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Directors Report of Vijaya Bank

Mar 31, 2015

The Board of Directors have pleasure in presenting the 35th Annual Report of the Bank along with the audited Balance Sheet as March 31, 2015 and the Profit and Loss Account for the year ended March 31, 2015.

The trends in financial results of the Bank are highlighted in the tables below: (Rs. in crore)

SI. Item 2013-14 2014-15 Annual No. increase (%)

1. Interest Income 10707 12273 14.64

2. Interest Expenditure 8623 9981 15.74

3. Net Interest Income (1-2) 2084 2292 10.03

4. Non-interest income 710 879 23.80

i. Profit on sale of 190 299 57.37 investments

ii. Other non-interest 520 580 11.54 income

5. Net Total Income (3 4) 2794 3171 13.49

6. Operating expense 1690 1912 13.14

I i. Staff Expenses 1040 11661 12.12

ii. Other operating 650 746 14.77 expenses

7. Operating profit 1104 1259 14.07

8. Operating profit 914 960 5.03 (excl. Treasury profit)

9. Provisions and 688 820 19.16 Contingencies

10. Net profit 416 439 5.65

Important Profitability Ratios

SI. Item 2013-14 2014-15 No. % %

1. Yield on funds 9.08 9.15

2 Cost of funds 7.31 7.44

3 Interest spread (1-2) 1.77 1.71

4 Yield on advances 11.26 11.34

5 Cost of deposits 7.98 8.10

6 Yield on investments - excluding Trading Profit 7.22 7.50

- including Trading Profit 7.75 8.17

7 Other operating expenses to 0.55 0.56 Average working funds

8 Cost-Income Ratio 60.49 60.30

9 Establishment cost to average 0.88 0.87 working funds_

Dividend

Taking into consideration the overall profitability, the Board of Directors has recommended a final dividend of Rs. 1.50 per share (15%), for the year 2014-15. The total amount of equity dividend including dividend tax for 2014-15 isRs. 155.10 crore.

Deposit Mobilization

During the year, CASA deposit of the bank grew to Rs. 25721 crore, a growth of 12.52% compared to previous financial year which was Rs. 22860 crore. Out of which the Saving Bank deposit grew by 12% and Current Account deposit grew by 14%. The CASA % to total deposit also improved to 20.35% from 18.39% for the last year. The total deposit of the bank increased to Rs. 126343 crore compared to last financial year which was Rs. 124296 crore. The Certificate of Deposit stood at Rs.12258 crore during the year.

Employees Productivity

Business per employee as at 31st March 2015 is Rs. 16.56 crore. Profit per employee stood at Rs. 0.03 crore as at March 2015.

Branch Network

With the opening of 109 branches during the year 2014-15, the network of branches reached the level of 1618 from 1512 during the previous fiscal and merged 3 Corporate banking Branches . There are 49 Extension Counters and 2 Satellite Offices at the end of the year 2014-15. The bank has also opened one new Regional Office at Meerut during the year 2014- 15 with that total number of Regional Offices reached to 27.

Retail Credit

Retail Lending is viewed as a viable business proposition and continue to be the thrust area for credit expansion in view of its inherent advantages such as risk spread, better yield and large volume credit buildup.

The Bank has disbursed Rs. 9065 crore under Retail credit during the year & the amount outstanding as at March 2015 stood at Rs. 18735 crore, recording an Y-o-Y of 19.96 %. The Retail Credit Portfolio accounted for at 21.36 % of the Bank''s Gross Credit.

The Balance outstanding under Housing loan, Education loan, Vehicle loan & Jewel Loan schemes, as on 31st March 2015, are Rs. 6526 crore, Rs. 903 crore, Rs. 2607 crore and Rs. 3820 crore respectively.

During the year, Bank launched special campaigns like ''Grand Festival Carnival'' offering attractive benefits to customers like waiver of charges etc was introduced.

Bank is continuously striving to make the Retail lending products more competitive in the market by revamping the existing products.

Bank has also launched Vijaya Top Up Loan exclusively for housing loan customers.

Bank has also revamped major retail products by following the present market conditions and going on par with the competitors which will help the field staff in canvassing more business.

Bank has started Online tracking of Retail Loan applications which helps for monitoring the pending applications by the applicant and the branch as well as Regional Office / Head Office.

Credit Expansion

The gross Credit of the Bank registered a growth of 6.39 % from Rs. 82425 crore on 31.03.2014 to Rs. 87692 crore on 31.03.2015. Considering the economic down trend the Bank had been selective in the approval of big ticket credit proposals.

The Bank has put in place a perfect due diligence mechanism for screening of credit proposals and implementing the guidelines received from Department of Financial Services and Reserve Bank of India. In terms of extant guidelines from Ministry of Finance, the Bank is following committee approach for credit approvals at Regional Office and Head Office levels. The committees meet as frequently as possible to reduce turnaround time for credit decision. The Bank has continued with its strategy to recruit professionals from CA/ICWA/CS/MBA streams for ensuring good standard credit processing.

Bank''s credit department is accredited with ISO/ IEC 27001:2005 certification for information security management system by British Standard Institute (BSI).

In tune with market trends, Bank has come up with various new loans products and also fine tuned existing ones to suit the needs of customers.

Large & Mid Corporate

The Large Corporate segment constituted 48% share in total domestic advances as on 31.03.2015. In order to have more focused attention and to reduce turnaround time, five specialised corporate banking branches are functioning at different geographical locations. Apart from Corporate Banking Branches, three Industrial finance branches are catering to the needs of the corporate customers including financing for infra/non infra projects. In addition the Bank has SME branches spread across the country catering to the needs of mid-corporate and SME clients by offering services including cash management, forex, treasury products, trade finance, deposits, retail banking etc.

Bank''s Corporate/SME/IFB Banking Division offers an array of loan products and services such as Term Loans, Demand Loans, Corporate Loan, Short-Term Loans, Working Capital Facilities (FB NFB), Trade Finance Products, Bridge Loans, Syndicated Loans, Infrastructure Loans, Foreign Currency Loans, Loan Against Future Rent Receivables and many more to its corporate clients depending upon their needs. Over the years, Bank has made significant progress in establishing healthy business relations with several multinationals, domestic business houses and prime public sector companies.

Infrastructure Finance

During the year, the Bank has sanctioned fund based limits of Rs. 7645 crore and Non Fund Based limits of Rs. 230.93 crore under infrastructure category covering power, telecommunications, ports, roads etc. Our exposure to infrastructure sector is 28.84 % of gross advances and is well within the prescribed sectoral exposure cap.

Project Finance and Syndication Group

Project Finance and Syndication Cell Is functioning at its Head Office, Bengaluru. The functions of the Cell include preparation of Project Information Memorandum, arranging for Techno Economic Viability Study of the projects and Syndication for credit requirements of the entrepreneurs. This Syndication Cell is well equipped with good manpower including senior executives and qualified professionals.

TREASURY AND INTERNATIONAL OPERATIONS:

Investment and Fund Management

Total Investment portfolio of the Bank increased from Rs. 42,833.78 crore (SLR Investment: Rs. 33,319.60 crore & Non-SLR Investment: Rs. 9,514.18 crore) as on March 31, 2014 to Rs. 44,698.34 crore (SLR Investment: Rs. 34,933.00 crore & Non-SLR Investment: Rs. 9,765.34 crore) as on March 31, 2015.

The 10 year benchmark yield closed at 7.74 % as on March 31, 2015 against 8.81 % as on March 31, 2014.

The average yield on investment (including profit on sale of investments and RIDF) during the year worked out to 8.17 % as against 7.75% in FY 2013-14.

The Bank also complied with CRR and SLR requirements as stipulated by RBI consistently during the year.

International Banking

Bank''s export credit as at 31.03.2015 registered a Y-o-Y growth of 23.79% and stood at Rs. 1571.39 crore. Out of the above, quantum of export credit extended by the Bank in foreign currency was USD 42.13 million. As at March 2015, foreign exchange business turnover of the Bank stood at Rs. 21,172.17 crore, recording an annualized growth of 0.51 % over the previous financial year.

Bank has successfully implemented Electronic Data Processing and Monitoring System (EDPMS), e-BIZ projects of RBI.

Bank''s total NRI deposits as at 31.03.2015 stood at Rs. 2998.96 crore, as against Rs. 2398.57 crore as at the end of previous financial year, thereby recording a growth of 25.03 %. During the financial year, the Bank has extended ''Speed/Flash Remittance'' facility to UAE Exchange Centre LLC, Al Ansari Exchange UAE, Wall Street Exchange, UAE and Al Bader Exchange, UAE to enable the NRIs from Gulf Countries to electronically remit funds to their account with our branches anywhere in India. In addition to the above, the bank also has Rupee Drawing Arrangement (RDA) with Oman United Company LLC, Oman to facilitate rupee remittances to the accounts in India. The Bank has set up a NRI Customer Cell at Head Office, Bangalore exclusively for responding to the queries of our NRI customers. The Bank has also launched Vijaya NRI Digest, a fortnightly e-newsletter covering area of interest to NRIs.

Export & import credit

The Bank is active in meeting the importer and exporter client''s financial requirements both in domestic and in foreign currency. Bank''s 47 branches across the country are designated to handle foreign exchange business.

ASSET QUALITY

The Bank continued its focus on maintaining quality assets along with thrust on preventing fresh slippages. It initiated and continued to emphasize various measures in this direction, including the following:

- Accounts showing signs of stress / likely default in dues are identified and treated as Special Mention accounts and are closely monitored. Wherever feasible, such assets are restructured on merits, with additional need-based credit limits considered in deserving cases. Viability study is to be conducted in respect of SME accounts slipped to NPA and to be brought under nursing wherever feasible within a time frame.

- Special Recovery Cells are formed at RO''s for systematic follow up of NPA accounts. Centres wherever DRT''s are functioning, nodal Officers are designated, who keeps regular liaison with the presiding officer and the bank''s advocate for speedy disposal of the cases.

- In case of willful defaulters, stringent recovery measures, including legal actions like Securitization and submitting the names to RBI are done.

- Services of Lok Adalats are resorted to for speedy recoveries of impaired assets.

- All 10 Lakhs and above NPA accounts are reviewed by the Top management through video conference with the Regional Heads and guiding them for the speedy recovery.

- To facilitate speedy recovery, ''Vijaya Adalats'' under the Recovery Policy of the Bank are regularly conducted at various centres by involving a cluster of branches and accounts are settled on the spot. During the year, Bank could settle Rs. 109.88 crore in 5628 accounts by way of settlements till 31.03.2015.

- A special One Time Settlement Scheme for chronic tractor loan NPAs was reintroduced on 01.01.2015 and the same was in force upto 31.03.2015.

- NPA recovery campaign-2015 has been introduced for a period from 01.01.2015 to 31.03.2015 in order to reduce the NPA level.

- To speed up the recovery in small value NPAs, 16 recovery officers have been posted at identified centers with large number of NPA accounts in 8 regions (6 in Karnatakaand2 in Andhra Pradesh). Recovery officers have made recovery of Rs. 38.27 crore and Upgradation of Rs. 53.78 crore upto the month of March 2015.

- In consultation with the Branches, we have identified 769 Doable NPA accounts with balance of Rs. 10 Lakhs and above totaling Rs. 807.37 crore which can be upgraded by March 2015.These accounts are followed up by our Department with the Branches concerned on Continuous Basis. Upto the month of March 2015, Rs. 608.39 crore has been recovered/upgraded.

The gross Non-Performing Assets of the Bank as on March 2015 stood at 2.78% of total advances, while net NPA ratio was 1.92% of net advances. During the year 2014-15, Bank could effect total cash recovery of Rs. 931.42 (including interest) and upgraded NPAs amounting to Rs. 931.96 crore. Further, the Bank also made provision of Rs. 698.40 crore for the unexpected defaults, apart from having a floating provision of Rs. 71.35 crore as on March 31, 2015. The Provision Coverage Ratio (including PWO) as at March 2015 worked out to 64.01%.

RISK MANAGEMENT

Credit Risk:

Bank has put in place a Comprehensive lending Policy as well as Credit Risk Management Policy which encompass various aspects such as risk appetite, risk based pricing, risk diversification / mitigation strategy, prudential limit, substantial exposure ceiling, group exposure ceiling, Rating wise exposure ceiling, preferred sector growth strategies, credit approval process, documentation and security standards, security valuation etc these policies are revised periodically based on corporate goal and business plans of the Bank.

As per RBI Guidelines on Stress Testing, the stress tests for Credit Risk have been carried out on a half year basis which covers scenarios such as credit portfolio to stress like increase in NPAs, slippage of restructured standard accounts, downgrade in Counter-party rating, depletion in collateral, etc.

Further, Bank has put in place a comprehensive risk rating/ scoring system which serves as a single point indicator of diverse risk factors on the counterparty and to facilitate execution of proper and consistent credit decisions. Bank has evolved separate risk scoring models for Housing /other Retail lending sectors and endeavors higher coverage in risk rating exercise. Rating migration analysis in respect of credit exposures of Rs. 1.00 crore and above is conducted on half yearly basis. Since September 2009, Bank has been conducting risk rating of all retail and non retail loans by using CRISIL RAM software which is Basel II compliant. The software facilitates Bank to maintain the credit quality and also to support efforts of the Bank in translation towards advanced approach of Basel II by ensuring that prior to sanction of loans, all type of exposures is covered under risk rating process.

Asset Liability Management (ALM) and Market Risk:

ALM and Market Risk of the Bank is managed by the Asset Liability Management Committee (ALCO) and Market Risk Management Committee (MRMC) respectively. Appropriate tolerance limits have been stipulated for mismatches in different time buckets, both for managing liquidity and interest rate risks. These are being monitored at fortnightly intervals and also appraised to the Board of Directors.

The market risk exposure is measured by tools like VaR (Value at Risk), AGL (Aggregate Gap Limit), and Duration gap analysis. Exposure limits for all countries have been put in place to manage and monitor the country risk. Mid-office reports on treasury operations are placed before the General Manager, Risk Management Dept., on a daily basis and before MRMC on a monthly basis, covering information about exceptions / reviews and compliance.

Interest Rate Risk on entire portfolio is identified and measured through Earnings at Risk (EaR). Sensitivity analysis is also conducted and reviewed by the top management. Contingency Funding Plans, Prudential Ratios / Limits have been set and actual position is monitored as part of Liquidity Risk Management. Stress Test on Interest Rate Risk, Liquidity Risk, Forex risk, etc on different scenarios are carried out on quarterly basis and appraised to Asset Liability Committee (ALCO). To monitor short term liquidity, the Bank is preparing the ALM statement of Structural Liquidity on daily basis.

The Duration Gap Analysis is implemented for assessing the possible impact on market value of equity (net worth) using 200 basis points shock on interest rate curve.

The bank has applied to RBI, seeking their approval to implement Internal Model Approach (Advanced Approach) for Market Risk.

The Funds Transfer Pricing, a new technology on transfer pricing mechanism, has been implemented for assessment of branch profitability in a scientific manner.

Operational Risk:

Bank has put in place a well defined Operational Risk Management Framework to effectively identify, measure, manage and address Operational risks. The Bank has also put in place a framework required for implementation of The Standardized Approach (TSA). The governance of Operational Risk Management is monitored by Operational Risk Management Committee (ORMC), which reviews the operational risk loss event data, new products, processes and systems adopted by the Bank and provides suggestions for taking corrective/preventive measures to strengthen the internal system and procedures. In order to mitigate Operational risks, several thematic studies have been conducted for frauds committed in loan and deposit portfolios, so as to identify systemic deficiencies from Risk Management angle. Further, in order to move towards advanced approaches, bank has put in place frameworks for Risk Control Self Assessment (RCSA) and Key Risk Indicators (KRIs). Bank has been taking steps to strengthen the RCSA and KRI by reviewing the same and improving the coverage area for management of Operational risk.

The Bank has been permitted by RBI to assess Operational risk capital under The Standardized Approach (TSA) - (Parallel run w.e.f March 2015).

Basel-ll & Basel III Compliance:

As the Bank requires corporate clients'' risk rating status awarded by rating agencies approved by RBI, the Bank has entered into MOU with all the six rating agencies viz CRISIL, ICRA, CARE, Brickwork, SMERA and Fitch so that borrowers can avail the rating services at a competitive fee and bank also derives benefits on lower capital charge depending on the rating status. The Bank has formulated its ICAAP policy which is revised from time to time and the ICAAP Document is submitted to RBI on half yearly basis.

In compliance to the RBI guidelines and adopting Standardised Approach for Credit Risk, Standardised Duration Gap for Market Risk and Basic Indicator Approach for Operational Risk, Bank has complied with Basel II norms and the overall Capital Adequacy Ratio as at 31st March ''2015 under Basel II works out to 11.70%, which is above the minimum stipulated norm of 9%. Bank has also complied with Basel III norms and the overall Capital Adequacy Ratio as at 31st March ''15 works out to 11.43%, which is above the minimum stipulated norm of 9.00%.

Integrated Risk Management System (IRMS) Project:

In order to facilitate smooth and effective compliance of Basel-ll norms, the Bank has taken up for implementation of Integrated Risk Management System (IRMS).

The unique IRMS Project consists of six solutions, viz. Credit Risk Management (CRM), Market Risk Management (MRM), Operational Risk Management (ORM), Credit Risk Rating Solution (CRR) (Retail & Non-Retail), Asset Liability Management (ALM) and Funds Transfer Pricing (FTP) Solution.

ISO - 27001- Certification for Risk Management Department

Chief Information Security Officer (CISO) of our Bank has been awarded Information Security Maestro 2015 awards for Information Security and BCP initiatives by Info security magazine.

Capital Adequacy

During current financial year, Bank has successfully raised Additional Tier- I Capital of Rs 500 crore and Tier- II ( Basel III Compliant) Bonds of Rs 1000 crore. The capital adequacy ratio improved to 11.70% ( in 31.03.2015) as compared to 10.97% ( in 31.03.2014) under Basel II norms and 11.43% ( in 31.03.2015) as compared to 10.56% (in 31.03.2014) under Basel III norms as on 31.03.2015 vis-a-vis the Reserve Bank of India norm of 9%. As on 31.03.2015, the Tier I capital of the Bank is Rs. 6423.25 crore under Basel II and Rs. 6414.63 crore under Basel III. The Tier II capital stood at Rs. 2687.81 crore under Basel II and Rs. 2480.53 crore under Basel III. The overall capital stood at Rs. 9111.06 crore under Basel II and Rs. 8895.16 crore under Basel III.

NATIONAL PRIORITY

Priority Sector Lending

Total Priority Sector advances of the bank stood at Rs. 30714 crore as at the end of March 2015. Priority Sector Credit of the bank constituted 35.97 % of the Adjusted Net Bank Credit.

Agricultural Finance

Direct Agricultural advances of the Bank as at March 2015 stood at Rs. 7546 crore. Total Agricultural advances stood at Rs. 11389 crore which formed 13.34 % of the Adjusted Net Bank Credit.

During the year, Bank has rolled out a special loan "Scheme for financing farmers for construction of farm house" on owned farm/agricultural land and a scheme for financing Farmer Producer Organizations (FPO).

Disbursements to agriculture:

Under Special Agricultural Credit Plan, Bank has disbursed Rs. 8442 crore during the year 2014-15, against the Target of Rs. 8369 crore.

Kisan credit card scheme:

In terms of the guidelines of RBI/GOI, the revised VKC

scheme has provision for both production credit (Short term crop loans) and Investment Credit (Term loans). The validity of the card is 5 years and the beneficiaries are issued with ATM enabled Kisan cards.

Under Vijaya Kisan Card Scheme (VKC), during 2014- 15, the bank has issued 73322 Kisan Cards amounting to Rs. 978 crore. The Outstanding level of VKCs stood at Rs. 2020 crore through 135208 accounts as at 31.03.2015. The Bank''s Kisan Cards are ATM enabled under RuPay platform and out of 97358 operative VKC A/cs, 88362 farmers have been so far issued ATM enabled Kisan cards.

Financing Micro, Small & Medium Enterprises (MSME):

The advances to Micro and Small Enterprises increased to Rs. 13366 crore as at March 2015 from Rs. 10690 crore as at March 2014, signifying Y-o-Y growth of 25%.

The advances to Micro, Small and Medium Enterprises increased to Rs. 15165 crore as at March 2015 from Rs. 13115 crore as at March 2014, signifying Y-o-Y growth of 15.63%.

Online registration of MSME loan applications and tracking system is in place for speedy disposal of proposals under MSME. Further, MSME loan borrowers are also getting acknowledgement through SMS alerts as soon as they apply online.

Further online tracking system of loan applications is also introduced for monitoring and speedy Action.

Advances to Weaker Sections:

As at March 2015, the outstanding under weaker section advances of the Bank stood at Rs. 8685 crore, which constitutes 10.17 % of the ANBC against the norm of 10%. The Weaker Section advances grew by Rs. 1471 crore, registering a growth rate of 20.39 % over March 2014.

Self Help Groups (SHGs)/Joint Liability Group (JLGs) /Micro Finance Institutions (MFIs):

Bank has accorded top priority to lending to SHGs/ JLGs/MFIs. Bank has disbursed Rs. 721 crore to SHGs/ JLGs/MFIS, the outstanding level of advances to this segment stood at Rs. 1115 crore as at 31.03.2015.

Bank is financing Joint Liability Farming Groups to meet credit requirements of farmers under "Bhoomiheen Kisan" scheme of Government of India and disbursed Rs. 28.35 crore to 983 such JLGs.

Bank is participating in the National Rural Livelihoods Mission (NRLM) Scheme by giving special thrust for lending to women SHGs. National Urban Livelihoods Mission (NULM) scheme has been launched by Govt, of India by replacing the existing SJSRY Scheme and Bank has been actively involved in implementing this scheme also.

The Bank received "Best Performance Award for Self Help Group/ Joint Liability group (SHG/JLG) linkage" for the year 2011-12 and 2012-13 which was presented during financial year 2014-15 by NABARD.

Credit to Women beneficiaries:

Advances to Women beneficiaries stood at Rs. 6438 crore as at March 2015 as against Rs. 5072 crore as at March 2014, registering a growth rate of 26.93 %. Against the stipulated benchmark level of 5% of Adjusted Net Bank Credit (ANBC), the Bank''s achievement stood at 7.54 %.

Lead Bank Scheme:

Our bank is having Lead Bank responsibility in three districts i.e. in Mandya, Dharwad and Haveri districts of Karnataka State. The Lead District Managers of all the three districts have been coordinating with all the bank branches in the concerned Districts to ensure achievement of targets under Annual Credit Plan, Government sponsored schemes, Financial Inclusion, Direct Benefit Transfer Scheme etc. In these three Districts, total credit share of our Bank through Annual Credit Plan is Rs. 725 crore against the target of Rs. 680 crore as at March 2015.

Lending under Government Sponsored Schemes:

Implementation of Government Sponsored Schemes receives the utmost attention of the Bank. The Bank''s lending under various Government sponsored schemes is furnished below:

(Rs. in crore) SI. Schemes No of Loan amount No. beneficiaries outstanding as at March 2015

1. PMEGP 7991 117

2. NRLM 11736 257

Advances to SC / STs:

Total advances to SC / STs stood at Rs. 1367 crore as at March 2015, against Rs. 1125 crore as at March 2014, with a growth rate of 21.51%.

Credit to Minority Communities:

Advances to Minority Communities stood at Rs. 4225 crore as at March 2015, constituting 13.76 % of total Priority Sector advances.

VIBSETIs (Vijaya Bank Self-Employment Training Institutes):

The Bank has established Vijaya BankSelf Employment Training Institutes [VIBSETIs] at Mandya and Haveri in Karnataka state and at Indore in Madhya Pradesh. The Institutes have been conducting various vocational training/skill upgradation / awareness programmes/ Entrepreneur Development Programmes etc. VIBSETIs at Mandya, Haveri & Indore have been graded ''AA'' for the year 2013-14 by Ministry of Rural Development (MoRD).

During the current year 2014-15, VIBSETIs have conducted 88 programmes and trained 2392 beneficiaries. Since inception, totally 1343 programmes have been conducted, training imparted to 45909 beneficiaries with an overall settlement rate of 74.88%. VIBSETI, Mandya in collaboration with All India Radio, Mysore and VRDF has conducted training programme on sheep rearing (Bannur variety) for 60 members. During the Month of September 2014, our VIBSETI, Mandya had conducted a special training programme for 60 Transgenders to take up income generating activities.

Vijaya Rural Development Foundation (VRDF):

With a view to focus the attention of rural masses on the need to modernize agricultural practices, for up gradation of skills and knowledge in various ventures and for achieving all-round socio-economic development, Vijaya Rural Development Foundation (VRDF) was promoted by our Bank in the year 1990 at Mangalore. VRDF is conducting various activities like training /awareness programmes, covering a wide range of subjects, through the Village Development Councils (VDC). At present 33 such VDCs are functioning under VRDF. During the year, VRDF has conducted 143 programmes benefiting 10845 persons. Free health camps have also been organized for the benefit of rural poor. The Foundation has also granted scholarships to poor meritorious students hailing from villages and studying in government schools. The Foundation has expanded its activities to other districts like Haveri, Dharwad and Mandya, where the Bank has Lead Bank Responsibility.

Visit of Parliamentary Committees:

1. Parliamentary Standing Committee on Finance visited on 19.01.2015 and discussed on "Financial Inclusion Schemes and Achievements" and "Banking Sector in India - Challenges & the Way Forward".

2. Parliamentary standing committee on Social Justice and Empowerment visited on 27.01.2015 and discussed about Priority sector lending to SC/STs, OBCs, Differently-abled persons & Minorities.

Education Loan

The Bank has provided utmost importance to education loan as it views this as an investment in human capital. During the year, the portfolio grew by Rs. 143 crore in absolute terms from a level of Rs. 760 crore as on 31.03.2014 to reach a level of Rs. 903 crore as on 31.03.2015 recording an Y-O-Y growth of 19%.

As it is a national priority, the Bank is aggressively marketing education loan. Bank also launched education loan campaign coinciding with the admission season. MoU was entered into with several reputed educational institutions/ colleges/universities for extending education loans. Bank participated in several expos and conducted camps during admission season to bring out the awareness amongst student community about the availability of education loan facility.

Financial Inclusion

Pradhan Mantri Jan Dhan Yojana (PMJDY) was launched by the Hon''ble Prime Minister on 28.08.2014 with the objective of bringing all unbanked households/ families of the country into banking fold by providing them with Basic bank accounts, Rupay cards with accidental insurance coverage of Rs. 1.00 lakh, life insurance coverage of Rs. 30,000/- and overdraft facility upto Rs. 5000/- based on the satisfactory transactions in the account.

Our Bank is actively participating in PMJDY scheme. Under PMJDY, our Bank has been allotted with 1151 Sub Service Areas comprising 3410 villages and 432 wards on a PAN India basis to provide banking facilities. We have provided Banking Facilities to these villages through 289 branches and 827 Bank Mitras (BCAs). Bank has conducted household survey in all allotted SSAs and Wards and covered all the households with at least one bank account.

Our Bank has opened 12.19 Lakh Basic Savings Bank Deposit accounts under PMJDY with a total balances of Rs. 63.63 crore, and all the account holders are provided with Rupay debit cards. Aadhaar numbers have been seeded in 7.27 lakh accounts. Bank has sanctioned Overdraft facility in 21 PMJDY account holders amounting to Rs. 0.66 Lakhs.

Bank is having Lead Bank responsibility in 3 districts viz Mandya, Dharwad and Haveri in Karnataka State. All the three Lead districts of the Bank have declared the districts as Saturated by covering all the households with Bank accounts within the timeline of Govt, of India.

FINANCIAL LITERACY:

Bank has floated Jnana Jyothi Literacy & Credit Counseling Trust (JJFLCCT), jointly with Syndicate Bank to set up and manage Financial Literacy Centres (FLCs) at District and Taluk level. Our Bank has 3 District level and 11 Taluk level Financial Literacy Centres. All the FLCs are regularly conducting Literacy programmes in villages /schools.

To create Financial Literacy on Pradhan Mantri Jan Dhan Yojana in Rural and Urban areas, Bank has prepared an Audio Film on PMJDY in regional languages for screening at account opening camps and other literacy programmes. Financial Literacy materials in regional languages were also provided to branches to impart financial literacy to PMJDY account holders.

DIRECT BENEFIT TRANSFER:

Bank is actively implementing the modified DBTL programme of the Govt, of India from 1st January 2015, by seeding Aadhaar number of LPG consumers into their accounts.

Our Lead District Managers in Dharwad, Haveri and Mandya are coordinating with the Oil Marketing Companies in their effort to cover maximum number of LPG beneficiaries under Cash Transfer compliance mode.

ELECTRONIC BENEFIT TRANSFER:

Bank is disbursing Social Security Pensions to more than one lakh beneficiaries in Mandya District through Business Correspondents Agents / Hand Held Machines under "one district one Bank Model" amounting to Rs. 6.20 crore per month.

INFORMATION & TECHNOLOGY

Core Banking solution and its progress

The Bank achieved 100% CBS which facilitates services like anywhere banking, Internet Banking, online transactions etc. to its customers. With 100% CBS, the Bank has moved closer to offer real time banking facilities to its customers. Passbook Kiosk has been implemented in 184 locations. Cash Deposit Kiosk has been implemented in 238 locations. Aadhaar Enabled Payment System was implemented for smooth implementation of GOIs Direct Cash Transfer Project. To minimize the frauds, bio-metric access for CBS users has been implemented at all locations.

The Bank has implemented Integrated Human Resources Management System, Integrated Treasury Management System and Integrated Risk Management System and are integrated with the Core Banking System. ITMS project has met all the objectives with the setting up a DR setup at Mumbai. HRMS has also met most of the objectives with the setting up a DR set up at Mumbai. IRMS is expected to be fully implemented by the end of this financial year.

ATMs

59 ATMs were operationalised during the year 2014- 15, taking the number of ATMs to 1383 as at the end of March 2015. Bank''s customers can also access over 1,90,000 ATMs connected under National financial Switch (NFS) across the country.

Internal Control

The Bank has well documented policies like IT & IS Security, Internet Banking Policy, IT Procurement Policy, Internet usage Policy, e-mail policy, Business Continuity Policy, Disaster Recovery Policy, Outsourcing Policy etc. covering wide range of functions at the field and administrative levels. Adequate controls are also built in to mitigate the risks associated with each of the activities. IT policy and IS policy was revised during 2013-14. Separate policies have been brought out for Incident management, Vulnerability and penetration test as part of IS Security policy.

Net working

Bank has brought all its branches, extension counters and offices under the corporate WAN and achieved 100 % networking of the branches. It has also used the latest technologies like MPLS, Radio frequency, VSATs, CDMA etc. for establishing connectivity.

RTGS & NEFT Services

Having brought all branches under Core Banking Solution, RTGS and NEFT services are available to the Bank''s customers from all its branches. Since STP has been enabled in RTGS and NEFT, the customers can enjoy the benefit of immediate inter-bank and intra bank fund transfer facility.

The centralized payment systems, viz. Real Time Gross Settlement System (RTGS) and National Electronic Funds transfer (NEFT), currently provide for only direct membership. It has been decided by the RBI to expand the sub-membership route to enable all licensed banks to participate in NEFT and RTGS systems. The sub-member/s would participate in the centralized payment systems through their sponsor bank which is a direct member of the centralised payment system. Bank has entered into an agreement with ShimshaSahakara Bank Niyamitha, Maddur and LokapavaniMahilaSahakari Bank, Mandya for using our RTGS/NEFT services as sub-members.

Missed Call Services (FreeBuzz):

Bank is providing missed call services to the customers & enable them to know the account balance and mini statement. The ease of giving missed calls with zero charges provides a huge advantage to the customers.

V-Fee Hive:

Our in-house software development team has developed a unique application for collection of fees for Educational Institutions, collection of monthly maintenance fee by Apartments and collection of fees by Clubs, etc. It is equipped with unique features like integration of other payment channels like debit card, credit card and internet banking. Prestigious institutions like IIM-Calicut, Army Public School- Delhi, Yenepoya College- Mangalore and Mount Carmel College - Bangalore are presently availing this service.

V-epassbook :

Our in-house software development team has developed mobile application for accessing account details / to get transaction details. The application is loaded with additional customer friendly features like facility to add notes to each transaction, facility to maintain various personal account heads and to add pass book transactions to these accounts on a single click,facility to add notes to each transaction, etc. A Page with latest offerings and information like interest rate of the bank with links to reach the website of the Bank and facility to refer us to a friend is also available in this application. New version of the software V-e Pass book 2.00 with attractive features like reset of password online, maintain financial calendar, locate our branch/ATMs, display details in Hindi/Kannada languages etc. released during the current year. Already 1,47,694 No of Customers have registered for availing this facility as on 31.03.2015 .

Cheque Truncation system:

As directed by the Reserve Bank of India, the Bank has implemented cheque truncation system in Northern, Southern and Western Grid covering all MICR centres. Subsequent to migration of MICR centres, RBI has directed banks to migrate Non-MICR centres, presently branches from Non-MICR clearing are live on CTS clearing in 30 locations as on 31st March 2015.

Security Operation Center

Our Bank established Security Operation Center with Security Information and Event Management Solution (SIEM) & Correlation tool, which will help the bank in block / mitigate the attacks procedurally.Our Bank has finalized the Common procurement process for 9 Public Sector Banks for implementation of SOC as per the new initiative of GOI under common RFP and the project has been successfully completed.

INTERNAL INSPECTION

The Bank has a well-defined Internal Audit Policy with the Audit Committee of the Board overseeing the audit functions and providing guidance for improvements.

During 2014-15, Risk Based Internal Audit (RBIA) of 1314 branches was conducted and 78.84% of the audited branches have secured "Low Risk". In addition, inspection of 12 Service Branches, 27 Currency Chests, 15 RACPCs, 09 MSME Cells, 17 Regional Offices and 07 Head Office Departments was conducted during the year. 82.27 % of Bank''s business is covered under Concurrent Audit against RBI stipulation of a minimum 50%.

Know Your Customer (KYC), Anti Money Laundering (AML) and combating of Financial Terrorism (CFT):

Bank has formulated a Comprehensive policy on ''Know Your Customer'', ''Anti Money Laundering'' and ''Combating of Financing of Terrorism'' which is being implemented by the KYC Cell at H.O. with required technical support for field functionaries. Detailed guidelines have been issued to the field functionaries for the implementation of KYC Norms, AML guidelines and CFT procedures which are uptaded / revised periodically based on instructions from RBI, GOI, IBA and other regulatory authorities. At the apex level it is being ensured that the KYC Norms and otherguidelines are implemented in letter and spirit.

Large value transactions are monitored to be in line with the declared business/ profession. AMLock software is deployed for generating requisite alerts. Cash Transaction Report (CTR), Suspicious Transaction Report (STR), Counterfeit Currency Report (CCR), Cross Border Wire Transfer (CBWT) and large value transactions of Non-Profit Organisations (NTR) are submitted to FIU-IND as per the prescribed periodicity. A system support to check the customers'' names with the UN list of terrorists is made available to prevent opening of accounts by terrorists and connected entities.

The implementation of KYC Norms and AML guidelines is being checked by the Internal Inspectors, Concurrent Auditors, Vigilance Inspectors and Executives during their branch visits. Bank is proposing to also use decoy customers for KYC/AML checks.

Offsite Monitoring Unit (OMU)

Bank has established an Offsite Monitoring Unit (OMU) to monitor exceptional transactions on an ongoing basis and generate MIS reports on critical items. The reports, classified under High, Medium and Low Risk categories are analysed and requisite action initiated. Nodal Officers have been identified at all ROs for effective follow-up and feedback. Based on the criticality and monitoring needs Bank has identified a set of reports that are to be generated and monitored. OMU also undertakes checking / validation of credit sanctions with regard to adherence to major terms and conditions like interest calculation, collection of processing charges, etc.; Detect Revenue Leakage and Sanitization and data cleaning.

Fraud Monitoring Cell:

Bank has an independent Fraud Monitoring Cell, functioning as per the RBI guidelines on Classification and Reporting. During the financial year, 36 frauds amounting to Rs. 329 crore were detected. All frauds are systematically scrutinized and analysed in terms of modus operandi and system lacuna are timely reports are submitted to the regulatory authorities.

Police / CBI cases are filed in respect of all fraud cases. Fraud cases exceeding Rs. 1 lakh are placed before the Board and Board instructions / guidelines are implemented. A review of large value frauds is also placed before the Special Committee of the Board at periodical intervals. Latest position / progress in all the fraud cases are reported to RBI on quarterly basis. Attempted frauds are dealt with in terms of RBI guidelines. Periodical guidelines / instructions are issued on fraud prevention measures and system improvements.

Vigilance

The Vigilance Department at Head Office is headed by Chief Vigilance Officer of the rank of General Manager who is on deputation from State Bank of India. The Vigilance Department overseas all vigilance works of the Bank as per the guidelines given by Central Vigilance Commission. In addition, Vigilance Department carries out surprise inspection of branches, and Controlling Offices, concentrating on preventive vigilance. These are done by field Vigilance Officers stationed at Regional Offices. All efforts are made to plug the loopholes in the existing system to prevent recurrence of similar frauds and to strengthen the preventive vigilance.

Compliance

Board approved Compliance Policy is a requirement under the extant RBI guidelines and accordingly, the Bank has adopted Compliance Policy. The Compliance Department, H.O. ensures compliance with various communications received at Head Office from Govt of India, Reserve Bank of India, IBA and others by sending all such communications to the concerned operational Departments for necessary action. The Compliance Department is headed by the Chief Compliance Officer who is of the Rank of a General Manager.

Right to Information Act 2005

Government of India enacted Right to Information Act, 2005 which came into force on October 12, 2005. The Act provides right to every citizen to secure/access to information under the control of Public Authorities. It aims to promote openness, transparency and accountability in administration and in relation to matter connected therewith or incidental thereto.

Bank has designated all the Branch Mangers as Assistant Public Information Officers, Second line Executives of all the 27 Regional Offices as Public Information Officers and Regional Head as Appellate Authorities under the Right to Information Act, 2005. At Head Office a Deputy General Manager is designated as Public Information Officer and a General Manager of the Bank as Appellate Authority. Bank as a whole 28 offices are provided with Public Information officer and Appellate Authority respectively under Right to information Act 2005.

Information sought under the RTI Act 2005 is being provided within the prescribed time frame. During 2014-15, bank as a whole has received and disposed of 995 Applications and 133 Appeals under the RTI Act 2005. "

Security Arrangements

The Bank has a well established security set up within the Bank''s organizational structure with clear cut delegation of authority and responsibility. Security arrangements at all bank branches, currency chests and ATM sites is being reviewed on an on-going basis, since in a dynamic environment, new threats may emerge posing new challenges to various delivery points. Bank security is being strengthened to be more effective, modern and an unobtrusive security system. Essential and mandatory security arrangements in terms of RBI/IBA guidelines are being provided to all branches. Security Alarm Systems and CCTV surveillance system have been provided at all branches for ensuring secure and reliable banking. Branches categorized as vulnerable from security point of view are provided with armed security guards during working hours.

The Regional Security Officers carryout branch inspection visits at regular intervals to assess the security arrangements in vogue and suggest means for strengthening these arrangements. The Regional Security Officers maintain close liaison with the law enforcing agencies. The security arrangements in the Bank have been geared up to meet the prevailing security scenario.

Access Control measures at all banks currency chests have been strengthened in terms of RBI guidelines, all cash handling operations are being done under CCTV surveillance. Security Officers / inspecting officials to currency chest review CCTV footage as a mandatory requirement during their visit to the chest. Effective and fool proof system of frisking each & every person entering / leaving the vault room of the chest is being carried out. Biometric access control systems have been installed at all currency chest of the Bank to strengthen access control measures.

Training including firing practice for armed security guards deployed at currency chests/branches is imparted on an annual basis. Refresher training workshop for Security Officers is also being organized annually. Security Committees formed at Regional Offices and at Head Office meet periodically to review and assess vulnerability of each delivery point and for taking proactive measures for further strengthening security arrangements at branches/ chests and ATM sites.

HUMAN RESOURCES MANAGEMENT

Manpower:

The total staff strength of the Bank stood at 13617 in March 2015 as compared to 12822 in March 2014. Of the total staff, 6271 are Officers, 4304 Clerical Staff, 2349 Sub-staff, and 693 Part-time Employees in the subordinate cadre. The number of women employees as at the end of March 2015 stood at 3426 consisting of 1469 Officers and 1957 Award Staff constituting 13617 of total employees in the Bank. As at the end of March 2015, there were 271 employees belonging to Persons With Disabilities(PWD)Category and 751 employees belonging to Ex-Servicemen Category.

Recruitment:

During the year the Bank has appointed 583 Officers in different Grades/Scales and 277 Probationary Clerks. Bank has also appointed 732 employees in subordinate cadre of Armed Guards, Peons & Part Time Sweepers.

Promotions:

The promotions effected during the year 2014-2015 are furnished hereunder:

SI. Promotion Promotion to Total No. from promoted

1 TEGS-VI TEGS-VII 8

2 SMGS-V TEGS-VI 17

3 SMGS-IV SMGS-V 46

4 MMGS-III SMGS-IV 66

5 MMGS-II MMGS-III 166

6 JMGS-I MMGS-II 139

7 Clerical JMGS-I 173

8 Sub staff Clerk 133

Training:

The training system in the Bank has been strengthened by providing additional competent manpower. The courses have been redesigned keeping in mind the essential inputs required for the employees to effectively handle the present & future assignments and to perform their duties and responsibilities effectively in the highly competitive tech-based customer-driven banking environment. The Bank is also imparting training to its employees through reputed external training institutions in certain specialized areas like Credit, FOREX, Treasury Management, Risk Management, HR, Marketing, etc. During the financial year the Bank has imparted training to 9579 employees constituting 70.34 percent of the total employees. Out of which, 8291 employees had undergone training in the Bank''s own establishments and 1288 were trained at the reputed external training institutions including some overseas institutions.

SC/ST/OBC Employees:

Out of the total manpower of 13617 as at the end of March-2015, 2752 employees belong to SC category, 993 to ST category and 2816 to OBC category.

SC/ST CELL:

SC/ST cell has been functioning at all the 27 Regional Offices and a Senior Officer belonging to SC/ST is designated as Liaison Officer. At Head Office, the Cell is functioning under the control of Chief Liaison Officer.

The grievances of SC/ST employees are looked into and prompt remedial action is taken. The Chief Liaison Officer meets the SC/ST Employees Welfare Association and their representatives to hear their grievances at Head office and refers the matters if any, to the concerned department at Head office for redressal. Similarly Regional Heads/Liaison Officers are attending to their grievances at Regional Office Level.

Further Quarterly meeting of SC/ST representatives with the Managing Director & CEO of the Bank are held regularly in terms of Govt, guidelines. In these meetings, the grievances, if any, pertaining to SC/ST employees are discussed with the representatives of the SC/ST welfare Association and sorted out. All the representations received are entered in a Register showing therein the action taken on each representation. The Register is inspected by the Chief liaison Officer periodically.

In the similar manner, OBC Cell is also functioning separately at all the 27 Regional Offices & at Head Office under the control of Chief Liaison Officer appointed separately for OBCs.

Bank is arranging pre-promotion training for SCs/STs & OBCs regularly (i.e for sub-staffs, clerks and officers up to scale-Ill).

Bank is complying with all the Policy Guidelines laid down by the Govt, of India pertaining to reservation of posts for SC/ST employees, OBC & Minority employees including Persons with Disability.

Staff Relation:

The pro-active and humanistic approach undertaken by the Bank has yielded positive results and the Bank is showing progressive growth consistently with the collective efforts of the management and employees of the Bank. The climate is positive and the same is echoed in the form of continuous growth of the Bank during the financial year ending March 2015. The industrial relations in the Bank have been cordial and harmonious. There was no agitation or unrest during the year by the employees relating to issues pertaining to our Bank. The consultative committee meetings and negotiating committee meetings were held with the representatives of the recognized unions at regular intervals to sort out the grievances of the employees and settle the disputes, if any, amicably and the said meetings are attended by the top executives of the Bank.

Sports Activities:

Our bank''s various sports teams have performed exceedingly well in the year 2014-15. Our Basketball team emerged winners in the All India Basketball Tournament held in Periyakulam, Tamil Nadu. The team also won the prestigious Association Cup and State Senior Division league held by the Karnataka State Basketball Association. Sri Arvind. A., working at Residency Road Branch, Bangalore was selected to attend the preparation camp of the Indian Basketball team in Gurgaon. Four members of Bank''s Basketball Team viz., Sri Arvind.A., Sri Anil Kumar.B.K., Sri Rajesh Prakash Uppar and Sri Roby Thomas were selected to represent Karnataka in the Senior National Basketball Championships and in the 35th National Games.

The bank''s Cricket team finished runners up in the All India YSCA Cricket Tournament and in the All India BPCL Kochi Refineries Cricket Tournament held in Chennai and Kochi respectively. Sri Muhammad Aslam.A.R, Clerk, Shanthinagar branch, was adjudged best Batsman of the tournament held in Kochi. Sri R. Vinay Kumar, member of our bank''s Cricket team, is the current captain of the Karnataka Ranji team which has won the Ranji Trophy tournament for the second consecutive time. Sri C.M.Gautham, Asst. Manager, Shanthinagar branch, who is also the vice-captain of the Karnataka Ranji team has been an integral part of the team. Sri Niyas Nizar, Clerk, N.R.Road branch represented Kerala in the Ranji Trophy for the year 2014-15.

The Kabaddi team of our bank has also excelled during the year. The team won 5 State Level Tournaments held in Koratagere, Gulur, Anekal, Mangalore and Karkala. The bank''s Kabaddi team also emerged runner up in the All India Kabaddi Tournament held at Mudhol, Karnataka and the State Level Kabaddi Tournament in Hebgodi, Karnataka. Sri Selvarajan.R., Service Branch, Sri Prashanth Rai, Indiranagar branch, Sri Sukesh, Hegde, HAL lllrd Stage branch and Sri Keerthi.H.S., Nagappa Block branch, were some of the star performers for the team. Sri Sukesh Hegde represented India in the Beach Kabaddi Championships held in Phuket, Thailand.

Staff welfare measures:

As per the directions of Ministry of Finance, Department of Economic Affairs Government of India, 3% of net profit with the maximum ceiling of Rs. 15 crore is to be earmarked for the welfare of its employees.

The Bank is having various staff welfare schemes such as:

1. Canteen Subsidy.

2. Newspaper reimbursement.

3. Annual Health Checkup.

4. Health Clinic at HO and at MSR Nagar, Bangalore.

5. Annual Medical Aid to the employees retired on superannuation.

6. Grant of Silver Jubilee awards.

7. Cash incentive to meritorious wards of staff.

8. Awarding scholarship of Rs. 5000/- for the girl children under V-Shakti, V-Subodhini, V- Pragati.

9. Group Mediclaim Insurance.

The Vijaya Bank Staff Welfare Fund Trust

Vijaya Bank Staff Welfare Fund Trust has been formed since 21.09.2002 :

Various welfare schemes implemented under the Trust are :

1. Awarding scholarships to the wards of the employees.

2. Reimbursement of residual claim of hospitalization expenses.

3. Reimbursement of cost of spectacles.

4. Funeral expenses to the family members on death of the employees.

5. Cash incentives to retirees on superannuation.

6. Scheme for providing assistance /scholarships to the parent employees of mentally challenged / spastic children.

7. Scheme for providing artificial limbs /hearing aid /crutches to physically challenged staff members/their children.

8. Holiday Homes at Goa, Darjeeling, Shimla, Tirupati, Bangalore, Mysore, Ooty, Delhi & Mumbai.

The bank is also administering Family Welfare Scheme under which amounts collected from the members of the scheme are distributed among the family members (nominees) of deceased employees.

Human Resources Management System:

With a view to streamline the process of faster decision making and enable error-free data management pertaining to the employees at a centralized location at Head Office, the Bank has implemented HRMS (Peoplesoft) Software.

The HRMS software combines many human resources functions including Benefits Administration, Payroll, and Training integrated into a single package.

Internal Complaints Committee

The Sexual Harassment of Women at Work Place (Prevention, Prohibition and Redressal) Act, 2013 (hereinafter called as the Act) has come into force and the same is published in the Gazette of India, Extraordinary, Part II, Section I dated 23.04.2013 as Act No. 14 of 2013.

This Act is to provide protection against sexual harassment of women at workplace and for the prevention and redressal of complaints of sexual harassment and for matters connected therewith or incidental thereto.

In compliance with Section 4 of the Act, Bank has constituted the Internal Complaints Committee (ICC) at the Head Office and at all the Regional Offices of the Bank to deal with the complaints received from staff members pertaining to gender discrimination and sexual harassment at workplace.

The ICC constituted at Head Office consists of the following members:-

1. Smt Nirmala Sridhar, GM - Chairperson

2. Smt Kamalakshi Hegde, CM - Member

3. Sri Krishna Kumar, CM - Member

4. Smt. Banumathi Ramasami, - Member Manager

5. Smt Sandeepa Mullath, -Member Manager

6. Smt. Geeta Menon - NGO - Member

Section 22 of the said Act stipulates the employer to include in its annual report the number of cases filed, if any and the disposal of cases under the Act.

The Central Govt, in exercise of its powers conferred under the Act has also formulated "Sexual Harassment of Women at Work Place (Prevention, Prohibition & Redressal) Rules, 2013". Rule 14 of which provide the employer to include the following information in the preparation of the Annual report:

a) No. of complaints of sexual harassment received in the year.

b) No. of complaints disposed of during the year.

c) No. of cases pending for more than 90 days.

d) No. of workshops or awareness programme against sexual harassment carried out.

e) Nature of action taken by the employer.

Accordingly, the details of complaints received by the Committee for the year April 2014 to March 2015 is furnished below.

SI. No of No. of No. of No of workshops or awareness No. complaints complaints cases programme against sexual of sexual disposed off pending for harassment carried out harassment during the more than received in year 90 days the year

1 7 6 Nil 2 (1 pending >90 davs Special programme for women Branch Managers.

Special programme for women employees.

At Southern India Bank, STC, Bangalore.

Attended by 58 lady officers.



No of complaints of sexual Nature of action taken by the harassment received in the year employer or Dist. Officer

7 Out of 6 cases -

4 cases, are resolved amicably.

2 cases, are referred to Personnel Dept. [IRD] for taking suitable action in the matter

OTHER SERVICES

Merchant Banking & Allied Activities:

The Bank is registered with Securities and Exchange Board of India (SEBI) for Merchant activities like: Category I Merchant Banker, Bankers to the Issue, Debenture Trusteeship and Depository Participant. The bank is also registered as Self Certified Syndicate Banks for accepting IPO/Rights issue applications under Applications Supported by Blocked Amount (ASBA).

The bank undertakes Payment Bankers Assignments for payment of Interest/Dividend/Refund orders of Corporates. Bank also offers Depository Services and online trading to its clients.

Government Business:

Among various Government business, Bank is collecting Direct tax through 276 branches. The bank has introduced online payment of taxes of CBDT&CBEC through V-net banking for all customers of all branches. 888 branches of the bank are designated to open Public Provident Fund accounts. Besides, all our branches are authorised to disburse Central Civil, Defence, Telecom pensions and State pensions in the states of Karnataka, Andhra Pradesh, Kerala and 4 Metro Cities. A separate cell called Centralized Pension Processing Center/CPPC has been set-up in HO for centralized payment of pensions of Central Government pensioners. 1487 branches are designated as NPS-Lite collection center (NL-CC) to accept subscription under NPS- Swavalamban scheme.

Corporate Agency with LIC:

Bank has entered into the Corporate Agency agreement with LIC of India to cater to the life insurance needs of the customers.

Corporate Agency with UIIC:

Bank has entered into the Corporate Agency agreement with United India Insurance Company Limited to cater to the non-life insurance needs of the customers.

Group Insurance Coverage for borrowers:

Bank has entered into an agreement with M/s Bajaj Allianz Ltd for Group coverage of individual borrowers.

Money Transfer Services (Conventional and Online):

Bank is a sub-agent for money transfer services of Money Gram and Xpress Money. Under Money gram the bank has tie-up with both UAE exchange & financial services and Thomas cook (India) Ltd. Bank has entered into a tie-up with Times of Money Ltd for online transfer of funds (Remit2lndia) as an additional service to NRIs. The Bank has a tie up arrangement with Wall Street Finance Ltd of Spice Group company for Western Union money Transfer Services.

Credit Card Business

At the end of the financial year, the total active cards issued by the bank stood at 159149. The Credit Card turn over is Rs 514.57 Crore as against the turnover of Rs 458.18 crore as on 31.03.2014. To provide more security for our cardholders, the bank has introduced chip cards under Classic variety during the year. We have also facilitated our cardholders to view their card transactions at any time through V-Net banking.

The total number of merchants enrolled by the bank during the financial year 2014-2015 stood at 917 as against 1293 merchants as on 31.03.2014. The Department has delisted merchants who has not given business for more than 12 months. The bank is also providing cordless card swiping machines and the terminals are EMV/UKPT/TLE compliant and PIN @ POS enabled. The bank makes direct payments to merchants maintaining account at our Core Banking branches.

Debit Card

There has been considerable increase in the issue of Debit Cards. We have totally issued 1539854 Debit/ATM cards during 2014-2015 as compared to 518809 cards issued during the financial year as on March 31, 2014. The Debit Card turnover is Rs 577.42 crore during 2014-2015 as against Rs 464.96 Crore as on March 31, 2014. The bank is opening Jan Dhan accounts and has launched Platinum Cards in association with Rupay & VISA in the month of March 2015.

Depository participant account and Online trading:

Vijaya Bank, a Depository Participant (DP) with National Securities Depository Limited.

Vijaya Bank DP offers the following depository services.

- Account Opening.

- Dematerialization of securities (shares, Debentures, Mutual funds etc.,)

- Electronic settlement of trades in stock exchanges connected to NSDL and CDSL.

- Pledge/hypothecation of demat security holdings against bank loan.

- Electronic credit of securities allotted in public issues.

- Freezing of accounts whenever required so that debits from the account are not permitted.

- Nomination facility for demat accounts.

- Services related to change of address, bank account details etc.,

- Effecting transmission of securities.

NSDL IDeAS facility.

The bank provides Depository Services to customers and Tied up with IDBI Capital for providing Online Trading.

Government Business Module (GBM)

Government Business module is implemented with the following modules.

- OLTAS Module which deals with Direct and Indirect Taxes and remittance of tax amount to RBI through link cell, Nagpur.

- Public Provident Fund - PPF is being accepted at the designated branches of the Bank.

Centralized Payment of Pension - A dedicated Centralized Pension payment processing cell has been created at HO. All types of pension like State, Central, Civil, Telecom, Defence, Judges and Freedom Fighters pension is being paid centrally by the CPPC cell at HO.

Senior Citizens Savings Scheme as perthe government guidelines is also implemented in the Bank.

Marketing Setup

Marketing cell at the Bank''s Head Office with active involvement of all Marketing officers posted across the country in various Regional Offices / RACPCs & MSME cell is actively engaged in popularizing and marketing of Bank''s various products.

Publicity and Public Relations

During the F Y 2014-15, the bank has carried out several major advertisement campaigns in print & Electronic media in English, Hindi and in regional languages throughout the country to elevate the visibility of the bank and its products. This year major Publicity Campaigns were carried out through Outdoor Advertisement media such as translites at airports and Delhi Metro Railway station, Kolkata Metro Stations. Outdoor Advertisement hoardings were taken in metro cities, glow sign/sign board advertisements at Railway stations/Bus stands.

Implementation of Official Language

Bank is implementing the Government''s Official Language Policy in letterandspiritsince Nationalization. With the efforts of staff members Bank could achieve Hindi correspondence of 90.07 % in Region "A" against the target of 100%, 80.64 % in Region "B" against the target of 90% and 61.49 % in Region "C" against the target of 55% as on 31.03.2015.

Under the banner of "V-Gen Uth" all 27 Regional Offices & Head Office has conducted V-GenUth Hindi singing Competition/Hindi Drawing Competition/ Hindi Elocution Competition, Hindi Quiz Competition, etc. for High School students. Every Regional Office has conducted Hindi Symposium (Aapasi samvaad Programme) in which teachers & students of various Colleges/Universities, customers and staff members have participated.

92 Hindi workshops were conducted for Executives / officers and clerical staff employees members in which 1610 staff members were trained. Importance of use of Unicode was stressed in these workshops.

The Drafting & Evidence Sub-Committee of Parliamentary Committee on Official Language had a discussion programme with Town Official Language Implementation Committee, Nagpur and member banks on 08.01.2015 in which our Regional Office, Nagpur participated as a member bank.

The Third Sub-Committee of Parliamentary Committee on Official Language visited our Udhagamandalam Branch on 07.02.2015.

Hindi Day was celebrated by Head Office on 16.09.2014 and Rajbhasha Sahayika was released on the occasion to enable all staff members of the Bank to implement Official Language in the Bank.

E-Passbook/Tele Banking in Hindi/taking ATM slips in Hindi in Diebold Machines facility is available in the Bank. The exclusive intra-net Rajbhasha website has been made more user friendly for the staff members by providing letter heads of all branches/offices, office notes letters etc. The Hindi version of the trilingual website of the bank is updated from time-to-time. V-Gyan Kendra'' is also made bilingual.

The Head Office along with various Regional Offices Bank have received prizes for Official Language Implementation for the year 2013-2014 awarded by the respective Town Official Language Implementation Committees, Staff College, Bangalore I prize, Regional Office, Hassan - I Prize; Mayo Hall Branch - Fourth Prize; Karnal Branch - Consolation Prize; Regional Office, Pune awarded for best performance in the field of O.L. Implementation.

Our Bank conducted inter-bank competitions under the aegis of various Town Official Language Implementation Committees all over India and a number of staff members have also won prizes.

Under the Bank''s Internal Rajbhasha Shield Scheme for the year 2013-14 Personnel Department I Prize, Planning and Development Department was awarded

II Prize and Central Accounts Department was awarded III Prize under HO Department Category for effective implementation of Official Language. Under Best Region Category Chandigarh was awarded I Prize, Lucknow Region II Prize and Bangalore (South)

III Prize.

ALTERNATE DELIVERY CHANNELS:

A number of activities were undertaken to ensure that technology driven Alternate Delivery Channels are utilized to the mutual advantage of the customers and the Bank. Mailers were sent to customers highlighting the advantages of using Alternate Delivery Channels like internet banking, use of Debit Card, on-line purchases, and funds transfer through RTGS/NEFT etc. Training programmes are conducted by Staff College to familiarize/ sensitize the staff members with these products so that the facilities percolate to the customer in a professional manner.

TeleBanking Facility

TeleBanking facility was started during 2012-13 and available 24/7.Tele Banking facility is available in three languages ENGLISH, KANNADA AND HINDI. TeleBanking provides the following facilities for the benefit of customers:

- Account details: This includes balance enquiry, last five transaction details, statement of accounts by e-mail, credit/debit card details.

- Request for cheque book, stop payment, cheque status enquiry.

- Financial Transactions: This includes transfer of funds to self -account.

- Loan Account Details and Deposit Account Details.

- Internet Banking Assistance and Mobile Banking Assistance.

- Adhaar number linking to account.

Internet Banking:

V-Net Banking, an Internet Banking channel of the Bank is providing services like balance enquiry, account statement, intra-bank and inter-bank fund transfers through RTGS/NEFT, transactions related SMS alerts, payment of Indirect / Direct taxes, State commercial Taxes, utility bill payments, online temple donations & online donations to Prime Ministers Relief Fund (PMRF) and others. The add-on features of V-net banking are:

- Password can be reset online.

- Creation of User-id and Password credentials online.

- Customers can view their PPF account and transfer funds to PPF Account from their linked operative accounts using V-Net Banking facility.

- Customer can View their Vijaya Bank Credit Card statement.

- Customer can pay Import & Export custom duties.

Mobile Banking:

V-Mobile Banking, the channel of the Bank for performing banking activities like balance enquiry, account statement, mobile recharge, intra and interbank funds transfer using NEFT, Airline ticket booking, Movie Ticket booking etc., with their mobile handset using SMS/ GPRS modes of communication. "Immediate Payment Service" - IMPS (P2P-Person to Person), an initiative from NPCI (National Payment Corporation of India) has been implemented for the benefit of the customers using Mobile banking services to perform the transactions 24x7 within and across the banks using MMID (Mobile Money Identifier). IMPS (P2A - Person to Account) is implemented in our existing Mobile Banking services, wherein the customers can do funds transfer using beneficiary''s A/c No. and IFSC code, without the use of MMID.

Now we have launched new version of Mobile Banking with enhanced look and feel, and additional features like facility for customers to receive notifications from the Bank, add remarks to fund transfer transactions, to generate application password by themselves, and a host of other customer friendly options.

SMS alerts/e-mail

The bank also offers SMS alert service. Messages are sent for all transactions of Rs. 100 and above and when cheques are returned with, irrespective of the amount. Monthly statement of account through e-mail to account holders who have registered the e-mail ID has been implemented.

SMS alert facility is also used for

- Adding beneficiaries in V-Net Banking through SMS - OTP(One Time Password).

- Online Resetting of Password in V-Net Banking SMS - OTP (One Time Password).

- Self User Creations for Retail Customers using SMS - OTP (One Time Password) along with other security features.

V-GyanSagar:

V-Gyansagar is an unique initiative by Vijaya Bank to impart financial information to the public as part of financial literacy. V-Gyansagar is an Android mobile application which provides the subscriber a facility for getting daily updates on Financial, Economic and Banking news and also explanation of Financial and Banking terms.

V- Abacus :

A facility to open account by giving a missed call and opening of account through Tab Banking was implemented.

This will be useful for the customers who could not come to branch and open an account.

V-QuickPay:

V-QuickPay is a unique initiative of our bank and is the next generation bill payment service where the Bill payment is made by scanning of QR code. Customer has to scan the QR code on the Bill generated by the merchant who has availed this facility from us, and proceed with the payment of the bill without having to swipe the Credit/Debit card on the POS machines. It facilitates Payment by way of Credit and Debit Cards and also net banking of any Bank. This product introduces a new bill payment channel, hitherto not provided by any Bank in the Indian Banking Industry.

USSD-NUUP:

Mobile Banking services were introduced by the bank in the year 2009. However availing even some of the basic banking services provided through Mobile Banking was beyond the reach of the people who did not possess a high end handset. Now NPCI''s Unstructured Supplementary Services Data -USSD (NUUP) offered by Telcos has been exploited by the bank to give mobile banking services even on a basic mobile phone, making mobile banking accessible to all customers.

V-Online SB a/c:

An option to open online SB account was introduced through our website ''WWW.VIJAYABANK.COM'' Customer has to choose account opening at his/ her place of choice and at his/her convenience. Branch receives an automated mail with regard to the customer''s request; branch will call the customer and informs the required documents and procedures. Customer will visit the branch on his / her chosen date and submits the necessary documents and opens the account.

Customer Service and Redressal of Complaints

- Our Bank has robust Customer Grievance Redressal Mechanism. Complaints received are attended immediately and vigorous efforts are made for a time bound resolution of all complaints.

- The Customer Service Committee of the Board and Standing Committee on Customer Service meets at Head Office periodically to discuss about the customer complaints and suggestions to improve customer service in the Bank.

- Standard Public Grievances Redressal System (SPGRS) has already been implemented in our Bank, which is an online portal for customers to lodge their complaints and track the same for its further developments. The complaints received from the multiple channels are being Registered and digitalized in order to have an integrated information system for customer grievances. All grievances are classified under various heads and sub-heads and automatically pushed to the concerned departments for easy and timely redressal.

- Incognito Visits are continued for the current year to evaluate branches in a discreet manner about the-

1. Ambience of the branches.

2. Product knowledge of the staff.

3. Customer Service.

4. Availability of mandatory disclosures as per the guidelines from the regulatory bodies like RBI/BCSBI.

The findings of the study were used to analyse the focus areas and to improve the customer service.

- Call Centres:-The bank is having a professionally managed call center to take care of all types of customers query. The bank has 24x7 exclusive Help Desk for Credit and Debit card holders to provide swift service on their emergency matters like blocking / hotlisting of cards, tracking of anonymous transactions etc. Bank takes care to see that customers'' queries / issues are resolved within minimum turnaround time. For this bank has set up exclusive call centre for Net Banking / Alternative Delivery Channel (10.am to 6.pm), Card Service (24X7) and General banking (8.am to 8.pm).

Banking Codes and Standards Board of India (BCSBI)

The Bank, being a member of BCSBI, has adopted the voluntary Codes formulated by BCSBI i.e. (i) ''Code of Bank''s Commitment to Customers'' (ii) ''Code of Bank''s Commitment to Micro and Small Enterprises.'' Bank has formulated and complied with several policies as per the guidelines of BCSBI. A session on Customer Service incorporating the provisions of the Codes has been included in the staff general banking training programmes in order to comply with the Codes in true letter and spirit. BCSBI revised ''Code of Bank''s Commitment to Customers'' in January 2014 and the Bank has taken several steps to abide with most of the revised guidelines.

CORPORATE SOCIAL RESPONSIBILITY

Our Bank has been actively involved in the CSR activities. However, we have adopted formal CSR activities as per Governments Gazette Notification dated 01.02.2014. Major initiatives during the Financial Year 2014-15 are:

- Providing support to the adopted villages by providing health facilities to people in rural areas by running Rural Health Centre in all these Villages by attaching the services of a Doctor and medicines to be provided free of cost;

- We have adopted 16 girl children under Girl Child Adoption Scheme sanctioning a sum of Rs. 11,55,000/-, the said expenditure to be utilized from the year of adoption till the completion of their graduation;

- We have provided donations to community oriented programmes like providing bus shelter, overhead tanks, ambulances to Trusts & Hospitals;

- Financial assistance to Mr. Aravind Bhatt, to attend Olympic games;

- Providing support to Government Schools for improvement of basic amenities like water tanks, water purifier, benches, solar lights, fans, library room etc.;

- Donation to different Trust/Foundations for the welfare of downtrodden, especially for SC/ST/ OBC category, and to orphanages and old age homes and support to senior citizens as a measure of reducing inequalities faced by socially and economically backward groups;

- Financial assistance to visually challenged school by way of providing kitchen items, freezer, desks and chairs, and providing hearing aids to hearing impaired and other assistances to differently abled persons;

- Contribution to Hudhud victims;

- Through donation to NGOs for part funding their community development oriented projects like Ashraya, which supports boarding, lodging and educating destitute girl child, Can Care Foundation, which provides relief both to the patients and their family members financially and morally, Laxminarasimha Charitable Trust, which supports pension to senior citizens, handicapped residents, etc;

- Bank is also providing training to unemployed youth, and creating self-employment opportunities;

- As CSR activity towards 84th Foundation day we have donated an ambulance to Sri Taralabalu Education Society, Sirigere, Shimoga;

- In furtherance to the directives of Hon. Prime Minister''s announcement on implementation of Swachchh Vidyalay we have taken up the activity of providing sanitation facilities to 84 Govt Schools, which are not provided with sanitation facility, in commemoration of 84th Foundation day, and in furtherance to these we have already completed construction of toilets at few places and the rest are in progress;

- To commemorate l8nternational Women''s Day, 2 homes working for the cause of women destitute was provided with mattresses, bedsheets, mugs, buckets, pillows;

- Support towards education of children by providing infrastructure, etc. aimed at positive development of the Nation.

Awards & Achievements

In recognition of varied initiative, the bank was conferred several awards and accolades during the year 2014-15.

- ''Best Asset Quality Management'' in India Top Banks and Banking Award 2014 Ceremony hosted by Dun & Bradstreet - Polaris Financial Technology.

- "Best performance Award for Self Help Group/ Joint Liability group (SHG/JLG) linkage From NABARD.

- "Excellence Award for PMJDY performance" by Micro Small and Medium Enterprises, Gol, in a function organized by Federation of Industry Trade and Services.

BOARD MEETING AND MEETING OF OTHER SUB COMMITTEES OF THE BOARD During the year 2014-15, the Board of Directors met 20 times. The details of Committee Meetings are as under:-

Name of the committee No. of Meetings

Management Committee of the Board 16

Audit Committee of the Board 12

Directors'' Promotion Committee 03

Risk Management Committee of the 05 Board

Committee to review Large Value Frauds 05

Remuneration Committee of the Board, 01

Nomination Committee of the Board, 02

Customer Service Committee of the 04 Board,

Stakeholders'' Relationship Committee 04

Share Transfer 07

Head Office Level Credit Approval 32 Committee

Special Committee to consider appeals 01 preferred by employees against final orders passed by Chairman & Managing Director as Disciplinary Authority.

IT Strategy Committee 03

Supporting candidates in the Election Nil

Credit Monitoring recovery management 05 of NPA

APAR Review Committee 01

Corporate Social Responsibility (CSR) 01

Review Committee in respect of Borrowers identified as Willful Defaulters -

HR Committee -

(b) Changes in the Board of Directors

During the year 2014-15, the following changes have taken place.

1. Shri Kishore Sansi has assumed charge as

Managing Director & CEO of our Bank on 01.01.2015 consequent upon demission of office by earlier Chairman & Managing Director Shri

V. Kannan on his attaining superannuation on 31.12.2014.

2. Shri Sanjay Kumar, Govt. Nominee Director joined the Board of our Bank on 12.09.2014 consequent upon retirement of Shri V. K. Chopra, Govt. Nominee Director on attaining superannuation on 31.07.2014.

3. Shri Prakash Chandra Nalwaya, Non Official Director ceased to be the Director on completion of his three year term on 19.05.2014.

4. Shri Ashok Gupta Non Official Director ceased to be the Director on completion of his three year term on 10.11.2014.

5. Shri H. Harish Ballal, Officer-employee Director ceased to be the Director on completion of his three year term on 24.01.2015.

The Bank''s Board as on date consists of the following D i recto rs:-

1. Shri Kishore Sansi, Managing Director & CEO

2. Shri K R. Shenoy, Executive Director

3. Shri B. S. Rama Rao, Executive Director

4. Shri Sanjay Kumar, Govt. Nominee Director

5. Smt. Suma Varma, RBI Nominee Director

6. Shri P. Vaidyanathan, Shareholder Director

7. Smt. Bharati Rao, Shareholder Director

8. Shri Y. Muralikrishna, Workmen Director

Acknowledgment

The Board wishes to place on record its sincere appreciation to the customers for their patronage, to the shareholders for their support, to the Government authorities and the Reserve Bank of India for their valuable guidance and support, to the Directors, who completed their tenure during the financial year under review and to all the staff members for their full support in the pursuit of organisational growth and excellence.

For and on behalf of the Board of Directors

Head Office: Bengaluru Kishore Sansi Dated the 12.05.2015 Managing Director & CEO


Mar 31, 2014

DIRECTORS'' REPORT 2013-2014

The Board of Directors have pleasure in presenting the 34th Annual Report of the Bank along with the Audited Balance Sheet as on March 31, 2014 and the Profit and Loss Account for the year ended March 31, 2014.

PERFORMANCE HIGHLIGHTS OF THE BANK DURING THE YEAR 2013-14

Capital, Reserves & Net worth

The Authorized Capital of the Bank at present is Rs.3000 Crore divided into 300 Crore shares of Rs.10 each. At present, Government of India holds 74.06% Equity Share Capital of the Bank. The total paid up (Equity Share) capital of the Bank is Rs.859.12 crore.

During 2013-14, Bank added Rs.1165.69 crore in to Reserves & surplus and the total Reserves and surplus is Rs.5028.80 crore. The Net worth of the Bank increased from Rs.4081.49 crore to Rs.5638.93 crore this year.

Working Results

Net profit for the year 2013-14 is Rs.416 crore as compared toRs.586 crore for 2012-13. On the deposit front, average cost of deposits decreased from 8.07% in 2012-13 to 7.98 % in 2013-14. Yield on advances for 2013-14 is 11.26% as against 11.54% for the previous year.

The trends in financial results of the Bank are highlighted in the tables below:

(Rs. in crore)

Sl. Item 2012-13 2013-14 Annual No. increase (%)

1. Interest Income 9052 10707 18.27

2. Interest Expenditure 7174 8623 20.20 3. Net Interest Income (1-2) 1878 2084 10.97

4. Non-Interest Income 607 710 16.97

i. Profit on sale of investments 113 190 68.14

ii. Other non-interest income 494 520 5.26

5. Net Total Income (3 4) 2485 2794 12.43 6. Operating Expense 1363 1690 23.99

i. Staff Expenses 849 1040 22.50

ii. Other Operating Expenses 514 650 26.46

7. Operating Profit 1122 1104 -1.60

8. Operating Profit (excl. Treasury profit) 1009 914 -9.42

9. Provisions and Contingencies 536 688 28.36

10. Net Profit 586 416 -28.89 Important Profitability Ratios

Sl. Item 2012-13 2013-14 No. (%) (%)

1 Yield on funds 9.27 9.08

2 Cost of funds 7.35 7.31

3 Interest spread (1-2) 1.92 1.77 4 Yield on advances 11.54 11.26

5 Cost of deposits 8.07 7.98

6 Yield on investments (including RDF)

- excluding Trading Profit 7.10 7.22

- including Trading Profit 7.47 7.75

7 Other operating expenses to Average working funds 0.53 0.55

8 Cost-Income Ratio 54.85 60.49

9 Establishment cost to average working funds 0.87 0.88

Dividend

Taking into consideration the overall profitability, the Board of Directors has recommended a final dividend of Rs.1.00 per share (10%), [in addition to interim dividend ofRs.1.00 per share (10%) declared during January 2014] for the year 2013-14. The total amount of equity dividend including dividend tax for 2013-14 is Rs.165.38 crore.

Deposit Mobilization

Total deposits of the Bank increased from Rs.97017 crore to Rs.124296 crore, recording an annual growth rate of 28.12%. CASA deposits recorded a 12.41% growth, accounting for 18.44% in aggregate deposits. CASA deposit growth was driven by 12% growth in SB deposits, to reach Rs. 16978 crore during the year. The average aggregate deposits stood at Rs. 104437 crore during 2013-14, compared toRs.84804.14 crore during 2012-13.

Employees Productivity

Business per employee as of March 2014 is Rs.16.74 crore against Rs.13.87 crore for the financial year ending March 2013. Profit per employee of the Bank as of March 2014 is Rs.0.03 crore against Rs.0.05 crore for the financial year ending March 2013.

Branch Network

With the opening of 153 branches during the year 2013-14, the network of branches reached the level of 1512 from 1359 during the previous fiscal. There are 46 Extension Counters and 2 Satellite Offices at the end of the year 2013-14.

Retail Credit

Retail Lending is viewed as a viable business proposition and continue to be the thrust area for credit expansion in view of its inherent advantages such as risk spread, better yield and large volume credit buildup.

The Bank has disbursed Rs.8920 crores under Retail credit during the year & the amount outstanding as at March 2014 stood at Rs.15617 crores, recording an Y-o-Y of 16.14%. The Retail Credit Portfolio accounted for 18.90% of the Bank''s Gross Credit.

The Balance outstanding under Housing loan, Education loan, Vehicle loan & Jewel Loan schemes, as on 31st March 2014, are Rs.5392 crore, Rs. 760 crores, Rs.2212 Crores and Rs.3265 crore respectively.

During the year, Bank launched special campaigns like ''Summer Bonanza'' ''Grand Festival Bonanza'' etc. offering attractive benefits to customers.

Bank is continuously striving to make the retail lending products more competitive in the market by revamping the existing products. Bank also came out with new tailor made product ''Vijaya Kisan Home Loan'' catering to the housing need of farming community.

Bank has also launched Vijaya Mangala, a personal loan product exclusively for Women and MSE Vijay to cater the needs of Micro and Small Enterprises.

Credit Expansion

The Gross Credit of the Bank registered a growth of 16.89% from Rs. 70513.53 crore on 31.03.2013 to Rs.82424.75 crore on 31.03.2014. Considering the economic down trend the Bank had been selective in the approval of big ticket credit proposal.

The Bank has put in place an efficient due diligence mechanism for screening of credit proposals and following the guidelines in this regard from Department of Financial Services and Reserve Bank of India. In terms of extant guidelines from Ministry of Finance, the Bank has adopted committee approach for credit approvals at Regional Office and Head Office levels. The committees meet as frequently as possible to reduce turnaround time for credit decisions. The Bank has continued with its strategy to recruit professionals from CA/ICWA/CS/ MBA for ensuring good standard credit processing .

Bank''s Credit Department is accredited with ISO/IEC 27001:2005 certification for information security management system by British Standard Institute (BSI).

Large & Mid Corporate

The Large Corporate segment constituted 43.94 % share in total domestic advances as on 31.03.2014. In order to have more focused attention and to reduce turnaround time, 8 specialised Corporate Banking Branches have been functioning at different geographically locations. Apart from Corp. Banking Branches, 3 Industrial finance branches are catering all corporate needs of the customers including financing for infra/non infra projects. In addition, the Bank has SME branches spread across the country, catering to the needs of mid-corporate and SME clients including their cash management, forex, treasury products, trade finance, deposits, retail banking etc.

Bank''s Corporate/SME/IFB Banking Division offers an array of loan products and services, such as Term Loans, Demand Loans, Corporate Loan, Short-Term Loans, Working Capital Facilities(FB NFB), Trade Finance Products, Bridge Loans, Syndicated Loans, Infrastructure Loans, Foreign Currency Loans, Loan Against Future Rent Receivables and many more to its corporate clients depending upon their needs. Over the years, Bank has made significant progress in establishing healthy business relations with several multinationals, domestic business houses and prime public sector companies.

Infrastructure Finance

During the year, the Bank has sanctioned fund based limits of Rs.8096 crore and Non Fund Based limits of Rs.254 crore under infrastructure category covering power, telecommunications, ports, roads etc. Our exposure to infrastructure sector is 25.85 % of gross advances and is well within the prescribed sectoral exposure cap.

Project Finance and Syndication Group

The Bank has commenced Project Finance and Syndication Cell at its Head Office, Bengaluru. The functions of the Cell include preparation of Project Information Memorandum, arranging for Techno Economic Viability Study of the projects and Syndication for credit requirements of the entrepreneurs. The Syndication Cell is well equipped with good manpower including senior executives and qualified professionals.

TREASURY AND INTERNATIONAL OPERATIONS

Investment and Fund Management

Total Investment portfolio of the Bank increased from Rs.31,504.02 crore (SLR Investment: Rs.26,064.87 crore & Non-SLR Investment: Rs.5,439.15 crore) as on March 31, 2013 to Rs.42833.78 crore (SLR investment: Rs. 33319.60 crore & Non-SLR Investment: Rs.9514.18 crore) as on March 31, 2014.

The 10 year benchmark yield closed at 8.81% as on March 31, 2014 against 7.96% as on March 31, 2013.

The average yield on investment (Including profit on sale of Investments and RIDF) during the year worked out to 7.75% as against 7.47% in FY 2012-13.

The Bank also complied with CRR and SLR requirements as stipulated by RBI consistently during the year.

International Banking

Bank''s export credit as at 31.03.2014 registered a Y-o-Y growth of 12.25% and stood at Rs.1269.38 crore. Out of the above, quantum of export credit extended by the Bank in foreign currency was USD 31.24 million. As at March 2014, foreign exchange business turnover of the Bank stood at Rs.21065 crore, recording an annualized growth of 42.91% over the previous financial year.

Bank has operationalised Centralized Forex Processing Cell (CFPC) at Head Office to process all the forex related transactions of our designated branches. Bank has also successfully implemented on-line submission project of XOS to RBI.

Bank''s total NRI deposits as at 31.03.2014 stood at Rs.2398.57 crore, as against Rs.1839.12 crore as at the end of previous financial year, thereby recording a growth of 30.42%. During the financial year, the Bank has extended ''Speed/Flash Remittance'' facility to UAE Exchange Centre LLC, Al Ansari Exchange UAE, Wall Street Exchange, UAE and Al Bader Exchange, UAE to enable the NRIs from Gulf Countries to electronically remit funds to their account with our branches anywhere in India. In addition to the above, the Bank also has Rupee Drawing Arrangement (RDA) with Oman United Company LLC, Oman to facilitate rupee remittances to the accounts in India. The Bank has set up a NRI Customer Cell at Head Office, Bengaluru exclusively for responding to the queries of our NRI customers. The Bank has also launched Vijaya NRI Digest, a fortnightly e-newsletter covering area of interest to NRIs.

Export & Import Credit

The Bank is active in meeting the importers and exporter clients'' financial requirements both in domestic and in foreign currency. Bank''s 47 branches across the country are designated to handle foreign exchange business.

ASSET QUALITY

The Bank continued its focus on maintaining quality assets along with thrust on preventing fresh slippages. It initiated and continued to emphasize various measures in this direction, including the following:

Accounts showing signs of stress/likely default in dues are identified and treated as Special Mention accounts and are closely monitored. Wherever feasible, such assets are restructured, with additional need-based credit limits considered in deserving cases, to prevent fresh slippages. A Sick Unit Rehabilitation Cell is formed to exclusively concentrate on the nursing programme of all sick viable MSME units both at Head Office and Regional Offices.

Special Recovery Cells are formed at RO''s for systematic follow up of NPA accounts. Centres wherever DRT''s are functioning, Nodal Officers are designated, who keeps regular liaison with the presiding officer and the Bank''s advocate for speedy disposal of the cases.

The services of retired officials of our Bank/Public Sector banks/Public Sector Enterprise/Government Departments are also engaged for recovery of the dues of the bank as per the latest policy of the Bank.

In case of willful defaulters, stringent recovery measures, including legal actions like Securitization and submitting the names to RBI are done.

Services of Lok Adalats / DRT Adalats are resorted for speedy recoveries of impaired assets.

To facilitate speedy recovery, ''Vijaya Adalats'' under the Recovery Policy of the Bank are regularly conducted at various centers by involving a cluster of branches and accounts are settled on the spot. During the year, Bank could settle Rs.90.92 crore in 6058 accounts by way of settlements till 31.03.2014.

A special One Time Settlement Scheme for small borrowers with liabilities up to Rs.5 lacs with liberalized terms was introduced during 2013-14 which was in force till 31.03.2014.

A special One Time Settlement Scheme for chronic tractor loan NPAs was introduced during the year and the same was in force upto 31.03.2014.

The gross Non-Performing Assets of the Bank as on March 2014 stood at 2.41% of total advances, while net NPA ratio was 1.55% of net advances. During the year 2013-14, Bank could affect total cash recovery of Rs. 704.13 crore (including interest) and upgraded NPAs amounting to Rs. 989.15 crore. Further, the Bank also made provision ofRs.567.21 crore for the unexpected defaults, apart from having a floating provision of Rs. 142.71 crore as on March 31, 2014. The Provision Coverage Ratio (including PWO) as at March 2014 worked out to 64.05%.

RISK MANAGEMENT

Credit Risk:

Lending Policy as well as Credit Risk Management Policy of the Bank are being revised from time to time, to include aspects such as risk appetite, risk based pricing, risk diversification/mitigation strategy, prudential limit, substantial exposure ceiling, preferred sector growth strategies, credit approval process, documentation and security standards, security valuation etc., in tune with the corporate goal and plan of the Bank.

Stress Test on Credit Risk by subjecting the credit portfolio to stress like downgrade in the rating, higher provisioning requirement, slippage in asset status, etc is carried out on annual basis, in terms of the Stress Test Policy of the Bank.

The Bank has put in place a comprehensive risk rating/ scoring system that serves as a single point indicator of diverse risk factors on the counterparty and for taking credit decision in a consistent manner. A separate risk scoring models for Housing and other Retail sectors has also been evolved and put in place so as to ensure higher coverage of risk rating exercise. Migration analysis is also carried out on half yearly basis in respect of exposures of Rs.1.00 crore and above. From Sept 09, 2013, Bank has introduced a Credit Risk rating software which is Basel II compliant procured from CRISIL for conducting risk rating of all retail and non retail loans. This software enables the Bank to ensure that all types of exposures are covered under risk rating before sanctioning of any loan so as to maintain the credit quality and also to move towards Basel II advanced approaches compliance.

Asset Liability Management (ALM) and Market Risk:

ALM and Market Risk of the Bank is managed by the Asset Liability Management Committee (ALCO) and Market Risk Management Committee (MRMC) respectively. Appropriate tolerance limits have been stipulated for mismatches in different time buckets, both for managing liquidity and interest rate risks and these are being monitored at fortnightly intervals and also appraised to the Board.

The market risk exposure is measured by tools like VaR (Value at Risk), AGL (Aggregate Gap Limit), and Duration Gap Analysis. Exposure limits for all countries have been put in place to manage and monitor the country risk. Mid-office reports on treasury operations are placed before the General Manager, Risk Management Department on a daily basis and before MRMC on a monthly basis, covering information about exceptions / reviews and compliance.

Interest Rate Risk on entire portfolio is identified and measured through Earnings at Risk (EAR). Sensitivity analysis is also conducted and reviewed by the top management. Contingency Funding Plans, Prudential Ratios/Limits have been set and actual position is monitored as part of Liquidity Risk Management. Stress Test on Interest Rate Risk, Liquidity Risk, Forex, etc on different scenarios are carried out on quarterly basis and appraised to ALCO. To monitor short term liquidity, the Bank is preparing the ALM statement of Structural Liquidity on daily basis.

The Duration Gap Analysis is implemented for assessing the possible impact on market value of equity (net worth) using 200 basis points shock on interest rate curve.

The Bank has applied to RBI for seeking permission to implement Internal Model Approach (Advanced Approach) for Market Risk.

The Funds Transfer Pricing, a new technology on transfer pricing mechanism, has been implemented for assessment of branch profitability in a scientific manner.

Operational Risk:

With a view to mitigate Operational Risk, several studies have been conducted for fraud cases in order to identify systemic deficiencies from Risk Management angle. These include analysis of major frauds reported under consortium finance, various VKC, Auto and Housing loan accounts. Further, to minimize operational risk, various suggestions have been implemented for improvement in existing systems and procedure. For assessment of Operational Risk, the Bank has been conducting Risk and Control Self-Assessment (RCSA) for critical business processes and identifying Key Risk Indicators (KRI''s) for tracking problem areas in key operations in order to avoid potential future operational losses. The Risk Control Self-Assessment (RCSA) and Key Risk Indicators (KRI) are being reviewed annually. Further, RCSA for critical areas such as Commercial Banking, Treasury Operations, Payment and Settlements, Financial Inclusion were conducted during the period 2013-14.

The Bank has applied to RBI for seeking approval for implementation of The Standardized Approach (TSA).

Basel-II & Basel III Compliance:

As the Bank requires corporate clients'' risk rating status awarded by RBI approved rating agencies, the Bank has entered into MOU with all the six rating agencies viz CRISIL, ICRA, CARE, Brickwork, SMERA and Fitch so that borrowers can avail the rating services at a competitive fee and Bank also benefits on lower capital charge depending on the rating status. The Bank has formulated its ICAAP policy and the same is submitted to RBI on half yearly basis.

In compliance to the RBI guidelines and adopting Standardised Approach for Credit Risk, Standardised Duration Gap for Market Risk and Basic Indicator Approach for Operational Risk, Bank has complied with Basel II norms and the overall Capital Adequacy Ratio as at 31st March ''14 works out to 10.97%, which is above the minimum stipulated norm of 9%. Bank has also complied with Basel III norms and the overall Capital Adequacy Ratio as at 31st March ''14 works out to 10.56%, which is above the minimum stipulated norm of 9%.

Integrated Risk Management System (IRMS) Project:

In order to facilitate smooth and effective compliance to the Basel-II norms, the Bank has taken up implementation of Integrated Risk Management System (IRMS).

The unique IRMS Project consists of six solutions, viz. Credit Risk Management (CRM), Market Risk Management (MRM), Operational Risk Management (ORM), Credit Risk Rating Solution (CRR) (Retail & Non- Retail), Asset Liability Management (ALM) and Funds Transfer Pricing (FTP) Solution.

ISO - 27001- Certification for Risk Management Department

The Risk Management Department of the Bank has been conferred with prestigious ISO/IEC 27001 Certification. The compliance with the ISO standards was certified by the British Standards Institution (BSI). This certification is the part of the Bank''s commitment to adopt best practices in security management for system, technology and processes serving Risk Management Systems. Bank''s Risk Management Department being ISO/IEC -27001 certified is committed to systematically evaluate information security risks, taking into account the impact of threats and vulnerabilities from Information Security angle.

Capital Adequacy

The capital adequacy ratio stood at 10.97% under Basel II and 10.56% under Basel III as on 31.03.2014 vis-à- vis the Reserve Bank of India norm of 9%. As on 31.03.2014, the Tier I capital of the Bank is Rs. 5638.93 crore under Basel II and Rs.5517.65 crore under Basel III. The Tier II capital stood at Rs.1816.07 crore under Basel II and Rs.1653.29 crore under Basel III.

NATIONAL PRIORITY

Priority Sector Lending

Total Priority Sector advances of the Bank stood at Rs.25855 crore as at the end of March 2014. Priority Sector Credit of the Bank constitutes 35.55% of the Adjusted Net Bank Credit.

Agricultural Finance

Direct Agricultural advances of the Bank as at March 2014 stood at Rs. 6392 crore. Total Agricultural advances stood at Rs.9665 Crore which formed 13.29 % of the Adjusted Net Bank Credit.

During the year, Bank has rolled out a new Pledge loan Scheme for farmers against Warehouse Receipt issued by Ware Houses registered with Warehouse Development & Regulatory Authority (WDRA) and fine tuned Vijaya Planters Card Scheme for coffee growers. Bank has put in place web based application for filing and tracking of agricultural loans through which the customers can apply online for any type of Agricultural credit by logging on to our website.

Disbursements to Agriculture:

Under Special Agricultural Credit Plan, Bank has disbursed Rs.6695 crore during the year 2013-14, thereby achieving the target of Rs.6634 crore.

Kisan Credit Card Scheme:

In terms of the guidelines of RBI/GOI, the Bank has revised Vijaya Kisan Card (VKC) scheme. The revised VKC scheme has provision for both production credit (Short term crop loans) and Investment Credit (Term loans). The validity of the card has been extended to 5 years and the beneficiaries are issued with ATM enabled Kisan cards.

Under Vijaya Kisan Card Scheme (VKC), during 2013- 14, the Bank has issued 67192 Kisan Cards amounting to Rs.765 crore. The Outstanding level of VKCs stood at Rs.1593 crore through 127477 accounts as at 31.03.2014. The Bank''s Kisan Cards are now ATM enabled under RUPAY platform and out of 88598 operative VKC A/cs, 81716 farmers have been so far issued with ATM enabled Kisan cards.

Vijaya Krishi Vikas Kendra (VKVK):

Vijaya Krishi Vikas Kendras (VKVK), headed by Chief Managers have been set up during the FY 2013-14 in Sangli (Pune Region) and Bagalkot (Hubli Region) to focus exclusively on high value/Hi-tech Agricultural projects through a cluster of branches in those centres.

Financing Micro, Small & Medium Enterprises

(MSME):

The advances to Micro and Small Enterprises increased to Rs.10691 crore as at March 2014 from Rs.8716 crore as at March 2013, signifying Y-o-Y growth of 22.66 %.

The advances to Micro, Small and Medium Enterprises increased to Rs. 13115 crore as at March 2014 from Rs.10594 crore as at March 2013, signifying Y-o-Y growth of 23.80%.

Bank has come out with new tailor made product ''MSE- Vijay'' exclusively for MSE customers under CGTMSE Scheme and ''V-Cashew'' to cater to Cashew industry.

Online registration of MSME loan applications and tracking system is in place for speedy disposal of proposals under MSME. Further, MSME loan borrowers are also getting acknowledgement through SMS alerts as soon as they apply online.

Advances to Weaker Sections:

As at March 2014, the outstanding weaker section advances of the Bank stood at Rs.7214 crore, which constitutes 9.92% of the ANBC against the norm of 10%. The Weaker Section advances grew by Rs.1633 crore, registering a growth of 29.26 % over March 2013.

Self Help Groups (SHGs)/Joint Liability Group (JLGs)/ Micro Finance Institutions (MFIs):

Bank has accorded top priority to lending to SHGs/JLGs/ MFIs. While the Bank has disbursed Rs.368 crore to SHGs/JLGs/MFIS, the outstanding level of advances to this segment stood at Rs.719 crore as at 31.03.2014.

Bank is actively participating in the National Rural Livelihood Mission (NRLM) Scheme launched by Govt. of India by replacing the existing SGSY Scheme.

Credit to Women Beneficiaries:

Advances to Women beneficiaries stood at Rs.5072 crore as at March 2014 as against Rs.4526 crore as at March 2013, registering a growth of 12.06%. Against the stipulated benchmark level of 5% of Adjusted Net Bank Credit (ANBC), the Bank''s achievement stood at 6.97%.

Lead Bank Scheme:

Our Bank is having Lead Bank responsibility in three districts i.e. in Mandya, Dharwad and Haveri districts of Karnataka State. The Lead District Managers of all the three districts have been coordinating with all the bank branches in the concerned Districts to ensure achievement of targets under Annual Credit Plan, Govt sponsored schemes, Financial Inclusion, Direct Benefit Transfer Scheme etc. In these three Districts, total credit share of our Bank through Annual Credit Plan is Rs.613 crore against the target of Rs.623 crore as at March 2014.

Lending under Government Sponsored Schemes:

Implementation of Government sponsored schemes receives the utmost attention of the Bank. The Bank''s lending under various Government sponsored schemes is furnished below:

(Rs. in crore)

Sl. Schemes No of Loan amount outstanding No. beneficiaries as at March 2014

1. PMEGP 7093 89.95

2. SGSY 1540 9.08

3. SJSRY 4058 24.12

4. NRLM 4247 89.60

Advances to SC / STs:

Total advances to SC / STs stood at Rs.1125 crore as at March 2014, against Rs.1015 crore as at March 2013, with a growth of 10.84%. The interest rates on all loans up to Rs.5 lakhs coming under Priority Sector & Retail loans extended to SC/STs is reduced by 1%.

Credit to Minority Communities:

Advances to Minority Communities stood at Rs.3143 crore as at March 2014, constituting 12.16% of total priority sector advances.

VIBSETIs (Vijaya Bank Self-Employment Training Institutes):

The Bank has established Vijaya Bank Self Employment Training Institutes [VIBSETIs] in Mandya and Haveri of Karnataka state and in Indore of Madhya Pradesh. The Institutes have been conducting various vocational training/skill upgradation/awareness programmes/ Entrepreneur Development Programmes etc. During the year 2013-14, VIBSETIs have conducted 125 programmes and trained 3416 beneficiaries. Since inception, totally 1145 programmes have been conducted, training 41469 beneficiaries with an overall settlement rate of 73%.

VIBSETIs at Mandya & Haveri have been graded "AA" and VIBSETI Indore has been graded "A" for the year 2012-13 by Ministry of Rural Development (MoRD). VIBSETI, Mandya has emerged as one of the top performing Institutes in the country based on overall performance and has been awarded Certificate of Excellence by MoRD.

Vijaya Rural Development Foundation (VRDF):

With a view to focus the attention of rural masses on the need to modernize agricultural practices, for up gradation of skills and knowledge in various ventures and for achieving all-round socio-economic development, Vijaya Rural Development Foundation (VRDF) was promoted by our Bank in the year 1990 at Mangalore. VRDF is conducting various activities like training /awareness programmes, covering a wide range of subjects, through the Village Development Councils (VDC). At present 32 such VDCs are functioning under VRDF. During the year, VRDF has conducted 157 programmes benefiting 7996 persons. Free health camps have also been organized for the benefit of rural poor. The Foundation has also granted scholarships to poor meritorious students hailing from villages and studying in government schools. The Foundation has expanded its activities to other districts like Haveri, Dharwad and Mandya, where the Bank has Lead Bank Responsibility.

Visit of Parliamentary Committee:

1. Parliamentary committee on Govt. assurances, Rajya Sabha visited on 09.07.2013 and discussed about Agriculture Debt Waiver & Debt Relief Scheme 2008 & liberal lending by Banks.

2. Parliamentary committee on welfare of SC/STs visited the Bank on 28.10.2013 and discussed about Organisational set-up and reservation in services & credit facilities extended for Scheduled Castes/Tribes in our Bank.

3. The Department related Parliamentary Committee on Industry visited on 11.01.2014 and discussed the various issues pertaining to credit flow to MSME of our Bank.

Education Loan

The Bank has provided utmost importance to education loan as it views this as an investment in human capital. During the year, the portfolio grew by Rs.89 crore in absolute terms from a level of Rs.671 crore as on 31.03.2013 to reach a level of Rs.760 crore as on 31.03.2014.

The Bank has taken several initiatives during the year to improve education loan portfolio. MoU was entered into with several reputed educational institutions/ colleges/universities for extending education loans. Bank participated in several expos and conducted camps during admission season to bring out the awareness amongst student community about the availability of education loan facility.

Financial Inclusion:

Our Bank has been allotted with 378 villages with above 2000 population on a pan India basis. We have provided banking facilities to these villages before the target date of 31.03.2012 through 89 Branches and 289 Business correspondent Agents ( BCAs).

During the year 2013-14, we have covered 2240 villages of below 2000 population through 32 branches, 457 Business Correspondent Agents(BCAs)/ Village Level Entrepreneurs(VLEs) and 20 ATMs.

Bank has engaged totally 789 BCAs to cover both the above and below 2000 population villages allotted to the bank.

Bank has floated Jnana Jyothi Literacy & Credit Counseling Trust (JJFLCCT), jointly with Syndicate Bank to set up and manage Financial Literacy Centers (FLCs) at District and Taluk level. During the year 2013-14, the Bank has opened 5 Taluk level FLCs, taking the total number of FLCs opened up to March-2014 to 11.

Financial Inclusion Resource Centers (FIRCs) have been opened in Bank''s Lead Districts.

Five Mobile Vans are provided for taking up Financial Literacy Campaigns in FI villages and are placed in Mandya, Dharwad, Haveri, Udupi and Mangalore and our rural branches are also conducting Financial Literacy camps in the allotted villages. Financial Literacy is spread through pamphlets, TV scrolls and street plays.

We have conducted "Financial Inclusion Rural

Out-reach" programme at Adichunchanagiri in Nagamangala Taluk of Mandya District, (our Lead District) on 24.09.2013. Dr. K.C. Charabarty, Deputy Governor, Reserve Bank of India, Smt. Uma Shankar, Regional Director, Reserve Bank of India, Shri H. S. Upendra Kamath, the then Chairman & Managing Director, Vijaya Bank & Shri K. R. Shenoy, Executive Director, participated in the programme. The programme marked the launch of Micro Insurance and Micro Recurring Deposit Schemes for the Financial Inclusion Villages. 10 girl children were adopted on this occasion and loan sanction letters were handed over to the beneficiaries. More than 2000 rural customers of our Bank participated in the programme. Eleven Ultra Small branches (USBs) were upgraded in to Low cost brick and Mortar branches on this occasion in Mandya District.

Bank has opened 10.17 lakhs Basic Savings Bank deposit accounts having a balance of Rs.97.63 crore and issued a total 3.86 lakh smart cards under Financial Inclusion. We have mobilised 5353 micro RD accounts and enrolled 3608 beneficiaries under micro insurance.

In the Pilot Districts under Electronic Benefit Transfer (EBT) in Karnataka, Bank has issued smart cards to more than 3.04 lakh beneficiaries of Social Security Pension (SSP) and Mahatma Gandhi National Rural Employment Generation Programme (MGNREGP). In Mandya District (Karnataka), Bank is disbursing Social Security Pensions to more than one lakh beneficiaries through smart cards under "one district one Bank Model" amounting to Rs.5.20 crore per month.

Bank is actively participating in the Direct Benefit Transfer (DBT) programme of the Government of India by opening the accounts of the beneficiaries, seeding their Aadhaar numbers and mapping the same to NPCI.

Our Bank is one of the Founder Trustees of the Karnataka Farmers'' Resource Centre (KFRC) set up for imparting training to farmers and agricultural laborers at Bagalkot.

Roadmap for 2014-15

We will be covering 293 villages of below 2000 population as per the Financial Inclusion Plan, through 52 BCAs/ VLEs during the year 2014-15. Wth this, Bank will be covering in all 2911 villages of both above and below 2000 population.

Bank will be opening 8 more taluk level FLCs in Karnataka during the year 2014-15 taking up the total number of FLCs to 19.

INFORMATION & TECHNOLOGY

Core Banking Solution and its Progress

The Bank achieved 100% CBS which facilitates services like anywhere banking, Internet Banking, online transactions etc. to its customers. With 100% CBS, the Bank has moved closer to offer real time banking facilities to its customers. Passbook Kiosk has been implemented in 21 locations. Cash Deposit Kiosk has been implemented in 231 locations. Aadhaar Enabled Payment System was implemented for smooth implementation of GOIs Direct Cash Transfer Project. To minimize the frauds, bio-metric access for CBS users has been implemented at all locations.

The Bank has implemented Integrated Human Resources Management System, Integrated Treasury Management system and Integrated Risk Management system and are integrated with the Core Banking System. ITMS project has met all the objectives with the setting up a DR setup at Mumbai. HRMS has also met most of the objectives with the setting up a DR set up at Mumbai. IRMS is expected to be fully implemented by the end of this financial year.

ATMs

654 ATMs were operationalised during the year 2013-14, taking the number of ATMs to 1528 as at the end of March 2014. Bank''s customers can also access over 1,50,000 ATMs connected under National financial Switch (NFS) across the country. We are one of the few Banks who have installed ATMs in equal to the number of branches as per the directions of Ministry of Finance, Government of India.

Internal Control

The Bank has well documented policies like IT & IS Security, Internet Banking Policy, IT Procurement Policy, Internet usage Policy, e-mail policy, Business Continuity

Policy, Disaster Recovery Policy, Outsourcing Policy etc. covering wide range of functions at the field and administrative levels. Adequate controls are also built in to mitigate the risks associated with each of the activities. IT policy and IS policy was revised during 2013-14. Separate policies have been brought out for Incident management, Vulnerability and penetration test as part of IS Security policy.

Networking

Bank has brought all its branches, extension counters and offices under the corporate WAN and achieved 100% networking of the branches. It has also used the latest technologies like MPLS, Radio frequency, CDMA etc. for establishing connectivity.

RTGS & NEFT Services:

The centralized payment systems, viz. Real Time Gross Settlement System (RTGS) and National Electronic Funds transfer (NEFT), currently provide for only direct membership. It has been decided by the RBI to expand the sub-membership route to enable all licensed banks to participate in NEFT and RTGS systems. The sub- member/s would participate in the centralized payment systems through their sponsor bank which is a direct member of the centralised payment system. Bank has entered into an agreement with ShimshaSahakara Bank Niyamitha, Maddur and LokapavaniMahilaSahakari Bank, Mandya for using our RTGS/NEFT services as sub-members.

Having brought all branches under Core Banking Solution, RTGS and NEFT services are available to the Bank''s customers from all its branches. Since STP has been enabled in RTGS and NEFT, the customers can enjoy the benefit of immediate inter-bank and intra bank fund transfer facility.

Missed Call Services (Free Buzz):

Bank is providing missed call services to the customers & enable them to know the account balance and mini statement. The ease of giving missed calls with zero charges provides a huge advantage to the customers.

V-Fee Hive :

Our in-house software development team has developed a unique application for collection of fees for Educational Institutions, collection of monthly maintenance fee by Apartments and collection of fees by Clubs, etc. It is equipped with unique features like integration of other payment channels like debit card, credit card and internet banking.

V-epassbook :

Our in-house software development team has developed mobile application for accessing account details / to get transaction details. The application is loaded with additional customer friendly features like facility to add notes to each transaction, facility to maintain various personal account heads and to add pass book transactions to these accounts on a single click, facility to add notes to each transaction, etc. A Page with latest offerings and information like interest rate of the bank with links to reach the website of the Bank and facility to refer us to a friend is also available in this application. 33902 Customers have registered for availing this facility as on 31.03.2014.

Cheque Truncation system:

As directed by the Reserve Bank of India, the Bank has implemented cheque truncation system in Southern and Western Grid covering all MICR centres and in Northern grid covering MICR centres of Delhi, Chandigarh, Punjab and Rajasthan states during 2013-14.

Security Operation Center

Setting up of Security Operation Center with Security Information and Event Management Solution (SIEM) & Correlation tool, which will help in analyzing all events and detect attack patterns, if any is under progress. Our Bank has been identified as Lead Bank for implementation of SOC for PSBs as per the new initiative of GOI under common RFP.

INTERNAL INSPECTION

The Bank has put in place a well-defined Internal Audit Policy. The Audit Committee of the Board oversees the performance of audit functions on a regular basis, providing guidance and directions for improvement in the audit system and internal controls in the Bank.

During the financial year, the Bank has conducted Risk Based Internal Audit (RBIA) of 937 branches out of 1115 branches programmed. Upon assessment of Risk rating, 53.95 % of these branches have secured "low Risk".

In addition, inspection of 12 service branches, 15 RACPCs, 6 Regional Offices and 10 Head Office.

Departments was conducted during the year. Besides, 1529 branches were programmed for IS Audit and audit of all these programmed branches were completed except 346 branches before 31.03.2014.

Bank has covered 83.62% of its business under Concurrent Audit in 419 branches/offices as against RBI stipulation to cover at least 50% of business. Bank is making use of Information Technology in its audit system including Risk Based Internal Audit (RBIA) for generating various value added reports.

Know Your Customer (KYC), Anti Money Laundering (AML) and Combating of Financial Terrorism (CFT):

Bank has in place a policy on ''Know Your Customer'' Anti Money Laundering'' and ''Combating of Financing of Terrorism'' and is being overseen by the KYC Cell constituted at H.O. and at Regional Offices by a designated Nodal Officer. The Policy Guidelines were first issued in the year 2005 and are being updated from time to time.

Necessary instructions have been passed on to the field functionaries for the implementation of KYC Norms, AML guidelines and CFT procedures. Further guidelines on these are being passed on to them, as and when instructions are received from RBI, GOI and IBA. The field functionaries have been given the required technical support to carry out the policies.

It is ensured that the branches have implemented instructions of KYC Norms and other guidelines in true spirit. Branches are not opening any new account wherever it is found to be short of KYC compliance. A system support is provided to check the level of KYC compliance in any account before a cheque book is issued for the same.

Branches are instructed to monitor transactions of large value in the accounts consistence with the declared business. The transactions are being overseen at Head Office, by robust AM Lock software which throws alerts on given parameters for monitoring on Anti Money Laundering guidelines. The transactions are monitored and large value cash transactions are reported to FIU- IND in the monthly CTR. Apart from this, if any transaction is found to be suspicious, irrespective of the amount, is being reported to FIU-IND in the form of Suspicious Transaction Report (STR).Large Value transactions found in the accounts of Non-Profit Organisations is being reported through monthly NTR. Any Counterfeit Currency found at the branches or currency chests is also being reported to FIU-IND through monthly CCR.

A system support to check the customers'' names with that of those, in the UN list of terrorists is made available. This enables branches not to open accounts for terrorists and connected entities.

The ongoing implementation of KYC Norms and AML guidelines is being checked by the Internal Inspectors, Concurrent Auditors, Vigilance Inspectors and Executives on their branch visit. Every Regional Office has a Nodal Officer to overlook the implementation at branches and submit a monthly certificate confirming implementation of KYC norms. The Top Management is being informed of the compliance periodically.

Offsite Surveillance Cell

In compliance with the guidelines of Govt of India on Model Audit Policy of the Bank, communicated vide their letter No.F.No./7/112/2011-BOA dated 28/06/2012,Offsite Surveillance Cell was set up in the Bank. The Cell is monitoring the exceptional transactions at branches/ offices on an ongoing/daily basis and also reviewing Management Information System (MIS) on critical items on daily basis to sensitize the controlling offices as well as branches / departments for corrective action.

Vigilance

The Vigilance Department at Head Office is headed by Chief Vigilance Officer of the rank of General Manager who is on deputation from State Bank of India. The Vigilance Department oversees all vigilance works of the Bank as per the guidelines given by Central Vigilance Commission. In addition, Vigilance Department carries out surprise inspection of branches, concentrating on preventive vigilance. These are done by field Vigilance Officers stationed at Regional Offices. All efforts are made to plug the loopholes in the existing system to prevent recurrence of similar frauds and to strengthen the preventive vigilance.

Compliance

Board approved Compliance Policy is a requirement under the extant RBI guidelines and accordingly, the Bank has adopted Compliance Policy. The Compliance Department, H.O. ensures compliance with various communications received at Head Office from Govt of India, Reserve Bank of India, IBA and others by sending all such communications to the concerned operational Departments for necessary action. The Compliance Department is headed by the Chief Compliance Officer who is of the Rank of a General Manager.

Right to Information Act 2005

Government of India enacted Right to Information Act, 2005 which came into force on October 12, 2005. The Act provides right to every citizen to secure/access to information under the control of Public Authorities. It aims to promote openness, transparency and accountability in administration and in relation to matter connected therewith or incidental thereto.

Bank has designated all the Branch Managers as Assistant Public Information Officers, Second line Executives of all the 26 Regional Offices as Public Information Officers and Regional Head as Appellate Authorities under the Right to Information Act, 2005. At Head Office, a Deputy General Manager is designated as Public Information Officer and a General Manager of the Bank as Appellate Authority. Bank as a whole 27 offices are provided with Public Information officer and Appellate Authority respectively under Right to information Act 2005.

Information sought under the Act is being provided within the prescribed time frame. During 2013-14, Bank as a whole has received and disposed of 873 Applications and 109 Appeals under the RTI Act 2005.

Housekeeping

Reconciliation with regard to all inter-bank transactions have been drawn upto 31.03.2014. As against the Reserve Bank of India Benchmark of six months for reconciliation of outstanding inter branch entries, we have no outstanding pending for reconciliation.

Security Arrangement

The Bank has a well established security set up within the Bank''s organizational structure with clear cut delegation of authority and responsibility.

The Department has reviewed and strengthened security arrangements at all Currency Chests and Bank branches. The Regional Security Officers carryout branch inspection visits at regular intervals to assess the security arrangements in vogue and suggest means for strengthening these arrangements. The Regional Security Officers maintain close liaison with the law enforcing agencies. The security arrangements in the Bank have been geared up to meet the prevailing security scenario.

Bank security is being strengthened to be more effective, modern and an unobtrusive Security System. Access Control measures at all Banks Currency chests has been strengthened in terms of RBI guidelines. A proper system of regulating access to Currency chest strong rooms and proper records of entry into/exit from the Vault Room of the chest is being maintained. Biometric access control systems have been installed at all currency chest of the Bank to strengthen access control measures.

Essential and mandatory security arrangements in terms of RBI/IBA guidelines are provided to almost all branches. Security Alarm Systems are installed at all branches and currency chests. Strong room conforming to RBI specification is provided to 1400 branches.

The Bank has a total of 27 (twenty seven) currency chests. Police guards have been provided to 26 currency chests. The Bank has outsourced round the clock guarding of Bhubaneshwar Chest to a Private Security Agency sponsored by DGR. Efforts are continuing for deployment of Armed Police Guards at Bhubaneshwar Currency chest.

Training including firing practice for Armed Guards deployed at currency chests/branches is imparted on an annual basis. Security Committees formed at Regional Offices and at Head Office meet periodically to review security aspects.

CCTV Surveillance System has been installed at 832 branches, CCTV system is being installed in a phased manner, all branches will be provided CCTV surveillance system by 31.03.2015.

HUMAN RESOURCES DEVELOPMENT

Manpower & Staff Productivity:

The total staff strength of the Bank stood at 12822 in March 2014 as compared to 12601 in March 2013. Of the total staff, 5947 are Officers, 4357 Clerical Staff, 2045 Sub-staff, and 473 Part-time Employees in the subordinate cadre. The number of women employees as at the end of March 2014 stood at 3125 consisting of 1291 Officers and 1834 Award Staff constituting 24.37% of total employees in the Bank. As at the end of March 2014, there were 248 employees belonging to Handicapped Category and 658 employees belonging to Ex-Servicemen Category.

Recruitment:

During the year the Bank has appointed 604 Officers in different Grades/Scales and 444 Probationary Clerks. Bank has also appointed 45 armed guards.

Promotions:

The promotions effected during the year 2013-2014 are furnished hereunder:

SI. Promotion Promotion Total No. from to promoted

1 TEGS-VI TEGS-VII 5

2 SMGS-V TEGS-VI 11

3 SMGS-IV SMGS-V 30

4 MMGS-III SMGS-IV 60

5 MMGS-II MMGS-III 241

6 JMGS-I MMGS-II 215

7 Clerical JMGS-I 173

8 Sub staff Clerk Under process

"Bank introduced the policy on disclosure of APAR marks/ratings and the Appeal procedure from the review year -2012-13"

Training:

The training system in the Bank has been strengthened by providing additional competent manpower. The courses have been redesigned keeping in mind the essential inputs required for the employees to effectively handle the present & future assignments and to perform their duties and responsibilities effectively in the highly competitive tech-based customer-driven banking environment. The Bank is also imparting training to its employees through some reputed external training institutions in certain specialized areas like Credit, FOREX, Treasury Management, Risk Management, HR, Marketing, etc. During the financial year, the Bank has imparted training to 8135 employees constituting 63.44% of the total employees. Out of which, 7383 employees had undergone training in the Bank''s own establishments and 752 were trained at the reputed external training institutions including some overseas institutions.

SC/ST/OBC Employees:

Out of the total manpower of 12822 as at the end of March-2014, 2468 employees belong to SC category, 896 to ST category and 2300 to OBC category.

SC/ST CELL:

SC/ST cell has been functioning at all the 26 Regional Offices and a Senior Officer belonging to SC/ST is designated as Liaison Officer. At Head Office, the Cell is functioning under the control of Chief Liaison Officer.

The grievances of SC/ST employees are looked into and prompt remedial action is taken. The Chief Liaison Officer meets the SC/ST Employees Welfare Association and their representatives to hear their grievances at Head Office and refers the matters if any, to the concerned department at Head Office for redressal. Similarly Regional Heads/Liaison Officers are attending to their grievances at Regional Office Level.

Further Quarterly meeting of SC/ST representatives with the Chairman & Managing Director of the Bank are held regularly in terms of Govt. guidelines. In these meetings, the grievances, if any, pertaining to SC/ST employees are discussed with the representatives of the SC/ST Welfare Association and sorted out. All the representations received are entered in a Register showing therein the action taken on each representation. The Register is inspected by the Chief Liaison Officer periodically.

In the similar manner, OBC Cell is also functioning separately at all the 26 Regional Offices & at Head Office under the control of Chief Liaison Officer appointed separately for OBCs.

Bank is arranging pre-recruitment/ pre-promotion training for SCs/STs & OBC regularly.

Bank is complying with all the Policy Guidelines laid down by the Govt. of India pertaining to reservation of posts for SC/ST employees, OBC & Minority employees including Persons with Disability.

Staff Relation:

The pro-active and humanistic approach undertaken by the Bank has yielded positive results and the Bank is showing progressive growth consistently with the collective efforts of the management and employees of the Bank. The climate is positive and the same is echoed in the form of exponential growth of the Bank during the financial year ending March 2014. The industrial relations in the Bank have been cordial and harmonious. There was no agitation or unrest during the year by the employees relating to issues pertaining to our Bank. The consultative committee meetings and negotiating committee meetings were held with the representatives of the recognized unions at regular intervals to sort out the grievances of the employees and settle the disputes, if any, amicably and the said meetings are attended by the top executives of the Bank.

Sports Activities:

Vijaya Bank has been encouraging sports and contributed generously to sporting activities all over the country. The Bank has recruited outstanding sports personnel in various disciplines like, Cricket, Basketball and Kabaddi. During the year, many of the sports persons have participated in the events organized at the national/ international levels. International Cricketer Shri R. Vinay Kumar and national players like Shri C. M. Gautam (Cricket) and Shri Sukesh Hedge (Kabaddi) are presently in the Bank''s fold. Shri Vinay Kumar and Shri C. M. Gautam were named Captain and Vice-Captain respectively of the Karnataka State Cricket Team for the year 2013-14, which won the Ranji Trophy and Irani Trophy for 2013-14. The Bank has sports teams in Cricket, Basketball and Kabaddi. During the year 2013-14, the Bank''s sports teams have performed well and brought a host of laurels to the institution. The Basketball Team won the all India Basketball Tournament held at Kottayam, Kerala. The Kabaddi team won the All India Kabaddi Tournament held at Karaikudi, Tamil Nadu.

Staff Welfare Measures:

As per the directions of Ministry of Finance, Department of Economic Affairs Governments of India, 3% of Net Profit with the maximum ceiling of Rs.15 crore is to be earmarked for the welfare of its employees.

The Bank is having various staff welfare schemes such as:

1. Canteen Subsidy

2. Conveyance expenses reimbursement

3. Newspaper reimbursement

4. Annual Health Check up

5. Health Clinic at HO and at MSR Nagar, Bengaluru

6. Annual Medical Aid to the employees retired on superannuation

7. Grant of Silver Jubilee awards

8. Cash incentive to meritorious wards of staff

9. Awarding scholarship ofRs.5000/- for the girl children under V-Shakti, V-Subodhini and V- Pragati

10. Group Mediclaim Insurance

11. Holiday Homes at Bengaluru, Mysore, Ooty, Delhi & Mumbai, etc.

The Vijaya Bank Staff Welfare Fund Trust

After adjusting the expenses incurred on various staff welfare measures (i.e. from 3% of the net profit of previous financial year with a cap of Rs.15 crore) the balance amount is being transferred to the trust.

The Bank is having various schemes under Staff Welfare Fund Trust such as:

1. Awarding scholarships to the wards of the employees.

2. Reimbursement of residual claim of hospitalization expenses.

3. Reimbursement of cost of spectacles.

4. Funeral expenses to the family members on death of the employees.

5. Cash incentives to retirees on superannuation.

The Bank is also administering Family Welfare Scheme under which amounts collected from the members of scheme are distributed among the family members (nominees) of deceased employees.

Human Resources Management System:

With a view to streamline the process of faster decision making and enable error-free data management pertaining to the employees at a centralized location at Head Office, the Bank has implemented HRMS (PeopleSoft) Software.

The HRMS software combines many human resources functions including Benefits Administration, Payroll, and Training integrated into a single package.

OTHER SERVICES

Merchant Banking & Allied Activities

The Bank is registered with Securities and Exchange Board of India (SEBI) for Merchant activities like: Category I Merchant Banker, Bankers to the Issue, Debenture Trusteeship and Depository Participant. The Bank is also registered as Self Certified Syndicate Banks for accepting IPO/Rights issue applications under Applications Supported by Blocked Amount (ASBA).

The Bank undertakes Payment Bankers Assignments for payment of Interest/Dividend/Refund orders of Corporate. Bank also offers Depository and online trading services to its clients.

Government Business:

Among various Government business, Bank is collecting Direct tax through 276 branches and Indirect tax through 37 branches. The Bank has also introduced online payment of taxes of CBDT&CBEC through V-net banking for all customers of all branches. 338 branches of the bank are designated to open Public Provident Fund accounts. Besides, all our branches are authorised to disburse Central Civil, Defense, Telecom pensions and State pensions in the states of Karnataka, Andhra Pradesh, Kerala and 4 Metro Cities. A separate cell called Centralized Pension Processing Center/CPPC has been set-up in HO for centralized payment of pensions of Central Government pensioners. 1385 branches are designated as NPS-Lite collection center (NL-CC) to accept subscription under NPS- Swavalamban scheme.

Corporate Agency with LIC:

Bank has entered into the Corporate Agency agreement with LIC of India to cater to the life insurance needs of the customers.

Corporate Agency with UIIC:

Bank has entered into the Corporate Agency agreement with United India Insurance Company Limited to cater to the non-life insurance needs of the customers.

Group Insurance Coverage for borrowers:

Bank has entered into an agreement with M/s Bajaj Allianz Ltd for Group coverage of individual borrowers.

Money Transfer Services (Conventional and Online):

Bank is a sub-agent for money transfer services of Money Gram and Xpress Money. Under Money gram the Bank has tie-up with both UAE Exchange & Financial Services and Thomas cook (India) Ltd. Bank has entered into a tie-up with Times of Money Ltd for online transfer of funds (Remit2lndia) as an additional service to NRIs.

Tie-up with Payment Gateways:

Bank has entered into tie-up with Times of Money Ltd for our Internet Banking Customers for Online payment of goods and services purchased/availed. Besides, the Bank also has tie-up with other Payment Gateways namely Bill Desk, C C Avenue and Tech Process Solutions Ltd etc.

Credit Card Business

At the end of the financial year, the total card issued by the bank stood at 1.56 lakhs, the Credit Card turnover is Rs.458.20 crore as against the turnover of Rs.451.22 crore during 2012-13. The Bank has started issuing chip based cards with effect from December 1, 2013.

The total number of merchants enrolled by the Bank for the year 2013 - 2014 stood at 1293. The Bank is also providing cordless card swiping machines and the terminals are EMV/UKPT/TLE compliant and PIN @ POS. The Bank makes direct payments to merchants maintaining account at our Core Banking branches.

Debit Card

There has been substantial increase in the issuance of Debit Cards. We have issued 32.20 lakh Debit Cards during the FY 2013-14 as against 24.60 lakh cards issued during 2012-13 . The Debit Card turnover was Rs. 464.96 crore during 2013-14 as against Rs.326.43 crore as on March 31, 2013.

The Bank is issuing Aadhar based Rupay cards under Financial Inclusion and ATM enabled Kisan Cards linked to VKC accounts. 77017 Cards under FI have been issued as on March 31, 2014. During the year, the Bank has started issue of Rupay branded Debit Card & also chip based Debit Cards. The Bank has launched Pre-paid domestically valid Gift Cards.

Depository Participant Account and Online Trading:

Vijaya Bank is a Depository Participant (DP) with National Securities Depository Limited.

Vijaya Bank DP offers the following depository services.

- Account Opening

- Dematerialization of securities (shares, Debentures, Mutual funds etc.)

- Electronic settlement of trades in stock exchanges connected to NSDL and CDSL.

- Pledge/hypothecation of demat security holdings against bank loan

- Electronic credit of securities allotted in public issues.

- Freezing of accounts whenever required so that debits from the account are not permitted.

- Nomination facility for demat accounts.

- Services related to change of address, bank account details etc.

- Effecting transmission of securities.

- NSDL IDeAS facility.

The Bank provides Depository Services to customers and Tied up with IDBI Capital for providing Online Trading.

Government Business Module (GBM)

Government Business module is implemented with the following modules.

- OLTAS Module which deals with Direct and Indirect Taxes and remittance of tax amount to RBI through link cell, Nagpur.

- Public Provident Fund - PPF is being accepted at the designated branches of the Bank.

Centralized Payment of Pension - A dedicated Centralized Pension payment processing cell has been created at HO. All types of pension like State, Central, Civil, Telecom, Defense, Judges and Freedom Fighters pension is being paid centrally by the CPPC cell at HO.

Senior Citizens Savings Scheme as per the government guidelines is also implemented in the Bank.

Marketing Setup

Marketing cell at the Bank''s Head Office with active involvement of all Marketing Officers posted across the country in various Regional Offices / RACPCs & MSME cell is actively engaged in popularizing and marketing of Bank''s various products and services.

Publicity and Public Relations

During FY 2013-14, the Bank has carried out several major advertisement campaigns in Print & Electronic media in English, Hindi and in regional languages throughout the country to elevate the visibility of the Bank and its products. This year, major Publicity Campaigns were carried out through Outdoor Advertisement media, such as, translates at airports and Delhi Metro Railway station, Kolkata Metro Stations. Outdoor Advertisement hoardings were taken in metro cities, glow sign/sign board advertisements at Railway stations/Bus stands besides ad campaign through FM radios - RADIO ONE, RADIO CITY & RADIO MIRCHI.

Implementation of Official Language

Bank is implementing the Government''s Official Language Policy in letter and spirit since Nationalization. With the efforts of staff members, Bank could achieve Hindi correspondence of 90.10% in Region "A" against the target of 100%, 78.57% in Region""B" against the target of 90% and 61.26 % in Region "C" against the target of 55% as on 31.03.2014.

Under the banner of "V-Gen UTH" - A savings bank product for children, all 26 Regional Offices & Head Office has conducted Hindi Elocution Competition and Hindi singing Competition for High School students. Every Regional Office has conducted Hindi Symposium, Hindi Quiz Programs and Hindi Elocution competitions in which teachers & students of various Colleges/Universities, customers and staff members have participated. 21 Special Hindi workshops were conducted in which 212 Executives participated. 102 Hindi workshops were conducted for staff members in which 1863 staff members were trained.

The Parliamentary Committee on Official Language (III rd Sub Committee) inspected our Head Office on 05.07.2013 and appreciated the efforts of the Bank in Hindi Implementation.

Our Head Office was inspected by the Joint Secretary and Joint Director (OL) of Dept. of Financial Services on O.L. Implementation on 14.09.2013 and reviewed the progress made in this direction. Our Head Office hosted a program on " Rajbhasha Prayog - Aapasi Samwad Sartak Disha" on 16.09.2013 chaired by the Joint Director (OL) in which representatives of Nationalised Banks participated.

Hindi Day was celebrated by Head Office on 18.09.2013 and a noting Sahayika in the form of a Desk Calendar was released on the occasion.

The exclusive intra-net Rajbhasha website has been made more user friendly for the staff members by providing letter heads of all branches/offices, office notes letters etc.

The Bank hosted the 91st meeting of CCTH of CAB Reserve Bank of India Pune, on 13.12.2013 at the Bank''s Head Office, in which representatives from all Nationalised Banks were present. Rajbhasha Adhikaris Conference was conducted on 01.02.2014 at the Bank''s Head Office.

Our Bank conducted inter-bank competitions under the aegis of various Town Official Language Implementation Committees all over India and a number of staff members have also won prizes.

The Head Office along with various Regional Offices of the Bank have received prizes for Official Language Implementation for the year 2012-2013 awarded by the respective Town Official Language Implementation Committees which were distributed during the current financial year. Bank''s Head Office, Bengaluru; Regional Office-Hassan and Regional Office-Kolkata have been awarded First Prize, Regional Office-Calicut - Second Prize, Regional Offices - Mangalore & Vijaywada - Third Prize and Regional Office-Bengaluru (North) has been awarded Consolation Prize.

ALTERNATE DELIVERY CHANNELS:

A number of activities were undertaken to ensure that technology driven Alternate Delivery Channels are utilized to the mutual advantage of the customers and the Bank. Mailers were sent to customers highlighting the advantages of using Alternate Delivery Channels like internet banking, use of Debit Card, on-line purchases, and funds transfer through RTGS/NEFT etc. Training programmes are conducted by Staff College to familiarize/ sensitize the staff members with the products so that these facilities percolate to the customer in a professional manner.

Tele Banking Facility

Tele Banking facility was started during 2012-13. Tele Banking facility provides a number of advantages to customers as support services are available 24/7.

Internet Banking:

V-Net Banking, an Internet Banking channel of the Bank is providing services like balance enquiry, account statement, intra-bank and inter-bank fund transfers through RTGS/NEFT, transactions related SMS alerts, payment of Indirect/Direct taxes, State commercial Taxes, utility bill payments, online temple donations & online donations to Prime Ministers Relief Fund (PMRF) and others.

Password can be reset online

Creation of User-id and Password credentials online.

Customers can view their PPF account and transfer funds to PPF Account from their linked operative accounts using V-Net Banking facility.

Customer can View their Vijaya Bank Credit Card statement.

Mobile Banking:

V-Mobile Banking, the channel of the Bank for performing banking activities like balance enquiry, account statement, mobile recharge, intra and interbank funds transfer using NEFT, Airline ticket booking, Movie Ticket booking etc., with their mobile handset using SMS/ GPRS modes of communication. "Immediate Payment Service" - IMPS (P2P-Person to Person), an initiative from NPCI (National Payment Corporation of India) has been implemented for the benefit of the customers using Mobile Banking services to perform the transactions 24x7 within and across the banks using MMID (Mobile Money Identifier). IMPS (P2A - Person to Account) is implemented in our existing Mobile Banking services, wherein the customers can do funds transfer using beneficiary''s A/c No. and IFSC code, without the use of MMID.

SMS Alerts/e-mail

The Bank also offers SMS alert service. Messages are sent for all transactions of Rs.2000 and above and when cheques are returned with irrespective of the amount. Monthly statement of account through e-mail to account holders who have registered the e-mail ID has been implemented.

SMS alert facility is also used for

Adding beneficiaries in V-Net Banking through SMS - OTP(One Time Password)

Online Resetting of Password in V-Net Banking SMS - OTP (One Time Password).

Self User Creations for Retail Customers using SMS

- OTP (One Time Password) along with other security features.

CUSTOMER SERVICE

Customer Service and Redressal of Complaints

There is a robust Grievances Redressal Mechanism in the Bank and vigorous efforts are made for a time bound resolution of all complaints.

A few of the steps taken by the Bank to ensure the quality of Customer Service/ Redressal of Complaints are as below:

- C3O Workshops:- "Creating a Customer Centric Organization" - Continuous workshops for all the frontline staff of the Bank to inculcate and sensitise them to the necessity of customer service, inculcate a sense of belonging, provide latest technical knowhow and continuous knowledge enhancement on the Bank''s products, etc.

- Incognito Visits: - Incognito visits were conducted to evaluate branches in a discreet manner about the

1. Ambience of the branches

2. Product knowledge of the staff

3. Reception & Acknowledgement of the customers

4. Overall Service level of the staff.

The findings of the study were used to analyse the focus areas of the visits and to improve the customer service.

SPGRS (Standardized Public Grievance Redressal System):- The Bank instantaneously followed the directions of the Department of Financial Services to implement the SPGRS. Under SPGRS, the complaints received through multiple channels will be registered and digitalized in order to have an integrated information system for customer grievances. All grievances are classified under various heads and sub-heads and automatically routed to the concerned Departments for easy and timely redressal.

Call Centre: - The Bank has an exclusive call centre to help the customers for attending to the matters of Alternate delivery channels, ATM/ Credit Cards, customer service, product promotions etc.

Unhappy SMS: - The Bank has introduced "Unhappy SMS" for the customers. A customer can send an "Unhappy SMS" from his mobile to us, by typing : HPY [space] N and send to 9844213910. Our Call Centre officials will immediately call them, enquire the reason for the unhappy condition and offer solution to cater to their needs.

Banking Codes and Standards Board of India (BCSBI)

The Bank, being a member of BCSBI, has adopted the voluntary Codes formulated by BCSBI i.e. (i) ''Code of Bank''s Commitment to Customers'' (ii) ''Code of Bank''s Commitment to Micro and Small Enterprises.'' Bank has formulated and complied with several policies as per the guidelines of BCSBI. A session on Customer Service incorporating the provisions of the Codes has been included in the staff general banking training programmes in order to comply with the Codes in true letter and spirit. The Bank conducted BCSBI Customers'' meet on 21st June 2013 at the Bank''s Head Office, Bengaluru. The meeting was chaired by Shri A. C. Mahajan, Chairman, BCSBI in the presence of the Chairman & Managing Director and Executive Director of the Bank.

CORPORATE SOCIAL RESPONSIBILITY

For the benefit of the society and to ensure inclusive growth, several Corporate Social Responsibility (CSR) initiatives have been taken up by the Bank during the FY 2013-14. During the FY 2013-14, Bank has adopted 35 girl students for financial support to pursue education upto graduation level. On the occasion of 83rd foundation day, donations were given for the purchase of an Ambulance and medical support, 183 water purifiers to Government Schools, construction of building for orphanages and disabled, sewing machines for destitute women. Bank has continued in extending services in rural health centers at villages that have been adopted in the year 2011-12. Also, Bank has taken initiatives to construct Bus shelters, Solar lights/lamps installations, assistance to orphanages, old age home centers, differently abled persons , assistance to Rural and Govt. Schools for creation of better facilities, organizing health camps, relief to victims of natural calamities, infrastructure support for rural schools and villages and activities that are aimed towards positive development of society.

Awards & Achievements

In recognition of varied initiatives, the Bank was conferred several awards and accolades during 2013-14.

''Best Banker - HR'' award by Sunday Standard of The New Indian Express group for excellence in human resources management practices.

''Amity Leadership award for business excellence by leveraging IT by Amity University for excellence in IT initiatives.

The Chairman of the Bank received the ''CEO with HR Orientation'' award by Institute of Public Enterprises.

Bank''s Credit Department is accredited with ISO/IEC 27001:2005 certification for information security management system by British Standard Institute (BSI).

BOARD MEETING AND MEETING OF OTHER SUB COMMITTEES OF THE BOARD

During the year 2013-14, the Board of Directors met 20 times. The details of Committee Meetings are as under:-

Name of the Committee No. of Meetings

Management Committee of the Board 15

Audit Committee of the Board 13

Directors'' Promotion Committee 04

Risk Management Committee of the Board 05

Committee to review Large Value Frauds 05

Remuneration Committee of the Board, 01

Nomination Committee of the Board, 01

Customer Service Committee of the Board, 03

Shareholders'' / Investors Grievances Committee 04

Share Transfer 09

Head Office Level Credit Approval Committee 53

Special Committee to consider appeals preferred by employees against final orders passed by Chairman & Managing Director as Disciplinary Authority 02

IT Strategy Committee 02

Supporting candidates in the Election 02

Credit Monitoring recovery management of NPA 05

Allotment Committee 02

Board of Directors

During the year 2013-14, the following changes have taken place.

1. Shri H. S. Upendra Kamath, Chairman & Managing Director demitted the Office of Chairman & Managing Director on 31.12.2013, on attaining superannuation.

2. Shri V. Kannan has assumed charge as Chairman & Managing Director of our Bank on 01.01.2014.

3. Shri B. S. Rama Rao has been appointed as Executive Director of the Bank w.e.f. 27.09.2013.

4. Shri Y. Muralikrishna has been appointed as Workmen Director w.e.f. 02.11.2013 vice Shri Suresh Kamath.

5. Shri Nishank Kumar Jain, Shareholder Director demitted the Directorship w.e.f 05.11.2013.

The Bank''s Board as on date consists of the following Directors:-

1. Shri V. Kannan, Chairman & Managing Director

2. Shri K. R. Shenoy, Executive Director

3. Shri B. S. Rama Rao, Executive Director

4. Shri V. K. Chopra, Director

5. Smt. Suma Varma, Director

6. Shri P. C. Nalwaya, Non Official Director

7. Shri P. Vaidyanathan, Shareholder Director

8. Smt. Bharati Rao, Shareholder Director

9. Shri Ashok Gupta, Non Official Director

10. Shri H. Harish Ballal, Officer-employee Director

11. Shri Y. Muralikrishna, Workmen Director

Acknowledgement

The Board of Directors placed on record its appreciation of the valuable services rendered by Shri H. S. Upendra Kamath as Chairman & Managing Director, Shri Suresh Kamath and Shri Nishank Kumar Jain as Directors of the Bank.

For and on behalf of the Board of Directors

Head Office, Bengaluru V. Kannan

Dated the 06.05.2014 Chairman & Managing Director


Mar 31, 2013

The Board of Directors have pleasure in presenting the 33rd Annual Report of the Bank along with the Audited Balance Sheet as on March 31, 2013 and the Profit and Loss Account for the year ended March 31,2013.

Recruitment:

During the year the Bank has appointed 1014 Officers in different Grades/Scales and 469 Probationary Clerks. Bank has also appointed 249 Part Time Sweepers in 1/3rd scale wages and 4 Armed Gaurds.

Promotions:

The promotions effected during the year 2012-2013 are furnished hereunder:

SI. Promotion Promotion Total No. from to promoted

1 TEGS-VI TEGS-VII 5

2 SMGS-V TEGS-VI 15

3 SMGS-IV SMGS-V 42

4 MMGS-III SMGS-IV 88

5 MMGS-II MMGS-III 139

6 JMGS-I MMGS-II 422

7 Clerical JMGS-I 147

8 Substaff Clerk 141

Training:

The training system in the Bank has been strengthened by providing additional competent manpower. The courses have been redesigned keeping in mind the essential inputs required for the employees to effectively handle the present & future assignments and to perform their duties and responsibilities effectively in the highly competitive tech-based customer-driven banking environment. The Bank is also imparting training to its employees through some reputed external training institutions in certain specialized areas like Credit, FOREX, Treasury Management, Risk Management, HR, Marketing, etc. During the last financial year the Bank has imparted training to 8381 employees constituting 66.5 % of the total employees. Out of which, 7949 employees had undergone training in the Bank''s own establishments and 432 were trained at the reputed external training institutions including some overseas institutions.

SC/ST/OBC Employees:

Out of the total manpower of 12601 as at the end of March 2013, 2302 employees belong to SC category, 852 to ST category and 2002 to OBC category. The separate Cell for SC/ST at Personnel Dept, HO looks into the matters pertaining to the SC/ST employees and also supervises prompt implementation of Government of India guidelines in service matters in respect of SCs/STs. SC/ST Cells are functioning in all the Regional Offices as well. Each Cell has a designated liaison officer to attend to the grievances of the SC/ST employees. At the Head Office, one of the officers in Top Executive Cadre has been designated as the Chief Liaison Officer for SC/ST employees in the Bank and he is being assisted by a separate Cell consisting of senior officials. The Chief Liaison Officer is involved in all the policy decisions concerning SC/ST employees.

‘OBC Employees Welfare Association'' has been formed in our Bank and an executive in the rank of General Manager has been designated as Chief Liaison Officer for OBC employees. Further, quarterly meetings are being held between representatives of SC/ST & OBC employees'' welfare associations and the management representatives. Relationship between the Bank and SC/ST/OBC employees associations continues to be cordial. The Bank is arranging pre-recruitment/ pre-promotion training for SCs/STs regularly. Pre-promotion test training for OBC employees for promotion from sub-staff cadre to clerical cadre has also been commenced from the current year''s promotion process.

Further, the Bank has designated one General Manager as Chief Liaison Officer to attend to the grievances of OBC and Minority Community Employees. Our Bank is complying with all the Policy Guidelines laid down by the Govt. of India pertaining to reservation of posts for SC/ST employees, OBC & Minority employees including Persons with Disability.

Staff Relation:

The pro-active and humanistic approach undertaken by the Bank has yielded positive results and the Bank is showing progressive growth consistently with the collective efforts of the management and employees ofthe Bank. The climate is positive and the same is echoed in the form of exponential growth of the Bank during the financial year ending March 2013. The industrial relations in the Bank have been cordial and harmonious. There was no agitation or unrest during the year by the employees relating to issues pertaining to our Bank. The consultative committee meetings and negotiating committee meetings are held with the representatives of the recognized unions at regular intervals to sort out the grievances of the employees and settle the disputes, if any, amicably and the said meetings are attended by the top executives of the Bank.

Sports Activities:

The Bank''s Sports teams have performed exceedingly well in the year 2012-13 and has brought a host of laurels to the institution.

Cricket:

The Cricket team reached the semi finals of the All India Tournaments held at Kochi and Bhopal. Sri R.Vinay Kumar, Sri C.M.Gautam, Sri S.L.Akshay and Sri K.Goutham represented Karnataka in the Ranji Trophy for the year 2012-13. Sri R.Vinay Kumar represented Royal Challengers Franchisee, Bangalore in the Indian Premier League (IPL).

Sri Vinay Kumar and Sri C.M.Gautam were selected to represent India A against the touring Australian Team. Sri Arjun Shetty represented Karnataka in the Col. C.K.Nayudu Tournament for men Under 25.

Basketball:

The Basketball team won the State Senior Division League title for the year 2012-13 beating MEG in the finals. The team also won the State Level Tournaments held at Shimoga and Sahakarnagar, Bangalore. Sri Arvind A. and Sri Srinivas Naik were selected to attend the National Basketball team''s conditioning camp at New Delhi.

Kabaddi:

During the year, the Kabaddi team has performed outstandingly well. Apart from winning 4 State Level Tournaments, the team emerged runners up in three All India Tournaments beating the top teams in the country. It has been a commendable effort by the team which consists of some young players who have been recruited very recently.

Staffwelfare measures:

The Bank is having various staff welfare schemes such as -Canteen Subsidy, Conveyance expenses reimbursement,

Newspaper reimbursement, Annual Health Checkup, Health Clinic at HO, Annual Medical Aid to the employees retired on superannuation, Grant of Silver Jubilee awards, cash incentive to meritorious wards of staff, Group Mediclaim Insurance, Holiday Homes at Bangalore, Mysore, Ooty, Delhi & Mumbai, etc.,

The Bank is having a separate Staff Welfare Fund Trust with an objective to provide welfare facilities to the employees and their dependents viz., Awarding scholarships to the wards of the employees, reimbursement of residual claim of hospitalization expenses, reimbursement of cost of spectacles, funeral expenses to the dependents of the deceased employee and incentive to the employees who retire from the services of the bank on attaining the age of superannuation etc.,

The bank is also administering Family Welfare Scheme under which amounts collected from the members of scheme are distributed among the family members (nominees) of deceased employees.

Housekeeping

Reconciliation with regard to all inter-bank transactions have been drawn upto 31.03.2013. As against the Reserve Bank of India Benchmark of six months for reconciliation of outstanding inter branch entries, our present status is

3 months. All outstanding entries under different sensitive accounts are being followed up promptly. Except entries relating to pending court cases, all other long outstanding entries have been eliminated.

Internal Inspection

The Bank has put in place a well-defined Internal Audit policy. The Audit Committee of the Board oversees the performance of audit functions on a regular basis, providing guidance and directions for improvement in the audit system and internal controls in the Bank.

During the financial year, the Bank has conducted Risk Based Internal Audit (RBIA) of all the 1033 programmed branches. Upon assessment of Risk rating, 73.09% of these branches have secured "Low Risk”.

In addition, inspection of 12 Service Branches, 15 RACPCs,

9 Regional Offices and 3 Head Office Departments was conducted during the year. Besides, 1323 branches were programmed for IS Audit and audit of all these programmed branches were completed except 60 branches before 31.03.2013.

Bank has covered 80.37% of its business under Concurrent Audit'' in'' 307'' branches/offices'' as'' against'' RBI'' stipulation'' to cover atleast 50% of business. Bank is making use of Information Technology in its audit system including Risk Based Internal Audit (RBIA) for generating various value added reports.

Know Your Customer (KYC), Anti Money Laundering (AML) and''Combating''of''Financing''of''Terrorism''(CFT).

Bank has in place a Policy on ‘Know Your Customer'', ‘Anti Money Laundering'' and ‘Combating of Financing of Terrorism'' and is being overseen by the KYC Cell constituted at H.O. and at Regional Office by a designated Nodal Officer. The''policy''Guidelines''was''first''issued''in''2005''and''is''being'' updated from time to time.

Necessary instructions have been passed on to the field functionaries for the implementation of KYC Norms, AML guidelines and CFT procedures. Further guidelines on these is being passed on to them, as and when instructions are received from, RBI, GOI and IBA. The field functionaries have''been''given''the''needed''technical''support''to''carry''out'' the policies.

It is ensured that the Branches have implemented instructions of KYC Norms and other guidelines in true spirit. Branches are not opening any new account wherever it is found to be short of KYC compliance. A System support is provided to check the level of KYC compliance in any account before a cheque book is issued for the same.

Branches are instructed to monitor transactions of large value in the accounts and ensure that the transactions are'' in'' consistence'' with'' the'' declared'' business.'' The'' transactions are being overseen at Head Office, by robust AMLock Software which throws alerts on given parameters for monitoring on Anti Money Laundering guidelines. The transactions are monitored and Large value cash transactions are reported to FIU-IND in the monthly CTR Apart''from''this''if''any''transaction''is''found''to''be''suspicious,'' irrespective''of''the''amount''is''being''reported''to''FIU-IND''by'' STR. Large value transactions found in the accounts of

Non-Profit''Organisations''is''being''reported''through''monthly'' NTR. Any Counterfeit Currency found at the Branches or Currency Chests is also being reported to FIU-IND through monthly''CCR.''

A''System''support''to''check''the''customer''s''names''with''that'' of those, in the UN list of terrorists is made available. This enables branches not to open accounts for terrorists and connected''entities.''

The ongoing implementation of KYC Norms and AML guidelines is being checked by the Internal Inspectors, Concurrent Auditors, Vigilance inspectors and Executives on their Branch visit. Every Regional Office has a Nodal Officer''to''overlook''the''implementation''at''the''branches''and'' submit a monthly certificate confirming implementation of KYC Norms. The Top Management is being informed of the''compliance''periodically.''

Vigilance

The Vigilance Department at Head Office is headed by Chief Vigilance Officer of the rank of General Manager who is on deputation from State Bank of India. The Vigilance Department overseas all vigilance related work of the Bank'' as'' per'' the'' guidelines'' given'' by'' Central'' Vigilance'' Commission. Cases offrauds involving Rs. 1.00 lakh & above are placed before the Board of Directors, reports forwarded to RBI as and when frauds are detected and reported. The Audit Committee of the Board is also apprised of frauds of Rs. 1.00 lakh & above on quarterly basis. In compliance with RBI guidelines, a Special Committee of the Board is constituted to review large value frauds involving Rs. 1.00 crore & above. After studying modus operandi offrauds detected, Bank issues suitable instructions to the field functionaries as a preventive Vigilance measure. In addition, Vigilance Department'' carries'' out'' surprise'' inspection'' of'' branches,'' concentrating on preventive vigilance. These are done by Field Vigilance Officers stationed at Regional Offices. All efforts are made to plug the loopholes in the existing system to prevent recurrence of similar frauds and to strengthen the preventive vigilance.

Compliance

Board''approved''Compliance''Policy''is''a''requirement''under'' the extant RBI guidelines and accordingly, the Bank has adopted Compliance Policy. The Compliance Department,

H.O. ensures compliance with various communication

Received at Head Office from Govt. of India, Reserve Bank of India, IBAand others by sending all such communications to the concerned operational Departments for necessary action. The Compliance Department is headed by the Chief Compliance Officer who is of the Rank of a General Manager.

Right to Information Act 2005

Government of India enacted Right to Information Act, 2005 which came into force on October 12, 2005. The Act provides right to every citizen to secure/access to information under the control of Public Authorities. It aims to promote openness, transparency and accountability in administration and in relation to matter connected therewith or incidental thereto.

Bank has designated all the Branch Mangers as Assistant Public Information Officers, Second line Executives of all the 24 Regional Offices as Public Information Officers and Regional Head as Appellate Authorities under the Act. At Head Office a Deputy General Manager is designated as Public Information Officer and a General Manager of the Bank as Appellate Authority. Bank as a whole 25 offices are provided with Public Information officer and Appellate Authority respectively under Right to information Act 2005.

Information sought under the Act is being provided within the prescribed time frame. During 2012-13, bankas a whole has received and disposed of 798 Applications and 122 Appeals under the Act.

Security Arrangement

The Department has reviewed and strengthened security arrangements at all Currency Chests and Bank branches. The Security Officers carryout branch inspection visits at regular intervals to assess the security arrangements in vogue and suggest means for strengthening these arrangements. The Security Officers maintain close liaison with the law enforcing agencies. The security arrangements in the Bank are being strengthened on an ongoing basis to meet the new challenges in a dynamic security scenario.

Bank security is being strengthened to be more effective, modern and an unobtrusive Security System. Access Control measures at all Currency chests of the Bank have been strengthened in terms of RBI guidelines. A proper system of regulating access to Currency chest strong rooms and proper records of entry into/exit from the Vault Room ofthe chest is being maintained. Essential and mandatory security arrangements in terms of RBI/IBA guidelines are provided to almost all branches. Security Alarm Systems are installed at all branches and currency chests. Strong room conforming to RBI specification is provided to 1291 branches.

Training including firing practice for Armed Guards deployed at currency chests/branches is imparted on an annual basis. Security Committees formed at Regional Offices and at Head Office meet periodically to review security aspects.

CCTV Surveillance System have been installed at 320 identified vulnerable branches; CCTV system installation work in 300 more branches 3and 105 offsite ATMs is under progress. CCTV systems is being installed at all vulnerable branches in a phased manner.

Implementation ofOfficial Language

Bank is implementing the Government''s Official Language Policy in letter and spirit since Nationalization. With the efforts of staff members Bank could achieve Hindi correspondence of 75.97% in Region "A” against the target of 100%, 70.42% in Region "B” against the target of 90% and 59.84% in Region "C” against the target of 55% as on 31.03.2013.

Under the banner of "V-Gen Uth” all 24 Regional Offices & Head Office has conducted Hindi Elocution Competition for High School students. Every Regional Office has conducted Hindi Symposium, Hindi Quiz Programs and Hindi Elocution competitions in which teachers & students of various Colleges/Universities, customers and staff members have participated. 21 Special Hindi workshops were conducted in which 259 Executives participated. 97 Hindi workshops were conducted for staff members in which 1604 staff members were trained.

Training programmes for employees of the Bank from all the cadres were conducted in mixed languages apart from English and Hindi.

Linguify.Banks, an interface software has been purchased by Bank and was launched on 27.09.2012 which facilitates the use of Hindi in CBS and HRMS.

An''exclusive''intra-net''website''for''Hindi''has''been''launched'' on the eve of "Hindi Day” i.e. on 14th September, 2012, which'' provides'' information/'' activities'' of'' implementation/ supporting''materials''in''bilingual''form''for''implementation''of'' Official Language Hindi.

The trilingual website of the bank is updated from time-to-time. Rajbhasha segment has been started in Bank''s internal portal ‘V-Gyan Kendra'' where information regarding Rajbhasha is available.

Awards

The various Regional Offices and branches of our Bank have received prizes for Official Language Implementation for the year 2011 -2012 awarded by the respective Town Official'' Language'' Implementation'' Committees,'' Regional'' Office Hassan Ist Prize, Regional Offices Mangalore and Pune IInd Prize, RS Puram Coimbatore branch - IInd prize, Regional Offices, Bangalore North, Kolkata,''Regional''Staff''College,''Mangalore''''were''awarded'' consolation''prizes.''

Our Mumbai Region was awarded Prize for Official Language Implementation for the year 2011-12 by State Level''Bankers''''Committee''Maharastra.''

Our Bank conducted inter-bank competitions under the aegis of various Town Official Language Implementation Committees all over India and a number of staff members have''also''won''prizes.

Under the Bank''s Internal Rajbhasha Shield Scheme for the year 2011-12 Dept. of Information Technology was awarded Ist Prize, Vigilance Department IInd Prize and Staff College-Bangalore was awarded IIIrd Prize under HO Department Category for effective implementation'' of'' Official'' Language.'' Under'' Best'' Region Category Bangalore-South Region was awarded Ist Prize, Ahmedabad Region IInd Prize and Vijayawada Region IIIrd Prize.

Corporate Social Responsibility

For the benefit of the society and to ensure inclusive growth, several Corporate Social Responsibility (CSR) initiatives have been taken up by the Bank. During the FY 2012-13, the CSR initiatives at 13 villages at 12 different districts of the country included financial support / adoption of needy 15 girl students from rural background for their studies up to graduation level. Construction''of''Bus''shelter''at''villages,''providing''drinking'' water facility at village Govt. schools, establishment of rural health centers at villages with doctor facility and medicines.

Also on the occasion of 82nd Foundation Day donations were made to ‘New Ark Mission of India-Home for destitute'' and ‘Sai Trust for disabled''.

Board Meetings and meetings of other Sub-Committees of the Board held during the year 2012-13

During the year 2012-13, the Board of Directors met 16 times. The details of Committee Meetings are as under:-

Management Committee of the Board 12 Meetings

Audit Committee of the Board 11 Meetings

Directors'' Promotion Committee 4 Meetings

Risk''Management''Committee''of''the''

Board 4 Meetings

Committee to review Large Value Frauds 4 Meetings

Remuneration Committee ofthe Board, 1 Meeting

Nomination Committee ofthe Board, 1 Meeting

Customer''Service''Committee''of''the''

Board, 4 Meeting

Shareholders''/Investors''Grievances''

4 Meeting

Committee

Share Transfer 14 Meeting

Head''Office''Level''Credit''Approval''

46 Meeting

Committee''

Committee for Monitory of Recovery 2 Meeting

Board of Directors

During the year 2012-13 the following changes have taken place.

1. Shri. K. Ramadas Shenoy, has been appointed as Executive Directorw.e.f. 18.06.2012.

2. Smt. Shubhalakshmi Panse, Executive Director, has demitted''the''Office''of''Executive''Director''on''her''elevation'' as''Chairperson''&''Managing''Director''of''Allahabad''Bank'' w.e.f. 1.10.2012.

The Bank''s Board as on 31st March, 2013 consists of the following Directors:-

1. Shri. H.S. Upendra Kamath, Chairman & Managing Director

2. Shri. K. R. Shenoy, Executive Director

3. Shri. V. K. Chopra, Govt. Nominee Director

4. Smt. Suma Varma, RBI Nominee Director

5. Shri. Suresh Kamath, Workmen Director

6. Shri. P. C. Nalwaya, Non Official Director

7. Smt. Bharati Rao, Shareholder Director

8. Shri. N. K. Jain, Shareholder Director

9. Shri. P. Vaidyanathan, Shareholder Director

10. Shri. Ashok Gupta, Non Official Director

11. Shri. H. Harish Ballal, Officer-employee Director

The Board of Directors placed on record its appreciation of the valuable services rendered by Smt. Shubhalakshmi

Panse during her tenure as Executive Director in the Bank.

Acknowledgement

The Board of Directors place on record their sincere appreciation for the excellent support and co-operation extended to the Bank by all customers, shareholders, staff members, financial institutions and other Banks, the Reserve Bank of India, the State Governments, the Securities and Exchange Board of India and the Government of India in improving its overall performance during the year 2012-13.

For and on behalf of the Board of Directors

Head Office,

Bangalore H. S. Upendra Kamath

Dated the 30th April, 2013 Chairman & Managing Director


Mar 31, 2012

The Board of Directors have pleasure in presenting the 32nd Annual Report of the Bank along with the Audited Balance Sheet as on March 31, 2012 and the Profit and Loss Account for the year ended March 31, 2012.

VIJAYA BANK'S PERFORMANCE IN 2011-12 Working Results

Net profit for the year 2011-12 is Rs 581 crore as compared to Rs 524 crore for 2010-11, recording a growth of 11%, while the operating profit for the year 2011-12 was Rs 1231 crore as compared to Rs 1047 crore for 2010-11. On the deposit front, average cost of deposits increased from 5.86% in 2010-11 to 7.68% in 2011-12 due to the market conditions. Yield on advances for 2011-12 (11.73%) improved by 148 basis points when compared to that of previous year (10.25%).

The trends in financial results of the Bank are highlighted in the tables below:

(Rs in crore)

Sl. Annual Item 2010-11 2011-12 No. increase (%)

1 Interest Income 5844 7988 36.69%

2. Interest Expenditure 3897 6084 56.12%

3. Net Interest Income (1-2) 1947 1904 -2.21%

4 Non-interest income 533 528 -0.94%

i. Profit on sale of investments 118 98 -16.95%

ii. Other non-interest income 415 430 3.61%

5. Net Total Income (3 4) 2480 2432 -1.94%

6 Operating expense 1433 1201 -16.19%

i. Staff Expenses 1010 740 -26.73%

ii. Other operating expenses 423 461 8.98%

7. Operating profit 1047 1231 17.57%

8. Operating profit 929 1133 21.96% (excl. Treasury profit)

9 Provisions and Contingencies 523 650 24.28%

10. Net profit 5241 581 10.88%



Important Profitability Ratios

Sl. Item 2010-11 2011-12 No.

1 Yield on funds 8.03 9.20

2 Cost of funds 5.36 7.00

3 Interest spread (1-2) 2.67 2.20

4 Yield on advances 10.25 11.73

5 Cost of deposits 5.86 7.68

6 Yield on investments

- excluding Trading Profit 6.50 6.87

- including Trading Profit 6.97 7.23

7 Other operating expenses to Average 0.58 0.53 working funds

8 Cost-Income Ratio 57.79 49.39

9 Establishment cost to average working 1.38 0.85 funds

Dividend

Taking into consideration the overall profitability position, the Board of Directors has recommended a dividend of Rs 2.50 per Equity Share of the face value of Rs 10/- for the year 2011-12. The total amount of equity dividend payable including dividend tax is Rs 143.98 crore.

Capital Adequacy

The capital adequacy ratio stood at 13.06% as on 31.03.2012 vis-a-vis the Reserve Bank of India norm of 9%. As on 31.03.2012, the Tier I capital of the Bank is Rs 4974.69 crore and Tier II is Rs 1733.10 crore.

Branch Network

With the opening of 100 branches during the year 2011-12, the network of branches reached the level of 1300, from 1200 during the previous fiscal. There were 49 Extension Counters and 2 Satellite Offices at the beginning of the year 2011-12. Bank opened 2 Extension Counters (EC) during the year taking the total number of Extension Counters to 51.

Deposit Mobilisation

Total deposits of the Bank increased from Rs 73248 crore to Rs 83056 crore, recording an annual growth rate of 13.4%. CASA deposit stood at Rs 18272 accounting to 22% in aggregate deposits. The average aggregate deposits increased by 21.56% from f 62104 crore during 2010-11 to Rs 75496 crore during 2011-12.

Credit Expansion

During the year 2011-12, Gross credit increased from Rs 49, 222 crore to Rs 58,670.99 crore, registering a growth of 19.20%

Infrastructure Finance

Amongst other sectors, Bank's lending to Infrastructure stood at f 11216.21 crore as at 31st March 2012, accounting for 19.12% of the Gross Credit. The Bank actively participated in lending to key Infrastructure segments like Power Generation, Roads/Highways, Ports, Airports and Educational Institutions. Significant disbursements are also due in the financial year 2012-13, against these sanctions already in place. While keeping in the pace of growth linked to the huge credit needs of Infrastructure sector and other core sectors like Industry, Trade and Services, the thrust has been on building a balanced Credit portfolio.

Retail Credit

Retail lending is the thrust area and the Bank continued to bestow its priority to Retail Lending Schemes Viz., Housing Loan, Education Loan, V-Wheels, SRTO, V-Cash, Jewel Loan, etc.

The Bank has disbursed Rs 5107 crore under Retail Lending during the year 2011-12 and the amount outstanding as on 31st March 2012 stood at Rs 11175 crore with a growth rate of 11.30%. The Retail Credit Portfolio accounted for 19.04% of the Bank's Gross Credit.

The Bank has disbursed Rs 702 crore under Housing loan, Rs 123 crore under Education loan, Rs 547 crore under V-Wheels and Rs 2281 crore under Jewel loan scheme during the year. The amount outstanding under Housing loan, Education loan, V-Wheels & Jewel Loan schemes, as on 31st March 2012, is Rs 4165 crore, Rs 643 crore, Rs. 1035 crore & Rs. 1796 crore, respectively. The year on year growth in Jewel loan segment is 99%; V-Wheels segment 11.45% and Education loan segment is 6.7%.

Bank has opened additional four RACPCs at Chandigarh, Hubli, Kochi & Coimbatore and added three Jewel Loan Shopees at Bangalore-Ulsoor, Rajhamandry and Gopalpuram branches.

Bank has implemented IBA Model Education Loan Scheme for the benefit of meritorious students.

With a view to improve the quality of the assets, the Bank has taken steps to implement the LAPS (Lending Automation Processing System) for processing selected Retail Lending Products which constitute the core of our retail business.

Bank has conducted 230 Housing Loan Melas and given Rs 623 crore in-principle sanction to 3810 prospective customers to boost lending under Housing Loan portfolio.

Priority Sector Lending

The Bank has been showing significant performance in lending to Priority sector over the years. Total Priority Sector advances of the bank have increased to Rs 17667 crore as at the end of March 2012 as against Rs 14671 crore as at March 2011 registering a growth rate of 20.42% Y-O-Y). Priority Sector Credit of the bank constituted 35.83% of the Adjusted Net Bank Credit, as against the stipulation of40%.

Agricultural Finance Outstanding Agriculture:

Direct Agricultural advances of the Bank as at March 2012 stood at f 4541 crore, as against f 3773 crore as at March 2011, showing an increase of f 768 crore and registering a growth rate of 20.34% over March 2011. Total Agricultural advances (with 4.50% cap on Indirect Finance for agriculture) stood at f 6558 Crore which formed 13.30% of the Adjusted Net Bank Credit, as against the norm of 18%.

Disbursements to Agriculture:

The Bank has done well with regard to agriculture loan disbursements during the year. Under Special Agricultural Credit Plan, the Bank has disbursed Rs 5145 crore during the year 2011-12, as against the target of Rs 5610 crore, which works out to an achievement of 91.71%. Growth under SACP disbursements comes to 29.89%, as against Govt. of India's stipulation of 30%.

Kisan Credit Card Scheme:

During the current year, the bank has issued 19647 Kisan Cards and disbursed Rs 564.54 crore under the Scheme. The performance comes to 72.50 % of the target of 27100 Kisan cards set for the year. The Kisan cardholders are covered under Personal Accident Insurance Scheme. The Bank has launched ATM enabled Kisan Credit Cards at some select branches for the benefit offarmers.

Financing Micro and Small Enterprises (MSE):

The advances to Micro and Small Enterprises increased to Rs 7272 crore as at March 2012 from Rs 5677 crore as at March 2011, signifying a year on year growth of 28.10%. As per the directives of RBI, advances under Micro Enterprises has to be 55% of MSE advances as at March 2012.The Bank has achieved 42.53% for the year 2011-12. Online registration of application and tracking system is in place for speedy disposal of proposals under MSE.

Financing Micro Small and Medium Enterprises (MSME):

The advances to Micro, Small and Medium Enterprises increased to Rs 8286 crore as at March 2012 from Rs 6768 crore as at March 2011, signifying a year on year growth of 22.43%.

During the year, 44 MSME Melas have been organized in different parts of the country; with sanction of Rs 353.26 crore and disbursed Rs 165.43 crore. Eight MSME Cells established by the bank have sanctioned 314 loans amounting to Rs 711.08 crore.

Advances to Weaker Sections:

As at March 2012, the outstanding weaker section advances of the Bank stood at Rs 4281 Crore, which constitutes 8.68% of the ANBC against the norm of 10%.

Self Help Groups (SHGs):

During the year 2011-12, the Bank has financed 6508 SHGs and disbursed Rs 238 crore. Cumulatively, the bank has disbursed Rs 1129 crore. Our Bank has been awarded with the First prize for highest share of SHG business to overall business as well as for Highest Average JLG loan for the year 2010-11 in Karnataka state by NABARD. Our Bank has also won 2nd Prize for Best Performance in Pune Division and 3rd prize in Maharashtra State among commercial banks operating in Maharashtra for SHG Bank Linkage for the year 2010-11 from NABARD.

Credit to Women beneficiaries:

Advances to Women beneficiaries stood at Rs 3593 crore as at March 2012 as against Rs 2784 crore as at March 2011, showing an increase of Rs 809 crore, registering a growth rate of 29.06 %. Against the stipulated benchmark level of 5% of net bank credit to women, the Bank's achievement stood at 7.29%.

Lead Bank Schemes:

Our bank is having Lead Bank responsibility in three districts i.e. in Mandya, Hubli and Haveri districts of Karnataka State. Under the Lead Bank Scheme, total credit share of our Bank through Annual Credit Plan is Rs 3299.46 crore against the target of Rs 3388.06 crore as at March 2012.

Advances under DRI:

Total advances under DRI stood at Rs 6.88 Crore as at March 2012, against Rs 6.13 crore as at March 2011, showing an increase of Rs 0.75 crore during the year with a growth rate of 12.23 %.

Lending under Govt. sponsored schemes:

Implementation of Govt. sponsored schemes receives the utmost attention of the Bank. The Bank's lending's under various Govt. sponsored schemes are furnished below:

(Rs In crore)

Sl. Target No. of Loan amount No. Groups/ beneficiaries outstanding as at Schemes March 2012

1. PMEGP 9585 82.48

2. SGSY 4426 31.52

3. SJSRY 4094 23.58

Advances to SC / STs:

Total advances to SC / STs stood at Rs 935 Crore as at March 2012, against Rs 807 crore as at March 2011, showing an increase of Rs 128 crore during the year with a growth rate of 15.86%.

Credit to Minority Communities:

Advances to Minority Communities stood at Rs 1882 crore as at March 2012, constituting 10.65% of total priority sector advances.

VIBSETIs(Viiaya Bank Self-Employment Training Institutes):

The bank has established Vijaya Bank Self Employment Training Institutes (VIBSETIs) in Mandya and Haveri of Karnataka State and in Indore at Madhya Pradesh State. The Institutes have been conducting various vocational Training / Skill-Upgradation / awareness programmes and product development workshops etc. During the current year, VIBSETIs have conducted 143 Programmes and trained 4664 beneficiaries, with a settlement rate of 82.83%.

Viiaya Rural Development Foundation:

Vijaya Rural Development Foundation was promoted by the bank in 1990 at Mangalore. During the year, VRDF has conducted 122 training /awareness programmes, covering a wide range of subjects, benefiting 5630 persons. Free health camps have also been organized for the benefit of rural poor. The Foundation has also granted scholarships to poor meritorious students hailing from villages and studying in government schools. The Foundation has expanded its activities to other districts like Haveri, Dharwad and Mandya, where the Bank has Lead Bank Responsibility.

Computer Training School has been opened at Mangalore to teach the fundamentals of computer for the Rural poor.

Visveshvaraya Grameena Bank:

Visveshvaraya Grameena Bank (VGB), a Regional Rural Bank established by the bank in Mandya District of Karnataka State has a total network of 32 branches and is a profit making RRB. All the Branches and HO of VGB are CBS compliant. As at March 2012, the total deposits and advances of the RRB stood at Rs 284.97 crore and Rs 198.58 crore respectively. The financials of the VGB have been quite encouraging as the Bank has ended the year 2011-12withaprofitof Rs 5.11 crore.

Visit of Parliamentary Committee:

The Parliamentary Committee on Subordinate Legislation, Rajya Sabha visited the Bank on 21.06.2011 and discussed various matters pertaining to Regional Rural Banks (Appointment and promotion of Officers) Rules 2010 and current status of Priority Sector Lending.

The Parliamentary Committee of Govt. Assurances Rajya Sabha visited the Bank on 16.01.2012 and discussed various matters regarding contract/casual laborers in Public Sector Banks and their present Status thereof.

Financial Inclusion:

Our Bank has been allotted with 407 villages with above 2000 population on a pan India basis. We have provided banking facilities to all these villages before the target date of 31.03.2012 set by Govt. of India. Out of the 407 villages, 29 villages are covered through Branch Model and remaining 378 villages through BC model. We have opened 2,16,019 Smart Card accounts in these villages with a balance of Rs 37.86 lakh.

As per the directives of Govt. of India, we have started five Ultra Small Branches in the FI villages allotted to the Bank on a pilot basis, i.e. Doddarasinakere and Santhekasalagere villages in Mysore region, Ladpur village in Delhi region, Kavrady village in Udupi region and Thachanattukara village in Calicut region.

Posters and Banners are displayed in various places in the FI Villages and the link Branches. Pamphlets on Financial Inclusion are distributed to all house holds in Villages where campaign for Savings Bank account opening is being conducted. TV Scrolls about FI are displayed in Mandya District for information of villagers. Street plays are also conducted in villages to create awareness among the villagers on FI activities. Four Mobile Vans are provided at Mandya, Dharwad, Haveri and Udupi Districts for exclusive Financial Literacy programme in these districts.

Financial Literacy and Counselling Centres (FLCCs) have already been opened in the Lead Districts of the Bank viz. Mandya, Dharwad and Haveri Districts of Karnataka State and are providing counseling service to the farmers.

Bank has floated Jnana Jyothi Financial Literacy & Credit Counseling Trust (JJFLCCT), jointly with Syndicate Bank to set up and manage FLCCs at District levels in accordance with the model scheme of RBI.

Bank has also setup Financial Inclusion Resource Centres (FIRCs) at Mandya, Dharwad and Haveri for imparting Financial Literacy for the benefit of all the stake holders involved in Financial Inclusion Plan.

Our Bank is one of the Founder Trustees of the Karnataka Farmers' Resource Centre (KFRC) set up for imparting training to farmers and agricultural labourers at Bagalkot.

Asset Quality

The Bank continued its focus on maintaining quality assets along with thrust on preventing fresh slippages. It initiated and continued to emphasize various measures in this direction, including the following:

Accounts showing signs of stress / likely default in dues are identified and treated as Special Watch accounts and are closely monitored. Wherever feasible, such assets are restructured, with additional need-based credit limits considered in deserving cases, to prevent fresh slippages. A Sick Unit Rehabilitation Cell is formed to exclusively concentrate on the nursing programme of all sick viable MSME units.

- In case of willful defaulters, stringent recovery measures, including legal options like Securitization, Lok Adalats / DRTs, etc., are promptly resorted to. We are advising extensive use of the Lok Adalats for recoveries.

- To facilitate speedy recovery, 'Vijaya Adalats' are regularly conducted to settle dues of defaulters amicably. During the year, Bank could recover Rs 39 crore under 3322 accounts by way of such settlements.

- To maximize recoveries and have a better follow up / liaison with the Debt Recovery Tribunals, Nodal Executives are designated at different centers.

- A special One Time Settlement Scheme for small borrowers with liabilities of upto Rs 5 lacs with liberalized terms was introduced during the year. The total recoveries made under the scheme are Rs 28 Crores.

The gross Non-Performing Assets of the Bank as on March 2012worked out to 2.93% of total advances, while net NPA ratio was 1.72 % of total advances. During the year 2011- 12, Bank could effect total cash recovery of Rs 666.82 crore (including interest) and upgraded NPAs amounting to Rs 924.91 crore. Further, the Bank also made provision of Rs 502.14 crore for the unexpected defaults, apart from having a floating provision of Rs 213 crore as on March 31, 2012. The Provision Coverage Ratio (including PWO) as at March 2012worked out to 62.14%.

Investment and Fund Management

Total investment portfolio of the bank increased from Rs 25138 crore as on March 31, 2011 to Rs 28939.17 crore as on March 31, 2012. The average yield on investment (excluding profit on sale of investments) during the year worked out to 6.87% as against 6.49% in 2010-11. The liquidity position of the bank was tight during the second half of the FY 2012. The bank also complied with CRR/ SLR requirements as stipulated by Reserve Bank of India consistently during the year.

Risk Management

Credit Risk

Lending Policy of the Bank is being revised from time to time, to include among other things, aspects such as risk appetite, risk based pricing, risk diversification/mitigation strategy, prudential limits, substantial exposure ceiling, preferred sector growth strategies, credit approval process, documentation and security standards, security valuation, etc., in tune with the corporate goal and plan of the Bank.

In order to enhance the effectiveness of Loan Review Mechanism, the Bank introduced onsite credit audit for exposures of Rs 5 crore and above and also modified its Loan Review Mechanism for exposures below Rs 5 crore. The Bank is meeting the RBI requirement that at least 30 to 40 % of the credit exposures should be covered under the Loan Review Mechanism / Credit Audit. Stress Test on Credit Risk by subjecting the credit portfolio to stress like downgrade in the rating, higher provisioning requirement, slippage in asset status, etc is carried out on annual basis, in terms of the Stress Test policy of the Bank.

The Bank has put in place a comprehensive risk rating / scoring system that serves as a single point indicator of diverse risk factors on the counterparty and for taking credit decision in a consistent manner. A separate risk scoring models for Housing and other Retail sectors has also been evolved and put in place so as to ensure higher coverage of risk rating exercise, which is presently around 90 %. Migration analysis is also carried out on half yearly basis in respect of exposures of Rs 1.00 crore and above. From Sept 09, Bank has introduced a Credit risk rating software which is Basel II compliant procured from CRISIL for conducting risk rating of all retail and non retail loans. This software enables the Bank to ensure that all types of exposures are covered under risk rating before sanctioning of any loan so as to maintain the credit quality and also to move towards Basel II advanced approaches compliance.

Asset Liability Management (ALM) and Market Risk

ALM and Market risk of the Bank is managed by the Asset Liability Management Committee (ALCO) and Market Risk Management Committee (MRMC). Appropriate tolerance limits have been stipulated for mismatches in different time buckets, both for managing liquidity and interest rate risks and these are being monitored at fortnightly intervals and also appraised to the Board.

The market risk exposure is measured by tools like VAR (Value at Risk), AGL (Aggregate Gap Limit) and Duration gap analysis. Single country limits and group limits for all countries have been put in place to manage and monitor the country risk. Mid-office reports on treasury operations are placed before the General Manager, Risk Management Dept., on a daily basis and before MRMC on a monthly basis, covering information about exceptions / reviews and compliance.

Interest rate riskon entire portfolio is identified and measured through Earnings at Risk (EAR). Portfolio Sensitivity analysis is also conducted and reviewed by the top management. Contingency Funding Plans, Prudential Ratios / Limits have been set and actual position is monitored as part of Liquidity Risk Management. Stress Test on Interest Rate Risk, Liquidity Risk, Forex, etc on different scenarios are carried out on quarterly basis and appraised to ALCO. To monitor short term liquidity, the Bank is preparing the ALM statement of Structural Liquidity on daily basis.

The Duration Gap Analysis is implemented for assessing the possible impact on market value of equity (net worth) using 200 basis points shock on interest rate curve.

The Bank has applied to RBI for seeking permission to implement Internal Model Approach (Advanced approach) for Market Risk.

The Funds Transfer Pricing, a new technology on transfer pricing mechanism, is being implemented for assessment of branch profitability in a scientific manner.

Operational Risk

With a view to mitigate Operational Risk, several studies were conducted during the year. These include analysis of major fraud reported at Ghaziabad branch, analysis of quick mortality accounts as on 31.03.2011, analysis of high value frauds reported during 2010-11, analysis of long pending suspense payment entries. Further, to minimize the operational risk the Bank has been conducting Risk and Control Self Assessment (RCSA) on critical business processes and identifying the Key Risk Indicators (KRI's) for tracking problem areas in key operations in order to avoid potential future operational losses. RCSA exercise on Internet Banking Operations, Currency Chest Operations, Forex Operations and Information Technology were conducted during 2011-12.

The Bank has applied to RBI for seeking approval for implementing The Standardized Approach (TSA) and parallelly computing capital charge under the TSA viz Da viz BIA since March 2011 onwards. Two days work shop on Credit & Operational Risk Management was conducted at STC Bangalore, STC Delhi and at Regional Office, Mumbai where-in Regional Risk Monitors (RRMs) and Regional Risk Officers (RROs) were provided hands on training in Oprisk Monitor. The Operational Risk Management Division (ORMD) had also conducted Operational Risk Management workshop in Vijayawada, Chennai and Delhi Regions.

Basel-II Compliance

With a view to comply with the Basel II norms, the Bank has been carrying out parallel run exercise on the capital adequacy calculation in the RBI prescribed format, on a quarterly basis and apprising the Board, apart from submitting the same to RBI

As the Bank requires corporate clients' risk rating status awarded by RBI approved rating agencies, the Bank has entered into MOU with all the four rating agencies viz. CRISIL, ICRA, CARE and Fitch so that borrowers can avail the rating services at a concession fee and Bank also benefits on lower capital charge depending on the rating status.

In terms of the Disclosure policy and ICAAP policy, the Bank has compiled the requisite information and got it vetted by the Quality Assurance Team for disclosure and submission to the Board and Reserve Bank of India.

In compliance to the RBI guidelines and adopting Standardised Approach for Credit Risk, Standardised Duration Approach for Market Risk and Basic Indicator Approach for Operational Risk, Bank has complied with Basel II norms and the overall Capital Adequacy Ratio as at 31st March 12 works out to 13.06%, which is above the minimum stipulated norm of 9 %.

Integrated Risk Management System (IRMS) Proiect.

In order to facilitate smooth and effective transition to the Basel-II compliance, the Bank has taken up implementation of Integrated Risk Management System (IRMS) through the assistance of a consultant.

The unique IRMS Project consists of six solutions, viz., Credit Risk Management (CRM), Market Risk Management (MRM), Operational Risk Management (ORM), Credit Risk Rating Solution (CRR) (Retail & Non-Retail), Asset Liability Management (ALM) and Funds Transfer Pricing (FTP) Solution. During the year, the Bank is in the process of implementing the Phase II of this project i.e started implementing the Advanced Approaches.

International Banking

Bank's export credit as at 31.03.2011 stood at Rs 951.56 crores out of which the quantum of export credit extended in foreign currency was USD 18.34 million. As at March 2012, foreign exchange business turnover of the Bank stood at Rs 15,846 crore as against Rs 12854 crore during the previous financial year.

The Bank is participating in the Rupee drawing arrangement with five leading exchange houses and two non-resident Banks from Middle East. Besides, the Bank has extended 'Speed Remittance' facility to UAE Exchange Centre LLC and Al Ansari Exchange UAE and 'Flash Remittance' facility to UAE Exchange Centre LLC, UAE to enable the NRIs from Gulf countries to electronically remit funds to their account with our branches any where in India.

In addition to this the Bank has introduced the 'Instant Welcome Kit' facility for the benefit of NRIs residing in UAE which will enable them to know their account number and also receive the passbook, cheque book, debit card etc., on the spot while handing over their application for opening the account to our Marketing Officers in UAE.

Merchant Banking & Allied Activities

The Bank is registered with Securities and Exchange Board of India (SEBI) for Merchant activities like: Category

I Merchant Banker, Bankers to the Issue, Debenture Trusteeship and Depository Participant. The bank is also registered as Self Certified Syndicate Banks for accepting IPO/Rights issue applications under Applications Supported by Blocked Amount (ASBA). The total income earned during the year 2011-12 from Debenture Trusteeship activities is Rs 14,27,000/-.

The bank undertakes Payment Bankers Assignments for payment, of Interest/Dividend/Refund orders of Corporates. Bank also offers Depository Services to its clients. The Online Trading commenced during the last financial year.

Government Business:

Among various Government business, Bank is collecting Direct and Indirect tax at its 288 branches. The bank has also introduced online payment of taxes in all the branches. 341 branches of the bank are designated to open Public Provident Fund accounts. Besides, this, all the branches are authorised to disburse State Pension/Central pension. A separate cell called Centralized Pension Processing Center has been set-up in HO for centralized payment of pensions of Central Government pensioners.

Cash Management Services Agency Arrangements with Banks in India:

The bank has tie up arrangement with other banks for payment of their Drafts/collection of local cheques with Corporation Bank, HSBC, HDFC, ING Vysya, ICICI and Deutsche Bank.

Corporate Agency with LIC: Bank has entered into the Corporate Agency agreement with LIC of India to cater to the life insurance needs of the customers. The total income earned during the year2011-12 is Rs 1,30,81,942/-.

Corporate Agency with UIIC: Bank has entered into the Corporate Agency agreement with United India Insurance Company Limited to cater to the non-life insurance needs of the customers. The total income earned during the year 2011-12 is Rs 1,76,93,738/-.

Group Insurance Coverage for borrowers: Bank has entered into an agreement with M/s Bajaj Allianz Ltd for Group coverage of individual borrowers.

Money Transfer Services (Conventional and Online): Bank is a sub-agent for money transfer services of Money Gram and Xpress Money. Bank has entered into a tie-up with Times of Money Ltd for online transfer of funds (Remit2lndia) as an additional service to NRIs. The income earned from the Money transfer Services for FY 2011-12 is f 5.03lacs.

Tie-up with Payment Gateways: Bank has entered into tie-up with Times of Money Ltd. for our Internet Banking Customers for Online payment of goods and services purchased/availed. Besides, the Bank also has tie-up with other Payment Gateways namely Bill Desk, C C Avenue and Tech Process Solutions Ltd.

Tie-ups for Vehicle Loans: Bank has tied up with M/s Toyota Motors Ltd, M/s Tata Motors Ltd, M/s Ashok Leyland Ltd, M/s Mahindra and Mahindra Ltd and M/s Hyundai Motors Ltd to extend vehicle loans for personal use.

Central Pension Processing Cell: Bank has been approved by CPAO (Central Pay and account office) for the payment of all the Central Civil Pensioner to serve our valued Pensioners.

Credit Card Business

At the end of the financial year, the total card issued by the bank stood at 150628. As on 31.03.2012, the Credit Card turn over is Rs 446.45 Crore as against the turnover of Rs 431.94 crore as on 31.03.2011.

The total number of merchants enrolled by the bank for the year stood at 1363 as against 1203 merchants as on 31.03.2011. The bank makes direct payments to merchants maintaining account at our Core Banking branches. For few other merchants maintaining accounts with other banks, NEFT of Reserve Bank of India is utilized for payment.

Debit Card

There has been good increase in the issue of Debit Cards. We have totally issued 18.71 lakh Debit/ATM cards as on March 31, 2012 as compared to 15.21 lakh cards issued during the financial year as on March 31, 2011. The Debit Card turnover was f 243.23 crore as against f 169.80 Crore as on March 31,2011.

To provide prompt & better customer service, V-Instant Debit Cards was launched during the year. The V Insta Debit Card along with PIN mailer will be available at the branches. The card is delivered to the cardholder and it gets activated on the next working day.

Marketing Setup

Marketing Cell at the Bank's Head Office is actively engaged in designing new products, conducting marketing campaigns in potential areas to popularize our retail products, reviewing and fine tuning existing products, taking measures to strengthen CASA base, designing pamphlets/posters/ brochures/mailers for marketing activities, percolating the perceptions of the Top Management to grass root level, creating awareness on technology-backed Alternate Delivery Channels services offered by the Bank like V-Net Banking, RTGS/NEFT, V-Mobile Banking and SMS Alerts.

In order to nurture the account holders in the new generation segment, number of programmes were organized. V-GenUTH Drawing competition was held across the country for school children with attractive prizes. V-GenUTH 'Hungama' events for children were conducted in apartment complexes to popularize V-GenUTH SB Account and V-GenUTH Unnati RD Account. The 26th V-GenUTH Quiz Contest for High School Children of Karnataka State was held at Bangalore. The highly popular Quiz Contest has become an iconic calendar event, associated with V-GenUTH, Unnati RD Contest products for the generation next.

Publicity and Public Relations

During the F Y 2011-12, the bank has gone for moderate spending on publicity activities. Total amount incurred for Advertising during the year is around Rs 743 lacs. This year major Publicity Campaigns were carried out through Outdoor Advertisement Media such as translites at airports and Delhi Metro Railway station. Outdoor Advertisement hoardings were taken in metro cities, glow sign / sign board advertisements at Railway stations and Bust stands. Rural publicity was carried out in this financial year by the of way hoardings and glow sign /sign boards in rural places / Semi urban places in Karnataka, Kerala, Tamilnadu and Andhra Pradesh states.

The other major activities during this year were TV ad campaign and Cheque Branding in the KANNADADA KOTYADHIPATHI, an on going special programme of SUVARNA TV and Radio jingles ad campaign in FM Radio City at all India level for Bank's Deposit Products.

Customer Service and Redressal of Complaints

There is a well defined Grievances Redressal Mechanism in the Bank and efforts are made to resolve the complaints within the time frame. Customer complaints are resolved completely to the satisfaction of customers. The Bank has constituted Customer Service Committees at branch level and Standing Committee of Customer Service at HO Level,

which includes representative from the customers. These Committees meet periodically to evaluate and monitor customer service and address deficiencies. Customer Service Committee of the Board is also reviewing customer service on quarterly basis.

Banking Codes and Standards Board of India (BCSB)

Bank, being a member of BCSBI has adopted the voluntary Codes formulated by BCSBI i.e. (i) 'Code of Bank's Commitment to Customers' (ii) 'Code of Bank's Commitment to micro and Small Enterprises.' Bank has formulated and complied with several policies as per the guidelines of BCSBI. A session on customer service incorporating the provisions of the Codes has been included in the staff general banking training programmes in order to comply with the Codes in true letter and spirit.

Information Technology

The Bank has implemented Integrated Human Resources Management System, Integrated Treasury Management system and Integrated Risk Management system. ITMS, HRMS and IRMS have been operationalised and integrated with the Core Banking System. ITMS project has met all the objectives with the setting up a DR setup at Mumbai. HRMS has also met most of the objectives and DR for the project has been sanctioned and will be set up shortly. IRMS is expected to be fully implemented by the end of this financial year.

Having brought all branches under Core Banking Solution, RTGS and NEFT services are available to the Bank's customers from all its branches. Since STP has been enabled in RTGS and NEFT, the customers can enjoy the benefit of immediate inter bank and intra bank fund transfer facility.

ATMs

205 more ATMs were operationalised during the year 2011- 12, taking the number of ATMs to 750 as at the end of March 2012. Bank's customers can also access over 91,000 ATMs connected under National financial Switch (NFS) across the country.

Internal Control

The Bank has well documented policies like IT & IS Security, Internet Banking Policy, IT Procurement Policy, Internet usage Policy, e-mail policy, Business Continuity Policy,

Disaster Recovery Policy, Outsourcing Policy etc. covering wide range of functions at the field and administrative levels. Adequate controls are also built in to mitigate the risks associated with each of the activities. These policies were subjected to review during the year 2012-13. Separate policies have been brought out for Incident management, Vulnerability and penetration test as part of IS Security policy.

Core Banking solution and its progress

The Bank achieved 100% CBS which facilitates services like anywhere banking, Internet Banking, online transactions etc. to its customers. With 100% CBS, the Bank has moved closer to offer real time banking facilities to its customers. Passbook Kiosk has been made operationalised in HAL III stage Branch and is likely to be implemented in important centers/ branches.

Alternate Delivery Channels:

A number of activities were undertaken to ensure that technology driven Alternate Delivery Channels are utilized to the mutual advantage of the customers and the Bank. Mailers were sent to customers highlighting the advantages of using Alternate delivery Channels like internet banking, use of Debit Card, on-line purchases, and funds transfer through RTGS/NEFT etc. Training programmes are conducted by Staff College to familiarize the staff members with the products so that these facilities percolate to the customer in a professional manner.

In the process of offering additional technology oriented services, e-Deposit, new deposit product was launched in 2011. E-Deposit is a convenient, speedy way for the V-Net customers to obtain a Fixed Deposit instantly, without approaching the branch.

Networking

Bank has brought all its branches, extension counters and offices under the corporate WAN and achieved 100 % networking of the branches. It has also used the latest technologies like MPLS, Radio frequency, CDMA etc. for establishing connectivity.

Internet Banking:

V-Net Banking, the internet banking channel of the Bank is providing services like balance enquiry, account statement, intra bank funds transfer, transaction related SMS alerts,

payment of indirect taxes, direct taxes and utility bills etc. with convenience of doing the same from wherever they like through Internet. With all the branches working with Core Banking Solution, all customers of the Bank can avail this facility.

Mobile Banking:

V-Mobile Banking, the channel of the Bank is providing services like balance enquiry, account statement, intra and inter bank funds transfer and utility bills etc. with convenience of doing the same from their hand set. Inter Bank Mobile Payment System (IMPS) an initiative from NPCI is already implemented for the benefit of customers.

Cheque Truncation system:

As directed by the Reserve Bank of India, the Bank has implemented cheque truncation system in NCR of Delhi and Chennai. As per the roadmap of NPCI, Grid Clearing with Chennai as the hub has been envisaged for the States of Tamil Nadu, Karnataka and Kerala covering 18 centres. Accordingly, pilot implementation has commenced in Bangalore and Coimbatore and our Bank has participated in the pilot phase in both the centres.

Depository participant account and Online trading:

The Bank has facilitated opening and maintaining demat accounts. Since shares can be now held in only demat form, this is another essential service that customers need. Online trading in our bank is an internet based investment activity that involves no direct involvement of the broker. The customer has to register with an online trading portal (currently paisabuilder.com) and get into an agreement to trade in different securities following the terms and conditions listed down on the agreement. The order processing is done in correct timings as the servers of the online trading portal are connected to the stock exchange and Vijaya Bank all round the clock. Customers can also get updates on the trading and check the current status of their orders either through e-mail or through the interface.

LAPS (Loan Application Processing system):

The Bank has now implemented a software solution for processing of loan applications - both corporate and retail, which would enable faster processing of loans. It would also make the processing of loans more objective since the criteria for the same are defined in the software. This would enable the branches to give up-to-date information to customers regarding their loan application.

Government Business Module (GBM)

Government Business module is implemented with the following modules.

- OLTAS Module which deals with Direct and Indirect Taxes and remittance of tax amount to RBI through link cell, Nagpur.

- Public Provident Fund - PPF is being accepted at the designated branches of the Bank.

- Centralized Payment of Pension - A dedicated Centralized Pension payment processing cell has been created at HO. All types of pension like State, Central, Civil, Telecom, Defence, Judges and Freedom Fighters pension is being paid centrally by the CPPC cell at HO.

- Senior Citizens Savings Scheme as per the government guidelines is also implemented in the Bank.

Call Center

Call center provides a number of advantages to companies as the support services are available 24 hours a day, 7 days a week. By centralizing telephone-based service and support in one location, Bank can easily adjust staffing to match call volume.

SMS alerts

The bank also offers SMS alert service. Messages are sent for all transactions of f 2000 and above and when cheques are returned with irrespective of the amount.

Proiects identified for implementation Near Site for CBS data updation

Recovery point objective (RPO) is the maximum amount of loss of data and Recovery Time objective (RTO) is the maximum duration of time to restore the operations, envisaged as acceptable, in the event of a disaster. Since RPO is very critical for a financial institution, the Bank is planning to set up a near site in Bangalore, for the critical applications like Core Banking, Internet Banking and RTGS for achieving zero Recovery Point Objective (RPO).

IT Security Initiatives :

Bank has initiated for establishment of Security operations Center with Security Information and Event Management Solution (SIEM) solution & Correlation tool, which will help in analyzing all events and detect attack patterns if any.

Bank has initiated ISO27001 certification process for Bank's Datacenter, DR Site and DIT and expecting to complete the certification process by Apr 2012. The certification will provide confidence to our customers and partners that our Bank is following Industry best practices related Information Security.

Bank has initiated process for implementing Risk based authentication solution with 2Factor authentication for Internet Banking application, and expected to be completed by August 2012 which will make our Internet Banking application more secure and increase comfort level for customers in using Internet Banking.

Bank has implemented Anti-Phishing & Malware scanning solution for Internet Banking, wherein we are able to know proactively about the phishing websites of our Internet Banking website and informing CERT-In to take down such sites.

Bank has taken membership in Data Security Council of India and getting all updates regarding the latest trends in Information Security.

Human Resources Management

Manpower & Staff Productivity:

The total staff strength of the Bank stood at 11838 in March 2012 as compared to 11,415 in March 2011. Of the total staff, 5258 are Officers, 4051 Clerical Staff, 2208 Sub-staff, and 321 Part-time Employees in the subordinate cadre. The number of women employees as at the end of March 2012 stood at 2674 consisting of 1014 Officers and 1660 Award Staff constituting 22.59% of total employees in the Bank. As at the end of March 2012 there were 210 employees belonging to Handicapped Category and 602 employees belonging to Ex-Servicemen Category.

Business per employee as of March 2012 is Rs 12.31 against Rs 11.05 crore for the financial year ending March 2011.

Recruitment:

During the year the Bank has appointed 653 Officers in different Grades/Scales and 447 Probationary Clerks. Bank has also appointed 229 Peons and 71 Armed guard. The Bank has initiated the process of recruitment of 819 officers in different grades/scales, through direct recruitment mode. Bank has issued appointment orders to 250 Part Time Sweeper in 1/3rd scale wages.

Promotions:

The promotions effected during the year 2011-2012 are furnished hereunder:

SI. No. Promotion from Promotion to Total promoted

1 TEGS-VI TEGS-VII 02

2 SMGS-V TEGS-VI 11

3 SMGS-IV SMGS-V 29

4 MMGS-III SMGS-IV 95

5 MMGS-II MMGS-III 117

6 JMGS-I MMGS-II Under process

7 Clerical JMGS-I 158

8 Sub staff Clerk 137

Training:

The training system in the Bank has been strengthened by providing additional competent manpower and increasing the budgetary allocation. The courses have been redesigned keeping in mind the essential inputs required for the employees to effectively handle the present & future assignments and to perform their duties and responsibilities effectively in the highly competitive tech-based customer- driven banking environment. The Bank is also imparting training to its employees through some reputed external training institutions in certain specialized areas like Treasury Management, Risk Management, FOREX, HR, Marketing, etc. During the last financial year the Bank has imparted training to 7314 employees constituting 61.78% of the total employees. Out of which, 6943 employees had undergone training in the Bank's own establishments and 371 were trained at the reputed external training institutions including some overseas institutions.

SC/ST Employees:

Out of the total manpower of 11838 as at the end of March 2012, 1922 employees belong to SC category and 660 to ST category. A separate Cell for SC/ST has been created in Personnel Dept, HO to look into the matters pertaining to the SC/ST employees and also to supervise prompt implementation of Government of India guidelines in service matters in respect of SCs/STs. SC/ST Cells are functioning in all the Regional Offices as well. Each Cell has a designated liaison officer to attend to the grievances of the SC/ST employees. At the Head Office, one of the officers in Top Executive Cadre has been designated as the Chief Liaison Officer for SC/ST employees in the Bank and he is being assisted by a separate Cell consisting of senior officials. The Chief Liaison Officer is involved in all the policy decisions concerning SC/ST employees. Besides, quarterly meetings are being held between representatives of SC/ ST employees' welfare association and the management. Relationship between the Bank and SC/ST employees association continues to be cordial. The Bank is arranging pre-recruitment/ pre-promotion training for SCs/STs regularly.

Further, the Bank has designated one General Manager as Chief Liaison Officer to attend to the grievances of OBC and Minority Community Employees. Our Bank is complying with all the Policy Guidelines laid down by the Govt. of India pertaining to reservation of posts for SC/ST employees, OBC & Minority employees including Persons with Disability.

Staff Relation:

The pro-active and humanistic approach undertaken by the Bank has yielded positive results and the Bank is showing progressive growth consistently with the collective efforts of the management and employees of the Bank. The climate is positive and the same is echoed in the form of exponential growth of the Bank during the financial year ending March 2012. The industrial relations in the Bank have been cordial and harmonious. There was no agitation or unrest during the year by the employees relating to issues pertaining to our Bank. The consultative committee meetings and negotiating committee meetings were held with the representatives of the recognized unions at regular intervals to sort out the grievances of the employees and settle the disputes, if any, amicably and the said meetings are attended by the top executives of the Bank.

Sports Activities:

Basketball:

Our Basketball Team emerged winners in the State Association Cup and State 1st Division League Tournaments for the year 2011. Sri Sanjay Raj and Sri Srinivas Naik were the stellar performers during the course of the Tournament. Sri Basavaraj Murgod, Sri Sanjay Raj and Sri Srinivas Naik represented Karnataka in the Senior Nationals held at Chennai during November 2011.

Kabaddi:

Our Kabaddi Team won the State Level Dasara Cup Tournament held in Bangalore in October 2011. Sri Prashanth Rai and Sri H.S.Keerthi are the rising stars for VIJAYA BANK and have a bright future ahead of them. Sri H.S.Keerthi represented Karnataka in the South Zone Nationals at Hyderabad and also represented Karnataka in the Super Nationals at Mumbai in December 2011.

Cricket:

Sri R.Vinay Kumar, Member of our Cricket team has represented India in the Test Debut at Perth. He is also the current captain of the Karnataka Ranji Team. Sri C.M.Gautam and Sri S.L. Akshay represented Karnataka in the Ranji Trophy for the year 2011-12.

Staff welfare measures:

The Bank is having various staff welfare schemes such as Canteen Subsidy, Conveyance expenses reimbursement, Annual Health Check up, Health Clinic at HO, Annual Medical Aid to the employees retired on superannuation, Newspaper reimbursement, Grant of Silver Jubilee awards, House Rent Reimbursement, Holiday Homes at Bangalore, Mysore, Ooty, Delhi & Mumbai, etc.,

The Bank is having a separate Staff Welfare Fund Trust with an objective to provide welfare facilities to the employees and their dependents viz., Awarding scholarships to the wards of the employees, reimbursement of residual claim of hospitalization expenses, reimbursement of cost of spectacles, funeral expenses to the dependents of the deceased employee and incentive to the employees who retire from the services of the bank on attaining the age of superannuation etc.,

The bank is also administering Family Welfare Scheme under which amounts collected from the members of scheme are distributed among the family members (nominees) of deceased employees.

Human Resources Management System:

With a view to streamline the process of faster decision making and enable error-free data management pertaining to the employees at a centralized location at Head Office, the Bank has implemented HRMS (Peoples oft) Software.

Housekeeping

Reconciliation with regard to all inter bank transactions have been drawn upto 31.03.2012. As against the Reserve Bank of India Benchmark of six months for reconciliation of outstanding inter branch entries, our present status is 3 months. All outstanding entries under different sensitive accounts are being followed up promptly. Except entries relating to pending court cases, all other long outstanding entries have been eliminated.

Internal Inspection

The Bank has put in place a well-defined Internal Audit policy. The Audit Committee of the Board oversees the performance of audit functions on a regular basis, providing guidance and directions for improvement in the audit system and internal controls in the Bank.

During the financial year, the Bank has conducted Risk Based Internal Audit (RBIA) of all the 897 programmed branches. Upon assessment of Risk rating, 73.02 % of these branches have secured "Low Risk".

In addition, inspection of 12 Service Branches, 13 RACPCs, 8 Regional Offices and 5 Head Office Departments was conducted during the year. Besides, 1200 branches were programmed for IS Audit and audit of all these programmed branches were completed before 31.03.2012.

Bank has covered 78.02% of its business under Concurrent Audit in 267 branches/offices as against RBI stipulation to cover atleast 50% of business. Bank is making use of Information Technology in its audit system including Risk Based Internal Audit (RBIA) for generating various value added reports.

Know Your Customer (KYC), Anti Money Laundering (AML) and Combating of Financing of Terrorism (CFT)

Bank has in place a Policy on 'Know Your Customer', 'Anti Money Laundering' and 'Combating of Financing of Terrorism'and is being overseen by the KYC Cell constituted at H.O. and at Regional Office by a designated Nodal Officer. The Policy Guidelines was first issued in 2005 and is being updated from time to time.

The ongoing implementation of KYC Norms and AML guidelines is being checked by the Internal Inspectors, Concurrent Auditors, Vigilance inspectors and Executives on their Branch visit. Every Regional Office has a Nodal Officer to overlook the implementation at the branches and submit a monthly certificate confirming implementation of KYC Norms. The Top Management is being informed of the compliance periodically.

The necessary changes are made in the Account Opening Forms to collect details on KYC Norms, Customer Profile and Risk Categorisation. System support is made to check the level of KYC compliance in an account before any cheque book is issued on any account.

A System support, to check the customer's names with that in the UN list of terrorists and also on the level of KYC compliance in each account is made available. As a part of Anti money laundering control, cash transactions and suspicious transactions are being viewed and monitored at

H.O. through exclusive AMLock Software.

Vigilance

The Vigilance Department at Head Office is headed by Chief Vigilance Officer of the rank of General Manager who is holding concurrent charge since the erstwhile Chief Vigilance Officer retired from the services of the Bank on 30/11/2011. The Fraud Prevention & Monitoring Cell is also functioning under Vigilance Department. The Vigilance Department overseas all vigilance works of the Bank as per the guidelines given by Central Vigilance Commission. Cases of frauds involving Rs 1.00 lakh & above are placed before the Board of Directors, reports forwarded to RBI as and when frauds are detected and reported. The Audit Committee of the Board is also apprised of frauds of Rs 1.00 lakh & above on quarterly basis. In compliance with RBI guidelines, a Special Committee of the Board is constituted to review large value of frauds involving Rs 1.00 crore & above. After studying modus operandi of frauds detected, Bank issues suitable instructions to the field functionaries as a preventive Vigilance measure. In addition, Vigilance Department carries out surprise inspection of branches, concentrating on preventive vigilance. These are done by Field Vigilance Officers stationed at Regional Offices. All efforts are made to plug the loopholes in the existing system to prevent recurrence of similar frauds and to strengthen the preventive vigilance.

Compliance

Board approved Compliance Policy is a requirement under the extant RBI guidelines and accordingly, the Bank has adopted Compliance Policy. The Compliance Department, H.O. ensures compliance with various communications received at Head Office from Govt of India, Reserve Bank of India, IBA and others by sending all such communications to the concerned operational Departments for necessary action. The Compliance Department is headed by the Chief

Compliance Officer who is of the Rank of a Deputy General Manager.

Right to Information Act 2005

Government of India enacted Right to Information Act, 2005 which came into force on October 12, 2005. The Act provides right to every citizen to secure/ access to information under the control of Public Authorities. It aims to promote openness, transparency and accountability in administration and in relation to matter connected therewith or incidental thereto.

The second line Executive at Regional Office is designated as the Public Information Officer and the Regional Head of the Regional Office is designated as the Appellate Authority under the Act. At the Head Office a Deputy General Manager is designated as Public Information Officer and a General Manager of the Bank as the Appellate Authority.

Information sought under the Act is being provided within the prescribed time frame. During 2011-12, bank as a whole has received and disposed of 1048 applications and 78 appeals under the Act.

Security Arrangement

The Bank has a well established security set up within the Bank's organizational structure with clear cut delegation of authority and responsibility.

The Department has reviewed and strengthened security arrangements at all Currency Chests and Bank branches. The Regional Security Officers carryout branch inspection visits at regular intervals to assess the security arrangements in vogue and suggest means for strengthening these arrangements. The Regional Security Officers maintain close liaison with the law enforcing agencies. The security arrangements in the Bank have been geared up to meet the prevailing security scenario.

Bank security is being strengthened to be more effective, modern and an unobtrusive Security System. The Access Control system at all Banks Currency chests has been strengthened in terms of RBI guidelines. A proper system of regulating access to Currency chest strong rooms and proper records of entry into/exit from the Vault Room of the chest is being maintained. Biometric access control systems have been installed at all currency chest of the Bank to strengthen access control measures.

Essential and mandatory security arrangements in terms of RBI/IBA guidelines are provided to almost all branches. Security Alarm Systems are installed at all branches and currency chests. Strong room conforming to RBI specification is provided to 1220 branches.

The Bank has a total of 28 (twenty eight) currency chests. Police guards have been provided to 27 currency chests. The Bank has outsourced round the clock guarding of Bhubaneshwar Chest to a Private Security Agency sponsored by DGR. Efforts are continuing for deployment Of Armed Police Guards at Bhubaneshwar Currency chest. Training including firing practice for Armed Guards deployed at currency chests/branches is imparted on an annual basis. Security Committees formed at Regional Offices and at Head Office meet periodically to review security aspects.

CCTV Surveillance System have been installed at 240 identified vulnerable branches in the first phase, keeping in view the threat perception, volume of cash and valuables handled and need for continuous surveillance. CCTV systems shall be installed at remaining vulnerable branches in a phased manner.

Implementation of Official Language

Bank is devoted for implementation of Government's Official Language Policy. With the efforts of staff members Bank could achieve Hindi correspondence target in all the region viz. 'A', 'B' & 'C' as on 31.03.2012.

Four of the Bank's Regional Offices conducted Hindi symposium in which teachers & students of various Colleges/ Universities, customers and staff members participated. 6 Special Hindi workshops were conducted in which 126 Bank Executives participated. 56 Hindi workshops were conducted for staff members in which 1003 staff members were trained.

Training programmes for employees of the Bank from all the cadres were conducted in mixed languages apart from English and Hindi.

The Parliamentary Committee on Official Language (Draft and Evidence Committee) had discussions with the Town Official Language Implementation Committees (TOLIC) of Jaipur City in which our Jaipur branch has also participated. The Bank has a Bilingual website which is updated from time-to-time. Rajbhasha segment has been started in Bank's internal portal 'V-Gyan Kendra' where information regarding Rajbhasha is available.

Conference was conducted for Rajbhasha Adhikaris in Region 'A' - Delhi.

Awards

Our Head Office, Bangalore was awarded I Prize by Town Official Language Implementation Committee (Banks'), Bangalore; our R.S.Puram-Coimbatore Branch was awarded I Prize by Town Official Language Implementation Committee, Coimbatore under 'Bank Branch Category'; our Rourkela Branch was awarded I Prize by Town Official Language Implementation Committee, Rourkela for the year 2010-11.

Our Bank conducted inter-bank competitions under the aegis of various Town Official Language Implementation Committees all over India.

Under the Bank's Internal Rajbhasha Shield Scheme for the year 2010-11 Personnel Department was awarded I Prize, Staff College-Bangalore II Prize and Vigilance Department was awarded III Prize under HO Department Category for effective implementation of Official Language. Under Best Region Category Hyderabad Region was awarded I Prize, Delhi Region II Prize and Nagpur Region III Prize.

Corporate Social Responsibility

To commemorate the 80th Foundation Day of the Bank, various welfare measures were taken up which are beneficial to the weaker sections of the society. Eight villages viz. Bhilay (Madhya Pradesh), Agadi (Karnataka), Madhapura Doddi (Karnataka), Tenkabellur (Karnataka), Chikkamagdur (Karnataka) Paruldanga (West Bengal), Olanda Saragaon (West Bengal), and Haripura (Rajasthan) were adopted by the bank. The following activities were taken up in these villages:

- Established a Rural Health Centre and provided free services of a doctor and medicines at a Capital cost of f 10000.00 and a recurring cost of Rs 15000 per month for each village.

- Adoption of one girl child with Educational expenses borne by the Bank up to graduation level.

- Construction of Bus Shelter in the village incurring a cost of Rs 2 lakh per village.

- Providing of water tank and construction of flag mast to village schools at a cost of Rs 20,000 per village.

Bank constructed a bus shelter a cost of Rs 1.50 Lakhs in Wazirpur village in Rajasthan state. Besides, Bank also was instrumental in setting up a Computer training centre at Mangalore for imparting free computer training to the under privileged children. Bank also provided Cots and essential furniture items to Daari Deepa Old Age Home at Ramnagara district of Karnataka State.

Board Meetings and meetings of other Sub-Committees of the Board

During the year, 13 Meetings of the Board of Directors, 18 Meetings of the Management Committee of the Board, 9 Meetings of the Audit Committee of the Board, 4 Meetings of the Directors' Promotion Committee, 5 Meetings of the Risk Management Committee of the Board, 4 Meetings of the Committee to Review Large Value Frauds of Rs. 1 crore and above, 1 Meeting of the Remuneration Committee, 2 Meetings of the Nomination Committee,4 Meetings of the Customer Service Committee, 4 Meetings of the Shareholders'/Investors' Grievances Committee, 11 Meetings of the Share Transfer Committee and 1 Meeting of the Share Allotment Committee were held.

Board of Directors

During the year 2011-12, the following changes have taken place.

1. Shri. H.S Upendra Kamath has been appointed as Chairman & Managing Director of the Bank w.e.f. 01.04.2011 vice Shri. Albert Tauro retired from the services of the Bank on attaining superannuation on 31.03.2011.

2. Shri. Prakash Chandra Nalwaya has been appointed as Non Official Director under CA category on the Bank's Board. w.e.f.20.05.2011

3. The tenure of Shri. Sridhar Cherukuri, Non Official Director appointed by the Government of India has come to an end on 09.07.2011.

4. Three Shareholder Directors viz., (i) Smt. Bharati Rao, (ii) Shri. Nishank Kumar Jain and (iii) Shri. P. Vaidyanathan were elected w.e.f. 08.08.2011 vice Shri. Ashok Kumar, Shri. Ashok Kumar Shetty and Shri. S. Ananthan, Shareholder Directors, whose term of Directorship had come to an end on 07.08.2011.

5. The tenure of Shri. Ranjan Shetty, Officer-Employee Director has come to an end on 08.09.2011.

6. Shri. Ashok Gupta has been appointed as Non Official Director on the Bank's Board with effect from 11.11.2011.

7. Shri. V.K Chopra, Deputy Secretary Dept. of Financial Services was appointed as Govt. Nominee Director vice Shri. L.K. Meena w.e.f. 02.12.2011.

8. Shri. H. Harish Ballal was appointed as Officer-employee Directorw.e.f. 25.01.2012vice Shri. Ranjan Shetty.

9. The tenure of Shri B. Ibrahim, Non Official Director, has come to an end on 02.03.2012.

The Bank's Board as on 31st March, 2012 consists of the following Directors:

1. Shri. H.S Upendra Kamath, Chairman & Managing Director

2. Smt. Shubhalakshmi Panse, Executive Director

3. Shri. V K Chopra, Government. Nominee Director

4. Smt. Suma Varma, RBI Nominee Director

5. Shri. Suresh Kamath, Workmen Director

6. Shri. Prakash Chandra Nalwaya, Non Official Director

7. Smt. Bharati Rao, Shareholder Director

8. Shri. Nishank Kumar Jain, Shareholder Director

9. Shri. P Vaidyanathan, Shareholder Director

10. Shri. Ashok Gupta, Non Official Director

11. Shri. H. Harish Ballal, Officer-employee Director

The Board of Directors placed on record its appreciation of the valuable services rendered by Shri. Sridhar Cherukuri, Shri. Ashok Kumar, Shri. Ashok Kumar Shetty, Shri. S. Ananthan, Shri. Ranjan Shetty, Shri. L K Meena and Shri. B. Ibr


Mar 31, 2011

The Board of Directors have pleasure in presenting the 31st Annual Report of the Bank along with the Audited Balance Sheet as on March 31, 2011 and the Profit and Loss Account for the year ended March 31, 2011.

VIJAYA BANKS PERFORMANCE IN 2010-11

Working Results

Net profit for the year 2010-11 is Rs. 524 crore as compared to Rs. 507 crore in 2009-10, recording a growth of 3.26%, while the operating profit for the year 2010-11 wasRs. 1047 crore as compared to Rs. 1057 crore for 2009-10. On the deposit front, average cost of deposits decreased from 6.21% in 2009-10 to 5.86% in 2010-11 due to better portfolio management. Yield on advances for 2010-11 (10.25%) is almost similar to that of previous year (10.26%).

The trends in financial results of the Bank are highlighted in the tables below:

(Rs. in crore)

Annual Sl. Item 2009-10 2010-11 increase No. (%)

1. Interest Income 5201 5844 12.36

2. Interest Expenditure 3752 3897 3.87

3. Net Interest Income (1-2) 1449 1947 34.36

4. Non-interest income 680 533 (-21.62)

i. Profit on sale of investments 283 118 (-58.30)

ii. Other non-interest income 397 415 4.53

5.Net Total Income (3+4) 2129 2480 16.49

6.Operating expenses 1072 1433 33.68

i. Staff Expenses 706 1010 43.06

ii. Other operating expenses 366 423 15.57

7. Operating profit 1057 1047 (-0.95)

8. Operating profit 774 929 (-20.03) (excl. Treasury profit)

9. Provisions and Contingencies 550 523 (-4.91)

10. Net profit 507 524 3.26

Important Profitability Ratios (%)

SI. Item 2009-10 2010-11 No.

1. Yield on funds 7.89 8.03

2. Cost of funds 5.69 5.36

3. Interest spread (1-2) 2.20 2.67

4. Yield on advances 10.26 10.25

5. Cost of deposits 6.21 5.86

6. Yield on investments

- excluding Trading Profit 6.67 6.50

- including Trading Profit 7.05 6.97

7. Other operating expenses to Average 0.56 0.58 working funds

8. Cost-Income Ratio 50.34 57.79

9. Establishment cost to average working 1.07 1.38 funds

Dividend

Taking into consideration the overall profitability position, the Board of Directors has recommended a dividend of Rs. 2.50 per Equity Share of the face value of Rs. 10/- for the year 2010-11, which works out to Rs. 137.34 crore including Dividend Tax.

Capital Adequacy

The capital adequacy ratio stood at 13.88% as on 31.03.2011 vis-a-vis the Reserve Bank of India norm of 9%. The Tier I capital of the Bank is X 4458 crore and Tier II is X 1806 crore.

Branch Network

With the opening of 42 branches during the year 2010-11, the network of branches reached the level of 1200, from the level of 1158 during the previous fiscal. There were 47 Extension Counters and 2 Satellite Offices at the beginning of the year 2010-11. Bank opened 2 Extension Counters (EC) during the year taking the total number of ECs and Satellite Offices to 51, ie, 49 Extension Counters and 2 Satellite Offices.

Deposit Mobilisation

Total deposits of the Bank increased from Rs.61932 crore to RS.73248 crore, recording an annual growth rate of 18.27%. CASA deposits recorded a 21.33% growth, accounting for 25.25% in aggregate deposits. CASA deposit growth was driven by 24.3% growth in SB deposits, to reach Rs. 13330 crore during the year.

The average aggregate deposits stood at Rs. 62104 crore during 2010-11, compared to Rs. 56702 crore during 2009-10. The Bank launched V-Platinum Current Account Deposit scheme during the year, to improve HNI clientele base and to improve corporate deposits.

Credit Expansion

During the year 2010-11, Gross Credit increased from RS. 41,935 crore to Rs.49,222 crore, registering a growth of 17.38%.

Infrastructure Finance

Amongst other sectors, Banks lending to Infrastructure stood at RS. 11,277 crore as at 31st March 2011, accounting for 22.91% of the Gross Credit. The Bank actively participated in lending to key Infrastructure segments like Power Generation, Roads/Highways, Ports, Airports and Educational Institutions. Significant disbursements are also due in the financial year 2011-12, against the sanctions already in place. While keeping the pace of growth linked to the huge credit needs of Infrastructure sector and other core sectors like Industry, Trade and Services, the thrust was on building a balanced Credit portfolio.

Considering the requirements of the Civil Contractors of Mumbai Metropolitan area, the Bank has introduced a new scheme under the style of "V-Contract (Mumbai) Scheme" to exclusively cater to their credit needs based on the commercial practices prevalent in that area.

Retail Credit

Bank continued to accord priority to its Retail Lending Schemes viz., Housing Loan, Education Loan, Jewel Loans etc., in view of the changing economic scenario and phenomenal growth of purchasing power of the population across all levels especially of the middle income segment.

The Bank has disbursed Rs. 4588 crore under Retail credit during the year & the amount outstanding as at March 2011 stood at Rs. 10041 crore. The Retail Credit Portfolio accounted for 20.40% of the Banks Gross Credit.

The Bank has disbursed Rs. 597 crore under Housing loan, Rs. 129 crore under Education loan, Rs. 550 crore under V-Wheels & Rs. 1158 crore under Jewel loan schemes during the year & the amount outstanding under Housing loan, Education loan, V-Wheels & Jewel Loan schemes, as on 31st March 2011, was Rs. 4213 crore, Rs. 603 crore, Rs. 929 crore & Rs. 902 crore respectively. The year to year growth in Road Transport Operators is 157 % and that under Jewel loan segment is 58 %.

The three major Retail Products viz, Vijaya Home Loan Scheme, V-Rent scheme and advances against gold jewellery has been comprehensively revised to make it more user friendly for availing finance without much hassles. Jewel Shoppe has been set up at 10 centers to give boost to the Jewel loan segment.

An innovative Retail product namely Vijaya Secured Overdraft scheme (VSOD) was introduced by the bank to cater to the financial requirement of mainly Micro and Small Enterprises with liberalized terms and conditions.

RACPCs are administratively de-linked from Regional Offices and have been set up as a separate business entity to enable them to aggressively market Retail lending by disposal of proposal expeditiously.

Priority Sector Lending

The Bank has been showing significant performance in lending to Priority sector over the years. Total Priority Sector advances of the bank have increased to X 14671 crore as at the end of March 2011.

Agricultural Finance

Outstanding agriculture:

Direct Agricultural advances of the Bank as at March 2011 stood at Rs. 3773 crore, as against Rs. 3608 crore as at March 2010, showing an increase ofRs. 165 crore, registering a growth rate of 4.57 % over March 2010. Total Agricultural advances (with 4.50% cap on Indirect Finance for agriculture) stood at Rs. 4969 crore.

Disbursements to agriculture:

The Bank has done well with regard to agriculture loan disbursements during the year. Under Special Agricultural Credit Plan, the Bank has disbursed Rs. 3961 crore during the year 2010-11, as against the target of Rs. 6432 crore, which works out to an achievement of 61.58%.

Kisan Credit Card scheme:

During the current year, the bank has issued 21426 Kisan Cards and disbursed Rs. 256 crore under the Scheme. The performance comes to 62.61 % of the target of 29200 Kisan Cards set for the year.The Bank has launched ATM enabled Kisan Credit Cards at some select branches for the benefit of farmers.

Coverage of new farmers:

During the year, the Bank has financed 69704 new farmers and disbursed Rs. 648 crore under various agricultural activities. The average number of new farmers financed comes to 131 as against the Government of India stipulation of minimum of 100 new farmers per rural and semi urban branch.

Financing Micro Small and Medium Enterprises (MSME):

The advances to Micro Small and Medium Enterprises increased to Rs. 6768 crore as at March 2011 from Rs. 5436 crore as at March 2010, signifying a year on year growth of 24.50%. As per the directives of RBI, advances under Micro Enterprises has to be 50% of MSE advances as at March 2011.The Bank has achieved 52% for the year 2010-11. Online registration of application and tracking system has been put up (w.e.f. 24.12.2010) for speedy disposal of proposals under MSE.

Bank has recently introduced a new scheme titled as "Vijaya Secured Overdraft" formulated mainly to cater to the credit needs of entities under MSE category under the Priority sector. During the year 2010-11 the bank has financed Rs. 345 crore under this scheme.

Advances to Weaker Sections:

As at March 2011 ,the outstanding weaker section advances of the Bank stood at Rs. 3808 crore, registering a growth of 9.99% over March 2010.

Self Help Groups (SHGs):

During the year 2010-11, the Bank has financed 25774 SHGs and disbursed Rs. 248 crore. Cumulatively, the bank has financed 144031 SHGs and disbursed Rs. 891 crore, with an outstanding of Rs. 511 crore. Our Bank has won the award for highest share of SHG business to overall business among commercial banks operating in Kamataka, for the year 2009-10.

Credit to Women beneficiaries:

Advances to Women beneficiaries stood at Rs. 2784 crore as at March 2011 as against Rs. 2342 crore as at March 2010, showing an increase of Rs. 442 crore, registering a growth rate of 18.87 %. Against the stipulated benchmark level of 5% of net bank credit to women, the Banks achievement stood at 6.64 %.

Advances to SC / STs:

Total advances to SC / STs stood at Rs. 807 crore as at March 2011, against Rs. 705 crore as at March 2010, showing an increase of Rs. 102 crore during the year with a growth rate of 14.47 %.

Credit to Minority Communities:

Advances to Minority Communities stood at Rs. 1411 crore as at March 2011, constituting 9.62 % of total priority sector advances, against RBI norm of 15%.

Lending under Govt. Sponsored Schemes:

Implementation of Govt, sponsored schemes receive utmost attention of the Bank. The Banks lendings under various Govt, sponsored schemes are furnished below:

(Rs. in crore)

Loan amount SI. Target Groups/ No. of outstanding as at No. Schemes beneficiaries March 2011

1. PMEGP 12376 85.89

2. SGSY 4557 29.59

3. SJSRY 4237 28.35

4. DRI 3317 6.13

Visveshvarava Grameena Bank :

Visveshvaraya Grameena Bank (VGB), a Regional Rural Bank established by the bank in 1985, has been making good progress. The VGB has a total network of 30 branches in Mandya District of Karnataka State. VGB is fully CBS compliant with effect from 25.08.2010. As at March 2011, the total deposits and advances of the RRB stood at Rs. 242 crore and Rs. 159 crore respectively. The financials of the VGB have been quite encouraging.

Financial Inclusion :

The Bank is implementing Financial Inclusion plan on Pan India Basis to cover 377 villages with population above 2000. As against a target of 75 villages to be covered under Fl the Bank has covered 113 villages in Karnataka and Kerala states as on 31.03.2011. It is proposed to cover all the remaining villages under FIP well before the scheduled date viz., 31st March 2012.

The Bank is also implementing the Electronic Benefit Transfer Scheme (EBT) of the Government of Karnataka. Under MNREGS, 52178 accounts are opened and 45028 Smart Cards issued. Similarly 40475 accounts are opened and 39187 Smart Cards issued under SSP Scheme.

The Jnana Jyothi Financial Literacy and Credit Counselling Trust has been formed jointly with Syndicate Bank under the model scheme of RBI. The Trust has already started its centre at Mandya. 2 more centres viz., Haveri and Dharwad will be activated soon. The Bank has also joined with other Banks and has set up a Karnataka Farmers Resource Centre at Bagalkot to reach the rural households more aggressively.

Asset Quality

The Bank continued its focus on maintaining quality assets along with thrust on preventing fresh slippages. It initiated and continued to emphasize various measures in this direction, including the following:

. Accounts showing signs of stress / likely default in dues are identified and treated as Special Watch accounts and are closely monitored. Wherever feasible, such assets are restructured, with additional need-based credit limits considered in deserving cases, to prevent fresh slippages.

. In case of willful defaulters, stringent recovery measures, including legal options like Securitisation, Lok Adalats / DRTs, etc., are promptly resorted to.

. To facilitate speedy recovery, Vijaya Adalats are regularly conducted to settle dues of defaulters amicably.

During the year, Bank could recover Rs. 46.57 crore under 3675 accounts by way of such settlements.

The gross Non-Performing Assets of the Bank as on March 2011 worked out to 2.56%, while net NPA ratio was 1.52%. During the year 2010-11, Bank could effect total cash recovery of Rs. 659 crore (including interest and recovery under written off Accounts) upgraded NPAs amounting to Rs. 332 crore. Further, the Bank also made provision of Rs. 273 crore for the unexpected defaults, apart from having a floating provision of Rs. 213 crore as on March 31, 2011. The Provision Coverage Ratio (including PWO) as at March 2011 worked out to 63.69%. However, as per RBI letter No. DBOD.No. BP.BC.87/21.04.048/2010-11 the Provision Coverage Ratio as on 30.09.2010 is 77.95%.

Investment and Fund Management

Total investment portfolio of the Bank increased from X 21107 crore as on March 31, 2010 to Rs. 25138 crore as on March 31, 2011. The average yield on investments (excluding profit on sale of investments) during the year worked out to 6.50% as against 5.79% in 2009-2010. The liquidity position of the Bank was generally comfortable throughout the year under review. The Bank also complied with CRR/SLR requirements as stipulated by Reserve Bank of India consistently during the year.

Implementation of RTGS & NEFT

The Bank joined the Real Time Gross Settlement (RTGS) system on June 14, 2004 and has been undertaking customer transactions with effect from January 12, 2005. The Bank joined the National Electronic Fund Transfer (NEFT) scheme with effect from December 7, 2006. NEFT facility has been extended to cover all our RTGS enabled branches/Offices.

Risk Management

Bank has implemented the Basel II Standardized Approach with effect from March 2009 and the overall Capital Adequacy Ratio as at 31st March 2011 works out to 13.88% which is above the minimum stipulated norm of 9%. In order to facilitate smooth and effective transition to the advanced approaches, the bank is implementing the Integrated Risk Management System (IRMS) project. The Bank has already approached RBI seeking approval for adoption of Internal Model Approach (IMA) for Market Risk and the Standardized Approach (TSA) for Operational Risk.

Credit Risk

The bank has put in place a comprehensive Credit Risk Management Policy, which include aspects such as Risk

rating , Risk Based Pricing, Risk Mitigation Strategies etc. The Banks Credit Risk Management exercise ensures compliance of regulatory guidelines with regard to fixation of prudential limits, substantial exposure, preferred sector growth strategies, Credit Approval process, Loan Review Mechanism etc. During the year, bank took several initiatives to improve the External Rating coverage. Banks corporate accounts are now covered under the external rating to extent of 80%. The bank has also put in place, two dimensional Credit risk rating software, procured from CRISIL for conducting Risk rating of all Retail and non retail Loans. The Bank conducts Stress test on Credit Risk in terms of Stress Test Policy of the Bank.

ALM and Market Risk

ALM and Market Risk of the bank is managed by Asset Liability Management Committee (ALCO) and Market Risk Management Committee (MRMC). Appropriate tolerance limits have been stipulated for mismatches in different time buckets, both for managing liquidity and interest rate risks. The bank is preparing daily ALM statements for better management of short term liquidity. Contingency funding plan, prudential ratios / limits have been set and actual position is monitored as a part of Liquidity Risk Management. Interest Rate Risk is measured through Earnings at Risk (EAR) and Duration Gap Analysis (DGA). Stress Test on Interest Rate Risk, Liquidity Risk, Forex Risks etc are carried out on quarterly basis. Mid-office reports on treasury operations are prepared on daily basis.

The VaR Calculation on trading book is being carried out under three methods viz Historical Simulation, Variance - Covariance and Monte Carlo simulation on daily basis since 1st April 2010. Further, the stress testing and back testing of VaR models are being done as per RBI guidelines on a monthly basis.

Operational Risk

During the year the bank took number of initiatives to improve the operational risk management framework for migrating to The Standardized Approach (TSA). Inline with the business Line Mapping Policy, the Bank computed the capital charge for operational risk under the Standardised approach (TSA) and appraised the position to ORMC/ RMCB/Board of Directors. The operational risk losses are reported to the ORMC regularly. The Board of Directors also reviewed the operational risk loss data for the year 2009-10. The Bank has constituted a Business Continuity Management Committee (BCMC) at the Apex Level and various emergency response teams at HO/RO/Branches to oversee implementation and management of the Business Continuity and related activities. These Committees/ Response Teams met periodically.

Basel-ll Compliance

In order to comply with the Basel 11 norms, the Bank has been carrying out parallel run exercise on the capital adequacy calculation in the RBI prescribed format, on a quarterly basis and apprising the Board, apart from submitting the same to RBI.

Besides, Bank has entered into MOU with all the four rating agencies viz. CRISIL, ICRA, CARE and Fitch, for risk rating of its corporate clients.

In terms of the Disclosure policy and ICAAP policy, the Bank has compiled the requisite information and got it vetted by the Quality Assurance Team for disclosure and submission to the Board and Reserve Bank of India.

Integrated Risk Management System (IRMS) Project

In order to facilitate smooth and effective transition to the Basel-ll compliance, the Bank is implementing the Integrated Risk Management System (IRMS). The IRMS Project consists of six solutions, viz., Credit Risk Management (CRM), Market Risk Management (MRM), Operational Risk Management (ORM), Credit Risk Rating Solution (CRR) (Retail & Non-Retail), Asset Liability Management (ALM) and Funds Transfer Pricing (FTP) Solution.

International Banking

Banks export credit as at 31.03.2011 stood at Rs. 1078 crore out of which the quantum of export credit extended in foreign currency was USD 22.81 million. As at March 2011, foreign exchange business turnover of the Bank stood at Rs. 12854 crore as against Rs. 12530 crore during the previous financial year.

The Bank is participating in the Rupee drawing arrangement with six leading exchange houses and two non - resident Banks from Middle East. Besides, the Bank has extended "Speed Remittance" facility to UAE Exchange Centre LLC and Al Ansari Exchange UAE to enable the NRIs from Gulf countries to electronically remit funds to their account with our branches any where in India.

In addition to this the Bank has introduced "V-Remit Xpress" - a web based online remittance facility - for the benefit of NRIs residing in USA to remit money for the credit of their own account or any other persons account either with our bank or with any bank in India.

Merchant Banking & Allied Activities

Bank is a SEBI registered category I Merchant Banker, Bankers to Issue, Debenture Trustee and Depository participant. The bank is also registered as Self Certified Syndicate Bank for accepting IPO/Rights issue applications under Applications Supported by Blocked Amount (ASBA).

The bank undertakes Payment Bankers Assignments for payment of Interest/Dividend/Refund orders of Corporates. Bank also offers Depository Services to its clients. The Online Trading commenced during the current financial year.

Government Business

Among various Government business, Bank is collecting Direct and Indirect tax at its 288 branches. The bank has also introduced online payment of taxes in all the branches. 153 branches of the bank are designated to open Public Provident Fund accounts. Besides, this, all the branches are authorised to disburse State Pension/Central pension. A separate cell called Centralized Pension Processing Center has been set-up in HO for centralized payment of pensions of Central Government pensioners.

Cash Management Services, Agency Arrangements with Banks in India:

The bank has tie up arrangement with other banks for payment of their Drafts, collection of local cheques with Corporation Bank, Citi Bank, HSBC, HDFC, ING Vysya, ICICI, Deutsche Bank and Standard Chartered Bank.

Corporate Agency with LIC: Bank has entered into the Corporate Agency agreement with LIC of India to cater to the life insurance needs of the customers.

Group Insurance Coverage for borrowers: Bank has entered into an agreement with M/s Bajaj Allianz Ltd for Group coverage of individual borrowers.

Money Transfer Services (Conventional and Online): Bank is a sub-agent for money transfer services of MoneyGram and XpressMoney. Bank has entered into a tie-up with Times of Money Ltd for online transfer of funds (Remit2lndia) as an additional service to NRIs.

Tie-up with Payment Gateways: Bank has entered into tie-up with Times of Money Ltd for our Internet Banking Customers for Online payment of goods and services purchased/availed. Besides, the Bank also has tie-up with other Payment Gateways namely Bill Desk, C C Avenue and Tech Process Solutions Ltd.

Tie-ups for Vehicle Loans: Bank has tied up with M/s Toyota Motors Ltd, M/s Tata Motors Ltd, M/s Ashok Leyland Ltd, M/s Mahindra and Mahindra Ltd and M/s Hyundai Motors Ltd to extend vehicle loans for personal use.

Credit Card Business

The billing has been centralized at Card Division with Credit Card billing being debited from Card Division, Head Office. At the end of the financial year, the total card issued by the bank stood at 148978. As on 31.03.2011, the Credit Card turn over is Rs. 43194 crore as against the turnover of Rs. 44174 crore as on 31.03.2010.

The total number of merchants enrolled by the bank for the year stood at 1203 as against 1098 merchants as on 31.03.2010. The bank makes direct payments to merchants maintaining account at our Core Banking branches. For few other merchants maintaining accounts with other banks, NEFT of Reserve Bank of India is utilized for payment.

Debit Card

There has been good increase in the issue of Debit Cards. We have totally issued 15.21 lakh Debit/ATM cards as on March 31, 2011 as compared to 11.35 lakh cards issued during the financial year as on March 31, 2010. The Debit Card turnover was Rs. 169.80 crore as against Rs. 95 crore as on March 31, 2010.

To provide prompt & better customer service, V-lnstant Debit Cards have been launched wherein the customer will get Debit Card immediately on opening of the account.

Marketing Setup

Marketing Cell at the Banks Head Office is actively engaged in designing new products, conducting marketing campaigns in potential areas to popularize our retail products, reviewing and fine tuning existing products, taking measures to strengthen CASA base, designing pamphlets/posters/ brochures/ mailers for marketing activities, percolating the perceptions of the Top Management to grass root level, conducting workshops on products and services of the bank and creating awareness on technology-backed Alternate Delivery Channels services offered by the Bank like V-Net Banking, RTGS/NEFT, V-Mobile Banking and SMS Alerts.

In order to nurture the account holders in the new generation segment, V-GenUTH SB Account and the niche segment V- Platinum SB account holders, a number of initiatives were under taken. V-GenUTH SB account holders maintaining balance of Rs. 25,000 and above were offered Blue colored School bags with the V-GenUTH logo. V-GenUTH Drawing Competition was held across the country for school children with attractive prizes. V-GenUTH Hungama event for children were conducted by all Regions in apartment complexes to popularize the product. The 25th V-GenUTH Quiz Contest for High School children of Karnataka State

was held at Bangalore. The highly popular Quiz Contest has become an iconic calendar event, associated with V-GenUTH SB and V-GenUTH Unnati RD products for the generation next.

To nurture the V-Platinum SB account segment, account holders were offered laptop bags, Gift packs of 4 Audio CDs, and complimentary cinema tickets for two, depending upon the balance. In addition to this, the young section in this segment in the age group of 20 to 30 years was offered "Wildrcraft" laptop bags. V-Platinum Current account holders were offered Divine Cards for viewing live proceedings in places of worship in India.

Publicity and Public Relations

During the Financial Year 2010-11, the bank carried out several major advertisement campaigns in print media in English, Hindi and regional languages throughout the country to enhance the visibility of the bank and its products. The bank has also carried out a corporate / product advertisement campaign in Radio Mirchi in its 32 stations during the World Cup Cricket. Simultaneously, the Bank is also continuing the outdoor publicity projects aimed at achieving heightened visibility through displays at Railway stations and bus stands and hoardings at prominent public places, highways and airport roads.

Customer Service and Redressal of Complaints

There is a well defined Grievances Redressal Mechanism in the Bank and efforts are made to resolve the complaints within the time frame. Customer complaints are resolved completely to the satisfaction of customers. The Bank has constituted Customer Service Committees at branch level and Standing Committee of Customer Service at HO level, which includes representative from the customers. These Committees meet periodically to evaluate and monitor customer service and address deficiencies. Customer Service Committee of the Board is also reviewing customer service on quarterly basis.

Banking Codes and Standards Board of India (BCSBI)

Bank, being a member of BCSBI has adopted the voluntary Codes formulated by BCSBI i.e. (i) Code of Banks Commitment to Customers (ii) Code of Banks Commitment to Micro and Small Enterprises. Bank has formulated and complied with several policies as per the guidelines of BCSBI. A session on customer service incorporating the provisions of the Codes has been included in the staff general banking training programmes in order to comply with the Codes in true letter and spirit.

Information Technology

The Bank has implemented Integrated Human Resources Management System (HRMS), Integrated Treasury Management system (ITMS), and Integrated Risk Management solution (IRMS). ITMS and HRMS have been operationalised and integrated with the Core Banking System. All major modules of these projects are live now.

Core Banking Solution (CBS):

The bank has implemented Core Banking Solution at all the branches with centralized database as on 28th March 2009 and covered 99.98% business with pending implementation of JND module. The present status of the branches/offices under CBS is here under:

CBS status as on 31.03.2011

CBS-Branches 1200

Extension counters in CBS 44

Offices including service branches 105

Total 1349

The data centre of the bank is located at Head Office Building Bangalore and Disaster Recovery Centre (DRC) has been set-up at Mumbai.

Alternative Delivery Channels

In order to ensure that technology driven Alternate Delivery Channels are utilized to the mutual advantage of the customers and the Bank, Marketing Cell has undertaken a number of activities. Mailers were sent to customers highlighting the advantages of using Alternate delivery Channels like internet banking, use of Debit Card, on-line purchases, funds transfer through RTGS/NEFT etc. In all the training programmes of the Staff College, one session on Alternate Delivery Channel is conducted for the benefit of the frontline staff. In order to ensure that these facilities percolate to the customer, staff members are being familiarized with these channels through workshops.

SMS Alerts:

As part of our continuous efforts to provide speedy and efficient technology based service for the benefit of our customers, Bank introduced in July 2009 SMS/e-mail alerts for financial transactions through finacle. As on 31.03.2011 there were 693726 registered users.

V-Mobile

Launched in September 2009, the product offers balance enquiry, mini statements, funds transfer, bill payment, mobile currency charging facilities etc. As on 31.03.2011 there were 22545 registered users across 21 Regions.

Internet Banking

V-Net Banking, the Internet banking module of the Bank, facilitates features like online funds transfer to other Banks through NEFT/RTGS, Online Registration of beneficiary, availability of latest challan formats for remittance of service tax, Central Excise etc in addition to the earlier facilities like balance enquiry, account statement, intra bank fund transfer, transaction related SMS alerts, payment of indirect taxes, direct taxes and utility bill payments etc. With all the branches working on Core Banking platform, all customers of the Bank can avail this facility with the convenience of accessing and transacting in their account from any location at any time through Internet. The Bank has initiated steps to implement two-factor authentication (2FA) for internet transactions. So far, 68575 retail clients and 8477 corporate clients are enrolled under the V-Net banking module.

ATMs

110 more ATMs were operationalised during the year 2010-11, taking the number of ATMs to 545 as at the end of March 2011. Banks customers have now access to over 70000 ATMs connected under National financial Switch (NFS) across the country.

Cheque Truncation system

As directed by the Reserve Bank of India, the Bank has implemented cheque truncation system in NCR of Delhi. Reserve Bank of India (RBI) has mandated National Payments Corporation of India (NPCI) to operationalise CTS in Chennai by March 2011. As per the roadmap of NPCI, Grid Clearing with Chennai as the hub has been envisaged for the States of Tamil Nadu, Karnataka and Kerala covering 18 centres. In the initial phase, CTS will be operationalised in Chennai by April 2011. Vijaya Bank is also ready to participate in CTS as and when live operations are started.

Human Resources Management

Manpower & Staff Productivity :

The total staff strength of the Bank stood at 11,415 in March 2011 as compared to 11,565 in March 2010. Of the total staff, 5,048 are Officers, 3,904 Clerical Staff, 2,127 Sub- staff, and 336 Part-time Employees in the subordinate cadre. The number of women employees as at the end of March 2011 stood at 2,346 consisting of 890 Officers and 1,456 Award Staff constituting 20.55 % of total employees in the Bank. As at the end of March 2011 there were 203 employees belonging to Handicapped Category and 576 employees belonging to Ex-Servicemen Category.

Business per employee as of March 2011 is Rs. 11.05 crore against X 9.30 crore for the financial year ending March 2010.

Recruitment:

During the year the Bank has appointed 590 Probationary Clerks. Bank has also appointed 47 Part Time Sweepers in 1/3rd Scale wages. The Bank has initiated the process of recruitment of 893 officers in different grades/scales, through direct recruitment mode as well as through campus recruitment mode.

In addition to the above the bank had also conducted Campus Recruitment Exercise to recruit newly qualified Chartered Accountants. Bank has initiated the process of appointing 235 Peons. Bank is in the process of appointing another 250 Part Time Sweeper in 1/3rd scale wages.

Promotions

The promotions effected during the year 2010-11 are furnished hereunder:

SI. Promotion from Promotion to Total No. promoted

1 TEGS-VI TEGS-VII 9

2 SMGS-V TEGS-VI 18

3 SMGS-IV SMGS-V 40

4 MMGS-III SMGS-IV 142

5 MMGS-II MMGS-III 269

6 JMGS-I MMGS-II 395

7 Clerical JMGS-I 233

Training :

The training system in the Bank has been strengthened by providing additional competent manpower and increasing the budgetary allocation. The courses have beer redesigned keeping in mind the essential inputs requirec for the employees to effectively handle the present & future assignments and to perform their duties and responsibilities effectively in the highly competitive tech-based customer driven banking environment. The Bank is also impartinc training to its employees through some reputed externa training institutions in certain specialized areas like Treasury Management, Risk Management, FOREX, HR, Marketing, etc. During the last financial year the Bank has imparted training to 6,777 employees constituting 59.40 % of the total employees. Out of which, 6,175 employees had undergone training in the Banks own establishments and 602 were trained at the reputed external training institutions including some overseas institutions.

SC/ST Employees :

Out of the total manpower of 11,415 as at the end of March 2011, 1,724 employees belong to SC category and 605 to ST category. A separate Cell for SC/ST has been created in Personnel Dept, HO to look into the matters pertaining to the SC/ST employees and also to supervise prompt implementation of Government of India guidelines in service matters in respect of SCs/STs. SC/ST Cells are functioning in all the Regional Offices as well. Each Cell has a designated liaison officer to attend to the grievances of the SC/ST employees. At the Head Office, one of the officers in Top Executive Cadre has been designated as the Chief Liaison Officer for SC/ST employees in the Bank and he is being assisted by a separate Cell consisting of senior officials. The Chief Liaison Officer is involved in all the policy decisions concerning SC/ST employees. Besides, quarterly meetings are being held between representatives of SC/ ST employees welfare association and the management. Relationship between the Bank and SC/ST employees association continues to be cordial. The Bank is arranging pre-recruitment/ pre-promotion training for SCs/STs regularly.

Further, the Bank has designated one General Manager as Chief Liaison Officer to attend to the grievances of OBC and Minority Community Employees. Our Bank is complying with all the Policy Guidelines laid down by the Govt, of India pertaining to reservation of posts for SC/ST employees, OBC & Minority employees including Persons with Disability.

Staff Relation :

The pro-active and humanistic approach undertaken by the Bank has yielded positive results and the Bank is showing progressive growth consistently with the collective efforts of the management and employees of the Bank. The climate is positive and the same is echoed in the form of exponential growth of the Bank during the financial year ending March 2011. The industrial relations in the Bank have been cordial and harmonious. There was no agitation or unrest during the year by the employees relating to issues pertaining to our Bank. The consultative committee meetings and negotiating committee meetings were held with the representatives of the recognized unions at regular intervals to sort out the grievances of the employees and settle the disputes, if any, amicably and the said meetings are attended by the top executives of the Bank.

Sports Activities :

During the year under reference, Bank continued to accord emphasis on promotion of Sports and Sports personalities on its rolls. Several sports personnel of the Bank participated in the various events and won prizes during the year.

BASKETBALL:

Our Basketball team participated and won the Karnataka State Senior Division League Championship & Mahindra NBA League Championship held in Bangalore during September-October 2010. Sri. Sanjay Raj and Sri. Srinivas Naik have represented Karnataka State for the National basketball Championship held at New Delhi during January 2011. Sri Srinivasa Gowda, Sri Basavaraj & Sri Srinivasa Naik have represented the Karnataka State in the National Games held at Ranchi during February 2011.

CRICKET:

Sri. R. Vinay Kumar has represented the Indian Cricket Team for the T-20 world Championship 2010-11 held in the West Indies. He has also been nominated as captain of the Karnataka State team for Ranji Trophy. Sri. C.M.Goutham and Sri. S.I. Akshay have represented the Karnataka State for Buchi Babu Tournament held at Chennai. Sri. R. Vinay Kumar and Sri. CM. Goutham have also represented the South Zone team for the Duleep trophy and Deodhar trophy championships 2010-11.

KABADDI :

Our Kabaddi Team participated in the Karnataka State level tournament held at Bangalore and won the Title. Sri. K Manoj, member of our Kabaddi team has been selected to attend the National Kabaddi Coaching Camp held at SAI Sports Complex, Sonipet during October 2010.

WEIGHT LIFTING:

Sri. S. Prakasha, member of our weight lifting team, working at our Vanivilas Road Branch, Bangalore as Asst. Manager, participated and secured second place [silver medal- in 77kg weight class] in the state weight lifting championship held in Puttur, Dakshin Karnataka.

Staff welfare measures :

The Bank is having various staff welfare schemes such as Canteen Subsidy, Conveyance expenses reimbursement,

Annual Health Check up, Health Clinic at HO, Annual Medical Aid to the employees retired on superannuation, Newspaper reimbursement, Grant of Silver Jubilee awards, House Rent Reimbursement, Holiday Homes at Bangalore, Mysore, Ooty, Delhi & Mumbai, etc.,

The Bank is having a separate Staff Welfare Fund Trust with an objective to provide welfare facilities to the employees and their dependents viz., Awarding scholarships to the wards of the employees, reimbursement of residual claim of hospitalization expenses, reimbursement of cost of spectacles, funeral expenses to the dependents of the deceased employee and incentive to the employees who retire from the services of the bank on attaining the age of superannuation etc.,

The bank is also administering Family Welfare Scheme under which amounts collected from the members of scheme are distributed among the family members (nominees) of deceased employees.

Human Resources Management System :

With a view to streamline the process of faster decision making and enable error-free data management pertaining to the employees at a centralized location at Head Office, the Bank has implemented HRMS (Peoplesoft) Software.

Housekeeping

Reconciliation with regard to all inter bank transactions have been drawn upto 31.03.2011. As against the Reserve Bank of India Benchmark of six months for reconciliation of outstanding inter branch entries, our present status is 3 months. All outstanding entries under different sensitive accounts are being followed up promptly. Except entries relating to pending court cases, all other long outstanding entries have been eliminated.

Internal Inspection

The Bank has put in place a well-defined Audit policy. The Audit Committee of the Board oversees the performance of audit functions on a regular basis, providing guidance and directions for improvement in the audit system and internal controls in the Bank.

The Bank conducts regularly Risk Based Internal Audit. The Bank has conducted Risk Based Internal Audit of 777 branches out of the 777 programmed branches.

In addition, inspection of 38 Forex Branches, 12 Service Branches, 29 Currency Chests, 10 Regional Offices and 9 Head Office Departments were conducted during the year. Branches are also subjected to IS Audit in accordance with the IS Audit Policy.

Bank has covered 77.31% of its business under Concurrent Audit by external firms of Chartered Accountants whereas 16 branches were subjected to Concurrent Audit by our Internal Inspectors (viz., Total 271 including 5 H.O. Departments). Bank is making use of Information Technology in its audit system including Automation in Risk Based Internal Audit System (RBIA).

KNOW YOUR CUSTOMER (KYC). ANTI MONEY LAUNDERING (AMD AND COMBATING OF FINANCING OF TERRORISM (CFT)

Bank has a Policy on "Know Your Customer", "Anti Money Laundering" and "Combating of Financing of Terrorism". It is being overseen by the KYC Cell constituted at H.O. and at Regional Offices by a designated Nodal Officer. The policy Guidelines was first issued in 2005 and is being updated from time to time.

KYC compliance for old accounts was achieved in April 2010. The ongoing implementation of KYC Norms and AML guidelines are being checked by the Internal Inspectors and Concurrent Auditors, Vigilance inspectors and Executives on their Branch visit. The Nodal Officer overlooks to the implementation of the KYC norms at the branches and submits a monthly certificate confirming implementation of KYC Norms. The top Management is being informed of the developments periodically.

Now a System support is also available to know the level of KYC Norms of any account whenever a new cheque book is applied for.

The necessary changes are made in the Account Opening Forms to collect details on KYC Norms, Customer Profile and Risk Categorisation. System support is made to check the level of KYC compliance in an account before a cheque book is issued to any account.

Implementation of Anti Money Laundering :

A System support, to check the customers names with that in the UN list of terrorists and also on the level of KYC compliance in each account is made available. As a part of Anti money laundering control transactions are being viewed at H.O. through exclusive AMLock Software. System support is also available, whenever a new account is opened, to get the name checked with the UN List of Terrorists and entities. Monitoring of large value transactions, generation of; Cash Transaction Reports on cash transactions of Rs. Ten lakhs and above, Suspicious Transaction Reports and Counterfeit Currency Reports are being carried out through the AMLock software.

The branches and the currency chests are instructed to inform to the KYC Celi and submit Counterfeit Currency Reports as and when it is found. Based on the information a CCR is generated at H.O. through the System and is being submitted to FIU-IND.

The Staff and Officers are being imparted the training on KYC, AML and CFT at the Staff Training College.

Vigilance

The Vigilance Department at Head Office is headed by Chief Vigilance Officer of the rank of Chief General Manager who is on deputation from State Bank of Hyderabad. The Fraud Prevention & Monitoring Cell is also functioning under the Vigilance Department. The Vigilance Department overseas all vigilance functions of the Bank as per the guidelines of Central Vigilance Commission. Cases of frauds involving Rs. 1 lakh & above are placed before the Board of Directors, reports forwarded to RBI as and when frauds are detected and reported. The Audit Committee of the Board is also apprised of frauds of Rs. 1 lakh & above on quarterly basis. In compliance with RBI guidelines, a Special Committee of the Board is constituted to review large value frauds involving Rs. 1 crore & above. After studying modus operandi of frauds detected, Bank issues suitable instructions to the field functionaries as a preventive Vigilance measure. In addition, Vigilance Department carries out surprise inspection of branches, concentrating on preventive vigilance. These are done by Field Vigilance Officers stationed at Regional Offices. All efforts are made to plug the loopholes in the exiting system to prevent recurrence of similar frauds and to strengthen the preventive vigilance.

Compliance

Board approved Compliance Policy is a requirement under the extant RBI guidelines and accordingly, the Bank has adopted Compliance Policy. The Compliance Department, H.O. ensures compliance with various communications received at Head Office from Govt of India, Reserve Bank of India, IBA and others by sending all such communications to the concerned operational Departments for necessary action. The compliance Department is headed by the Chief Compliance Officer who is of the rank of a Deputy General Manager.

Right to Information Act. 2005

Government of India has enacted Right to Information Act, 2005 which has come into force on October 12, 2005. The Act provides right to every citizen to secure/ access to information under the control of Public Authorities, consistent with interest. It aims to promote openness, transparency and accountability in administration and in relation to matter connected therewith or incidental thereto.

The second line Executive at Regional Office is designated as the Public Information Officer and the Regional Head of the Regional Office is designated as the Appellate Authority under the Act. At the Head Office Deputy General Manager (R&R) is designated as Public Information officer and General Manager (R&R) of the Bank as the Appellate Authority.

Information sought under the Act is being provided within the prescribed time frame. During 2010-11 bank received and disposed of 586 applications and 47 appeals under the Act.

Security Arrangements

The Bank has a well established Security set-up within the Banks organizational structure with clear cut delegation of authority and responsibility.

The Department has reviewed and strengthened security arrangements at all Currency Chests and Bank branches. The Regional Security Officers carry-out Branch Inspection visits at regular intervals to assess the security arrangements in vogue and suggest means for strengthening these arrangements. The Regional Security Officers maintain close liaison with the law enforcing agencies. The security arrangements in the Bank have been geared up to meet the prevailing security scenario.

Bank security is being strengthened to be more effective, modern and an unobtrusive Security System. The Access Control System at all Banks Currency Chests has been strengthened in terms of RBI guidelines. A proper system of regulating access to Currency Chest Strong Rooms and proper records of entry into / exit from the Vault Room of the chest is being maintained. Biometric access control systems have been installed at all currency chest of the Bank to strengthen access control measures.

Essential and mandatory security arrangements in terms of RBI/ IBA guidelines are provided to almost all branches. Security Alarm Systems are installed at all branches and currency chests. Strong Room conforming to RBI specification are provided to 1100 branches.

The Bank has a total of 29 (twenty nine) currency chests. Police guards have been provided to 28 currency chests. The Bank has outsourced round the clock guarding of

Bhubaneshwar Currency Chest to a Private Security Agency sponsored by DGR. Efforts are continuing for deployment of Armed Police Guards at Bhubaneshwar Currency Chest.

Training including firing practice for Armed Guards deployed at currency chests / branches is imparted on an annual basis. Security Committees formed at Regional Offices and at Head Cffice meet oenodicaily to review security aspects CCTV Surveillance System have been installed at 206 identified vulnerable branches in the first phase, keeping in view the threat perception, volume of cash and valuables handled and need for continuous surveillance. CCTV systems shall be installed at remaining vulnerable branches in a phased manner.

Implementation of Official Language

Bank could achieve Hindi correspondence percentage of 86.61% in area A, 90.02% in area B and 64.35% in area C as on 31.03.2011, thanks to enterprise-vide initiatives and efforts.

Ten of the Banks Regional Offices conducted Hindi symposium in which teachers & students of various Colleges/Universities, customers and staff members participated. Special Hindi workshops were conducted for 124 Bank Executives. Training on Unicode is being imparted in all Hindi Workshops as per the recommendation of Parliamentary Committee on Official Language. 77 Hindi workshops were conducted for staff members in which 1350 staff members were trained. The Bank has a Bilingual website which is updated from time-to-time.

The Parliamentary Committee on Official Language (Draft and Evidence Committee) had discussions with the Town Official Language Implementation Committees (TOLIC) of Coimbatore and Jhansi in which our branches participated. The Third Sub-Committee on Parliamentary Committee on Official Language inspected Regional Office, Kochi and appreciated the work done by the Bank in progressive use ofO.L. Hindi.

Awards

The Bank has been awarded I prize in Region C in the competition for Progressive Use of Hindi under Reserve Bank Rajbhasha Shield Scheme for the year 2009-10.

BTM Layout Branch was awarded II Prize under Non-Member Office Category and Staff College, Bangalore was awarded II Prize under Training Centre Category by TOLIC, Bangalore for effective Implementation of Official Language for the year 2009-10. Regional Office, Mangalore was awarded II Prize by TOLIC, Mangalore ; Sadashivpet, Pune branch was awarded III Prize by TOLIC, Pune ; Regional Office, Hassan was awarded II Prize under Public Sector Bank Category by TOLIC, Hassan and Regional Office, Delhi was awarded III Prize by TOLIC, Delhi.

The staff members working In Bangaore city participated in the Inter-Bank competitions conducted under the aegis of TOLIC. 12 competitions were conducted, in which our Bank bagged 5 prizes.

Under the Banks Internal Rajbhasha Shield Scheme for the year 2009-10 Department of Information Technology was awarded I Prize, Staff College-Bangalore II Prize and Card Division was awarded III Prize under HO Department Category for effective implementation of Official Language. Under Best Region Category Nagpur Region was awarded I Prize, Mumbai Region II Prize and Chandigarh Region III Prize.

Corporate Social Responsibility

As a responsible and responsive corporate citizen, Vijaya Bank consistently engages itself in community and social investment.

For the cause of promoting education, the Bank contributed Rs. 50,000/- to the Malnad Progressive Education Society, Honavar, Uttara Kannada District, towards construction of a new building to house its CBSE School. The Bank has also contributed towards purchase of sports equipment to Govt. Higher Primary School, Belve, Udupi District.

In a move towards promoting healthcare, the Bank has contributed Rs. 3,00,000/- to the Sevekshethra Hospital, Bangalore, managed by the Canara Bank Relief & Welfare Society towards purchase of 3 Multi Parameter Patient Monitor equipment. The Bank has also spent Rs. 30,000/- per year to provide free treatment to poor patients by providing bed charges and cost of medicines for 2 beds at Nazareth Hospital, Lucknow.

Bank contributed Rs. 20 lakh for the Vijaya Rural Development Foundation (VRDF) to conduct various trainings, free health camps, scholarships to meritorious students hailing from villages and studying in government schools, etc.

Vijava Rural Development Foundation:

Vijaya Rural Development Foundation was promoted by the bank in 1990 at Mangalore. During the year, VRDF has conducted 108 training /awareness programmes, covering a wide range of subjects, benefiting 6360 persons. Free health camps have also been organised for the benefit of rural poor. The Foundation has also granted scholarships to poor meritorious students hailing from villages and studying in government schools. The Foundation has expanded its activities to other districts like Haveri, Dharwad and Mandya, where the Bank has Lead Bank Responsibility. Bank has granted Rs. 20 lakhs to the Foundation during the current year for diversification of activities and expansion of their service to other areas.

VIBSETIs (Viiava Bank Self-Employment Training Institutes):

The bank has established a self-employment training institute called Vijaya Bank Self Employment Training Institute (VIBSETI) in Mandya on 1-1-2000. The institute has its own Campus at Mandya with residential facilities for the trainees. It has been conducting various vocational training / skill-upgradation / awareness programmes and product development workshops etc. During the current year, the Institute has conducted 60 Programmes involving 475 training days and trained 3267 beneficiaries, of whom 3142 have settled by setting up own ventures / gainful self-employment. The Bank has also established another VIBSETI at Haveri, on 1.9.2003. VIBSETI, Haveri, has conducted 73 programmes involving 284 training days and trained 2893 candidates, of whom 2584 have settled down with various gainful self-employment ventures.During the current year the Bank has opened one more VIBSETI at Indore, which started functioning from 03.02.2011 and conducted one training programme during the year benefitting 14 people.

Board Meetings and meetings of other Sub-Committees of the Board During the year, 12 Meetings of the Board of Directors, 23 Meetings of the Management Committee of the Board, 10 Meetings of the Audit Committee of the Board, 4 Meetings of the Directors Promotion committee, 7 Meetings of the Risk Management Committee of the Board, 5 Meetings of the Committee to Review Large Value Frauds of Rs. 1 crore and above, 1 Meeting of the Remuneration Committee, 1 Meeting of the Nomination committee, 5 Meetings of the Customer Service Committee, 4 Meetings of the Shareholders/ Investors Grievances Committee, 17 Meetings of the Share Transfer Committee, 1 Meeting of the Committee to consider appeals preferred by employees against final orders passed by Chairman & Managing Director as Disciplinary Authority and 1 Meeting of the Share Allotment Committee were held.

Board of Directors

During the year 2010-11, the following changes have taken place in the Constitution of Banks Board:

1. Smt. Suma Varma, was nominated as RBI Director, vice Shri. K Venkatappa w.e.f 30.07.2010.

2. Shri. G B Singh, Government Nominee Director retired from the services on attaining his superannuation on 30.09.2010.

3. Shri. L K Meena has been nominated as Government Nominee Director w.e.f. 29.10.2010 vice Shri. G B Singh

4. Shri. Suresh Kamath has been appointed as Workmen Director vice Shri. P Shantharam Shetty w.e.f. 02.11.2010

5. Shri. Nishank Kumar Jain, Non Official Director ceased to be the Director of the Bank w.e.f. 02.01.2011, on completion of his three year tenure.

The Banks Board as on 31st March 2011 comprised the following Directors :

1. Shri. Albert Tauro, Chairman & Managing Director

2. Smt. Shubhalakshmi Panse, Executive Director

3. Shri. L K Meena, Government Nominee Director

4. Smt. Suma Varma, RBI Nominee Director

5. Shri. Ashok Kumar, I.A.S (Retd.), Shareholder Director

6. Shri. Ashok Kumar Shetty, Shareholder Director

7. Shri. S Ananthan, Shareholder Director

8. Shri. Ranjan Shetty, Officer-employee Director

9. Shri. Sridhar Cherukuri, Non-Official Director

10. Shri. B Ibrahim, Non Official Director

11. Shri. Suresh Kamath, Workmen Employee Director

The Board of Directors placed on record its appreciation of the valuable services rendered by Shri. K Venkatappa, Shri. G B Singh, Shri. P Shantharam Shetty, and Shri. Nishank Kumar Jain, Directors during their respective tenure in the Bank.

Acknowledgement

The Board of Directors place on record their sincere appreciation for the excellent support and co-operation extended to the Bank by all customers, shareholders, staff members, financial institutions and other Banks, the Reserve Bank of India, the State Governments, the Securities and Exchange Board of India and the Government of India in improving its overall performance during the year 2010-11.

For and on behalf of the Board of Directors

Head Office, Bangalore H.S. Upendra Kamath

Dated the 28th April, 2011 Chairman & Managing Director


Mar 31, 2010

The Board of Directors have pleasure in presenting the 30th Annual Report of the Bank along with the Audited Balance Sheet as on March 31, 2010 and the Profit and Loss Account for the year ended March 31, 2010.

21. Housekeeping

Reconciliation with regard to all inter bank transactions has been drawn up to 31.03.2010. As against the Reserve Bank of India Benchmark of six months for reconciliation of outstanding inter branch entries, Banks present status is 3 months. All outstanding entries under different sensitive accounts are also being followed up promptly. Except entries relating to pending court cases, all other long outstanding entries have been eliminated.

22. Internal Inspection

The Bank has put in place a well-defined Audit policy. The Audit Committee of Board oversees the performance of audit functions on a regular basis, providing guidance and directions for improvement in the audit system and internal controls in the Bank.

The Bank conducts regu ¦ l Risk Based Internal Audit and Surprise Inspect i- In addition, inspection of 41 Forex Branches, 12 Services Branches, 27 Currency Chests, 10 Regional Offices and 7 Head Office Departments were conducted during the year. Branches are also subjected to IS Audit in accordance with the IS Audit Policy

Bank has covered 76 54% of its business under concurrent audit by external firms of Chartered Accountants whereas 17 branches were subjected to Concurrent Audit by our Internal Inspectors. Bank is making use of Information Technology in its audit system including Automation in Risk Based Internal Audit System (RBIA),

Know Your Customer / Anti Money Laundering.

Due to technological advancement, Money Launderers move funds faster across continents making detection and prevention thereof difficult. Bank has taken several initiatives to be more vigilant while opening account as well as in monitoring operations more closely, as per the guidelines under Prevention of Money Laundering Act.

- Bank has a Policy on Know Your Customer & Anti Money Laundering in place as per the guidelines issued by Reserve Bank of India and Indian Banks Association.

- Account Opening Forms have also been modified to capture the risk category of the customers.

- Anti-Money Laundering Software (AML Software) for detecting suspicious transactions in CBS environment has been installed and Suspicious Transaction Reports (STRs) are being generated and submitted to FIU, India. The Counterfeit Currency Reports (CCRs) are also being sent to FIU (I) as per the guidelines.

- Cash Transaction Report (CTR) in Electronic form is also regularly submitted to Financial Intelligence Unit (FIU), India on a monthly basis.

Bank has included a special session in training programmes to sensitize the staff on the importance of and adherences to Know Your Customer/ Anti Money Laundering concepts

23. Vigilance

The Vigilance Department at the Banks Head Office is headed by Chief Vigilance Officer in the rank of Chief General Manager. The Fraud Prevention & Monitoring Ceil is also functioning under the Vigilance

Department. The Vigilance Department overseas all vigilance functions of the Bank as per the guidelines of Central Vigilance Commission. Cases of frauds involving Rs.1 lakh & above are placed before the Board of Directors, reports forwarded to RBI as and when frauds are detected and reported. The Audit Committee of the Board is also apprised of frauds of Rs.1 lakh & above on quarterly basis. In compliance with RBI guidelines, a Special Committee of the Board is constituted to review large value frauds involving Rs.1 Crore & above. After studying modus operandi of frauds detected, Bank issues suitable instructions to the field functionaries as a preventive Vigilance measure. Bank has also put in place "Whistle- Blowers" Policy; accordingly, it is the bounden duty of staff members to report to the Chief Vigilance Officer/ Executive Director/ Chairman & Managing Director the incidence of fraud/malpractices, etc. which come to their knowledge in the course of their day-to-day functioning.

Further, the Vigilance Department carries out surprise inspection of branches, concentrating on preventive vigilance by Field Vigilance Officers stationed at Regional Offices. All efforts are made to plug the loopholes in the existing system to prevent recurrence of similar frauds and to strengthen the preventive vigilance machinery.

24. Compliance

Board approved Compliance Policy is a requirement under the extant RBI guidelines and accordingly, the Bank adopted a Compliance Policy. The Compliance Department, H.O. ensures compliance with various communications received at Head Office from Govt, of India, Reserve Bank of India, IBAand others by sending all such communications to the concerned operational Departments for necessary action. The Compliance Department is headed by the Chief Compliance Office- who is in the rank of a Deputy General Manager.

25. Right to Information Act. 2005

Government of India has enacted the Right to Information Act, 2005 which has come into force on October 12, 2005. The Act provides for right to every citizens to secure access to information under the control of public authorities, consistent with public interest. It aims to promote openness, transparency and accountability in administration and in relation to matters connected therewith or incidental thereto.

The second line Executive at the Regional Offices are designated as the Public Information Officer and the Regional Heads are designated as the Appellate Authority under the Act. At the Head Office, a Deputy General Manager is designated as the Public Information Officer and a General Manager as the Appellate Authority.

As per the provisions of the Act, various information sought under the Act is being provided within the prescribed time frame. During the year 2009-10, the Bank received 377 applications and 52 appeals under the Act and the same have been responded to by the Bank.

26. Security Arrangements

The Bank has a well-established Security set-up, facilitating all the essential and mandatory security arrangements at branches and currency chests as per RBI/IBA guidelines. 1056 Branches of the Bank are provided with strong room conforming to RBI specification. However, branches without strong room as per RBI specification are proposed to be shifted to new premises in a phased manner. CCTV Surveillance System has been installed at select branches keeping in view the threat perception, volume of cash and valuables handled and need for continuous surveillance.

The Bank has 29 currency chests. Police guards have been provided to 28 currency chests. A private security agency sponsored by Directorate General of Resettlement has been arranged for round the clock guarding of Banks Bhubaneshwar Currency Chest.

Training, including firing practice organized for Armed Guards deployed at currency chests / branches, is imparted on an annual basis. Security Committees formed at Regional Offices and at the Head Office meet periodically to review various security aspects.

The Bank has 414 Armed Guerds posted to vulnerable branches / cash escort duties at currency chests and for guarding Head Office.

There were no incidents of Dacoity /Robbery, except, eight incidents of Burglary at branches reported. However, there was no loss of cash or property.

27. Progressive Use of Hindi

Bank could achieve Hindi correspondence percentage of 94.58% in area A, 90.87% in area B and 69.63% in a»ea C as on 31.03.2010, thanks to enterprise-vide initiatives and efforts.

Seven of the Banks Regional Offices conducted Hindi symposium in which School/ college teachers, students, customers and staff members participated. Special Hindi workshops were conducted for 134 Bank Executives. A session on Unicode has been included in all Hindi Workshops, as it is required to be followed as per the Presidential Orders on recommendation of Parliamentary Committee on Official Language. The Bank actively participated in the National Seminar in Hindi organised by C.A.B. RBI, Pune. 82 Hindi workshops were conducted for staff members in which 1439 staff members were trained. The Bank also has a Bilingual website.

The Parliamentary Comrrmtee on Official Language (Draft and Evidence Committee) inspected Town Official Language Implementation Committee (TOLIC) Bhubaneshwar and appreciated the work done by the Bank in progressive use of Hindi.

28. Awards

In recognition of performance in implementing Hindi Language, the Bank was awarded III prize under the prestigious INDIRA GANDHI RAJBHASHA PURASKAR for the year 2007-08. The Bank has also been awarded II prize in Region C" for Progressive Use of Hindi under Reserve Bank Rajbhasha Shield Scheme for the year 2008-09.

The Bank was awarded I prize by Regional Implementation Office (North- East), Ministry of Home, Govt, of India in North Eastern Region for Progressive Use of Hindi for the year 2008-09. SLBC Gujarat also conferred on the Bank III prize for effective implementation of the Official Language.

The Banks Regional Office, Bangalore (North) was awarded I Prize by TOLIC, Bangalore for effective Implementation of Official Language for the year 2008-09. Also Regional Offices, Kolkata and Hubli, were awarded II Prize by TOLIC, Kolkata and Hubli respectively for effective Implementation of Official Language. Regional Office, Ahmedabad has been awarded Consolation prize by TOLIC, Ahmedabad during the year.

The staff members working in Bangalore city participated in the Inter-Bank competitions conducted under the aegis of TOLIC. 12 competitions were conducted, in which our Bank bagged 9 prizes, out which 2 were First prizes.

During the year, the Bank received an award from the NABARD in recognition of the highest share of SHG business to its overall business, under SHG Bank linkage programme for the year 2008-09, among commercial Banks in the State of Karnataka.

29. Corporate Social Responsibility

As a responsible and responsive corporate citizen, Vijaya Bank consistently engages itself in community and social investment. Among the various initiatives,

? For the cause of promoting Education, Bank donated a class Room to St. Maria Goretti Higher Primary School at Kukkundur, Karkala, contributed Rs.5 lakhs to Bharatiya Vidya Bhavan, Shimoga, for construction of Building, donated computers to S.B. High School at Holalkere, contributed to Akshaya Patra school childrens mid-day meal programme, in Karnataka State.

? Bank contributed Rs.33.70 lakhs for the development of a Circle at Mangalore named after Sri A.B.Shetty, the founder Chairman of the Bank.

? To encourage cultural activities, Bank contributed Rs. 10 lakhs for Vishwa Tulu Koota- a congregation of village folk for cultural activities at Ujire organized by Sri Kshetra Dharmastala Rural Development Programme and contributed Rs.2 lakh for the popular Dasara Cultural activities at Mysore.

? In a move towards promoting health care, donations were given to Helpage India, Bangalore for conducting Cataract operations, to Nazareth Hospital, Lucknow for providing beds to poor patients. Bank also provided drinking water Cooler to SSA Mandal at Akkalkot, Maharastra, in addition to putting up educative/public utility sign Boards at Bangalore, Mysore and Konkan Railway Stations.

? Apart from the above, the Bank has Vijaya Rural Development Foundation (VRDF) and Vijaya Bank Self-Employment Training Institutes (VIBSETI) devoted to the cause of imparting training under various job-oriented activities.

? Financial Inclusion is yet another aspect where the Bank has actively involved itself.

Vijaya Rural Development Foundation:

During the year, VRDF conducted 66 training / awareness programmes, covering a wide range of subjects, benefiting 5074 persons. Free health camps have also been organised for the benefit of the rural masses.

The Foundation also granted scholarships to poor mejiorious students hailing from villages and studying in Government schools. The Foundation has since expanded its activities to other districts like Haveri, Dharwad and Mandya, where the Bank has Lead Bank Responsibility.

VIBSETIs (Vijava Bank Self-Employment Training Institutes):

Bank has a Self-employment Training Institute, Vijava Bank Self Employment Training Institute (VIBSETI) at Mandya in Karnataka. The Institute has its own Campus with residential facilities for the trainees. It has been conducting various vocational training / skill up-gradation / awareness programmes and product development workshops etc. During the year, the Institute conducted 56 Programmes involving 472 training days and trained 1843 beneficiaries, of whom 1330 are settled with own ventures/gainful self-employment. Cumulatively 355 programmes were conducted training 12417 beneficiaries of which 8677 have settled with gainful self-employment. The second VIBSETI at Haveri established in the year 2003, conducted 72 programmes during the year involving 277 training days and trained 2968 candidates, of whom 2462 are settled with various gainful self-employment ventures. Cumulatively, 324 programmes have been conducted by the institute training 11966 beneficiaries of whom 8861 have settled with gainful self-employment.

30. Board meetings and Meetings of other Sub Committees of the Board

During the year, 12 Meetings of the Board of Directors, 19 Meetings of the Management Committee of the Board, 9 Meetings of the Audit Committee of the Board, 4 Meetings of the Directors Promotion Committee, 6 Meetings of the Risk Management Committee of the Board, 4 Meetings of the Committee to Review Large Value Frauds of Rs.1 Crore and above, 2 Meetings of the Remuneration Committee, one Meeting of the Nomination Committee, 4 Meetings of the Customer Service Committee, 4 Meetings of the Shareholders/ Investors Grievances Committee and 12 Meetings of the Share Transfer Committee were held.

31. Board of Directors

During the year 2009-10, the following changes have taken place in the Constitution of the Banks Board :-

1. Shri. S C Kalia, Executive Director demitted the Office of Vijaya Bank on 20.11.2009.

2. Mrs. Shubhalakshmi Panse has been appointed as Executive Director of the Bank w.e.f. 20.11.09 vice Shri. S.C. Kalia.

3. Shri. Brij Mohan Sharma, Non Official Director appointed under CA category ceased to be the Director w.e.f. 2.1.2010.

The Banks Board as on 31st March. 2010 comprised the following Directors :-

i. Shri Albert Tauro, Chairman & Managing Director

ii. Mrs. Shubhalakshmi Panse, Executive Director

iii. Shri G.B. Singh, Government Nominee Director

iv. Shri K. Venkatappa, RBI Nominee Director

v. Shri P. Shantharam Shetty, Workmen Director

vi. Shri Ranjan Shetty, Officer-employee Director

vii. Shri Nishank Kumar Jain, Non Official Director

viii. Shri Sridhar Cherukuri, Non Official Director

ix. Shri B. Ibrahim, Non Official Director

x. Shri Ashok Kumar, I.A.S (Retd.), Shareholder Director

xi. Shri Ashok Kumar Shetty, Shareholder Director

xii. Shri S. Ananthan, Shareholder Director

The Board of Directors place on record their appreciation of the valuable services rendered by Shri. S.C. Kalia and Shri. Brij Mohan Sharma during their respective tenure in the Bank.

Acknowledgement

The Board of Directors place on record their sincere appreciation for the excellent support and co-operation extended to the Bank by all customers, shareholders, staff members, financial institutions and other Banks, the Reserve Bank of India, the State Governments, the Securities and Exchange Board of India and the Government of India in improving its overall performance during the year 2009-10.

For and on behalf of the Board of Directors

Head Office, Bangalore Albert Tauro

Dated, the 30 April, 2010 Chairman & Managing Director



 
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