging markets. Doubts have surfaced as to the sustainability of Quantitative Easing programme in the U.S which has led to further pullout of funds by FIIs from emerging markets. Almost all emerging market currencies, including that of India, are depreciating against the Dollar. However, data from European Union is also disappointing with the manufacturing purchasing Managers Index (PMI) at 46.5, well below 50- the 1

borderline situation. The European Central Bank at its meeting on May 2, 2013 cut key benchmark rate by 25 bps from 0.75% to 0.50%. High interest rates as well as policy constraints adversely impacted investment and in 2011-12 and 2012-13, the growth rate slowed to 6.2 per cent and 5.0 per cent respectively. The moderation in growth is primarily attributable to weakness in industry which registered a growth rate of only 1 per cent for the whole of 2012-13. Even for the current financial year, things are not looking different since industrial production growth for April 2013 came in at 2.3% only. The world economy is expected to perform slightly better during 2013-14. However, in the domestic scenario, only a modest improvement is expected over the last year. With global growth unlikely to improve significantly from 2013, growth in services and exports may remain sluggish. For instance, data released for the month of May 2013 showed that exports declined by 1.1% over the previous year. This, coupled with rising gold imports threatens to widen the current account deficit. Accordingly, the baseline GDP growth for 2013-14 is projected at 5.7 per cent. March 2013 WPI inflation at 6.0 per cent was lower than Reserve Bank s indicative projection of 6.8 per cent, due to a sharp deceleration in non-food manufactured products inflation. WPI inflation is expected to be range-bound at 5.5 per cent during 2013-14. Indian Economy The year 2012-13 was challenging for the Indian economy. Gross Domestic Product growth was just 5% for the entire financial year while for the fourth quarter, growth was just 4.8%. A significant aspect of the growth process this time was the deceleration seen across all the major segments, viz, agriculture, industry and the service sector. Major industries such as power, mining and steel continued to face headwinds from domestic as well as global factors. The extent of deceleration is evident from the fact that growth in Index of Industrial Production was only 1% for the entire FY 2012-13. Despite subdued growth, RBI has to keep the policy rates at elevated levels in view of higher current account deficit and inflationary expectation. RBI started cutting rates only from January 2013 onwards as inflation moderated to the comfort zone of RBI. Meanwhile, Government efforts at reform measures did not pick up the momentum as was desired although initial aggression was visible since September 2012. In major parameters such as the Ease of doing business India continue to rank at the bottom of the ladder, denting investor 2

optimism. Current Account Deficit was 4.8% for FY 2012-13 and chances of its further coming down may be difficult, in view of surging gold imports. In April 2013, export growth also declined by 1.1% on a year-on-year basis, increasing the challenges on reducing the CAD. Yet another concern that has recently developed is the persistent depreciation of the Rupee since May 2013. The Rupee depreciated as much as 7.5% since May and is one of the most depreciated currencies except the South African Rand. Appreciation of the Rupee is constrained by the fact that RBI s forex reserves shrunk to $ 287 billion, sufficient for only 6 months of imports as against 12-13 months a couple of years before, leaving little room for an intervention in the forex market to support the Rupee. Cumulative FII outflows since May is to the tune of $ 6 billion out of which $ 4 billion is in the debt segment. Government and RBI are closely monitoring the current situation and have pledged to take the required steps. BANKING SECTOR: As far as the banking sector is concerned, it mirrors the growth of the economy. Both credit growth and deposit growth as at the end of March 2013 was below the indicative target of RBI. This was in response to growth pressures as well as concerns on the asset quality front. Persistent inflation meant that real returns from bank deposits were negative and banks had to offer higher interest rates on term deposits to attract investors, since alternate asset classes such as real estate and gold offered better returns. The challenge was compounded by the fact that while offering higher term deposit rates, banks also had to ensure that they achieved a decent quantum of low cost CASA deposits to protect their margins. Asset quality pressures continue to weigh on the banking sector. RBI has progressively tightened the provisioning norms for restructured assets to reach 5% by the end of 2013-14 from 2.5% at the initial level, which will have a further impact on bank bottom lines. On the growth front also, 2013-14 is unlikely to be different from FY 2013, and pressures on asset quality and margins are expected to continue. Bank s performance I would now like to touch upon highlights of our Bank s performance for the year 2012-13 3

Business Growth Global Business-mix of the Bank reached a level of Rs. 6,74,808 crore as on 31st March 2013 from Rs.5,69,710 crore as on 31st March 2012, registering a growth rate of 18.45%. The Banks Total Deposits went up from Rs. 3,18,216 crore as on 31st March 2012 to Rs. 3,81,840 crore as on 31 st March 2013 by 20% and Gross Advances went up from Rs.2,51,494 crore to Rs.2,92,968 crore as on 31st March,2013 i.e. by 16.49%. Domestic Business Deposits grew from Rs. 2,48,475 Crore on 31.03.2012 to Rs. 2,94,067 Crore on 31.03.2013 (Growth 18.35%) Advances grew from Rs. 1,77,950 Crore on 31.03.2012 to Rs. 2,04,036 Crore on 31.03.2013 (Growth 14.66%) CASA Deposit grew from Rs. 81352 Crore on 31.03.2012 to Rs. 93,800 Crore on 31.03.2013 (Growth 15.30%) Overseas Business Bank is having 53 branches/ offices across the world. Deposits grew from Rs. 69,741 Crore on 31.03.2012 to Rs. 87,773 Crore on 31.03.2013 (Growth 26%) Advances grew from Rs. 73,544 Crore on 31.03.2012 to Rs. 88,932 Crore on 31.03.2013 (Growth 21%) The total business of international operations constitutes 26% in the total business mix of the Bank. Profitability Your Bank posted an Operating Profit growth of 11.42% during FY 2012-13 to Rs.7458 Cr from Rs. 6694 crore during FY 2011-12. Net Profit of the Bank for FY 2012-13 rose by 2.69% from Rs. 2,677 Crore during FY 2011-12 to Rs. 2749 Crore during FY 2012-13. The Non-Interest Income during the year 2012-13 registered a growth of 13.39% to Rs.3766 crore from Rs. 3321 crore during the year 2011-12. 4

The Earning per Share (EPS) of the Bank for FY 2012-13 stood at Rs. 47.79. The Book value per share improved from Rs. 326.52 as on 31 st March, 2012 to Rs. 362.37 as on 31st March 2013. The Cost to Income Ratio dropped appreciably during the year from 42.47% in FY 2011-12 to 41.69% for FY 2012-13. Your Bank s Net Worth increased from Rs. 18759 Crore on 31.03.2012 to Rs. 21621 crore as on 31st March, 2013. Capital Adequacy Ratio (CRAR) stood at 11.02% as on 31st March, 2013 as per Basel II. Despite subdued demand for credit, your Bank s net interest income grew by 8.55% during FY 2012-13, yet Net Interest Margin (NIM) remained at 3.00% for domestic operations and 2.46% for Global operations. Priority Sector Bank has adopted various strategies during the year to achieve sustainable credit growth, improve asset quality and maintaining well diversified credit portfolio to all sections of society to ensure inclusive growth. Priority sector advances of the Bank reached at a level of 65,518 crore as on March 2013 registering a growth of 21.20% over last year. It constitutes 36.71 percent of ANBC. Credit to agriculture sector reached a level of Rs. 27041 Crore, registering a growth of 27.68% over last year. Asset Quality The standard assets constitute 97.01% of the Bank s credit. Gross NPA dropped from 3.42% in September 2012 to 2.99% on 31 st march 2013. Net NPA is 2.06%. Provision coverage ratio is 60.92%. In order to address the asset quality concerns, your Bank continued vigorous follow up and recovery of NPA accounts. Your Bank also stepped up credit monitoring system for prevention of slippages and speedy monitoring of advances. Branch Network 5

During the year 2012-13, Bank has opened 292 new branches and took the total number of domestic branches to 4292 in India. 453 new ATMs were installed taking the total number of ATMs to 2133 as on March 31, 2013. Bank has opened one more branch in Tanzania on 10.09.2012. Representative office in Johannesburg has been upgraded to branch in September 2012 and opened a new subsidiary at Uganda. Total number of offices at overseas centres inclusive of Representative offices and subsidiaries are 53. Thus your Bank has presence in 20 countries. Dividend The Board of Directors of your Bank has recommended a Dividend of Rs. 10/- per share (100%) for the year 2012-13 as against Rs. 7/- per share (70%) for the year 2011-12. Technological Initiatives SMS based Grievance Redressal system which is being brought to the notice of the Zonal Head on real-time basis for due attention to the customers and for speedy resolution from the Business Team. Launching of Balance enquiry for SB & OD Accounts through SMS using Missed call facility free-of-cost to the customers. Online acceptance of PPF subscription in PPF account maintained with Bank of India. Online acceptance of Donation for Prime Minister National Relief Fund (PMNRF) Linking of Aadhaar Number and Account number on the basis of Customer ID which will enable Direct Cash Transfers of subsidies into the Bank account of the beneficiaries under Government s various welfare schemes being implemented such as MGNREGA, Fertilizer Subsidy, Scholarship, LPG subsidy, etc. Customer Service Your Bank has been periodically assessing customer service at various centres through surveys conducted by reputed marketing agencies who have rated the services as most satisfactory. In order to improve customer 6

services, your Bank introduced SMS Based Grievance Redressal System and the complaint received are directly addressed by Zonal Manager. Your Bank has been awarded 2 nd Best Brand by the Economic Times. Other Initiatives Your Bank undertook several initiatives to foster business growth and customer services. The major highlights are: 15 Million New Customers were added during the year 2012-13, taking the total Customer base to 68 Million. Your Bank remains one of the front runners in the implementation of Financial Inclusion Initiatives. Committed to Financial Inclusion efforts, Bank opened 80 lacs No-Frill accounts. Bank has engaged 5,000 Business Correspondents. Bank achieved 100% Financial Inclusion in 11,300 villages and has a UID enrollment of 150 lacs. Your Bank, with a view to serve clients with better Mutual Funds products, re-entered the Asset Management Business and finalized a joint venture with AXA Investment Managers, a market leader in Asset Management business. Human Resources Initiatives To cope with Business Expansion and superannuation, Bank recruited 3870 (1492 officers and 2378 award staff) employees during the year 2012-13. Looking to the superannuation during the year 2013-14, Bank plan to recruit 4113 more employees. Industrial Relations The Industrial Relations in the Bank has been cordial and harmonious, fostering a healthy work environment. The Union / Association have been responsive and proactive and they have been extending unstinted support for the progress and prosperity of the Bank. Corporate Social Responsibility (CSR Initiatives) As one of India s largest and most reputed banks, your bank has undertaken a variety of initiatives in the CSR, including 7

Your Bank has 42 Rural Self- Employment Training Institutes (R-SETIS) and 52 Financial Literacy and Credit Counseling Centres (FLCCs) including 6 `ABHAY Centres across the country. These R-SETIS and FLCCs provide Financial literacy and training to the needy people for their self employments. These R-SETIS have provided training to 41393 persons in 1476 programs organized by them. They have provided credit linkage to 14863 needy persons. The FLCCs have counseled over 80000 cases and organized more than 400 awareness camps. Your Bank has adopted 146 villages across the country and is involved in Integrated development of these villages though intensive credit disbursements and CSR activities as solar lighting, providing drinking water, bearing education expenses of the needy girl children, sanitation facilities. During the year 2012-13, Bank supported activities like welfare of Blind persons, Education of the under privileged girl children, sponsorship of various exhibition aimed at providing Scientific and Cultural awareness amongst the youth, support for cataract operations/ eye care, development of sport activities, adoption of one Teacher school in Tribal area of Bihar purchase of medical equipments and vehicles. Awards and Accolades: During the year, the Bank has received the following awards- The Bank has been awarded as ` The Best Bank for excellence in AADHAR related UIDAI programme of Government of India at the hands of Prime Minister of India. Outlook Money Award 2012 for ` Best Education Loan provider ET s 2 nd Most trusted Brands in India National Award-2011 for implementing PMEGP scheme in West Zone. The Bank has been adjudged Second Rank by Ministry of MSME, New Delhi, based on its performance in lending to Micro Enterprises Road Ahead Bank s business policy 2013-14 has emphasized thrust on 8

Focus on CASA Growth Aggressive thrust on SME, Retail and Agriculture credit Development of Priority Sector Advances Focus on improvement of Assets Quality. Growth in Non Interest Income Growth in profitability of the Bank Acknowledgement I would like to take this opportunity to thank the members of the Board for their Valuable guidance, support and prudent counsel. On behalf of the Board of Directors and on my personal behalf, I also thank all our Shareholders for their unstinted support. I would like to assure them commitment for creating an enduring value for all Stakeholders, the Shareholders and the Society we serve. I thankfully acknowledge the support and guidance from the Government of India, Reserve Bank of India and Securities Exchange Board of India. I also thank the Officers Association and Staff Unions of your Bank for the support and co-operation extended by them. I wish to place on record my appreciation to the employees for their commitment, dedication and hard work. Lastly, and most importantly, I acknowledge with gratitude the unstinted support and trust of the millions of growing customers who constitute the strength of the Bank and who are our source of inspiration. We look to the future with confidence and of running the business optimally, maximizing the returns to our stakeholders. I look forward to your continued support and patronage. Thanking You all, Mrs.V.R.Iyer 9