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UCO BANK
OFFER DOCUMENT
(Wholly owned by Government of India)Constituted under the Banking Companies (Acquisition & Transfer of Undertakings) Act, 1970
Head Office: 10, B.T.M. Sarani, Kolkata-700 001.Tel no.: (033) 22343600/22343661, Fax no.: (033) 22254538,
E-mail: [email protected],Web site: www.ucobank.com
Public Issue of 20,00,00,000 equity shares of Rs. 10/- each for cash at premiumof Rs. 2 per share i.e. at a price Rs. 12 per share aggregating to Rs. 240 Crores
RISK IN RELATION TO THE FIRST ISSUE
This being the first issue of the Bank, there has been no formal market for the equity shares of the Bank. The issue price (as hasbeen determined and justified by the Lead Manager and the issuer as stated under “Basis of Issue Price” on page no. 55) shouldnot be taken to be indicative of the market price of the equity shares after the shares are listed. No assurance can be givenregarding an active or sustained trading in the equity shares of the Bank nor regarding the price at which the equity shares willbe traded after listing.
GENERAL RISK
Investment in equity and equity related securities involves a degree of risk and investors should not invest any funds in thisissue unless they can afford to take the risk of losing their investment. Investors are advised to read the risk factors carefullybefore taking an investment decision in this issue. For taking an investment decision, investors must rely on their ownexamination of the issuer and the issue including the risks involved. The securities have not been recommended or approvedby Securities and Exchange Board of India nor does Securities and Exchange Board of India guarantee the accuracy or adequacyof this document.
The attention of Investors is drawn to the statement of Risk Factors on Page i of the Offer Document.
ISSUER’S ABSOLUTE RESPONSIBILITY
The Bank, having made all reasonable inquiries, accepts responsibility for, and confirms that this Offer Document contains allinformation with regard to the Issuer and the Issue, which is material in the context of the Issue, that the information containedin this Offer Document is true and correct in all material respects and is not misleading in any material respect, that the opinionsand intentions expressed herein are honestly held and that there are no other facts, the omission of which makes this documentas a whole or any of such information or the expression of any such opinions or intentions misleading in any material respect.
LISTING
The equity shares of the Bank are proposed to be listed on Calcutta Stock Exchange (CSE), The Stock Exchange, Mumbai (BSE)and the National Stock Exchange of India Ltd. (NSE) and the “in-principle” approvals for listing from the Calcutta Stock Exchange,The Stock Exchange, Mumbai, and the National Stock Exchange of India Ltd have been received on August 8th, 2003, August13th, 2003 and August 13th, 2003 respectively.
ISSUE OPENS ON : SEPTEMBER 3RD, 2003 ISSUE CLOSES ON : SEPTEMBER 10TH, 2003
LEAD MANAGER TO THE ISSUE REGISTRAR TO THE ISSUE
SBI CAPITAL MARKETS LTD. KARVY CONSULTANTS LTD.202, Maker Tower ‘E’, Cuffe Parade Karvy House, 46, Avenue IV, Street No. 1Mumbai – 400 005 Banjara Hills, Hyderabad – 500 034Tel.: (022) 2218 9166 Tel.: (040) 2331 2454Fax: (022) 2218 8332 Fax: (040) 2331 1968Email: [email protected] Email:[email protected]
TABLE OF CONTENTS
PAGE NO.
ABBREVIATIONS
RISK FACTORS, MANAGEMENT PROPOSALS (MP) THEREOF & NOTES TO RISK FACTORS .......................... i
PART I
I. GENERAL INFORMATION ......................................................................................................................... 1
II. CAPITAL STRUCTURE .............................................................................................................................. 9
III. TERMS OF THE PRESENT ISSUE ............................................................................................................ 12
IV. PARTICULARS OF THE ISSUE .................................................................................................................. 19
V. BANK AND MANAGEMENT ..................................................................................................................... 19
VI. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL PERFORMANCE .................................... 54
VII. BASIS OF ISSUE PRICE ............................................................................................................................ 55
VIII. OUTSTANDING LITIGATION, DEFAULTS AND MATERIAL DEVELOPMENTS ......................................... 57
IX. INVESTOR GRIEVANCE & REDRESSAL SYSTEM ..................................................................................... 62
RISK FACTORS, MANAGEMENT PROPOSALS (MP) THEREOF & NOTES TO RISK FACTORS .......................... 62
PART II
A. GENERAL INFORMATION ......................................................................................................................... 67
B. FINANCIAL INFORMATION ....................................................................................................................... 71
C. STATUTORY AND OTHER INFORMATION ................................................................................................ 93
D. MAIN PROVISIONS OF THE BANK NATIONALISATION ACT ................................................................... 95
E. MATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTION ............................................................. 97
PART III
DECLARATION ........................................................................................................................................... 99
UCO BANK
ABBREVIATIONS
ALPM Automated Ledger Posting Machine
AS Accounting Standard
ATM Automated Teller Machine
BIS Bank of International Settlements
BSE The Stock Exchange, Mumbai
BTC Bankers’ Training College
CSE Calcutta Stock Exchange Association Limited
CAGR Compounded Annual Growth Rate
CAR Capital Adequacy Ratio
CDSL Central Depository Services (India) Ltd.
CMD Chairman & Managing Director
CRISIL The Credit Rating Information Services of India Limited
CRR Cash Reserve Ratio
CVO Chief Vigilance Officer
Designated In terms of SEBI DIP Guidelines, 2000 “Designated Stock Exchange” means a stock exchange in which securitiesStock Exchange of the company are listed or proposed to be listed and which is chosen by the Bank for purposes of a particular
issue under these guidelines. National Stock Exchange of India Limited (NSE) will be the Designated StockExchange for the purpose.
DICGC Deposit Insurance and Credit Guarantee Corporation of India Limited
DP Depository Participant
DRT Debt Recovery Tribunal
ECGC Export Credit Guarantee Corporation Of India Limited
ECS Electronic Clearing Services
ED Executive Director
EFT Electronic Funds Transfer
EPS Earning Per Share
FCNR (B) Foreign Currency Non Resident Account
FEDAI Foreign Exchange Dealers Association of India
FIs Financial Institutions
FII Foreign Institutional Investors
FRA Forward Rate Agreement
FY Financial Year
GoI Government of India/ Central Government
HUF Hindu Undivided Family
ICD Inter-Corporate Deposits
IDRBT Institute for Development & Research in Banking Technology
INR Indian National Rupee
IRS Interest Rate Swap
UCO BANK
Issue Public Issue of 20,00,00,000 equity shares of Rs. 10/- each for cash at premium of Rs 2 per share i.e. at a price Rs12 per share aggregating to Rs. 240 Crores.
IT Information Technology
INFINET Indian Financial Network
KVP Kisan Vikas Patra
L/C Letter of Credit
MoF Ministry of Finance
MP Managements Proposals to address the risks
MRTP Monopolies & Restrictive Trade Practices Act
MTRP Medium Term Restructuring Plan (2000-2003)
NABARD National Bank for Agricultural and Rural Development
NAV Net Asset Value
NBFC Non Banking Finance Company
NHB National Housing Bank
NI Act Negotiable Instruments Act
NIBM National Institute of Bank Management
NPAs Non- Performing Assets
NRE Non Resident External Account
NRNR Non Resident Non-Repatriable Account
NRO Non Resident Ordinary Account
NRIs Non Resident Indians
NSDL National Securities Depository Limited
NSE The National Stock Exchange of India Limited
OCBs Overseas Corporate Bodies
PAN Permanent Account Number
P/E Price to Earnings Ratio
PLR Prime Lending Rate
PSU Public Sector Undertakings
RBI Reserve Bank of India
RIDF Rural Infrastructure Development Fund
ROANW Return on Average Net Worth
RRB/RRBs Regional Rural Bank (s)
SEBI Securities and Exchange Board of India
SLBC State Level Bankers Committee
SLR Statutory Liquidity Ratio
SARFAESI Act The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002
SRP Strategic Revival Plan (1997-2000)
SSI Small Scale Industries
UCO BANK
SWIFT Society for Worldwide Inter Bank Financial Telecommunication
TDS Tax Deducted at Source
The Bank/ UCO BankIssuer/ UCO
The Bank The Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 as amendedNationalisation from time to timeAct
The Board The Board of Directors of the Bank
The BR Act The Banking Regulation Act, 1949 (Amended)
The Companies Act Companies Act, 1956 (Amended)
The IT Act Income Tax Act, 1961 (Amended)
UTI Unit Trust of India
VRS Voluntary Retirement Scheme
VSAT Very Small Aperture Terminal
IMPORTANT NOTE: The accounting and financial information and ratios mentioned in the Offer Document are based on Auditor’sReport dated June 15th, 2003. Auditors have adjusted changes in accounting policies, changes arising out of Audit Qualifications andfor the adjustments relating to previous years. Therefore, Accounting & Financial information and ratios may not match with thepublished annual reports of the Bank.
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UCO BANK
RISK FACTORS, MANAGEMENT PROPOSALS (MP) THEREOF & NOTES TO RISK FACTORS
The following are certain considerations, which the investors should specifically peruse through before takingan investment decision in the offer. In some of the risk factors and their management proposals, reference pagenumbers have been provided, which can be used to obtain more details about the said risk.
INTERNAL RISK FACTORS
1. Accumulated losses in the past
The Bank had incurred financial losses from FY90 to FY99 and the accumulated losses of the Bank were
Rs. 1751.16 crores at the beginning of FY03. The Bank has written off accumulated losses to the extent of
Rs.1665.16 crore from its paid up capital and Rs. 86 crore from profit for FY03.
MP: The losses mainly arose on account of making provisions in line with RBI guidelines. Such losses have
since been accounted for and Bank at present carries no accumulated losses. The Bank has introduced
number of new deposit and advances products to achieve higher level of business growth and is also
implementing action plan for improving market share and profitability. The senior management of the Bank
review the progress of the Bank on an ongoing basis. For more details refer para Business and Activities of
the Bank on page no. 23.
2. Decline in return ratios
Interest Income to Average Working Fund declined from 9.27% in FY02 to 8.82% in FY03. Further Non
Interest Income to Average Working Fund declined from 2.13% in FY02 to 1.92% in FY03. As a result, ROA
declined from 0.83% in FY02 to 0.77% in FY03 and ROANW declined from 36.36%in FY02 to 28.35% in
FY03.
MP: The slowdown in growth of net interest income and the related ratios can be mainly attributed to
downward trend in the interest rates, which has resulted in the squeeze on the margins of the entire banking
sector. Also, the Bank has been able to bring down its average cost of funds by 79 bps (7.4% in FY02 to
6.61% in FY03). While focusing on its core activity of commercial banking, the Bank is also taking steps to
diversify its income stream and enhance the proportion of fee-based income to provide stability to its future
income stream.
3. Non Performing Assets (NPAs)
As on March 31st, 2003, the net NPAs of the Bank stood at 4.36% of its net advances amounting to Rs. 697.14
crores in absolute terms. In the event of non-recovery of these assets, the Bank may have to provide for
these NPAs in future, which might affect the profitability of the Bank. For details, investors are advised to
refer to para on Asset Classification, Income Recognition and Provisioning on page 33 of the offer document.
MP: The Net NPAs of the Bank have consistently been declining in percentage terms, from 5.45% as on
March 31st, 2002 to 4.36% in March 31st, 2003 and the Bank has provided for its NPAs in conformity with RBI
guidelines and provision for NPA as a percentage of gross NPA stood at 47.52%.
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UCO BANK
4. Regional concentration of the Bank
UCO Bank has a regional concentration in Eastern, Northern and North-Eastern Region, which constitutes of
64.25% of Deposits and 50.01% of Advances.
MP: The network of branches is spread throughout the country. There are 36% of the branches in East, 24%
in North, 18% in West, 9% in South and remaining 13% in Central and North East. The businesses are also
spread over the different zones. The Bank proposes to effectively utilise technology to increase its reach and
presence in every corner of the country.
5. Asset Liability Position
A large portion of the funding of the Bank is in the form of short and medium term deposits. The asset liability
position of the Bank could be affected if the depositors do not roll over the deposits.
MP: Assets have been created in line with maturity of liabilities and prudential guidelines on the matter as
given by Reserve Bank of India/determined by Board of Directors. As on March 31st, 2003, 64.98% the Bank’s
total deposits were term deposit. Bank has put in place an asset liability management system and a high
power committee reviews the position every fortnight. For more details please refer page no. 36.
6. Credit Risk
The Bank’s main business of lending carries an inherent credit risk, which involves inability or unwillingness
of a customer or counterparty to meet commitments in relation to lending, trading, hedging, settlement and
other financial transactions.
MP: Bank has taken steps to deal with credit risk aspects of its business. For the purpose Bank has formulated
guidelines for acquiring loan assets and it’s monitoring. Credit Administration and Credit Risk Management
has been segregated. Effective coordination is being created through corporate level Risk Management
Committee of the Bank. Bank is in the process of introducing credit rating of accounts. For more details
please refer page no. 43.
7. Asset Concentration
The top 5 industries account for 14.57% of the gross domestic credit exposure of the Bank as on March 31st,
2003. Also, the top ten non-food credit borrowers of the Bank account for about 13.55% of the total domestic
advances of the Bank as on March 31st, 2003. The borrower specific and industry specific behaviour may
potentially affect the overall asset quality of the Bank.
MP: Group/individual borrower concentration is well within the prudential norm set by Reserve Bank of India
and Bank’s Board of Directors. The Bank’s exposure to single industry in non-food segment is less than 5%
of domestic net bank credit. For more details please refer page no. 29.
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UCO BANK
8. Outstanding Litigations against the Bank
As on June 30th, 2003, there were 872 cases including writ petitions filed by employees/ ex-employees, suits/
writs by customers and consumer cases with aggregate claim of Rs. 72.17 crores, for which no contingent
liability has been provided. Out of these, the claim amount was above Rs. 50.00 lakhs in 20 cases. Further,
there are 135 instances, wherein criminal cases have been outstanding against the officials of the Bank in
connection to the transactions of the Bank. In addition, there are 151 cases filed by the employees/ ex-
employees or family members of deceased employees against the Bank claiming service benefits such as
withdrawal of VRS application and reinstatement in service/challenging order of dismissal from service/non-
payment of terminal benefit like gratuity, non payment of family pension/not giving due promotion etc.
which are pending before the Supreme Court/various High Courts/ Civil court/ Labour Court /Tribunals etc.
None of the above claims relates to pecuniary benefits as well as is not quantified. For more details, investors
are advised to refer to para on ‘Outstanding Litigations, Defaults and Material Developments’ on page 57 of
the Offer Document.
9. Tax Disputes
As on March 31st, 2003 proceedings against the Bank related to Income Tax (total disputed amount of
Rs. 1655.01 crores are pending in appeal with the Income Tax authorities from assessment year 1960-61.
Also, as on March 31st, 2003, 11 (eleven) proceedings related to Interest Tax (total disputed amount of
Rs. 47.07 crores) are pending in appeal with the Tax authorities from assessment year 1975-76. These claims
pertain to the past periods and appeals have been pending before CIT (A) and IT Tribunal. For more details
of the tax disputes, investors are advised to refer to para on ‘Outstanding Litigations, Defaults and Material
Developments’ on page 57 of the Offer Document.
10. Contingent Liabilities
As on March 31st, 2003, the Bank had contingent liabilities aggregating to Rs. 5614.23 crores, comprising
Rs. 72.17 crores as claims not acknowledged as debt by the Bank, Rs. 0.31 crores as liability for partly paid
investments, Rs. 2387.01 crores as liability on account of outstanding Forward Exchange Contracts,
Rs. 1582.71 crores as Guarantees given on behalf of constituents, Rs. 1034.79 crores as Acceptance,
Endorsements and other obligations and Rs. 537.24 crores as other items.
MP: The Contingent Liabilities are inherent in the normal course of banking business and are subject to the
prudential norms as prescribed by RBI.
11. Export Credit Target
The Bank has not met export credit target (5.65% of net credit) for the year FY03. For more details, refer to
para on ‘Export Credit’ on page 29 of the offer document.
MP: The non-achievement of the target has no bearing on the working results of the Bank.
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UCO BANK
12. RBI’s Annual Financial Inspection Report
The Annual Inspection Report of RBI on the financial position of the Bank as on March 31st, 2002 has identified
certain weaknesses in the system, operational irregularities and other deficiencies in the internal controls.
MP: The Bank has advised the RBI of the remedial measures already taken.
13. Accumulated losses of Regional Rural Banks (RRBs)
As on March 31st, 2002, the 8 out of 11 RRBs sponsored by the Bank had accumulated losses aggregating
Rs. 305.19 crores.
MP: UCO Bank has sponsored 11 RRBs in 5 states in association with Government of India and respective
State Governments. Government of India, State Governments and the Bank have contributed 50%, 15% and
35% of equity capital of the RRBs respectively. The performances of RRBs are improving gradually. However,
performance of RRBs has no bearing on the performance of the Bank. Bank’s stake in RRBs is restricted only
to the extent of capital invested in equities of RRBs.
14. Banks investment in IFCI & IDBI:
In respect of Banks investment in IFCI, a proposal for restructuring of maturity period and interest thereon
has been received. The Bank has given a “counter proposal”. In view of this, the Bank has fully provided for
the interest differential for the FY03 and no interest is being booked on accrual basis with effect from April 1st,
2003. Similarly, IDBI has also given a proposal for roll over of the Banks investment with them on the respective
dates. There will be no immediate impact on the Banks Balance Sheet.
15. In Priority Sector Lending, lending to agriculture and weaker sections constituted 12.45% and 4.43% of Net
Bank Credit respectively as against the stipulated targets of 18% and 10% as on last reporting Friday of
September 2002. Public Sector Banks are required to achieve the target/sub-targets for lending to Priority
Sector by end of Financial Year.
MP: Several policy initiatives have been taken to increase credit flow to agriculture and weaker sections.
These include creation of a special cell at Head Office for monitoring enhanced credit flow to these sectors,
paying focused attention to achieve the targets, special tie-up arrangements with the equipment manufacturer
for supply of equipments at cheaper rates, promotion of agri-finance through financial assistance in agri-
exports zone and launching of special schemes.
16. Two branches were deauthorised by SEBI to act as Collecting Bankers for a period of 3 months for an Issue
in 1999. In 1999, another branch was also debarred from acting as Collecting Bankers for any Issue for a
period of 1 year with effect from August, 1999.
MP: The de-authorisation of the three branches from acting as a Collecting Banker to Issues has expired in
August, 2000. The bank has taken measures to streamline the working of branches as Bankers to an Issue
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UCO BANK
17. The growth of Deposits has fallen from 24.67% in FY02 to 16.74% in FY03
MP: The percentage fall in deposit growth rate was on account of the conscious attempt on the part of the
Bank to contain high cost deposit, focus its attention towards acquiring more low cost deposit and thereafter
properly balance the deployment thereof. The total deposits of the Bank have increased from Rs. 26848.77
crore in FY02 to Rs. 31343.39 crore in FY03 i.e., an increase of Rs. 4494.62 crore during FY03.
18. Any future offering by the Bank or its existing shareholders may dilute the holdings of the allottees of the
present public issue or may affect the market price of the shares of the Bank adversely.
EXTERNAL RISK FACTORS
1. Regulatory restrictions on the Bank and limitations of the powers of shareholders of the Bank
There are a number of restrictions as per the Bank Nationalisation Act and Banking Regulations Act, which
impede flexibility of the Bank’s operations and affect/restrict investors’ right. These are as under:
(i) The Banks can carry on business/activities as specified in the Act. There is no flexibility to pursue
profitable avenues if they arise, in contrast with companies under the Companies Act, where shareholders
can amend the Objects Clause by a special resolution.
(ii) In terms of Section 8 of The Banking Regulation Act, 1949, the Bank is prohibited from doing trading
activity, which may act as an operational constraint.
(iii) In terms of Section 17(1) of The Banking Regulation Act, 1949, every banking company shall create a
Reserve Fund and shall, out of the balance of profit of each year as disclosed in the Profit & Loss a/c
prepared under Section 29 and before any dividend is declared transfer to the Reserve Fund a sum
equivalent to not less than twenty five percent of such profit.
(iv) In terms of Section 19 of The Banking Regulation Act, 1949 there are some restrictions on the banking
companies regarding opening of subsidiaries which may deny the Bank from exploiting emerging
business opportunities.
(v) In terms of Section 23 of The Banking Regulation Act, 1949 there are certain restrictions on the banking
companies regarding opening of new place of business and transfer of existing place of business,
which may hamper the operational flexibility of the Bank.
(vi) In terms of Section 25 of The Banking Regulation Act, 1949 each banking company has to maintain
assets in India which is not less than 75% of its demand and time liabilities in India which in turn may
prohibit the Bank from creating overseas assets and exploiting overseas business opportunities.
(vii) There are restrictions in the Banking Regulation Act regarding,
a) Management of a bank including appointment of directors
b) Borrowings and creation of floating charge thereby hampering leverage.
c) Expansion of business as the branches need to be licensed
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UCO BANK
d) Disclosures in the profit & loss account and balance sheet
e) Production of documents and availability of records for inspection by shareholders
f) Reconstruction of banks through amalgamation
g) Further issues of capital including issue of bonus shares/rights shares for which prior MoF approval
is required
(viii) The financial disclosures in the offer document may not be available to the investors after listing on a
continuous basis.
(ix) Various rights/powers of shareholders available under the Companies Act in this behalf are not available
to the shareholders of the banks. These rights include rights such as calling for general meetings,
inspection of minutes and other material records, application for relief in cases of oppression and
mismanagement, voluntary winding up etc.
(x) As per Section 3 (2E) of the Bank Nationalisation Act, “no shareholder other than Central Government
shall be entitled to exercise voting rights in respect of any equity shares held by him/her in excess of
one per cent of the total voting rights of all the shareholders of the Bank”.
(xi) No banking company shall pay dividend on its shares until all its capitalised expenses (including
preliminary, organisational expenses, share selling commission, brokerage, amounts of losses and any
other item not represented by tangible assets) have been completely written off. The Bank has received
an exemption from GoI, Ministry of Finance, Department of Economic Affairs (Banking Division) vide
gazette notification F. No. 11/6/2003-BOA dated July 18th, 2003 from the provisions of the said Section
15(1) relating to the payment of dividend, for a period of five years from the date of the notification.
2. Sensitivity to the economy and extraneous factors
The Bank’s performance is highly correlated to the performance of the economy and the financial markets.
The health of the economy and the financial markets in turn depends on the domestic economic growth,
state of the global economy and business & consumer confidence, among other factors. Any event disturbing
the dynamic balance of these diverse factors would directly or indirectly affect the performance of the Bank
including the quality and growth of its assets.
3. Competition from existing and new Commercial Banks
Competition in the financial sector has increased with the entry of new players and is likely to increase further
as a result of further deregulation in the financial sector. The Bank may face competition both in raising
resources and in deploying them.
MP: The Bank has an established broad-based presence and has been taking steps to enhance customer
satisfaction by upgrading skills, systems and technology to meet such challenges. The Bank is attempting to
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UCO BANK
add quality assets on competitive terms. The Bank is also taking steps to broad base its product bouquet with
a special emphasis on enhancement in the non-fund based income. On the resource-raising front, the Bank
is actively endeavouring to broaden its reach and raise resources through its wide distribution network of
1709 branches, 10 service branches and 172 extension counters. For more details on the business environment
of the Bank, investors are advised to refer to the para on ‘Management Discussion and Analysis of Financial
Results’ on page 54.
4. Changes in regulatory Policies
Major changes in Government/ RBI policies relating to banking sector may have an impact on the operations
of the Bank.
MP: The Policy changes may provide both opportunities and challenges for the Bank. The Bank has a long
presence in the banking sector for more than 60 years and does not perceive policy changes to be a major
threat.
5. Disintermediation in the financial markets:
Development of Capital Markets may result in disintermediation by current and potential borrowers whereby
many companies may access the markets directly, thereby reducing their dependence on the Banking system.
MP: The Bank has, in recent years, launched several retail lending schemes so as to broaden its borrower
base and distribute its risk concentration. Further, disintermediation brings with it the opportunity for the
Bank to expand its fee-based activities. The Bank has been endeavouring to develop a presence in several
financial services to earn fee based income by focussing on businesses such as foreign exchange, treasury,
investments, cash management, Bancassurance and depository participants, thus taking advantage of the
disintermediation phenomenon.
6. Forex risk
Exchange Rate fluctuations may have an impact on the Bank’s financial performance.
MP: As per RBI guidelines, banks are not allowed to keep open position on their foreign exchange transactions
beyond prescribed limits on a daily basis. Foreign exchange transactions beyond such limits, if any, must be
squared off at the end of each day. Hence, the risk from exchange rate fluctuations is minimised. The Board
of Directors of the Bank has also prescribed limits for gaps or mismatches in maturities of bank’s foreign
currency assets & liabilities and forward transactions in foreign exchange. The Bank operates within the
limits fixed for gaps or mismatches in maturities of Bank’s foreign currency assets and liabilities and forward
transactions in foreign exchange, thus minimising the risks of mismatches in maturities and interest rates.
7. Interest rate risk
Interest rate volatility exposes the Bank to an interest rate risk or market risk. Such interest rate risk has a
potential impact on net interest income or net interest margin as well as on the market value of the fixed
income securities held by the Bank in its investment portfolio.
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UCO BANK
MP: These risks are inherent in the banking business. However, the Bank has put in place a system of regular
review of lending and deposit rates in order to minimise the interest rate risk. The Corporate Risk Management
Committee of the Bank reviews the risk on a regular basis. Continuous Risk Management measures are
initiated depending upon the movement in the market interest rates. The movement in the interest rates is
closely monitored for appropriate action. For more details on the Risk Management procedures, investors
are advised to refer to para on `Risk Management’ on page 43 of the offer document.
8. Operational Risk
Operational risk is a result of failure of operating system in a bank due to certain reasons like computer break-
downs, power disruptions, fraudulent activities, natural disaster, human error or omission or sabotage.
MP: For mitigating and controlling the operational risk, the Bank has established a strong internal control
system. Apart from that, the Bank also has a separate administrative structure to formulate, implement and
monitor systems and procedures.
9. Financial Statements in the offer document
The financial statements and derived ratios therefrom contained in the offer document are prepared/computed
as per the permissible accounting practices. The investors may want to make their own adjustments to the
same before arriving at an investment decision in the offer.
MP: The financial statements and the derived ratios have been prepared in conformity to the extant guidelines
and the same have been certified by the statutory auditors of the Bank. The Bank is also governed by the
prudential norms of RBI for income recognition, NPA provisioning etc.
NOTES TO RISK FACTORS
1. Networth of the Bank as on March 31st, 2003 is Rs. 909.70 crores.
2. The present Initial Public Offering (IPO) of the Bank aggregates to Rs. 240 crores.
3. The Book Value of the share as on March 31st, 2003 is Rs. 15.18 per share (face value of Rs.10/- per share)
4. Cost per share of the Bank to the Government of India is Rs. 10/-.
5. During FY03, the Bank had adjusted accumulated losses of Rs. 1665.16 crores, from its paid-up capital as on
March 31st, 2002 by setting off the same against the paid-up capital of the Bank
6. Section 3(2B)(c) of the Bank Nationalisation Act provides that the paid-up capital may, from time to time, be
increased by such amounts as the Board of Directors of the Bank may, after consultation with the RBI and
with the previous sanction of the Central Government, raise by Public Issue of equity shares as may be
prescribed, so however, that the Central Government, at all times, hold not less than fifty-one per cent of the
paid-up capital of each of the Corresponding New Bank. The Banking Companies (Acquisition & Transfer of
Undertakings) and Financial Institutions’ Laws (Amendment Bill 2000) proposes to reduce the minimum stake
of the Government from 51% to 33%.
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UCO BANK
UCO BANK(Wholly owned by Government of India)
Constituted under the Banking Companies (Acquisition & Transfer of Undertakings) Act, 1970
Head Office: 10, B.T.M. Sarani, Kolkata-700 001.Tel no.: (033) 22343600/22343661,
Fax no.: (033) 22254538, E-mail: [email protected], Web site: www.ucobank.com
Public Issue of 20,00,00,000 equity shares of Rs. 10/- each for cash at premium of Rs. 2 per share i.e. at a priceRs. 12 per share aggregating to Rs. 240 Crores.
PART II. GENERAL INFORMATION
The United Commercial Bank Limited was set up in Kolkata on January 6th, 1943. Subsequently, it has been constituted as a CorrespondingNew Bank under the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 and its name was changed to UnitedCommercial Bank. On December 30th, 1985 the name of the Bank was changed again to UCO Bank (hereinafter referred to as ‘the Bank’)through an Act of Parliament.
The Bank is offering 20,00,00,000 equity shares of Rs. 10/- each for cash at premium of Rs. 2 per share i.e. at a price Rs. 12 per shareaggregating to Rs. 240 Crores (including reservation of 2,00,00,000 equity shares of Rs. 10/- each for cash at Rs.12 per share aggregatingRs. 24 Crores for the permanent/ regular employees and Working Directors of the Bank).
AUTHORITY FOR THE PRESENT ISSUE
The issue of equity shares is being made pursuant to the sanction of Government of India (GoI) in consultation with the Reserve Bank of India(RBI) vide its letters no. F. No. 11/6/2003-BOA dated June 9th, 2003, under Section 3(2B)(c) of the Banking Companies (Acquisition andTransfer of Undertakings) Act, 1970, as amended and the Resolution passed at the meeting of the Board of Directors of the Bank, held onMarch 20th, 2003.
It is to be distinctly understood that the sanction/ approval of the GoI and RBI should not in any way, be deemed or construed that the OfferDocument has been cleared or approved by them nor do they take any responsibility either for the financial soundness of the Bank or thecorrectness of the statements made or opinions expressed in the Offer Document.
The Bank can undertake the activities proposed by it in view of the present approvals, and no further approvals from any Governmentauthority are required by the Bank to undertake the proposed activities.
DISCLAIMER CLAUSE
AS REQUIRED, A COPY OF THIS OFFER DOCUMENT HAS BEEN SUBMITTED TO THE SECURITIES AND EXCHANGE BOARD OF INDIA(HEREINAFTER REFERRED TO AS SEBI). IT IS TO BE DISTINCTLY UNDERSTOOD THAT THE SUBMISSION OF THE OFFER DOCUMENTTO SEBI SHOULD NOT, IN ANY WAY, BE DEEMED OR CONSTRUED THAT THE SAME HAS BEEN CLEARED OR APPROVED BY SEBI.SEBI DOES NOT TAKE ANY RESPONSIBILITY EITHER FOR THE FINANCIAL SOUNDNESS OF ANY SCHEME OR THE PROJECT FORWHICH THE ISSUE IS PROPOSED TO BE MADE OR FOR THE CORRECTNESS OF THE STATEMENTS MADE OR OPINIONS EXPRESSEDIN THE OFFER DOCUMENT. THE LEAD MANAGER, SBI CAPITAL MARKETS LTD, HAS CERTIFIED THAT THE DISCLOSURES MADE INTHE OFFER DOCUMENT ARE GENERALLY ADEQUATE AND ARE IN CONFORMITY WITH SEBI (DISCLOSURE AND INVESTORPROTECTION) GUIDELINES IN FORCE FOR THE TIME BEING. THIS REQUIREMENT IS TO FACILITATE INVESTORS TO TAKE ANINFORMED DECISION FOR MAKING INVESTMENT IN THE PROPOSED ISSUE. IT SHOULD ALSO BE CLEARLY UNDERSTOOD THATWHILE THE ISSUER BANK IS PRIMARILY RESPONSIBLE FOR THE CORRECTNESS, ADEQUACY AND DISCLOSURE OF ALL RELEVANTINFORMATION IN THE OFFER DOCUMENT, THE LEAD MANAGER IS EXPECTED TO EXERCISE DUE DILIGENCE TO ENSURE THATTHE BANK DISCHARGES ITS RESPONSIBILITY ADEQUATELY IN THIS BEHALF AND TOWARDS THIS PURPOSE, THE LEAD MANAGER,SBI CAPITAL MARKETS LTD, HAS FURNISHED TO SEBI A DUE DILIGENCE CERTIFICATE DATED July 18th, 2003 IN ACCORDANCEWITH SEBI (MERCHANT BANKERS) REGULATIONS, 1992, WHICH READS AS FOLLOWS :
“(1) WE HAVE EXAMINED VARIOUS DOCUMENTS INCLUDING THOSE RELATING TO LITIGATION LIKE COMMERCIAL DISPUTES,DISPUTES WITH EMPLOYEES/ EX-EMPLOYEES ETC., AND OTHER MATERIALS IN CONNECTION WITH THE FINALISATION OFTHE DRAFT OFFER DOCUMENT PERTAINING TO THE SAID ISSUE;
(2) ON THE BASIS OF SUCH EXAMINATION AND THE DISCUSSIONS WITH THE BANK, ITS DIRECTORS AND OTHER OFFICERS,OTHER AGENCIES, INDEPENDENT VERIFICATION OF THE STATEMENTS CONCERNING THE OBJECTS OF THE ISSUE, PRICEJUSTIFICATION AND THE CONTENTS OF THE DOCUMENTS MENTIONED IN THE ANNEXURE AND OTHER PAPERS FURNISHEDBY THE BANK,
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UCO BANK
WE CONFIRM THAT:
(A) THE OFFER DOCUMENT FORWARDED TO SEBI IS IN CONFORMITY WITH THE DOCUMENTS, MATERIALS AND PAPERSRELEVANT TO THE ISSUE;
(B) ALL LEGAL REQUIREMENTS CONNECTED WITH THE SAID ISSUE AS ALSO THE GUIDELINES, INSTRUCTIONS, ETC. ISSUEDBY SEBI, THE GOVERNMENT AND ANY OTHER COMPETENT AUTHORITY IN THIS BEHALF HAVE BEEN DULY COMPLIEDWITH; AND
(C) THE DISCLOSURES MADE IN THE OFFER DOCUMENT ARE TRUE, FAIR AND ADEQUATE TO ENABLE THE INVESTORS TOMAKE A WELL INFORMED DECISION AS TO THE INVESTMENT IN THE PROPOSED ISSUE.
(3) WE CONFIRM THAT BESIDES OURSELVES, ALL THE INTERMEDIARIES NAMED IN THE OFFER DOCUMENT ARE REGISTEREDWITH SEBI AND THAT TILL DATE SUCH REGISTRATION IS VALID.”
FILING OF THE OFFER DOCUMENT WITH SEBI DOES NOT, HOWEVER ABSOLVE THE BANK FROM ANY LIABILITIES UNDER SECTION63 OR 68 OF THE COMPANIES ACT OR FROM THE REQUIREMENT OF OBTAINING SUCH STATUTORY OR OTHER CLEARANCES ASMAY BE REQUIRED FOR THE PURPOSES OF THE PROPOSED ISSUE. SEBI FURTHER RESERVES THE RIGHT TO TAKE UP, AT ANYPOINT OF TIME, WITH THE LEAD MANAGER(S) ANY IRREGULARITIES OR LAPSES IN THE OFFER DOCUMENT.
The lead manager has issued a fresh due diligence certificate dated August 21st, 2003, which reiterates the statements made in the abovereferred certificate and states that all observations made by SEBI vide letter no. CFD/DIL/SNB/15645 dated August 19th, 2003, have beenincorporated in the offer document.
DISCLAIMER CLAUSE OF THE CALCUTTA STOCK EXCHANGE (CSE)
The Calcutta Stock Exchange Association Limited (‘CSE’) has given, vide its letter no. CSEA/LD/929/2003 dated August 8th, 2003, permissionto the Bank to use the name of CSE in this Offer Document as one of the stock exchanges on which this Bank’s securities are proposed to belisted. The CSE has scrutinised this Offer Document for its limited internal purpose of deciding on the matter of granting the aforesaidpermission to the Bank. CSE does not in any manner :–
1. warrant, certify or endorse the correctness or completeness of any of the contents of this Offer Document;
2. warrant that this Bank’s securities will be listed or will continue to be listed on CSE; or
3. take any responsibility for the financial or other soundness of this Bank, promoters, management or any scheme or project of this Bank;
And it should not be, for any reason be deemed or construed that this Offer Document has been cleared or approved by CSE. Every personwho desires to apply for or otherwise acquires any securities of this Bank may do so pursuant to independent inquiry, investigation andanalysis and shall not have any claim against the CSE, whatsoever, by reason of any loss which may be suffered by such person consequentto or in connection with such subscription/ acquisition whether by reason of anything stated in the Offer Document or any other reasonwhatsoever.
DISCLAIMER CLAUSE OF THE NATIONAL STOCK EXCHANGE OF INDIA LIMITED (NSE)
“As required, a copy of this Offer Document has been submitted to National Stock Exchange of India Limited (hereinafter referred to asNSE). NSE has given vide its letter dated August 13th, 2003, permission to the Issuer to use the Exchange’s name in this Offer Document asone of the stock exchanges on which this Issuer’s securities are proposed to be listed. The Exchange has scrutinised this Offer Documentfor its limited internal purpose of deciding on the matter of granting the aforesaid permission to this Issuer. It is to be distinctly understoodthat the aforesaid permission given by NSE should not in any way be deemed or construed that the Offer Document has been cleared orapproved by NSE; nor does it in any manner warrant, certify or endorse the correctness or completeness of any of the contents of this OfferDocument, nor does it warrant that this Issuer’s securities will be listed or will continue to be listed on the Exchange; nor does it take anyresponsibility for the financial or other soundness of this Issuer, its promoters, its management or any scheme or project of this Issuer.
Every person who desires to apply for or otherwise acquire any securities of this Issuer may do so pursuant to independent inquiry,investigation and analysis and shall not have any claims against the Exchange whatsoever by reason of any loss which may be suffered bysuch person consequent to or in connection with such subscription/ acquisition whether by reason of anything stated or omitted to bestated herein or any other reason whatsoever.”
DISCLAIMER CLAUSE OF THE STOCK EXCHANGE, MUMBAI (BSE)
The Stock Exchange, Mumbai (‘BSE’) has given, vide its letter dated August 13th, 2003, permission to the Bank to use the name of theExchange in this Offer Document as one of the stock exchanges on which this Bank’s securities are proposed to be listed. The Exchange hasscrutinised this Offer Document for its limited internal purpose of deciding on the matter of granting the aforesaid permission to the Bank.The Exchange does not in any manner :–
1. warrant, certify or endorse the correctness or completeness of any of the contents of this Offer Document; or
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UCO BANK
2. warrant that this Bank’s securities will be listed or will continue to be listed on BSE; or
3. take any responsibility for the financial or other soundness of this Bank, promoters, management or any scheme or project of this Bank;
And it should not for any reason be deemed or construed that this Offer Document has been cleared or approved by BSE. Every personwho desires to apply for or otherwise acquires any securities of this Bank may do so pursuant to independent inquiry, investiga tion andanalysis and shall not have any claim against the Exchange, whatsoever, by reason of any loss which may be suffered by such personconsequent to or in connection with such subscription/ acquisition whether by reason of anything stated or omitted to be stated herein orany other reason whatsoever.
DISCLAIMER IN RESPECT OF JURISDICTION
This offer is made in India to persons resident in India and to NRIs/ OCBs on a non-repatriation basis. This Offer Document does not,however, constitute an offer to sell or an invitation to subscribe to shares offered hereby in any other jurisdiction to any person to whom itis unlawful to make an offer or invitation in such jurisdiction. Any person into whose possession this Offer Document comes is required toinform himself about and to observe any such restrictions. Disputes arising out of this Issue shall be subject to the jurisdiction of Court(s) inIndia.
GENERAL DISCLAIMER
The Bank accepts no responsibility for statements made otherwise than in the Offer Document or in the advertisements or any other materialissued by or at the instance of the Bank and that anyone placing reliance on any other source of information would be doing so at his/herown risk.
FILING OF THE DRAFT OFFER DOCUMENT
The draft offer document was filed with SEBI on July 21st, 2003 at Mumbai. A copy of this offer document, having attached thereto the‘Material contracts & documents’ referred to elsewhere in the offer document, has been delivered for registration to the Calcutta StockExchange so also to the Stock Exchange, Mumbai and National Stock Exchange. The Bank has also incorporated the comments given bySEBI before filing the offer document with the said Stock Exchanges. A complete copy of ‘Material contracts & documents’ have been keptopen for public inspection at the Head Office of the Bank. The Lead Managers and the Bank shall make all information available to the publicand investors at large and no selective or additional information would be available for a section of investors in any manner whatsoever.Also, The Bank and the Lead Manager are obliged to update the offer document and keep the public informed of any material changes tillthe listing and trading commencement.
It should be noted that submission of Offer Document to SEBI should not in any be deemed or construed that the same has been clearedor approved by SEBI. SEBI does not take any responsibility either for financial soundness of any scheme or the project for which issue isproposed to be made or for correctness of statements made or opinions expressed in the Offer Document.
All the legal requirements applicable till filing of Offer Document with Stock Exchanges have been complied with.
LISTING
The equity shares of the Bank are proposed to be listed on Calcutta Stock Exchange (CSE), The Stock Exchange, Mumbai (BSE) and theNational Stock Exchange of India Ltd. (NSE) and the “in-principle” approvals for listing from the Calcutta Stock Exchange AssociationLimited, The Stock Exchange, Mumbai, and the National Stock Exchange of India Ltd have been received on August 8th 2003, August 13th
2003 and August 13th 2003 respectively.
The Bank shall comply with the requirements of the listing agreement to the extent applicable to it on a continuous basis.
If the permissions to deal in and for an official quotation of the equity shares are not granted by any of the Stock Exchanges, the Bank shallforthwith repay, without interest, all such moneys received from the applicants in pursuance of this Offer Document. If such money is notrepaid within eight days after the Bank becomes liable to repay it (i.e. from the date of refusal or within 70 days from the date of closing ofthe subscription list, whichever is earlier), then the Bank will be liable to repay the money, with interest, as prescribed under Section 73 ofthe Companies Act.
ELIGIBILITY OF THE BANK TO COME OUT WITH THE PUBLIC ISSUE
The SEBI (Disclosure and Investor Protection) Guidelines, 2000 prescribe eligibility norms for a company to list its shares. Clause 2.2 of theGuidelines specifies the eligibility requirements for Public Issue by Unlisted Company. Clause 2.4.1, however, exempts a banking companyfrom these requirements. Hence in terms of Clause 2.4.1, the Bank is eligible to come out with Public Issue. The Bank has received necessaryapproval for making the Issue through the fixed price route.
PROHIBITION BY SEBI
The Bank, its associates and companies with which the Directors of the Bank are associated as Directors or Promoters are not prohibitedfrom accessing the capital market under any order or directions passed by SEBI.
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UCO BANK
ISSUE OF SHARES IN DEMATERIALISED FORMAT
The Bank has entered into a tripartite agreement with NSDL and CDSL for dematerialisation of shares for the existing/proposed shareholders.The Bank has also given an option to the subscribers / shareholders / investors to receive the share certificates in physical form or in thedemat form.
IMPERSONATION
As a matter of abundant caution, the attention of the investor is drawn to the provision of Section 68 (A) of the Companies Act, 1956,reproduced below:
“Any person who
(a) makes in a fictitious name an application to the Bank for acquiring or subscribing for any shares therein; or
(b) otherwise induces the Bank to allot or register any transfer of shares therein to him or any other person in a fictitious name
shall be punishable with imprisonment for a term which may extend to five years”, as applicable under the provisions of law.
MINIMUM SUBSCRIPTION
If the Bank does not receive the minimum subscription of 90% of the issued amount, on the date of closure of the Issue, or if the subscriptionlevel falls below 90% after the closure of the Issue on account of cheques having been returned unpaid or withdrawal of applications, theBank shall forthwith refund the entire subscription amount received. If there is delay beyond 8 days after the Bank becomes liable to pay theamount, the Bank shall pay interest as per Section 73 of the Companies Act, 1956.
LETTERS OF ALLOTMENT/ SHARE CERTIFICATES/ REFUND ORDERS
Letters of Allotment/ Share Certificates or Refund Orders, as the case may be, will be despatched by Registered Post or as per extant postalrules at the sole risk of the applicant to the sole/ first applicant within thirty days from the date of closing of the subscription list. Inaccordance with the extant postal rules the Bank will ensure dispatch of refund orders of value up to Rs. 1500/- under Certificate of Postingand refund orders of value above Rs. 1500/- by Registered Post only and adequate funds for the purpose shall be made available to theRegistrars by the Bank.
Further,
a) allotment of the equity shares shall be made within 30 days of the closure of the Issue; and
b) the Bank shall pay interest at the rate of 15% per annum (except to the applicants applying through Stockinvest) if the allotment has notbeen made and/or the Letters of Allotment/ Refund Orders have not been despatched to the investors within 30 days from the date ofthe closure of the Issue, for the delayed period beyond 30 days.
The Bank will provide adequate funds to the Registrars to the Issue, for the purpose of despatch of Letter(s) of Allotment/ Share Certificate(s)/Letter(s) of Regret/ Cancelled Stockinvest(s)/ Refund Order(s). Despatch of share certificates/refund orders/cancelled stockinvests anddemat credit would be completed and allotment and listing documents shall be submitted to the Stock Exchanges within 2 working daysof finalisation of the basis of allotment. Formalities pertaining to listing and trading of the securities offered through this offer document shallbe completed at all stock exchanges where they are proposed to be listed within 7 working days of date of finalisation of the basis ofallotment.
DENOMINATION OF SHARES
The Bank undertakes that at any given time, there shall be only one denomination for the shares of the Bank and that the Bank shall complywith such disclosures and accounting norms specified by SEBI from time to time.
OVERSUBSCRIPTION
In the event of the present Issue of equity shares being oversubscribed, the basis of allotment will be finalised in consultation with theDesignated Stock Exchange.
ISSUE PROGRAMME
The subscription list will open at the commencement of banking hours and will close at the close of banking hours on the dates mentionedbelow:
ISSUE OPENS ON : WEDNESDAY, SEPTEMBER 3RD, 2003
ISSUE CLOSES ON : WEDNESDAY, SEPTEMBER 10TH, 2003
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UCO BANK
ISSUE MANAGEMENT TEAM
LEAD MANAGERS TO THE ISSUE
SBI CAPITAL MARKETS LTD.202, Maker Tower ‘E’, Cuffe ParadeMumbai – 400 005Tel: (022) 2218 9166, Fax: (022) 2218 8332Email: [email protected]
ENAM FINANCIAL CONSULTANTS PRIVATE LIMITED801, Dalalmal Towers, Nariman Point,Mumbai – 400 021Tel: (022) 5638 1874/1962, Fax: (022) 2284 6824Email: [email protected]
KOTAK MAHINDRA CAPITALCOMPANY LIMITEDBakhtawar, 3rd Floor, 229, Nariman Point,Mumbai – 400 021Tel: (022) 5634 1100, Fax: (022) 2282 6632Email: [email protected]
DSP MERRILL LYNCH LIMITEDMafatlal Centre, 10th Floor,Nariman Point, Mumbai – 400 021Tel: (022) 5632 8131/8118,Fax: (022) 2204 8518/ 2283 2008Email: [email protected]
JM MORGAN STANLEYPRIVATE LIMITED141, Maker Chamber III,Nariman Point,Mumbai – 400 021.Tel: (022) 5630 3030Fax: (022) 5630 1694/2204 2137Email: [email protected]
STATEMENT OF INTER-SE ALLOCATION OF RESPONSIBILITIES
ACTIVITIES RESPONSIBILITY CO-ORDINATOR
1. Capital Structure with the relative components and formalities such as compositionof debt and equity, type of instruments.
SBICAP SBICAP
2. Drafting and design of Offer Document. The designated Lead Manager shall ensurecompliance with the Guidelines for Disclosure and Investor Protection and otherstipulated requirements and completion of prescribed formalities with StockExchange and SEBI.
SBICAP SBICAP
3. Advertisement and Issue of the Statutory Prospectus Advertisement as per SEBIGuidelines
SBICAP SBICAP
4. Advertisement / publicity material including brochures and newspaper materials.The designated Lead Manager shall ensure compliance with the Guidelines forDisclosure and Investor Protection and other stipulated requirements and completionof prescribed formalities with Stock Exchange and SEBI.
SBICAP SBICAP
5. Selection of various agencies connected with the issue, namely:
i) Registrars to issue
ii) Printers
iii) Advertising agencies
SBICAPDSPMLENAMJMMSKOTAK
DSPML
6. Marketing of the issue, which will cover, inter-alia, formulating marketing strategies,preparation of publicity budget, arrangements for selection of ad media.
SBICAPDSPMLENAMJMMSKOTAK
Retail Investors:ENAM
InstitutionalInvestors: DSPML
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UCO BANK
ACTIVITIES RESPONSIBILITY CO-ORDINATOR
7. Distribution of publicity and issue material including application form, prospectusand brochure and deciding on the quantum of the issue material.
SBICAPDSPMLENAMJMMSKOTAK
DSPML
8. Coordinating the training session module for the branch managers of the Bankregarding marketing.
SBICAPDSPMLENAMJMMSKOTAK
KOTAK
9. Arrangement for selection of centers for holding press/ broker/ investor conferences,preparation of press, broker, investor conference material, presentation
SBICAPDSPMLENAMJMMSKOTAK
JMMS
10. Selection of the Bankers to the Issue and follow-up with bankers to the issue to getquick estimates of collection and advising the issuer about closure of the issuebased on the correct figures.
JMMS JMMS
11. The post issue activities will involve essential follow-up steps, which must includefinalisation of basis of allotment/ weeding out of multiple applications, listing ofinstruments and despatch of certificates and refunds, with the various agenciesconnected with the work such as registrars to the issue, bankers to the issue and thebank handling refund business.
Even if many of these activities would be handled by other intermediaries, thedesignated Lead Manager shall be responsible for ensuring that these agenciesfulfill their functions and enable him to discharge this responsibility through suitableagreements with the issuer company.
JMMS JMMS
CO-MANAGERS TO THE ISSUE
ALLIANZ SECURITIES LIMITEDC-2, Green Park Extension,New Delhi - 110 116.Tel: (011) 2656 8613/8618Fax: (011) 2696 9478
A. K. CAPITAL SERVICES LIMITEDFlat No. N, Sagar Aptts.,6 Tilak Marg,New Delhi – 110 001Tel: (011) 2338 5704/8235,Fax: (011) 2238 5189
CENTRUM FINANCE LIMITEDBombay Mutual Fund Bldg,2nd Floor,Dr. D. N. Road,Fort,Mumbai – 400 001Tel: (022) 2266 2434Fax: (022) 2266 3458
KARVY INVESTOR SERVICES LIMITED“Karvy House”, 46, Avenue IV,Street No. 1, Banjara Hills,Hyderabad – 500 034Tel: (040) 2331 2454,Fax: (040) 2331 1968
REGISTRAR TO THE ISSUE
KARVY CONSULTANTS LIMITEDKarvy House, 46, Avenue IV, Street No 1Banjara Hills, Hyderabad 500 034Tel.: (040) 2331 2454,Fax: (040) 2331 1968Email: [email protected]
LEGAL ADVISOR TO THE ISSUE
M/S. SANDERSONS & MORGANSRoyal Insurance Buildings,5, Netaji Subhas Road,Kolkata – 700 001.Tel: (033) 2248 2644-47,Fax: (0033) 2248 2648Email: [email protected]
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UCO BANKIndore Regional Office2nd Floor, 380, Saket NagarIndore, (M.P. 452 001
Bareilly Regional Office35A/8, Rampur GardenOpp. Prabha Cinema, Bareilly-243 001 (U.P.)
Raipur Regional Office97, Anand Nagar, G.E. RoadRaipur (M.P.) 492 001
Lucknow Regional OfficeAkash Deep Building23, Vidhan Sabha Marg, Lucknow-226 001
Mumbai Regional OfficeMafatlal Centre, 2nd FloorNariman Point, Mumbai (Maharashtra) 400 021
Varanasi Regional OfficeB-27/92-5, Jawahar NagarBhelupura, Varanasi-221 010 (U.P.)
Nagpur Regional OfficePlot No. 1A, 101, Bhawaghar LayoutDharampeth, Nagpur (Maharashtra) 440 010
Burdwan Regional OfficeTown Hall Para, G.T. Road, Burdwan-713 001 (W.B.)New Delhi Regional Office5, Sansad MargNew Delhi 110 001
Kolkata Regional Office31, B.B.D. Bag (south)Hongkong House, Kolkata-700 001
Guwahati Regional OfficeMani Ram Dewan RoadP.O. Silpukhuri, Guwahati 781 003
Howrah Regional OfficeP-18, Dobson Lane, 1st FloorHowrah-711 101
Jorhat Regional OfficeT.R. Phukan RoadJorhat – 785 001, (Assam)
Salt Lake Regional Office1B, Russel StreetKolkata - 700 071
Cuttack Regional Office925/15, Kanika ChhakTulsipur, Cuttack - 753 008
Suri Regional OfficeDumka Road, SuriDist.-Birbhum-731 701, West Bengal.
COMPLIANCE OFFICER
Shri B. K. Choudhury, Deputy General Manager, has been designatedas the Compliance Officer for the Issue. In case of any pre-issue/post-issue related problems such as non-receipt of letters of allotment/share certificates/ refund orders/ cancelled stock invests, etc. theinvestors are requested to contact the Compliance Officer at:
Shri B. K. ChoudhuryDeputy General ManagerUCO BankHead Office: (T & IM Department), 10, B.T.M. Sarani,Kolkata-700 001.Tel no.: (033) 22343278,Fax no.: (033) 22254538E-mail: [email protected] site: www.ucobank.com
CREDIT RATING/ DEBENTURE TRUSTEES
Since the present issue is of equity shares, credit rating andappointment of trustees is not required.
UNDERWRITING
The present issue of equity shares is not underwritten.
CORPORATE GOVERNANCE
The SEBI guidelines in respect of corporate governance, in line withthe regulatory framework for public sector banks, shall be applicableto the Bank immediately on the listing of shares on the various stockexchanges. The Bank undertakes that it shall take the necessary stepsto comply with all the requirements of the guidelines on corporategovernance as would be applicable to it upon listing of its shares aswell as any requirements of the stock exchanges with regard tocorporate governance before grant of listing permission by thestock exchanges. The Bank also confirms that it shall comply withthe requirements of the stock exchanges to their satisfaction. In thisregard, the Bank is taking steps to further broad-base it’s Board ofDirectors and also set up the necessary committees as per therequirements of the revised guidelines.
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UCO BANK
Year ended Increase/(decrease) Mode Paid up capital in capital
March 31,1995 515.52 Do 1550.52
March 31,1996 110.00 Do 1660.52
March 31,1997 54.00 Do 1714.52
March 31,1998 350.00 Do 2064.52
March 31,1999 200.00 Do 2264.52
March 31,2003 (1665.16) Adjustment of accumulated Losses** 599.36
* The contribution of capital by GoI has been in the form of recapitalisation bonds.
** Ministry of Finance has given their approval for adjustment of accumulated losses against capital vide letter F. No.11/22/2001-BOA dated September 6th, 2002.
2. The Authorised share capital of the Bank is Rs. 1500.00 crores as per section 3 sub-section 2A of The Banking Companies (Acquisitionand Transfer of Undertakings) Act, 1970, as amended from time to time.
3. The Government of India, Ministry of Finance, Department of Economic Affairs (Banking Division), vide its letter F.No. 11/22/2001-BOAdated September 6th, 2002, in exercise of the powers conferred by Section 3 (2BB) inserted in the Banking Companies (Acquisition andTransfer of Undertakings) Act, 1970 by the Banking Companies (Acquisition and Transfer of Undertakings) Amendment Act, 1995, andin consultation with the Reserve Bank of India, has permitted the Bank to reduce its paid-up capital by adjusting accumulated lossesof Rs. 1665.16 crores from its paid-up capital. The present paid-up capital of the Bank is Rs. 599.36 crores.
4. The entire pre-issue capital of the Bank i.e. 59,93,60,000 shares are held by Government of India. After the issue, the shareholding ofGoI will be 74.98%. The Government of India vide its letter no. F. No. 11/6/2003-BOA dated July 16th, 2003 has given its approval tolock-in of 20% of the post issue share capital of the Bank for 3 years from the date of allotment in the public issue and lock in of balancepre issue share capital for a period of 1 year from the date of allotment in the public issue. Further, the shares issued last shall be lockedin first.
5. Under section 3A of the Bank Nationalisation Act, no notice of any Trust, express, implied or constructive, shall be entered on theRegister or be receivable by the Bank. In terms of this Section, while Trusts could make investments in equity shares of the Bank, thiscould be only in the name of the Trustees and no details of the Trust would be taken cognisance of by the Bank on its Register ofShareholders.
6. i) Section 3 (2E) of the Bank Nationalisation Act provides that no shareholder other than Central Government shall be entitled toexercise voting rights in respect of any equity shares held by him/ her in excess of one percent (1%) of the total voting rights ofall the shareholders of the Bank.
ii) Section 3 (2B)(b) of Bank Nationalisation Act provides that the paid up capital of every corresponding new bank from time to timebe increased by such amounts as the Central Government may, after consultation with the Reserve Bank of India, contribute tosuch paid-up capital.
iii) Section 3(2B)(c) of Bank Nationalisation Act provides that the paid up capital of every corresponding new bank may from time totime be increased by such amounts as the Board of Directors of the Bank may, after consultation with the Reserve Bank of Indiaand with the previous sanction of the Central Government, raise by Public Issue of shares as may be prescribed, so however, thatthe Central Government shall at all times hold not less than fifty-one percent of the paid-up capital of each corresponding newbank. The Banking Companies (Acquisition and Transfer of Undertakings) and Financial Institutions Laws (Amendment) Bill, 2000proposes to reduce the minimum stake of the Government from 51% to 33%.
7. In the event of oversubscription, in the process of rounding off to ensure allotment in lot size of 100 shares, the Bank will makeadjustments in the basis of allotment as may be necessary in consultation with the Designated Stock Exchange, such that the Issue sizedoes not exceed 10% of net offer to public.
8. In the event of oversubscription, the allotment shall be made on a proportionate basis as is outlined elsewhere in this Offer Document.Investors are advised to refer to para on ‘Oversubscription and Basis of Allotment’ on page no. 15 of the offer document.
9. Only permanent/ regular employees and Working Directors of the Bank as on the cut-off date i.e. August 31st, 2003, would be eligibleto apply in this Issue under reservation for employees on competitive basis. The number of permanent/regular employees of the Bankas on March 31st, 2003 is 25060. The Bank has reserved 2,00,00,000 equity shares for permanent/ regular employees and WorkingDirectors of the Bank.
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UCO BANK
10. The unsubscribed portion, if any, out of the equity shares reserved for Employees of the Bank will be added back to the Net Offer tothe Public.
11. In case of under-subscription in the net offer to the public portion, the excess subscription, if any, in the reserved categories would spillover to the public portion.
12. No single applicant in the net offer to the public category can make an application for a number of equity shares, which exceeds thenet offer to the public. No single applicant in any reserved category can make an application for a number of equity shares, whichexceeds the reservation in that category.
13. A minimum 50% of the net Issue to the Indian public will be made available for allotment in favour of those retail individual investorswho have applied for shares for a value of Rs.50,000 or less. This percentage may be increased in consultation with the DesignatedStock Exchange depending on the extent of response to the Issue from investors in this category. The balance of the net Issue to theIndian public shall be made available for allotment to investors, including Corporate Bodies, Institutions and individual applicantswho apply for shares for a value of more than Rs. 50,000. The unsubscribed portion of the net Issue to any one of the above twocategories shall be made available to the applicants in the other category, if so required and allotment made on a proportionate basisas per the relevant SEBI guidelines.
14. The GoI/Directors/Lead Managers have not entered into any buy-back and/or standby arrangements for purchase of the equity sharesof the Bank with any person.
15. The Bank has not availed any Bridge Loan against the proceeds of this Issue.
16. The Bank undertakes that it shall not make any further issue of capital whether by way of issue of bonus shares, preferential allotment,rights issue or public issue or in any other manner, during the period commencing from submission of draft offer document to SEBIfor the public issue till the securities referred in the Offer Document have been listed or application monies refunded on account offailure of the issue. As of date the Bank does not propose to alter the capital structure by way of split/consolidation of the denominationof shares or issue of shares on preferential basis, or issue of bonus or rights or further public issue of shares or any other securitieswithin a period of six months from the date of opening of present issue.
17. GoI (the Promoter) has not undertaken any transaction in the equity shares of the Bank in the last six months.
18. On the date of filing the draft offer document with SEBI, there were no outstanding financial instruments or any other right which wouldentitle the existing promoters or shareholders or any other person any option to receive equity shares after the IPO.
19. Top 10 shareholders of the Bank at the time of Stock Exchange filing and 10 days before Stock Exchange filing:
Shareholders Name No. of shares held % shareholding
Government of India 59,93,60,000 100%
Top 10 shareholders of the Bank 2 years prior to the time of Stock Exchange filing:
Shareholders Name No. of shares held % shareholding
Government of India 226,45,20,000 100%
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UCO BANK
III. TERMS OF THE PRESENT ISSUE
The Bank is offering 20,00,00,000 equity shares of Rs. 10/- each forcash at premium of Rs. 2 per share i.e. at a price of Rs. 12 per shareaggregating to Rs. 240 Crores (including reservation of 2,00,00,000equity shares of Rs. 10/- each for cash at Rs. 12 per share aggregatingRs. 24 Crores for the permanent/ regular employees and WorkingDirectors of the Bank). The equity shares are being offered subject,inter-alia, to the terms of this offer document, the application forms,the provisions for listing as specified in guidelines issued by StockExchanges and the GoI from time to time, the terms and conditionsstated in the allotment letters/ share certificates to be issued, theprovisions of the Bank Nationalisation Act, the Banking RegulationAct, 1949, to the extent applicable, the provisions of the CompaniesAct, 1956 to the extent applicable, the GoI, Ministry of Finance,Department of Economic Affairs (Banking Division) vide their letterF. No. 11/6/2003-BOA dated June 9th, 2003 approving the Issue, theguidelines for Disclosure and Investor Protection issued by SEBIand the provisions of the Depository Act, 1996 to the extentapplicable.
RIGHTS OF THE EQUITY SHAREHOLDERS
a) Right to receive dividend, if declared
b) Right to attend general meetings and exercise voting powers,unless prohibited by law
c) Right to vote either personally or by proxy, subject to Section3(2E) of the Bank Nationalisation Act.
FACE VALUE OF EQUITY SHARES
Each equity share being offered will have a face value of Rs. 10 andis offered at Rs. 12 per share.
RANKING OF EQUITY SHARES
The equity shares, now being offered shall rank pari-passu with theexisting equity shares of the Bank in all respects including dividendsave and except the following:
1. As per Section 3(2E) of the Bank Nationalisation Act, “noshareholder other than Central Government shall be entitled toexercise voting rights in respect of any equity shares held byhim/ her in excess of one percent of the total voting rights of allthe shareholders of the Bank”.
2. As per Section 15(1) of the Banking Regulation Act, 1949. “NoBanking Company shall pay any dividend on its shares until allits capitalised expenses (including preliminary expenses,organisational expenses, share selling commission, brokerage,amounts of losses incurred and any other item of expenditurenot represented by tangible assets) have been completelywritten off”. The GoI, Ministry of Finance, Department ofEconomic Affairs (Banking Division) gazette notification ref. F.No. 11/6/2003/BOA dated July 18th, 2003 from the provisions ofthe said Section 15(1) of the Banking Regulation Act, 1949,relating to the payment of dividend, for a period of five yearsfrom the date of the notification.
TERMS OF PAYMENT OF THE EQUITY SHARES
Applications should be for a minimum of 200 equity shares and inmultiples of 100 thereafter. The offer price is Rs. 12/- per share andthe entire amount is payable on application. Where an applicant isallotted lesser number of equity shares than he/ she has applied for,the balance if any, will be refunded to the applicant. No interestwould be payable on application money pending allotment up to30 days from the date of closure of the Issue.
INTEREST IN CASE OF DELAY IN ALLOTMENT/REFUNDS
The Bank agrees that
a) it will allot the equity shares within 30 days from the date ofclosure of the Issue.
b) it shall pay interest @ 15% p.a., except to applicants applyingthrough Stockinvests, if the allotment is not made and/or therefund orders are not dispatched to the investors within 30 daysfrom the date of closure of the Issue for the period of delaybeyond 30 days.
TRANSFER OF SHARES
As per Section 3 (2D) of the Bank Nationalisation Act, the shares ofevery corresponding new Bank, not held by the Central Government,shall be freely transferable.
PROCEDURE FOR APPLICATION AND MODE OFPAYMENT
AVAILABILITY OF OFFER DOCUMENT ANDAPPLICATION FORMS
The Memorandum Form 2A containing the salient features of theOffer Document together with application forms and copies of thisOffer Document may be obtained from the Lead Managers to theIssue, Brokers, Bankers to the Issue named herein, the collectioncentres of the Bankers to the Issue mentioned in the ApplicationForms, the Head Office, Regional Offices and all designated branchesof the Bank. The investors are advised to retain the copy of the OfferDocument/Memorandum in Form 2A (Abridged Offer Document)for their future reference.
APPLICATION MAY BE MADE BY
1. Indian Nationals Resident of India who are adult Individuals insingle name or joint names (not more than three).
2. Hindu Undivided Families (HUF) through the Karta of the HUF.(Applications by HUF would be given the same treatment asthat to applications by individuals)
3. Companies, Body Corporate and Societies registered underthe applicable laws in India and authorised to invest in theShares.
4. Scientific and/or Industrial Research Organisations, which areauthorised to invest in the equity shares.
5. Indian Mutual Funds registered with SEBI.
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UCO BANK
6. Indian Financial Institutions & Banks.
7. Trusts who are registered under the Societies Registration Act,1860 or any other Trust Law and are authorised under theirconstitution to hold and invest in shares subject to provisions ofSection 3A of the Bank Nationalisation Act.
8. Commercial Banks and Regional Rural Banks. Co-operativeBanks may also apply subject to permission from Reserve Bankof India.
9. Permanent and Regular employees/ Working Directors of theBank.
10. Non Resident Indians (NRIs) and Overseas Corporate Bodies(OCBs) on non-repatriation basis.
APPLICATIONS NOT TO BE MADE BY
1. Minors
2. Foreign Nationals
3. Partnership firms or their nominees
4. Trust or Society (except as stated above)
5. HUFs (except as stated above)
A single application can be made only for the number of equityshares that are being offered to respective category.
JOINT APPLICATIONS IN CASE OF INDIVIDUALS
Applications may be made in single or joint names (not more thanthree). In case of Joint Applications, refund, pay orders, dividendwarrants etc. if any, will be drawn in favour of the first applicant andall communications will be addressed to the first applicant at her/hisaddress as stated in the application form.
MULTIPLE APPLICATIONS
The application form shall contain space for indicating number ofshares subscribed for in demat and physical shares or both. Noseparate applications for demat and physical can be made. If suchan application is made, the applications for physical shares will betreated as multiple applications. An applicant should submit onlyone application form (and not more than one) for the total number ofequity shares applied for. Two or more applications in single orjoint names will be deemed to be multiple applications if the soleand/ or first applicant is one and the same.
In case of applications by Mutual Funds, a separate applicationmust be made in respect of each scheme of an Indian Mutual Fundregistered with SEBI and such applications will not be treated asmultiple applications, provided that the application made by theAsset Management Company/ Trustees/ Custodian clearly indicatetheir intention as to the scheme for which the application has beenmade.
The Bank reserves the right to accept or reject, in its absolutediscretion, any or all multiple applications. Applications made bypermanent/ regular employees of the Bank both under the reservedcategory for employees as well as in the net public offer shall not betreated as multiple applications. A separate single cheque/ draft/stockinvest must accompany each application form.
APPLICATIONS UNDER POWER OF ATTORNEY OR BYLIMITED COMPANIES
In case of applications under Power of Attorney or by Companies,Bodies Corporate, Societies registered under the applicable laws,trustees of trusts, Provident Funds, Superannuation Funds, GratuityFunds and Scientific and/ or Industrial Research Organisations, acertified copy of the Power of Attorney or the relevant authority, asthe case may be, must be lodged separately at the office of theRegistrars to the Issue simultaneously with the submission of theapplication form, indicating the serial number of the applicationform and the name of the Bank and the branch office where theapplication has been submitted and the Bank and the branch onwhich the cheque/ draft has been drawn. The Bank in its absolutediscretion reserves the right to relax the above condition ofsimultaneous lodging of the power of attorney along with applicationform subject to such terms and conditions as it may deem fit.
PAN/ GIR NUMBER
Where an application is for a total value of Rs. 50,000 or more, theapplicant, or, in case of applications in joint names, each of theapplicants should mention his/ her/ their Permanent Account number(PAN) allotted under Income Tax Act, 1961 or where the same hasnot been allotted, the GIR Number and the IT Circle/ Ward/ District.Applications without this will be considered incomplete and areliable to be rejected.
Signatures Thumb impressions and signatures other than in English/Hindi or any other language specified in the 8th Schedule to theConstitution of India, must be attested by a Magistrate or a NotaryPublic or a Special Executive Magistrate under his/ her official seal.
NOMINATION FACILITY
As per Section 109A of the Companies Act, 1956 and the NotificationNo: G.S.R. 836(E) dated October 24th, 2000 amending Form 2B ofnomination form of the Companies (Central Government’s) GeneralRules and Forms, 1956, only individuals applying as Sole Applicant/Joint Applicant can nominate, in the prescribed manner, a person towhom his share in the Bank shall vest in the event of her/his death.Non-individuals including society, trust, body corporate, Karta ofHUF, holder of power of attorney cannot nominate.
OTHER APPLICATION DETAILS
1. Applications must be made only on the prescribed ApplicationForm and should be completed in BLOCK LETTERS in ENGLISHin accordance with the instructions contained herein and in theapplication form, and are liable to rejection if not so made. Theprescribed application forms will have the following colours:-
Category Colour of form
Indian Public & NRI/OCBs White(Non-repatriation basis)
Employees Pink
2. Payments should be made by cash, stockinvest, cheque, ordemand draft drawn on any Bank (including a Co-operativeBank), which is situated at, and is a member of or sub-memberof the bankers’ clearing house located at the centre where theApplication Form is submitted. Outstation cheques/bank drafts
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UCO BANK
Stockinvest(s) shall be sent back by the Registrars directly to theinvestors. The currency of the Stockinvest is four months.
Reserve Bank of India, vide its circular DBOD No. FSC.BC.100/24.47.001/94 dated September 2nd, 1994, has restricted the use ofStockinvest(s) to individual investors and Mutual Funds only. Brokers,Corporate Bodies, Banks and Financial Institutions are not allowedto invest through Stockinvest(s). A ceiling of Rs. 50,000/- per individualper Stockinvest by Banks has been imposed. The above ceiling isnot applicable to Mutual Funds.
In the interest of the investors, to avoid rejection of applicationson technical grounds, it is suggested that the applicant shouldensure that
1. The date of issue of the Stockinvest by the issuing bank is clearlymentioned on the instrument
2. The instrument is duly signed by the authorised officer of thebank giving his code number
3. The instrument bears the code number and the address of theissuing bank branch
4. Any correction/ alteration in the date of issue, amount, the nameof the issuer, etc. should be attested by an authorised officer ofthe issuing bank
5. The applicant has clearly written the name of the issuer, theamount and signed the instrument
6. Amount written in the application form to be deposited and theamount of the instrument accompanying the application formshould be the same
Note: The above information is given for the benefit of investors andthe Bank is not liable for any modification in the terms of theStockinvest or procedure thereof by the issuing bank.
PARTICULARS OF BANK ACCOUNT
All the applicants, including applicants with Stockinvest, shouldmention particulars relating to Savings Bank/Current Account numberand the name of the bank and branch with whom such account isheld in the appropriate place in the application form to enableRegistrars to print the said details in the refund orders after the nameof the payee. Please note that it is mandatory to provide the afore-mentioned details. Applications without these details would betreated as incomplete and applications are liable to be rejected.
Note
(i) Applicants are requested to write the application serial numberon the reverse of the instruments by which the payments arebeing made to avoid misuse of instruments submitted alongwith the applications for equity shares.
(ii) Applications by NRIs/OCBs on non-repatriation basis can bemade using the Form meant for Public out of the funds held inNon Resident (Ordinary) Account (NRO)/NRE Account. Therelevant bank certificate must accompany such forms. Suchapplications will be treated at par with the applications madeby the public. For further instructions, please read theApplication Form carefully.
REJECTION OF APPLICATIONS
The Board of Directors of the Bank reserves in its absolute discretionthe right to accept or reject any application in full or in part. Thevarious reasons for rejections could be, but not limited to following:incomplete or illegible applications, number of shares applied forless than minimum required number, no information about PAN/GIRin case of applications of value over Rs. 50,000, non-adherence toinstructions as mentioned under para ‘applications by stockinvestsfor stockinvest applications, applications accompanied by cash ofmore than Rs. 20,000. Applicants are also advised to refer para on‘General Instructions’ to understand various other reasons for rejectionof applications.
DISPOSAL OF APPLICATIONS AND APPLICATIONMONEY
The Bank reserves, in its own, absolute and uncontrolled discretionand without assigning any reason, the right to accept in whole or inpart or reject any application. If an application is rejected in full, theentire application money received will be refunded to the applicant.If the application is rejected in part, excess of the application moneyreceived will be refunded to the applicant within 30 (thirty) daysfrom the date of closure of the Issue. No interest will be payable onthe application money so refunded. Refund will be made by chequesor demand drafts drawn in favour of the sole / first applicant (includingthe details of his / her savings/ current account number and the nameof the bank with whom the account is held) to the Issue and will bedespatched by Registered Post for amounts above Rs. 1,500 and byCertificate of Posting otherwise. Such refund orders will be payableat par at specified centres.
The subscription received in respect of Public Issue will be kept in aseparate bank account and the Bank shall not have access to suchfunds unless approvals for dealing from all the Stock Exchanges,where listing has been proposed and approval of the DesignatedStock Exchange for utilisation has been obtained.
The Bank has undertaken to make adequate funds available to theRegistrars to the Issue for complying with the requirements ofdespatch of Allotment Letters/Refund Orders by Registered Post.
OVERSUBSCRIPTION AND BASIS OF ALLOTMENT
In the event of the present issue of equity shares beingoversubscribed, the allotment will be made on a proportionatebasis and the basis of allotment will be finalised in consultation withthe Designated Stock Exchange (i.e. National Stock Exchange ofIndia Limited).
The drawal of lots (where required) to finalise the basis of allotment,shall be done in the presence of a Public Representative on thegoverning board of the Designated Stock Exchange. The ExecutiveDirector/Managing Director of the Designated Stock Exchange alongwith the post-issue Lead Managers and the Registrars to the Issueshall be responsible to ensure that the basis of allotment is finalisedin a fair and proper manner in accordance with the SEBI Guidelines.
The allotment shall be on proportionate basis under the reservationfor employees’ category as well as under the net public offercategory, subject to allotment of Shares in lot size of 100 shares, andthe basis of allotment would be arrived at as explained below:
16
UCO BANK1. Applicants will be categorised according to the number of
shares applied for.
2. The total number of shares to be allotted to each category, as awhole shall be arrived at on a proportionate basis i.e. the totalnumber of shares applied for in that category (number ofapplicants in the category x number of shares applied for)multiplied by the inverse of the oversubscription ratio.
3. Number of shares to be allotted to the successful allottees willbe arrived at on a proportionate basis i.e. total number ofshares applied for by each applicant in that category multipliedby the inverse of the oversubscription ratio.
4. In all the applications where the proportionate allotment worksout to less than 100 shares per applicant, the allotment shall bemade as follows:
a. Each successful applicant shall be allotted a minimum of100 shares.
b. The successful applicant out of the total applicants for thatcategory shall be determined by draw of lots in such amanner that the total number of shares allotted in thatcategory is equal to the number of shares worked out asper 2 above.
5. If the proportionate allotment to an applicant works out to anumber that is more than 100 but is not a multiple of 100, itwould be rounded off to the higher multiple of 100 if that numberis 50 or higher. If that number is lower than 50, it would berounded off to the lower multiple of 100. All applicants in suchcategories would be allotted shares arrived at after suchrounding off.
6. If the shares allocated on a proportionate basis to any categoryare more than the shares allotted to the applicants in thatcategory, the balance available shares for allotment shall befirst adjusted against any other category where the allocatedshares are not sufficient for proportionate allotment to thesuccessful applicants in that category. The balance shares, ifany, remaining after such adjustment will be added to thecategory comprising of applicants applying for minimumnumber of shares.
7. A minimum 50% of the net Issue to the Indian public will bemade available for allotment in favour of those retail individualinvestors who have applied for shares for a value of Rs.50,000or less. This percentage may be increased in consultation withthe Designated Stock Exchange depending on the extent ofresponse to the Issue from investors in this category. The balanceof the net Issue to the Indian public shall be made available forallotment to investors, including Corporate Bodies, Institutionsand individual applicants who apply for shares for a value ofmore than Rs. 50,000. The unsubscribed portion of the net Issueto any one of the above two categories shall be made availableto the applicants in the other category, if so required andallotment made on a proportionate basis as per the relevantSEBI guidelines.
In the event of oversubscription, in the process of rounding off toensure allotment in lot size of 100 shares, the Bank will makeadjustments in the basis of allotment as may be necessary in
consultation with the Designated Stock Exchange, such that the Issuesize does not exceed 10% of net offer to the public.
The Designated Stock Exchange reserves the right to modify theabove stated Basis of Allotment within the overall conformity tothe extant regulations in this regard.
INTEREST ON EXCESS APPLICATION MONEY
Payment of interest at the rate of 15% per annum on excess applicationwill be made to the applicants for the delayed period, if any, whereallotment of equity shares and issuance of Refund Orders takes placebeyond 30 days from the date of closure of the Issue
DISPUTES
Any disputes arising out of this Issue will be subject to the jurisdictionof Court(s) in India.
DEMATERIALISATION
The equity shares of the Bank have been admitted fordematerialisation by National Securities Depository Limited (NSDL),vide a tripartite agreement dated July 10th, 2001 signed betweenthe Bank, NSDL and the Registrar to the Issue, Karvy ConsultantsLimited to enable all shareholders of the Bank to have theirshareholding in electronic form. The Bank has also entered into atripartite agreement with Central Depository Services (India) Limited(CDSL) and the Registrar to the Issue, Karvy Consultants Limited fordematerialisation of its shares vide a tripartite agreement datedSeptember 16th, 2002.
1. An applicant has the option of seeking allotment of Equity Sharesin electronic or in physical mode.
2. Separate applications for electronic and physical shares by thesame applicant shall be considered as multiple applications.
3. The applicant seeking allotment of shares in the electronic formmust necessarily fill in the details (including the beneficiaryaccount no. and Depository Participant’s ID no.) appearingunder the heading ‘request for shares in electronic form’
4. An applicant who wishes to apply for shares in the electronicform must have at least one beneficiary account with any of theDepository Participants (DPs) of NSDL or of CDSL, registeredwith SEBI, prior to making the application
5. Shares allotted to an applicant in the electronic account will becredited directly to the respective beneficiary accounts (withthe DP)
6. For subscription in electronic form, names in the shareapplication form should be identical to those appearing in theaccount details in the depository. In case of joint holders, thenames should necessarily be in the same sequence as theyappear in the account details in the depository
7. Non-transferable allotment letters/ refund orders will be directlysent to the applicant by the Registrar to this Issue.
8. Incomplete/ incorrect details given under the heading ‘Requestfor shares in electronic form’ in the application form will beassumed as an application for shareholding in physical form.
9. The applicant is responsible for the correctness of theapplicant’s demographic details given in the application form
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UCO BANKvis-à-vis those with his/ her DP.
10. It may be noted that the electronic shares can be traded only onthe Stock Exchanges having electronic connectivity with NSDLand CDSL.
11. One time cost of dematerialisation of shares would be borneby the Bank. The one time cost refers to the demat charges forthe shares opted for in this issue by an investor in electronicform. Subsequent charges for dematerialisation of physicalshares held by the investors would have to be borne by theinvestor.
12. In case of partial allotment, allotment will be done in dematoption for the shares sought in demat form and balance, if any,will be allotted in physical form.
The Bank has obtained approval from SEBI vide letter CFD/DIL/SNB/15888/2003 dated August 21st, 2003 for making allotment in physicalcertificates in the present issue. In case of allotment of shares inphysical form, the Bank may issue certificates of appropriatedenomination or may issue consolidated certificates.
INVESTORS MAY NOTE THAT, ALTHOUGH THE APPLICATIONMAY BE MADE FOR PHYSICAL/DEMAT SHARES AT THE OPTIONOF INVESTORS, AS PER EXTANT SEBI GUIDELINES, TRADING INTHE SECURITIES SHALL BE IN DEMATERIALISED FORM ONLY.
UNDERTAKING BY THE BANK
The Bank undertakes
a) to attend to the complaints received in respect of the Issueexpeditiously and satisfactorily;
b) to take all steps for completion of necessary formalities forlisting and commencement of trading at all stock exchangeswhere the securities are to be listed within 7 working days offinalisation of basis of allotment;
c) to apply in advance for the listing of equities
d) that the funds required for dispatch of refund orders/ allotmentletters/ certificates by registered post shall be made availableto the Registrar to the Issue by the issuer Bank;
e) that the certificates of the securities/refund orders to the NonResident Indians shall be dispatched within specified time.
f) that no further issue of securities shall be made till the securitiesoffered through this offer document are listed or till theapplication monies are refunded on account of non-listing,under subscription.
UTILISATION OF ISSUE PROCEEDS
The Board of Directors undertake that
a) all monies received out of issue of shares to public shall betransferred to separate bank accounts other than the bankaccount referred to in sub-section (3) of section 73 of theCompanies Act, 1956;
b) details of all monies utilised out of the issue referred to in sub-item (a) shall be disclosed under an appropriate separate headin the Balance Sheet of the Bank indicating the purpose forwhich such monies had been utilised
c) details of all unutilised monies out of the issue of shares, if any,referred to in sub-item (a) shall be disclosed under anappropriate separate head in the Balance Sheet of the Bankindicating the form in which such unutilised monies have beeninvested.
d) the utilization of monies received under reservations shall bedisclosed under an appropriate head in the Balance Sheet ofthe Bank indicating the purpose for which such monies havebeen utilised
e) details of all unutilised monies out of funds received underreservations shall be disclosed under an appropriate separatehead in the Balance Sheet of the Bank indicating the form inwhich such unutilised monies have been invested.
TAX BENEFITS
M/s. S. Ghose & Co. has advised the Bank vide their report datedJune 27th, 2003, that following tax benefits would be available to theBank and its shareholders under the provisions of current Direct TaxLaws. In our opinion, the following tax benefits would be availableto the Bank and its shareholders under the provisions of the currentDirect Tax Laws.
I. To the Bank
1. As per the provisions of Section 10(23G) of Income Tax Act,1961, any income from dividend, interest or long term capitalgain of the Bank arising from investments made on or after the1st day of June, 1998 by way of shares or Long Term Finance inany enterprise or fund or a co-operative Bank wholly engagedin the business of (i) developing, or (ii) maintaining and operating,or the (iii) developing, maintaining and operating anyinfrastructure facility and which has been approved by theCentral Government and which satisfies the prescribedconditions as per Rule 2E of the Income Tax Rules, 1962, isexempt from tax.
2. As per the provisions of Section 36(1) (vii) of the Income TaxAct, 1961, any bad debt or part thereof of the Bank which iswritten off as irrecoverable in the books of account of the Bankis allowable as deduction subject to the condition that when theBank claims deduction under sub clause (viia) of Section 36(1),the amount of the deduction relating to any such bad debt orpart thereof shall be limited to the amount by which such debtor part thereof exceeds the credit balance in the provision forbad and doubtful debts account under the said sub clause.
3. As per the provisions of Section 36(i) (viia) of the Income TaxAct, 1961, in respect of any provisions for bad and doubtfuldebts created by the Bank, relating to advances made by therural branches of the Bank, the Bank is entitled to a deductionnot exceeding: -
i) 5% of the total income computed before making anydeduction under this clause and chapter VIA of the sameAct, and
ii) 10% of the aggregate average advances made by therural branches of the Bank computed in the prescribedmanner.
However, the Bank, at its option, instead of deductions referred
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UCO BANKto in para 3(i) and 3(ii) can claim, in any of the relevant assessmentyears, deduction in respect of any provision made by it for anyasset classified by the Reserve Bank of India as doubtful assetsor loss assets in accordance with the guidelines issued by it inthis behalf, of an amount not exceeding 10% of the amount ofsuch assets shown in the books of account of the Bank on thelast day of the previous year. The option is available upto theyear ending 31.3.2004 relevant to the assessment year 2004-2005.
4. As per the provisions of Section 43D of the Income Tax Act,1961, the interest income of the Bank in relation to suchcategories of bad or doubtful debts as are prescribed in Rule6EA of the Income Tax Rules, 1962, shall be chargeable to taxin the year in which it is credited by the Bank to its Profit andLoss account or in the year in which it is actually received bythe Bank, whichever is earlier.
5. As per the second proviso to Section 48 of the Income Tax Act,1961, the long term capital gains of the Bank arising on transferof a capital asset other than bonds and debentures (not beingcapital indexed bonds) will be computed after indexing thecost of acquisition/improvement and the same would be chargedto tax at a concessional rate of 20% plus applicable surchargeas per Section 112 of the Income Tax Act, 1961. In respect oflong term capital gains arising from the transfer of listedsecurities or units, tax shall be chargeable at 10% of the amountof capital gains plus applicable surcharge before giving effectto the provisions of the second proviso to Section 48 i.e. withoutindexing the cost of acquisition, if the Bank so opts.
6. As per the provisions of Section 54EC of Income Tax Act, 1961,and subject to the conditions specified therein, the Bank iseligible to claim exemption from the tax arising on long termcapital gains, on investment of such capital gains in certainnotified bonds, within six months from the date of transfer ofcapital asset. If only a portion of the capital gains is invested,then the exemption is proportionately available.
7. As per the provisions of Section 54ED of Income Tax Act, 1961,the capital gain arising from the transfer of investments held aslong term capital assets, being listed securities or units is fullyexempt from tax if the Bank invests within a period of six monthsafter the date of such transfer, the whole of the capital gain inacquiring equity shares forming part of an eligible issue ofcapital as defined in clause (i) of the Explanation to the aboveSection. Where only a part of the capital gains is so investedthen the exemption is proportionately available. The exemptionis available subject to the other conditions specified in thatSection.
8. As per the provisions of Section 80LA of the Income Tax Act,1961 where the gross total income of the Bank, in any previousyear, includes any income from an off-shore banking unit in aspecial economic zone, or from the business with an undertakinglocated in a special economic zone or any other undertakingwhich develops, or develops and operates, or operates andmaintains a special economic zone, shall, subject to thefulfillment of the conditions specified in the said Section 80LA,
be entitled to 100% deduction of such income for three (3)consecutive assessment years, beginning with the assessmentyear relevant to the previous year in which the Reserve Bank ofIndia’s permission to open the off-shore unit shall have beenobtained, and after those three years, 50% deduction of suchincome for the next two consecutive assessment years.
II. To the Shareholders of the Bank
a) Resident Shareholders
1. As per the provisions of Section 54EC of the Income Tax Act,1961, full exemption from capital gains tax is available in respectof long term capital gains arising on transfer of the shares of theBank, if the assessee, at any time within a period of six monthsfrom the date of such transfer, invests the whole of such capitalgains in certain notified bonds. If only a portion of the capitalgains is invested, then the available exemption is proportionatelyreduced.
2. As per the provisions of Section 54ED of Income Tax Act, 1961,long term capital gains arising from the transfer of shares of theBank on its shares being listed, is fully exempt from tax if theassessee invests within a period of six months from the date oftransfer, the whole of the capital gains in acquiring equity sharesforming part of an eligible issue of capital as defined in clause(i) of the Explanation to the above Section. Where only a part ofthe capital gains is so invested, the exemption is proportionatelyavailable. The exemption is available subject to other conditionsspecified in that Section.
3. As per the provisions of Section 54F of the Income Tax Act,1961, long term capital gains arising on the transfer of shares ofthe Bank in the case of individuals or a Hindu Undivided Familyshall be exempt if the net consideration is invested in thepurchase of a residential house within a period of one yearbefore or two years after the date of transfer or the netconsideration is invested in the construction of a residentialhouse within a period of three years from the date of transfer.The exemption is available proportionately if only a portion ofthe net consideration is invested as above. The exemption issubject to other conditions specified in that Section.
4. As per the provisions of Section 10(33) of the Income Tax Act,1961, with effect from the assessment year 2004-2005, any incomearising from dividends declared by the Bank will be exemptfrom tax in the hands of the shareholders.
5. As per the provisions of Section 112 of Income Tax Act, 1961,where the total income of any assessee includes any long termcapital gains on transfer of shares of the Bank, the same issubject to a concessional rate of tax at 20% plus applicablesurcharge after indexing the cost as per the second proviso toSection 48 of the Income Tax Act, 1961. Alternatively, at theoption of the assessee, where the tax payable in respect of anysuch long term capital gain exceeds 10% of the amount ofcapital gains arrived at without indexing the cost, the capitalgains are chargeable at 10% only plus applicable surcharge.
6. No Wealth Tax is payable in respect of investments in shares ofthe Bank.
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UCO BANK
b) Non-Resident Individual Shareholders
1. As per the provisions of Section 48 of the Income Tax Act,1961, capital gains arising to a non-resident on transfer of sharesof the Bank is computed by converting the cost of acquisitionetc. and the full value of the consideration of the transfer ofshares into the same foreign currency as was initially utilised inthe purchase of the shares, and the capital gains so computedin such foreign currency shall be reconverted into Indian currency.Further the aforesaid manner of computation of Capital Gainsshall be applicable in respect of Capital Gains accruing orarising from every reinvestment made thereafter in, and sale of,shares in, or debentures of, an Indian Company.
2. As per the provisions of Section 115I of the Income Tax Act,1961, non-resident Indians have an option to be governed bythe Chapter XII-A of the Income Tax Act, 1961, according towhich: -
a) As per the provisions of Section 115E of the Income TaxAct, 1961, the long term capital gains on transfer of sharesof the Bank acquired by him out of convertible foreignexchange (without aggregating any other taxable incomeearned in India which will be taxed separately) shall betaxed at the rate of 10% plus applicable surcharge.
b) As per the provisions of Section 115F of the Income TaxAct, 1961, the long term capital gain on the sale of sharesof the Bank acquired by the non-resident Indian out ofconvertible foreign exchange shall be exempt from IncomeTax entirely/proportionately, if the entire or part of the netconsideration is invested for a period of three years in anyof the assets specified in Section 115C within 6 monthsfrom the date of transfer.
c) As per the provisions of Section 115G of the Income TaxAct, 1961, a non-resident Indian is not required to file areturn of income under Section 139(1) of the Income TaxAct, 1961, if his total income consists only of investmentincome and/or long term capital gains arising frominvestment in shares of the Bank, subscribed to -, orpurchased with convertible foreign exchange and the taxdeductible at source has been deducted therefrom.
d) As per the provisions of Section 115H of the Income TaxAct, 1961, where the non-resident Indian becomesassessable as a resident in India in any previous year,along with his return of income under Section 139 of theIncome Tax Act, 1961, for that year, he may furnish adeclaration in writing to the Assessing Officer to the effectthat the provisions of the Chapter XII-A shall continue toapply to him in relation to income derived for that yearand subsequent years from the shares of the Bank acquiredwith convertible foreign exchange, until such assets areconverted into money
e) As per the provision of Section 115I of the Income Tax Act,1961, a non-resident Indian may elect not to be governedby the provisions of Chapter XIIA for any assessment yearby furnishing his return of income for that assessment yearunder Section 139 of the Income Tax Act, 1961, declaringtherein that the provisions of Chapter XII-A shall not apply
to him for that assessment year and accordingly his totalincome for that assessment year will be computed inaccordance with the other provisions of the Income TaxAct, 1961.
c) Foreign Companies & Foreign Institutional Investors
1 As per the provisions of Section 54EC of the Income Tax Act,1961, any long term capital gains arising from the transfer ofshares in the Bank is exempt from tax as has been set out inParagraph 2 of Part II above, subject to the extent and conditionsmentioned therein.
2. As per the provisions of Section 115AD of the Income Tax Act,1961, where the total income of FII’s include any income byway of short term or long term capital gains arising from thetransfer of shares in the Bank, income tax shall be payable at 30per cent on the short term capital gains and 10 per cent on thelong term capital gains plus applicable surcharge.
d) Mutual Funds
As per the provisions of Section 10(23D) of the Income Tax Act,1961, any income from investments in shares of the Bank or incomeby way of short term or long term capital gains arising from transferof such shares earned by Mutual Funds registered under the Securitiesand Exchange Board of India Act, 1992 or Regulations madethereunder or Mutual Funds set up by the public sector banks orpublic financial institutions and Mutual Funds authorised by theReserve Bank of India would be exempt from income tax subject tosuch conditions as the Central Government may by notification inthe Official Gazette specify in this behalf.
IV. PARTICULARS OF THE ISSUE
OBJECTS OF THE ISSUE
The present issue of equity shares is being made:
1. To augment the capital base of the Bank to meet its future capitaladequacy requirements.
2. To augment the long-term resources of the Bank.
3. To list the shares of the Bank on the various Stock Exchanges asspecified elsewhere.
4. To meet the expenses of the Issue.
The proceeds of this Issue after meeting all expenses of the issue willbe used by the Bank for its regular business activities.
V. BANK AND MANAGEMENT
BRIEF HISTORY AND BACKGROUND
UCO Bank (formerly known as The United Commercial Bank Ltd)was established in Kolkata (erstwhile Calcutta) on January 6th, 1943by Shri Ghanshyam Das Birla, a noted industrialist of his time andsome other eminent personalities of the country. Shri Birla was alsoappointed as the first Chairman of the Bank. The Bank started itsoperations at 4, Clive Ghat Street, Kolkata with a subscribed capitalof Rs. 2 crore and a paid up capital of Rs. 1 crore. It earned a profitof Rs. 5 lacs in its first year of operation. Due to increase in thevolume of business, the Registered and Head Office of the Bank wasshifted to 2, Royal Exchange Place, Kolkata. Again, in the year 1964,
21
UCO BANK
respectively. Net NPA of the Bank has on March 31st, 2003 stood at Rs. 697.14 crore which is equal to 4.36% of its net advances.
The Bank’s Capital Adequacy as on March 31st, 2003 was 10.04%. The capital structure as on that date include Rs. 450.15 crore asSubordinated Bonds which it could raise successfully during FY01, FY02 and FY03 respectively. Present capital of the Bank stands at Rs.599.36 crore after making an adjustment of accumulated losses to its capital in terms of Ministry of Finance approval F. No/11/22/ 2001-BOAdated September 6th, 2002.
The Bank has also reduced its expenses through restructuring organisational set up and manpower by reducing number of Regional officesto the present level of 34 and by effecting special Voluntary Retirement Scheme in FY01.
Bank subscribes to the policy of transparency and makes disclosures as is required under the existing policy of regulatory Authority. It hasput in place Citizen Charter, fair practice code and adheres to the principles of corporate governance.
OVERVIEW OF THE BANKING SECTOR
Structure of Indian Banking Industry
Scheduled Banks in India
Scheduled Commercial Banks India Scheduled Co-operative Banks
Public Sector Banks (27) Regional Rural Banks (196) Foreign Banks in India (40) Private Sector Banks (30)
SBI & its Assoc.(8) Nationalised Banks (19)
New Private Banks (8)
Old Private Banks (22)
Scheduled Urban Co-operative Banks (52)
Scheduled Co-operative Banks (16)
Note: Figures in bracket indicate number of Banks in each group.
The formal banking system in India comprises the Reserve Bank of India, Commercial Banks, Regional Rural Banks and the Co-operativeBanks. In the recent past, private non-banking finance companies also have been active in the financial system, and are being regulated bythe RBI.
Scheduled Commercial Banks (SCBs)
The scheduled commercial banks (SCBs) comprise of:
Public Sector Banks (PSBs): The banking sector in India has been characterized by the predominance of PSBs. The PSBs had 46,118branches (SBI & Associates: 13,434; Nationalised Banks: 32,684) as on June 30th, 2002. The aggregate assets of all PSBs stood at Rs.11,55,736.77 crores at end FY02 accounting for 75.27% of assets of all SCBs in India. The PSBs’ large network of branches enables themto fund themselves out of low-cost deposits. PSBs account for 81% of deposits, 74.43% of advances, 77.63% of income, of all scheduledcommercial banks at end FY02, thus clearly demonstrating their dominance of the Indian banking sector.
Private Sector Banks: In July 1993, as part of the banking sector reform process and as a measure to induce competition in the bankingsector, the RBI permitted entry by the private sector into the banking system. This resulted in the introduction of 9 private sector banks.These banks are collectively known as the ‘new’ private sector banks, and operated through 803 branches at end FY01. With the mergerof Times Bank Limited into HDFC Bank Limited in February 2000, there are only eight ‘new’ private sector banks at present. At end FY02,the total assets of private sector banks aggregated Rs. 2,67,679 crore and accounted for 17.43% of the total assets of all SCBs. Althoughthe share of private sector banks in total assets has increased from 12.61% at end FY01, new private sector banks have accounted for mostof the gain. The new private sector banks’ share of assets of all private sector banks increased from 27.5% at end-FY97 (2.4% of assets ofSCBs) to 65.17% at end-FY02 (11.36% of assets of SCBs). The share of old private sector banks (in total assets of SCBs) has decreasedmarginally (from 6.4% at end FY97 to 6.07% at end FY02), as well as their share in total assets of private sector banks has declined from72.5% at end FY97 to 34.82% at end FY02.
Foreign Banks: Presently, there are 40 foreign banks operating in India with 203 branches. While 4 banks have 10 or more branches, 18banks were operating with only one branch each. Some foreign banks have also set up representative offices in India. Thus, as on June 30th,2002, 63 banks had their presence in India, including 23 banks from 12 countries, which have only their representative offices here.
At end-FY02, the total assets of foreign banks aggregated Rs. 1,12,096 crore and accounted for 7.3% of the total assets of all SCBs. Theprimary activity of most foreign banks in India has been in the corporate segment. However, in recent years, some of the larger foreign
22
UCO BANK
banks have started making consumer financing a larger part of their portfolios, based on the growth opportunities in this area in India.These banks also offer products such as automobile finance, home loans, credit cards and household consumer finance.
Deposits Advances Total Income
1999-00 2000-01 2001-02 1999-00 2000-01 2001-02 1999-00 2000-01 2001-02
Public Sector Banks 737281 859462 968749 354071 414989 480681 90911 103499 117252
Private Sector Banks 110039 136667 169440 54196 68058 116430 13690 16595 20817
Foreign Banks 49377 59190 64511 35858 42997 48632 10330 11984 12960
Regional Rural Banks 32161 38294 44539 12414 15050 17710 4142 4859 5561
UCO Bank 18360 21536 26849 7490 9865 12412 2226 2572 3125
Source: RBI Publications for Banking Sector Statistics, UCO Bank figure as per Auditor’s Report
The salient features in the evolution of Indian banking are as follows:
The number of banks (including regional rural banks (RRBs) hasincreased from 89 in 1969 to 293 in 2002. The population perbranch has declined significantly, from 75,000 in 1950 to 16,000 in2002. With the nationalization of banks in 1969, the number of bankbranches (including Regional Rural Banks) increased from 8,262 in1969 to 66,186 in 2002. Most of the expansion has been in the ruraland semi-urban areas.
Since 1950, the credit-deposit ratio of SCBs has declined to reach62.3% as on March 31st, 2002, with a corresponding increase in theinvestment-deposit ratio. The change has been largely due to theGovernments regulations regarding the statutory liquidity ratio (SLR),and the preference for Government securities (as a result of theincrease in the Government borrowing programme and the lowrisk-high return nature of the instrument).
Priority sector lending increased from Rs 14,834 crore in 1984 toRs.2,10,308 crore in 2002. (Credit to the agricultural sector and small-scale sector was one of the key objectives of the nationalization ofbanks.)
Performance of Banking Industry
On the funding side, during 2002-03 (upto October 4, 2002), aggregatedeposits recorded a growth of 12.6% (Rs.1,38,806 crore) ascompared with 9.4% (Rs.90,554 crore) in the corresponding periodof the previous year. During FY02, the aggregate deposits of SCBsincreased by Rs. 1,12,340 crore as on March 29, 2002 reflecting anincrease of 13.60% (year on year), as compared with 16.20% duringFY01. Deposit mobilization was higher during FY01 because of Rs.25,700 crore raised through India Millennium Deposits (IMD).
On the assets side, bank credit to the commercial sector increased ata slower rate than the growth in bank deposits. Bank credit increasedto Rs. 6,04,500 crore as on March 29th, 2002, reflecting an increaseof 14.20% (yoy), compared with 16.60% (yoy) during FY01. Theslower growth in bank credit was primarily because of the industrialslowdown. Non-food credit increased to Rs. 4,89,500 crore as onMarch 29, 2002, showing an increase of 12.40% (yoy). By contrast,food credit of SCBs increased 37.10% (yoy) to Rs. 54,500 crore ason March 29th, 2002, in response to the increase in the quantum aswell as the price of food grains procured. The investments made bySCBs in government and approved securities increased 19.50%(yoy) to Rs. 4,38,900 crore as on March 29th, 2002, compared with agrowth of 17.80% (yoy) on March 30, 2001. As of end FY01, banks’
holding of SLR securities, amounted to Rs. 1,06,000 crore over andabove the SLR requirement and was substantially higher than the netannual borrowings of the Central Government.
Following the announcement of policy measures during FY02, therehas been a decline in SCBs’ lending and deposit rates. The PLRs ofmajor PSBs declined from 11% to 13% p.a. at end FY01 to between10% to 12% p.a. at end FY02. Some PSBs reduced their PLRs by 25to 100 basis points at the end of October 2002. The implicit yield on91-day T-bills declined from 8.50% p.a. on March 23rd, 2001 to7.04% p.a. on July 4th, 2001 and 6.05% p.a. on March 20th, 2002.Reflecting the comfortable liquidity condition, deposit rates of PSBs,which were ranging from 4.00% to 10.50% in March 2001, softenedto 4.25% to 8.25% by October 2002 in all maturities except for amarginal increase of 25 basis points at the short end of 15-daydeposits. Long-term domestic deposit rates of PSBs declined to8.0% to 8.75% by March 2002 from 9.5% to 10.50% in March 2001.During the current financial year (upto October 2002), deposit ratesof PSBs for maturity periods upto one year have remained in therange of 4.25% to 6.75%. For longer maturities, as compared toMarch 2002, the rates for deposits of maturity over 1 year to 3 yearsdeclined by 75 basis points, while those for over 3 year maturityperiod declined by 50 to 100 basis points.
Recent Trends in Banking Industry
In recent years, the banking industry has been undergoing rapidchanges, reflecting number of underlying developments. The mostsignificant has been enactment of the NPA Act to tackle high incidenceon Non-Performing Assets. The Securitisation and Reconstructionof Financial Assets and Enforcement of Security Interest (Bill) 2002was passed by Lok Sabha in November 2002. It seeks to deal withSecuritisation of assets, Setting up of asset reconstruction company(ARCs), and enforcement of security interest. After the ordinance onSecuritisation, Banks have been issuing notice to their defaulters forrecovering money. Banks have issued more than 1100 notices,amounting to more than Rs. 10,000 crores (around 9-10% of theestimated gross NPAs of the scheduled commercial banks anddevelopmental financial institutions).
The first asset reconstruction company called Asset ReconstructionCompany of India Limited (ARCIL) has been incorporated and themajor shareholders are ICICI Bank, Industrial Development Bank ofIndia, State Bank of India each holding 24.5% in ARCIL. HDFC bankowns 10% and other remaining is held by IDBI Bank and UTI Bank.UCO Bank has issued 1125 number of notices and amount involved
23
UCO BANKis Rs. 86.24 crores for recovering money till March 31st, 2003, afterthe Securitisation Ordinance/ The Securitisation and Reconstructionof Financial Assets and Enforcement of Security Interest Act, 2002was passed.
The retail loan market has grown at a CAGR of 34% over the last fouryears to reach about Rs. 45,000 crores. Housing and Car Financesegment account for nearly 80% of the retail finance segment.
Absorption of technology and upgradation of technologicalinfrastructure, which have accelerated and broadened disseminationof financial information while lowering the costs of many financialactivities. This has also led to transparency in information to thepublic on deposits and advances and interest rate structures.
The fiscal year 2002-03 for the Commercial Banks was by and largecharacterised by soft interest rates regime with flexible interest ratestructures. There has also been a good inflow of foreign exchangein the country, with taking the forex reserves of the country to all timehigh. There has been a comfortable resources growth with highercredit growth. Treasury operation of Banks has been offeringhandsome opportunities of gains.
The stance of the Monetary Policy in recent years has been to maintainadequate liquidity in the market with a preference for soft interestrates. With a view to having a vibrant and resilient competitivefinancial sector for sustenance of the reform process in the realsector of the economy, the focus has been on the structural andregulatory measures to strengthen the financial system. Thesemeasures have been guided by the objectives of increasingoperational efficacy of the Monetary policy, redefining the regulatorygoal of Reserve Bank of India, strengthening prudential norms.
These developments have manifold consequences for theinstitutional and systemic structure of the financial sector in generaland banking in particular. The business profile of financial institutionsis also undergoing change. Mergers and takeovers of smallerinstitutions have led to the emergence of transnational conglomerates,offering services ranging from traditional commercial banking toinvestment banking and insurance.
(Source: Published Banking Sector Reports, RBI Statistical dataand other publicly available sources)
MAIN OBJECT OF THE BANK
The main object and business of the Bank, as laid down in the BankNationalisation Act is as under:
The main object of the Banking Companies (Acquisition and Transferof Undertakings) Act, 1970 under which the undertaking of the Bankwas taken over by the Central Government is as under: “An Act toprovide for the acquisition and transfer of the undertakings of certainBanking Companies, having regard to their size, resources, coverageand organisation, in order to control the heights of the economy andto meet progressively, and serve better, the needs of the developmentof the economy, in conformity with national policy and objectivesand for matters connected therewith or incidental thereto”.
The Main Object of the Bank enables it to undertake the activities forwhich the funds are being raised and the activities, which it has beencarrying on till date.
Business Sphere of the Bank
The Bank shall carry on and transact the business of Banking asdefined in Clause (b) of Section 5 of the Banking Regulation Act,1949, and may engage in one or more of the other forms of businessspecified in Sub-Section (1) of Section 6 of that Act.
Clause (b) of Section 5 of the Banking Regulation Act, 1949 definesBanking as “the accepting for the purpose of lending or investment,of deposits of money from the public, repayable on demand orotherwise, and withdrawable by cheque, draft, order or otherwise.”
Other Business that the Bank may undertake (Section 3 (7))
Sections 3 (7) of Chapter II of the Banking Companies (Acquisition)Act 1970 provides for the Bank to act as Agent of Reserve Bank.
1. The Bank shall, if so required by the Reserve Bank of India, actas agent of the Reserve Bank at all places in India where it has abranch for:
a) Paying, receiving, collecting and remitting money, bullionand securities on behalf of the Government of India
b) Undertaking and transacting any other business which theReserve Bank may from time to time entrust to it
2. The terms and conditions on which any such agency businessshall be carried on by the corresponding new Bank on behalf ofthe Reserve Bank shall be such as may be agreed upon
3. If no agreement can be reached on any matter referred to inClause (ii) above, or if a dispute arises between thecorresponding new Bank and the Reserve Bank as to theinterpretation of any agreement between them, the matter shallbe referred to the Central Government and the decision of theCentral Government, thereon, shall be final.
4. The corresponding new Bank may transact any business orperform any function entrusted to it under Clause (i) by itself orthrough any agent approved by the Reserve Bank.
BUSINESS AND ACTIVITIES OF THE BANK
Vision Statement of the Bank
To achieve Rs. 1,00,000 crore total business by the year 2007.
Mission Statement of the Bank
To be a top-class Bank to achieve a sustained growth of Businessand Profitability, fulfilling socio-economic obligations, excellencein customer service, through upgradation of skills of staff, theireffective participation and making use of the state- of-the arttechnology.
In order to achieve the objectives as set out in the mission statement,the Bank has identified certain important thrust areas forming part ofthe Bank’s Corporate Policy guidelines 2003-04. These are beingimplemented as an action plan for the current financial year. Thethrust areas as identified by the Bank are:
1. To improve standard of customer service and make efforts forimage building of the Bank.
2. Effective use of technology to link the existing branch network,ATM network and improve MIS for better customer care.
24
UCO BANK3. To increase growth of business so as to achieve higher levels of
deposits and gross advances.
4. To improve market share of the Bank in terms of total business.
5. To achieve higher growth in business in order to improve Bank’smarket share in the top metros and other important businesscentres.
6. To achieve higher levels of credit growth with the focus ongrowth of advances in the mid market segment, housing loan,educational loan and export credit.
7. To increase credit dispensation under various priority sectorschemes including advances to agriculture and SSI sectors.
8. To increase fee based income by venturing into newer areas ofoperation like currency swaps, export-import business, forexand integrated dealing room operations, collection ofGovernment taxes, telephone and electricity bills, school fees,admission forms of professional institutions, application formson behalf of housing projects etc.
9. To improve the quality of assets through effective NPAmanagement strategy.
10. To maintain adequate level of Capital Adequacy ratio.
11. To achieve reduction in operating expenses.
12. To take effective steps for turn around of loss making branches.
13. To maintain the status of 100% balanced branches.
14. To take effective and timely steps on the irregularities pointedout by inspecting officials and auditors.
15. To finalise the regional and branch level budgets in a timebound manner and regularly monitor the performance at everylevel.
16. To undertake skill development programmes for existing staffmembers along with recruitment of specialised personnel formanaging IT, Forex, Treasury and Credit functions of the Bank.
Competitive Strengths
A number of new banks, both private and foreign, have entered theindustry are offering new and innovative products at competitiverates. In this scenario, UCO Bank believes that its competitive strengthsare:
1. Rich tradition of 60 years of banking experience
2. Large and loyal customer base
3. Wide and extensively spread branch network having presencein major banking centres of the country
4. Four overseas branches in Singapore and Hongkong
5. Specialised branches to provide focussed attention to customerneeds
6. Diversified deposit and credit products with special emphasison mid market segment
7. Depository Participant (DP) facilities for customers
8. Integrated treasury operations to give better rates to customers
9. Well defined risk management structure
10. Experienced and customer friendly workforce committed toachieve growth of business with profit
11. Increased share of low cost retail deposits in order to bringdown the cost of deposits
12. Marketing of new products like insurance policies and cashmanagement services.
BRANCH NETWORK OF THE BANK
The Bank has 34 Regional Offices for controlling 1705 domesticbranches and 172 Extension Counters as on March 31st, 2003.
Distribution of domestic branch network
Geographical Distribution of branches is as under:
State/ Union Territory Number of Number ofBranches Extension
CountersWest Bengal 281 7Bihar 154 12Orissa 152 16Rajasthan 128 18Himachal Pradesh 119 6Uttar Pradesh 104 35Maharashtra 100 11Madhya Pradesh 94 10Assam 94 4Punjab 86 14Gujarat 68Tamil Nadu 62 5Jharkhand 37 6Delhi 37 10Andhra Pradesh 36 1Haryana 26Karnataka 25 5Chhattisgarh 24 5Kerala 19Uttaranchal 14 4Jammu & Kashmir 12Pondicherry (U.T.) 6Goa 5Tripura 5 3Meghalaya 4Chandigarh (U.T.) 3Manipur 2Sikkim 2Arunachal Pradesh 2Nagaland 1Andaman & Nicobar Island 1Mizoram 1Daman & Diu 1
All India 1705 172
25
UCO BANKThe population group wise break up of the domestic branches is asfollows:
Population Group No. % share to Total
Rural 829 48.62
Semi Urban 322 18.89
Urban 337 19.77
Metropolitan 217 12.72
Total 1705 100.00
PRODUCTS AND SERVICES OF THE BANK
Apart from offering traditional banking products to its customers,the Bank also has introduced following special deposit schemes:
1. Kuber Yojna: This is a cumulative fixed deposit schemeavailable for various tenures upto ten years. The interest iscalculated on a quarterly rests. Loan facility as also prematureencashment of deposit without any lock-in-period is allowed.
2. UCO Laksmi Yojana: This is a recurring deposit a/c with variableamount of monthly instalment allowing the depositor to deposithis/her monthly instalment according to his/her convenience.Interest is compounded half yearly in this scheme and creditedto the a/c. Premature encashment and loan against moniesdeposited is allowed.
3. Flexi Fixed Deposit Scheme: This is a fixed deposit schemewhere part withdrawal from the corpus is allowed withoutaffecting the rest of the amount of deposit. Penal rate of interestapplies only on the amount withdrawn before maturity periodof deposit.
4. UCO Diamond Deposit Scheme: Fixed deposit with bothcumulative and regular income facility for 10 years termspecially designed on the occasion of Diamond Jubileecelebration of the Bank, where interest rate is higher than normalterm deposit rate.
5. Friend in Need: The scheme is designed to enable the depositorto avail loan upto certain portion of his/her term deposit as andwhen required to meet unforeseen circumstances.
6. Two-way Deposit Scheme: This is a combination of currentdeposit/savings deposit a/c with the facility of to and fro transferof funds for creation of fixed deposit at specified interval tomaximize the yield of the depositor.
7. UCO Floating Rate Deposit Scheme: Fixed deposit with floatingrate of interest when interest can be received either on quantityor cumulative basis. The rate varies on a quarterly basis.
8. Laghu Bachat Yojna: This is a daily collection scheme througha network of agents.
Special Advances Products:
The Bank has traditionally offered credit products to big industrialhouses, middle class people, priority sector schemes and rural poor.
The Bank has also identified lending to mid market segments as oneof the thrust areas. Following new schemes have been devised forthe benefit of customers falling under this category:
1. UCO Shelter: This is a home loan product available forpurchase of new house/flat, construction of house and also forrepair/extension/renovation of a house/flat at competitive ratesof interest.
2. UCO Rent: Owners/Lessors of house/flat/godown/warehouseetc. may raise loans against their rent recoverables for thepurpose of business activity.
3. UCO Trader: This scheme finances the working capital need ofcustomers engaged in retail and wholesale trading activities.The customers can avail minimum loan of Rs.1 lac andmaximum loan of Rs.1 crore.
4. UCO Cash: A personal loan scheme to meet marriage, medical,travel, educational and other expenses arising out of socialobligation. 90% of the proposed expenditure with a ceiling ofRs. 2 lakhs may be available under this scheme.
5. UCO Nari Shakti: This scheme has been devised for workingwomen having an experience of at least 3 years. Upto 90% ofthe proposed expenditure can be sanctioned subject to amaximum limit of Rs.2 lacs.
6. UCO Pensioner: UCO Pensioner is a short-term loan schemefor pensioners who receive pension through UCO Bankbranches. The quantum of loan under this scheme is 10 timesthe monthly pension received upto a ceiling of Rs. 1 lakhs andis repayable within 24 months.
7. UCO Education Loan: Students seeking admission inprofessional/technical courses through entrance test/selectionprocess upto a certain age are eligible for education loan subjectto prescribed limits.
8. UCO Super Shopper: It is an easy finance scheme for purchaseof new car manufactured by established Indian companies.Salaried persons, professional and businessman can apply forthis product. The amount of loan would be 85% of the cost ofthe vehicle or Rs. 7.50 Lacs whichever is lower in case of newvehicle; in case of old vehicle maximum amount of loan wouldbe Rs. 2.50 lacs or 70% of the cost of the vehicle whichever isless.
9. UCO Shopper: It is for purchase of consumer durable itemslike TV, computer, refrigerator etc. Salaried persons andprofessional and businessman can apply for this product.Maximum limit of loan is Rs.1 Lac and minimum limit is Rs.10,000.
10. UCO Mega Cash: UCO Mega Cash is a product, which canmeet the larger needs of the middle as well as upper classindividuals and families, as well as term loan requirements ofprofessionals and businessmen. Government employees,reputed private company employees, professionals andbusinessmen can avail of this product. It is to meet planned andunforeseen expenses of any nature. Minimum quantum of loanthat can be availed under this scheme is Rs. 2 Lacs and maximumlimit is Rs. 20 Lacs.
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UCO BANK
DETAILS OF SOURCES OF FUNDS
Deposits (Global*)
(Rs. in crores)
As on March 31st 2000 2001 2002 2003
Deposits 18359.95 21535.66 26848.77 31343.39
Annual Growth– Amount 2108.74 3175.71 5313.11 4494.62– Percent 12.98 17.30 24.67 16.74
Cost of Deposits (%) 8.05 8.02 7.40 6.61
* Global deposits include domestic deposits and deposits withoverseas branches.
Deposits (Domestic)
(Rs. in crores)
As on March 31st 2000 2001 2002 2003
Deposits 16925.07 20006.22 25224.12 29741.15
Annual Growth– Amount 2122.89 3081.16 5217.90 4517.03– Percent 14.34 18.20 26.08 17.91
Cost of Deposits (%) 8.46 8.31 7.77 6.90
Deposits (Overseas)
(Rs. in crores)
As on March 31st 2000 2001 2002 2003
Deposits 1434.88 1529.44 1624.65 1602.24
Annual Growth– Amount (-)14.55 94.56 95.21 (-)22.41– Percent (-)0.97 6.59 6.22 (-)1.38
Cost of Deposits (%) 3.71 4.42 2.45 1.51
Total deposits of the Bank grew by 16.74% to Rs. 31343.39 crores ason March 31st, 2003 from Rs. 26848.77 crores as on March 31st, 2002.The share of low cost deposits (Current Account and Savings bankaccounts) constituted 35.01% as on March 31st, 2003. Mobilisationof low cost resources remained the focus of attention of the Bank.Cost of Deposits declined to 6.61% during FY03 from 7.40% duringFY02 in line with fall in interest rates in the economy.
The category-wise break-up of total global deposits during last 5years is presented below.
(Rs. in crores)
Year ended 1998-99 1999-00 2000-01 2001-02 2002-03 March 31st
Current Deposits 1991.90 2315.00 2590.93 3067.73 3083.69
Savings BankDeposits 4419.39 5044.03 5810.83 6812.32 7891.29
Term Deposits 9839.92 11000.92 13133.90 16968.72 20368.41
Total 16251.21 18359.95 21535.66 26848.77 31343.39
The category-wise break-up of total domestic deposits during last 5years is presented below.
(Rs. in crores)
Year ended 1998-99 1999-00 2000-01 2001-02 2002-03March 31st
Current Deposits 1891.37 2220.41 2483.35 2959.25 2950.55
Savings Bank Deposits 4386.27 5010.74 5775.22 6765.87 7849.92
Term Deposits 8524.54 9693.92 11747.66 15499.00 18940.68
Total 14802.18 16925.07 20006.23 25224.12 29741.15
Distribution of Deposits (Domestic)
The share of urban & metropolitan branches of UCO Bank accountfor 32.49% of its network and accounts for 62.09% of total deposits.The Population Group-wise break-up of aggregate deposits for thelast five years is as given in the table below.
(Rs. in crore)
As on last Friday 1998-99 1999-00 2000-01 2001-02 2002-03of March
Rural 3136 3456 4101 5283 5491
Semi-Urban 2476 3465 4028 5099 5337
Urban 4016 4679 5561 6891 8098
Metropolitan 4456 4365 5042 6438 9635
Total 14084 15965 18732 23711 28561
Regionwise distribution of domestic deposits
The region wise distribution of deposits as on last Friday of Marchevery year (as per RBI’s region classification) as a percentage ofaggregate deposits of the Bank is given below.
Region 1998-99 1999-00 2000-01 2001-02 2002-03
Northern 2767.44 3992.56 4809.95 6128.31 7464.70
North-Eastern 732.24 824.08 970.38 1229.84 1466.44
Eastern 4816.65 5664.05 6501.55 8423.10 9420.89
Central 1932.35 2222.98 2599.41 3183.24 3986.32
Western 2564.18 1887.46 2147.17 2681.12 3630.55
Southern 1270.76 1374.20 1704.48 2065.85 2591.99
Total 14083.62 15965.33 18732.94 23711.46 28560.89
Non Resident Deposits
The total NRI deposits of the Bank as on March 31st, 2003 wereRs. 746.31 crore. The details of NRI deposits during the last 3 yearsare as under:
(Rs. In crore)
As on March 31st 2000-01 2001-02 2002-03FCNR (B) 162.18 162.76 170.5NRE 212.40 279.39 478.86NRNR 198.34 212.53 96.94
Total 572.92 654.68 746.31
27
UCO BANKNote: NRI Deposits as shown in the above table are term deposits.
Maturity Profile of Term Deposits (Global)
(Rs. in crore)
As on March 31st 2000-2001 2001-2002 2002-2003
1-14 Days 986.86 1196.15 933.37
15-28 Days 635.30 996.56 724.21
29 Days – 3 Months 1398.42 1866.13 1883.40
3-6 Months 1484.38 1678.51 2583.84
6 Months – 1 Year 2409.24 2900.99 4248.79
1- 3 Years 3816.43 5016.04 6250.06
3 – 5 Years 1485.76 2294.76 2458.71
Over 5 Years 917.51 1019.58 1286.03
Total 13133.90 16968.72 20368.41
Maturity Profile of Term Deposits (Domestic)
(Rs. in crore)
As on March 31st 2000-2001 2001-2002 2002-2003
1-14 Days 608.41 844.05 750.24
15-28 Days 363.41 594.11 651.94
29 Days – 3 Months 1017.68 1432.44 1718.12
3-6 Months 1278.88 1532.26 2414.98
6 Months – 1 Year 2290.17 2778.40 4133.54
1- 3 Years 3799.27 5016.04 5962.78
3 – 5 Years 1485.76 2294.76 2163.12
Over 5 Years 904.08 1006.94 1145.95
Total 11747.66 15499.00 18940.67
Borrowings of the Bank
Unsecured Borrowings of the Bank as March 31st, 2003
Sr. no Name of the lender Outstanding Balance Interest Rate (%) Period Date of Repayment(Rs. in crores) Repayment terms
1 Lender A 14.40 1.65 6 months 13.8.03 Bullet
2 Tier II Bond Sr. I 150.15 11.00 63 months 30.6.06 Bullet
3 Tier II Bond Sr. II 150.00 9.50 63 months 7.4.07 Bullet
4 Tier II Bond Sr. III 150.00 7.50 66 months 8.5.08 Bullet
5 Overdraft amount in NOSTRO A/c 146.47 — — On going —
6 Borrowing underTT discounting facility from SBI 11.76 — — On going —
The above borrowings are all unsecured. No promoters / directors have given any personal guarantee for collaterally securing theborrowings. None of the lenders is an affiliate / associate of the Bank. The Bank has not defaulted in repayment / redemption of any of theborrowings. RBI’s nominee director is on the Board of the Bank, the details of which are shown under the section “Board of Directors”.
28
UCO BANK
Details of top 4 borrowings of the Bank
(Rs. in crores)
Outstanding Balance Interest Rate (%)
1. Borrowing A 150.15 11.00
2. Borrowing B 150.00 9.50
3. Borrowing C 150.00 7.50
4. Borrowing D 14.40 1.65
Fixed and floating rate liabilities of the Bank
The break-up of fixed and floating rate liabilities of the Bank as onMarch 31st, 2003 is furnished in the following table.
(Rs. in crores)
Fixed Rate Liabilities
Term deposits 20368.41Borrowings 407.21Subordinated debt 450.15Tier-II —
Floating Rate Liabilities
Balancing in Savings Bank Account 7891.29
Note: Demand deposits from banks (Rs. 159.33 crores), others(Rs.2924.36 crores) and other liabilities(Rs. 1507.67 crores) as shown inStatement of Assets & Liabilities in the Auditor’s Report are non-interest bearing in nature and hence, are not classified in the abovetable.
Details Of Deployment of Funds
Details of Advances (Domestic)
Population group-wise classification of advances in India as on lastFriday of March:
(Rs. in crores)
Gross Bank Credit * 1999 2000 2001 2002 2003
Rural 908 948 1054 1176 1450
Semi-urban 610 805 935 1205 1517
Urban 1284 1553 1914 2221 2711
Metropolitan 3038 3925 5580 7570 10250
Total 5840 7231 9483 12172 15928
*Gross Bank Credit excludes Deposits under Rural InfrastructureDevelopment Fund (RIDF), Advances under Provident Fund Pro Noteetc. as on last Friday of March.
Growth of Advances
The growth of the Bank’s global advances during the past five yearsis as follows:
(Rs. in crores)
Year Ended March 31st Gross Credit Annual Increase(%)
1999 7121.30 6.19
2000 8456.61 18.75
2001 10480.85 23.94
2002 13008.84 24.12
2003 16583.24 27.48
Region wise credit exposure
The region wise credit exposure of the Bank’s domestic creditportfolio as on as on March 31st, 2003 is given below:
(Rs. in crores)
Region Amount % of GrossCredit
Northern 2763.74 17.94
North-Eastern 415.99 2.70
Eastern 4524.25 29.37
Central 1023.37 6.64
Western 3795.32 24.64
Southern 2881.93 18.71
Total 15404.60 100.00
29
UCO BANKSector wise credit portfolio
The sectorwise domestic credit portfolio of the Bank as on March31st, 2003 is as under:
(Rs. in crores)
Industry Amount Exposure togross bank credit (%)
Gross Bank Credit
1 Food Credit 1510 9.80
2 Non Food Credit: 13895 90.20
2 a Medium & Large ScaleIndustry 3892 25.27
2 b Wholesale Trade 690 4.48
2 c Priority Sector 6332 41.10
2 d Export Credit 870 5.65
2e Other Sectors 2111 13.70
Total (1+2) 15405 100.00
Note: The Gross Bank Credit excludes deposits under RuralInfrastructure Development Fund (RIDF), advances under providentfund etc. as on last Friday of March. The advances figures shown inthe Statement of Assets & Liabilities have been arrived at afterdeducting provisions on non-performing advances as per theprudential norms of RBI, DICGC/ECGC balance as per the standardpractice, as a result the advance figures shown above will not matchwith the figures shown in the Statement of Assets & Liabilities.
Industry wise classification
The Bank has a diversified industry-wise portfolio since adherenceto exposure limits is followed. The industry-wise break-up of creditportfolio of top 10 industries as on March 31st, 2003 is furnishedbelow.
(Rs in crores)
Sl. Name of the Industry Outstanding OutstandingNo. to the Industry to the
Industry as %of Domestic Net
Bank Credit
1 Electricity 646 4.19
2 All Engineering 489 3.17
3 Iron & Steel 473 3.07
4 Cotton Textiles 339 2.20
5 Drugs &Pharmaceuticals 297 1.93
6 Gems & Jewellery 174 1.13
7 Infrastructures 170 1.10
8 Other Textiles 143 0.93
9 Fertilizers 131 0.85
10 Petro-Chemicals 123 0.80
Exposure to top ten companies of the portfolio
(Rs. in crores)
Account Name Industry Outstanding % of Gross Asset ROIadvances quality (% pa)
Borrower A Steel 320 2.08 Standard 11.00
Borrower B Housing 305 1.98 Standard 11.00
Borrower C Finance Sector 300 1.95 Standard 6.30
Borrower D InfrastructureDevelopment 275 1.78 Standard 10.00
Borrower E Power 200 1.30 Standard 10.50
Borrower F Power 200 1.30 Standard 9.20
Borrower G Finance Sector 150 0.97 Standard 9.50
Borrower H Metal 126 0.82 Standard 11.50(PLR)
Borrower I Power 125 0.81 Standard 12.50
Borrower J Textiles 87 0.56 Standard 11.50
Exposure to top five business groups:
(Rs. in crores)
Name of Outstanding Fund based % of grossBorrower Amount Outstanding advances
amount
Group A 359 263 1.70
Group B 269 98 0.64
Group C 214 108 0.70
Group D 174 115 0.75
Group E 166 80 0.52
Total 1182 664 4.31
Sanctions & Disbursements
The following table provides a summary of the total domesticsanctions and outstanding amount for the last five years:
(Rs. in crores)
Year ended 1999 2000 2001 2002 2003March 31 st
Sanctioned NA NA 4351 7040 7673
Outstanding ason March 31st 6087 7363 9291 11904 15405
Export Credit
In tune with national priorities of boosting exports, the Bank hasplayed a significant role in extending export credit, both in rupeeterms as well as in foreign currency. The Bank’s outstanding exportcredit as on March 31st, 2003 stands at Rs. 870.12 crore which is5.65% of the outstanding net advances of the Bank as againstprescribed target of 12%. The Bank is making efforts to increase theadvances to this sector by providing various fund based and non-
30
UCO BANK
fund based facilities to the exporters.
(Rs in crores)
Export Credit 1998-99 1999-00 2000-01 2001-02 2002-03
Target 708.00 870.00 1110.00 1476.00 1786.00
Achieved 446.85 569.17 674.28 819.48 870.12
% of Export 7.56% 7.85% 7.28% 6.66% 5.65%Credit to NetCredit
Priority Sector Lending
As per RBI norms, the Public Sector Banks’ credit to the PrioritySector should be 40% of the Net Bank Credit and that for agricultureshould be 18% of the Net Bank Credit. The policy of the Bank withregard to financing to the Priority Sector is based upon the normsstipulated by Reserve Bank of India. As on March 31st, 2003, thePriority Sector credit stood at 41.10% of the Net Bank Credit andAgricultural credit stood at 13.26% of the Net Bank Credit. ReserveBank of India vide its letter no. RPCD No. Plan 730/04.09.01/2002-03dated December 23rd, 2002 had advised the Bank to initiateappropriate measures to improve the lending in these areas so thatthe targets are achieved.
Several policy initiatives have been taken during the last few yearsto substantially increase credit flow to Priority sectors and especiallyto the agricultural sectors. These initiatives include the following:
l Emphasis on sanctions and disbursements of loan under UCOHirak Jayanti Krishi Yojana
l Financing of Self Help Groups to increase micro credit
l Creation of Priority Sector cell at regional office level
l Proper monitoring of branches for achieving priority sectorlending targets
l Financing under Kisan Credit Card Scheme
l Effective communication and publicity plan at branch level
l Focus on lending to corporate agriculture accounts andfinancing contract farming
Promote agri-finance through financial assistance in agri-exportszone.
Details of Sector-wise distribution of Priority Sector Credit for thelast five years is given below:
(Rs. in crores)
Year ended 1999 2000 2001 2002 2003 March 31st
Agriculture 751 802 965 1551 2042Small Scale 681 812 794 1246 1458IndustryOther Priority 698 947 1241 2051 2832Sector AdvancesTotal Priority 2130 2561 3000 4848 6332Sector Credit% To Net Bank 35.00 34.78 32.29 40.72 41.10Credit
Targets — — — — —
Lead Districts
As required by the GoI/RBI, the Bank has been assigned the role oflead bank in 33 districts in 7 states. The assigned lead bankresponsibilities are discharged by maintaining Inter-institutionalcoordination in the preparation and implementation of variousdevelopment programmes in each district. In terms of therecommendation made by Committee of Bankers appointed by RBIunder the Chairmanship of Shri F. K. F. Nariman, RBI FormulatedLead Bank Scheme in December 1969. Under the scheme eachdistrict has been assigned to different banks to act as a consortiumleader to co-ordinate the efforts of banks in districts, particularly inmatters of branch expansion and credit planning. The implementationof the Lead Bank Scheme can broadly be divided into six phases asunder:
1. Allocation of districts among various commercial banks forassuming the role of lead district responsibility.
2. Conducting of impressionistic surveys and identification ofgrowth centres for branch expansion.
3. Constitution of District Consultative Committees in all the leaddistricts.
4. Preparation of first round District Credit Bank (DCP).
5. Preparation and implementation of Annual Action Plan (AAP).
6. Introduction of Service Area Approach (SAA).
31
UCO BANKDetails of branch network, resources mobilised and advances made in the lead districts are as under:
(Rs. in crores)
State No. of lead No. of UCO Total deposits Total advances Advances to Percentage todistricts branches in of UCO Bank of UCO Bank priority total
lead districts branches branches(A) sector (B) advances (B/A)
Assam 8 66 754.84 236.67 154.15 65.13
Bihar 4 102 762.00 135.00 110.00 81.48
Himachal Pradesh 4 87 777.26 205.44 142.44 69.33
Orissa 7 87 2076.70 698.91 515.04 73.69
Punjab 2 31 637.49 71.24 49.06 68.87
Rajasthan 4 91 1742.51 494.89 319.39 64.54
West Bengal 4 131 1976.80 273.49 177.00 64.72
As per GoI/RBI guidelines, the benchmark of 40% advances to prioritysector has been surpassed in all the Lead Districts. The performanceof the branches in the lead districts is monitored by the RegionalOffices and the Head Office. Bank’s Board is apprised with theprogress on a quarterly basis.
Loan Policy
The Bank’s Lending policy conforms to various directives /instructions/guidelines issued by the Government of India/ ReserveBank of India/ Bank’s Board of Directors. The purpose of the policyis to enunciate the thrust areas, risk factors, and set out credit exposurelimits. The policy serves as a broad guideline for credit dispensationby the Bank. The main objectives of the policy are as under:
1. Minimise slippages in the existing portfolio through bettermonitoring, follow up and timely action at all levels.
2. Wherever possible, to replace unremunerative assets with thathaving better risk-return characteristics to increase yield onportfolio.
3. Achieve incremental credit deployment, mostly in desiredareas, to make an additional contribution to the bottomline.
Keeping in view the diverse and changing credit needs of the people,the Bank strategically aims at segmentation of the market and offerssuitable credit products. Bank is endeavouring to increasinglycustomize various loan products.
Bank is also following prudential exposure norms relating to creditexposure in terms of risk management policy adapted by the Bank.For managing concentration risk, the Bank has laid down norms forrestricting credit to a single industry/sector. Presently, the thrustareas identified by the Bank for credit expansion are given as below:
1. Consumer credit/mid-market segment with emphasis on housingsub-sector
2. Export sector
3. Agriculture sector with emphasis on direct financing
4. Medium scale industry
5. Trade
Credit Approval Authority and Procedures
The Bank’s Board delegates the credit sanction authority to its officersworking in branches and administrative offices, who are obliged toexercise it in terms of loan policy guidelines approved by the Board.The Bank has designated adequate lending powers, which arereviewed periodically. The proposals falling beyond the delegatedlending powers of Chairman & Managing Director are consideredby the Management Committee of the Board.
Sanction in schematic lending is in accordance with the schemesdesigned and circulated for the relevant product. Any variation inthe scheme requires an approval from the Executive Director of theBank. New accounts for other than standardised products followdue diligence on promoters and the line of business and it should bein accordance to the loan policy of the Bank. All proposals for creditto new accounts with proposed exposure in excess of Rs. 2 croresneed to be cleared by New Business Committee (NBC).
As a part of monitoring of credit risk, the Bank has also implementeda system of Credit Review and Audit as per RBI Guidelines. Bankalso has in place a distinct and well-defined Loan Review Policy,which is under implementation.
Fresh credit proposals sanctioned by sanctioning authorities at headoffice during FY03.
(Rs. in crores)
Sanctioning Authority Number of Fund Based Non-fundAccounts Based
Management Committeeof Board 71 2497.68 409.55
Chairman & ManagingDirector 101 583.34 123.83
Executive Director / CCAC 160 666.57 172.76
General Manager (Credit) 1 0.72 0.00
TOTAL 333 3748.31 706.14
32
UCO BANK
INVESTMENTS
Investment Portfolio
The book value of the investment portfolio of the Bank was atRs. 14137.51 crores mark as on March 31st, 2003. The investmentportfolio of the Bank as on March 31st, 2003 is furnished below.
(Rs. in crores)
Government Securities 9478.93
Other Approved Securities 550.71
Shares 82.40
Debentures & Bonds 2556.18
Subsidiaries & Joint Ventures —
Others 786.00
Total Investments in India 13454.22
Total Investments outside India 683.29
Total Investments 14137.51
The Indian financial system particularly the banking sector has beenundergoing a major transformation under the process of liberalisationand globalisation of the economy and financial sector reforms. Thishas resulted in rapid changes in the treasury management in India. Inthe above backdrop, the treasury function of the Bank is no longer aresiduary operation concerned only with compliance with CRR andSLR but is operated in terms of integrated treasury operations, whichcover forex operation also. Today the treasury management of theBank involves functions ranging from liquidity management,investment management, balance sheet management, operationsinvolving trading activity, managing capital adequacy and riskmanagement. Accordingly, the investment portfolio of the Bank hasincreased steadily over the years and it has been able to maintain afairly consistent portfolio yield by changing portfolio mix by regularchurning without changing the portfolio risk. A large proportion(73.72%) of Bank’s total investment is held in Government and otherapproved securities in India and outside India.
Bank has been able to maintain a fairly consistent portfolio yield bychanging portfolio mix by regular churning without changing theportfolio risk.
Investment strategy
The main objectives of the Investment strategy are as follows:
1. To raise funds from the money market and deploy resourcesallocated/available for treasury for optimisation of incomehaving due regard to the risk profile of assets and capitaladequacy requirements
2. To comply with all regulatory requirements including StatutoryLiquidity Ratio (SLR) and Cash Reserve Ratio (CRR) in the countryand abroad as per local regulations.
3. To manage liquidity risk, interest rate risk, credit risk and counterparty risk so far as investment portfolio is concerned.
4. To take advantage of market conditions for profitable tradingactivities in securities.
The Bank has formulated an exhaustive treasury manual and thecomprehensive investment policy and the investment and operationsare conducted in accordance with such laid down guidelines tominimise not only the interest rate and credit risk but also theoperational risks.
The break-up of the Bank’s investments is given below. As per RBIguidelines investments are classified into three categories, viz. HeldTill Maturity, Available For Sale and Held For Trading. Recapitalisationbonds amounting to Rs. 2256 crores and Subsidiary and JointVentures amounting to Rs.12.96 crores are not considered whilecalculating the percentage of Held Till Maturity securities to totalinvestments. The classification of domestic investments is as under:
Net Book Value of Global Investments
(Rs. In crores)
As on March 31 2001 2002 2003
Amount % of Total Amount % of Total Amount % of Total
Held to Maturity 1957 22.26 1576 15.12 2583 21.76
Available for Sale 6620 75.29 8758 84.02 9105 76.72
Held for Trading 216 2.45 90 0.86 180 1.52
Total 8793 100.00 10424 100.00 11868 100.00
Others 2269 2271 2269
Grand Total 11062 12695 14137
In order to cash in on the trading opportunities, the Bank, during thelast two years has increased its activity in secondary market operationsparticularly in Government securities and in Debenture & Bondportfolio. During year ended March 31, 2003, Bank earned a tradingprofit of Rs. 354.61 crores as compared to Rs346.36 crores for theprevious year. During FY03, the net investments of the Bank increasedby Rs 1442.00 crores to Rs 14137.51 crores as on March 31, 2003registering an increase of 11.36%. The 78.24% investment portfolioof the Bank is marked to market as on March 31, 2003, whereas inprevious year it was 84.88%. The Bank has transferred Rs. 30 croresto Investment Fluctuation Reserve in FY03.
Non-performing investment have been identified and the provisionhas been made for the entire amount as per RBI guidelines.
Statement of Average Investment and Adjusted Yield on GlobalInvestments
The yield on investments (%) for the last five years is given below:
(Rs. In crores)
As on March 31st 1999 2000 2001 2002 2003
Inclusive of SLR/Non-SLR / GoI Special
1. Average Investment 8038.52 9349.04 10355.76 11754.23 13304.84
2. Income (inclusive ofdividend on shares) 907.55 1077.01 1168.13 1250.65 1319.84
Adjusted yield onDomesticinvestments (%) 11.29% 11.52% 11.28% 10.64% 9.92
33
UCO BANK
Statement of Average Investment and Adjusted Yield on DomesticInvestments
(Rs. in crores)
As on March 31st 1999 2000 2001 2002 2003
Inclusive of SLR/Non-SLR / GoI Special
1. Average Investment 7707.25 9007.78 10039.25 11278.27 12923.23
2. Income (inclusive ofdividend on shares) 888.61 1057.34 1149.56 1228.27 1311.49
Adjusted yield onDomesticinvestments (%) 11.53% 11.74% 11.45% 10.89% 10.15%
Funds Management and integration of treasuries
The Bank monitors its funds on day-to-day basis so as to ensureadequate liquidity for daily requirement vis-à-vis gainful deploymentof surplus funds. While doing the same a strict vigil is kept onmovement of idle assets like cash and bank balances, which are keptat a bare minimum level.
In the call money/ inter bank term money market, the Bank is a netlender. With the call money rates moving within a narrow band of4.75% to 5.00% during the last few months, the Bank has developedinvesting overseas in the short term out of domestic funds as a moreprofitable alternative. This step by the Bank is towards integration ofits domestic and forex treasuries. The Bank has set up an IntegratedTreasury Branch at Mumbai and Domestic Treasury Operations areheld from Head Office in Kolkata.
DETAILS OF INTEREST EARNING ASSETS &LIABILITIES
Particulars FY01 FY02 FY03
Average Interest EarningAssets(Rs. in crores) 20317.96 24283.52 27958.83
Interest rates on InterestEarning Assets (%) 11.20 10.47 9.99
Average Interest BearingLiabilities(Rs. in crores) 19651.73 23585.16 28550.47
Interest rates on InterestBearing Liabilities (%) 8.21 7.68 6.69
Average Balances –Interest Bearing RupeeLiabilities (Rs. in crores) 18144.79 21944.14 26921.42
Interest rates – InterestBearing RupeeLiabilities (%) 8.41 8.01 6.99
ASSET CLASSIFICATION, INCOME RECOGNITION &PROVISIONING
Regulatory Position
In keeping with RBI guidelines on asset classification, incomerecognition and provisioning, the Bank has adopted the system ofclassifying the advances under 4 categories:
Category Classification
1. Performing
Standard Asset An asset which has not posed anyproblem and which does not carrymore than the normal business risk
2. Non-Performing
a) Sub-standard Asset An asset which has been non-performing for a period less than orequal to eighteen months
b) Doubtful Asset An asset, which has been non-performing for a period exceedingeighteen months.
c) Loss Asset Asset where loss has been identifiedby the Bank or auditors / RBI .Thevalue of security is less than 10%.
For this purpose, all advances are segregated into performing assets(standard assets) and non-performing assets. A borrowal account isclassified as Non Performing Assets (NPA) when interest and/orinstalment are due for more than 180 days. Borrowal accounts treatedas NPA for not exceeding one and half years are classified as substandard assets and borrowal accounts treated as NPA for morethan one and half years are treated as doubtful assets. NPAs wheresecurities are less than 10% and which are considered as difficult torecover are treated as loss assets.
When an account is classified as NPA, interest already debited to theaccount but not realised, is de-recognised and further interest accruedis collected on cash basis.
Provisions are arrived on all outstanding NPAs, as under:
a) Sub Standard Assets at 10% of the outstanding
b) Doubtful Assets at 20% or 30% or 50% of the secured portionbased on the number of years the account remained as “DoubtfulAsset” (i.e. up to one year, one to three years and more thanthree years respectively) and at 100% of the unsecured portionof the outstanding after netting retainable or realisable amountof the guarantee claims already received / lodged with DICGC/ECGC, if any.
c) Loss Assets at 100% of the outstanding after netting retainableamount of the guarantee claims already received/lodged withDICGC/ECGC, if any.
34
UCO BANKThe asset quality of the Bank has improved considerably during thelast three years. Between FY01 to FY03, Gross NPA to Gross Advancesratio dropped from 12.25% to 8.24% while Net NPA to Net Advancesratio fell from 6.35% to 4.36%.
General data on Non-Performing Assets
The details of Non-Performing Assets of the Bank are furnished invarious tables below.
(Rs. in crores)
Particulars (As on March 31st) 2001 2002 2003
Gross NPA at the beginningof the year 1651 1275 1333
Addition during the year 250 431 391
Reduction during the year
a) Upgradation 74 25 59
b) Cash Recovery 145 151 144
c) Compromise
d) Write-off 135 197 155
e) Interest Suspense 263
Gross NPA at the end of the year 1284* 1333 1366
Provision 602 583 649
Interest Suspense/Margin/Subsidy 1 12 9
DICGC & ECGC Balance 25 14 11
Net NPA at the end of the year 656 724 697
* includes NPA in investments for Overseas branches for Rs. 9 Cr.NPA’as on March 31st, 2001 included an investment in FRN ofUS$ 2 million by Singapore main branch. Consequent uponupgradation of the subject account, it was not an NPA. As aresult, the amount of Rs. 9 crores was not carried forward inFY02.
The provision of Rs. 649 crore given in the above table is the grossprovision as on March 31st, 2003, while Rs. 224.72 crores representing“ provision of bad & doubtful debts” given in Statement of Profit &Loss under the Auditors Report represents the provision made anddebited to Profit & Loss Account during the FY02-03.
Asset classification (Global) of performing and non performingassets for the last five years
(Rs in crores)
Classification of 1999 2000 2001 2002 2003assets as onMarch 31st
Standard assets 5405 6806 9197 11676 15217
Sub-standard 368 303 257 448 380
Doubtful 1129 1098 842 766 753
Loss 219 250 185 119 233
Gross NPAs 1716 1651 1284 1333 1366
Gross Advances 7121 8457 10481 13009 16583
Classification of 1999 2000 2001 2002 2003assets (%)as onMarch 31st
Standard assets 75.90 80.48 87.75 89.75 91.76
Sub-standard 5.17 3.58 2.45 3.45 2.29
Doubtful 15.85 12.98 8.03 5.89 4.54
Loss 3.08 2.96 1.77 0.91 1.41
Gross NPAs 24.10 19.52 12.25 10.25 8.24
Gross Advances 100.00 100.00 100.00 100.00 100.00
The gross advances figures shown in the above table are for theglobal operations of the Bank. After netting of the provisions fromthe non-performing assets and netting of the amount of DICGC/ECGCbalance from the gross advances, the net figures are shown asadvances in the Statement of Assets and Liabilities in the Auditor’sReport.
The position regarding the number and details of the current NPAaccounts are indicated below:
(Rs. in crores)
No. of accounts NPA as on Amount ofas on 31.3.2003 31.3.2003 interest not
debited as on31.03.2003
Below Rs. 25,000/- 236616 160 95
Above Rs. 25,000/- 42959 1206 602
Total 279575 1366 697
Industry Classification of top 10 Domestic NPA A/Cs – as on March31st, 2003
(Rs. in crores)
Industry Balance % to the Categoryoutstan- gross
ing advance
Engineering (Watch) 40.92 0.25 Sub-standard
Chemicals, Dyes & Paints 30.49 0.18 Doubtful
Chemicals, Dyes & Paints 28.91 0.17 Doubtful
Textiles 24.12 0.14 Doubtful
Iron & Steel 21.45 0.13 Doubtful
Textiles 19.32 0.12 Sub-standard
Electricals (Cables) 15.73 0.09 Doubtful
Textiles 14.82 0.09 Sub-standard
Engineering 12.13 0.07 Doubtful
Gems & jewellery 12.03 0.07 Doubtful
35
UCO BANKSector wise analysis of Gross Non-Performing Assets
The sector-wise analysis of NPAs for the last four years is as under.
(Rs. in crores)
Sector 1999-2000 2000-2001 2001-2002 2002-2003
Amount % Amount % Amount % Amount %
Large & Medium Industries 427 25.86 274 21.34 295 22.13 403 29.50
Small Scale Industries 258 15.63 177 13.78 190 14.25 196 14.35
Priority Sector (Agriculture) 221 13.39 181 14.10 202 15.16 173 12.67
Other (Trade & Others) Otherpriority & non-priority sector 745 45.12 652 50.78 646 48.46 594 43.48
Total 1651 100.00 1284 100.00 1333 100.00 1366 100.00
All quantative disclosures regarding non-performing assets are in conformity with RBI norms.
NPA Management Strategy
The objective of NPA Management Policy is to bring about aqualitative improvement in the credit portfolio of the Bank so as toimprove yield on total advances and to reduce Gross and Net NPApercentages below the industry level. The thrust areas of the NPAManagement Policy are Cash recovery, Compromise, Write off,Upgradation and Protecting and strengthening the security.
l The Bank has set up committees at Head Office and RegionalOffices to the NPA management efforts of the Bank. SettlementAdvisory Committee is headed by a retired High Court Judge.
l The recovery and upgradation efforts are executed throughseparate Recovery Department set up at Head Office and atrespective Regional Offices.
l An elaborate strategy has been drawn-up and implemented bythe bank for reduction of NPAs.
l Credit monitoring system has been revamped.
l Individual high value NPA accounts are thoroughly reviewedperiodically.
l High incidence NPA areas are directly monitored by the GeneralManagers at H.O.
l Compromise through Settlement Advisory Committee
l An incentive scheme has been launched to motivate and involvethe members of staff in a NPA recovery.
l Best use of newly enacted SRFAESI ACT to recover Bank’sdues.
The Bank operates with four layers of Committees for NPAManagement. The role and definitions of these Committees are asgiven below:
1. Settlement Advisory Committee (SAC): At Head Office level forclearing compromise and write off proposals, beyond thepowers of Chairman & Managing Director i.e. proposals, whichare, put upto the Management Committee of the Board forApproval.
2. Committee for Evaluation of Compromise Proposals (CECP) AtHead office Level: For clearing proposals within the powers ofGeneral Manager (Recovery), Executive Director, Chairman &Managing Director. Normally, proposals within the powers ofGeneral Manager (Recovery) is disposed of at General Manager(Operations) only and doesn’t comes to Head office level at all.This provision has been made to take care of exceptionalcircumstances, when Executive Director/Chairman & ManagingDirector may authorise/instruct General Manager (Recovery) tonegotiate and arrive at a compromise. It also covers cases oflarge borrowal accounts wherein amounts are sought to bewritten off on regular or prudential basis.
3. CECP at General Manger (Operations) Level: These Committeesoperate in the Offices of General Manager (Operations) and thetwo Regional Offices headed by General Managers. TheseCommittees will clear proposals falling within powers of therespective General Manager (Operations) or Regional Offices.
4. CECP at Regional Office Level: These Committees operate inthe Regional Offices and clear proposals falling within thepowers of the concerned Regional office headed by DeputyGeneral Manger.
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UCO BANK
ASSET LIABILITY MANAGEMENT
The maturity profile of deposits as on March 31, 2003 is as under:
(Rs. in crores)
Domestic Domestic Investment* Borrowing Foreign currencyDeposit Advance Assets Liabilities
1-14 days 5341 4934 1422 388 927 754
15-28 days 652 447 258 0 153 137
29 days upto 3 months 1718 1277 625 0 430 223
Over 3 months upto 6 months 2415 726 731 0 295 219
Over 6 months upto 12 months 4134 864 1245 0 40 215
Over 1 year upto 3 years 6737 1911 4048 0 313 344
Over 3 years upto 5 years 2868 1856 1919 0 362 296
Over 5 years 5876 2865 3211 0 260 407
Total 29741 14880 13459 388 2780 2595
* The difference between the figure of investment shown in the above table and Statement of Assets & Liabilities in the Auditor’s Report ison account of investment of Rs. 4.59 crores made by the Bank outside India.
Statement of Borrowings
India Foreign Total
Borrowings in India
Reserve Bank of India Nil Nil Nil
Other Banks 12 Nil 12
Other Institutions & Agencies 234 Nil 234
Borrowings outside India 142 19 161
Grand Total 388 19 407
37
UCO BANK
MATURITY PROFILE OF THE ASSET AND LIABILITY AS ON MARCH 31, 2003
(Rs. in crores)
Maturity 1-14 days 15- 29 days- 3- 6 6 -12 1- 3 yrs. 3- 5 yrs. Over Total
28 days 3 mths mths mths 5 yrs.
Outflows
1. Capital 0.00 0.00 0.00 0.00 0.00 0.00 0.00 599.36 599.36
2. Reserve & Surplus 0.00 0.00 0.00 0.00 0.00 0.00 0.00 488.76 488.76
3. Deposits 5340.83 651.94 1718.12 2414.98 4133.54 6737.40 2867.97 5876.37 29741.15
4. Borrowings 387.96 0.00 0.00 0.00 0.00 0.00 0.00 0.00 387.96
5. Interest Accrued 27.07 7.18 18.93 26.61 45.55 65.71 23.84 12.65 227.54
6. Other Liability
and Provision 651.98 51.40 51.40 154.19 205.59 194.42 450.15 84.30 1843.43
A: Total Outflows 6407.84 710.52 1788.45 2595.78 4384.68 6997.53 3341.96 7061.44 33288.20
B: Cumulative Outflows 6407.84 7118.36 8906.81 11502.59 15887.27 22884.80 26226.76 33288.20
Inflows
1. Cash 243.06 0.00 0.00 0.00 0.00 0.00 0.00 0.00 243.06
2. Balance with RBI 0.00 333.48 149.71 150.37 257.38 431.11 178.10 383.76 1883.91
3. Balance with other Banks 736.40 0.00 0.00 0.00 0.00 0.00 0.00 0.00 736.40
4. Investments 1422.19 257.76 624.43 731.14 1244.82 4048.37 1919.30 3210.71 13458.72
5. Advances 4933.93 446.75 1276.95 726.17 864.26 1910.88 1856.45 2864.19 14879.58
6. Fixed Assets 0.00 0.00 0.00 0.00 0.00 0.00 0.00 226.30 226.30
7. Other Assets 197.07 0.00 0.00 0.00 229.58 230.36 0.00 3.27 660.28
8. Interest Accrued 0.00 0.00 137.00 274.00 274.00 0.00 0.00 0.00 685.00
9. Foreign exposure -44.42 40.92 -1.46 96.35 -39.75 -54.92 0.00 0.00 -3.28
C: Total Inflows 7488.23 1078.91 2186.63 1978.03 2830.29 6565.80 3953.85 6688.23 32769.97
D: Cumulative Inflows 7488.23 8567.14 10753.77 12731.80 15562.09 22127.89 26081.74 32769.97
E: Mismatch (C-A) 1080.39 368.39 398.18 -617.75 -1554.39 -431.73 611.89 -373.21 -518.23
F. Cumulative
Mismatch (D-B) 1080.39 1448.78 1846.96 1229.21 -325.18 -756.91 -145.02 -518.23
F: Cum. Mismatch/
total liabilities 3.00% 4.00% 6.00% 4.00% -1.00% -2.00% 0.00% -2.00%
38
UCO BANK
MATURITY PROFILE OF THE ASSET AND LIABILITY AS ON MARCH 31, 2002
(Rs. in crores)
Maturity 1-14 days 15- 29 days- 3- 6 6 -12 1- 3 yrs. 3- 5 yrs. Over Total
28 days 3 mths mths mths 5 yrs.
Outflows
1. Capital 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2264.52 2264.52
2. Reserve & Surplus 0.00 0.00 0.00 0.00 0.00 0.00 0.00 376.38 376.38
3. Deposits 2449.96 594.11 1432.44 1532.26 2778.40 6686.74 3535.97 6214.24 25224.12
4. Borrowings 393.04 0.00 0.00 0.00 0.00 0.00 0.00 0.00 393.04
5. Interest Accrued 28.92 7.00 16.88 18.05 32.74 59.10 27.04 11.86 201.59
6. Other Liability and
Provision 607.26 0.00 37.20 111.61 223.21 131.01 300.15 70.65 1481.09
A: Total Outflows 3479.18 601.11 1486.52 1661.92 3034.35 6876.85 3863.16 8937.65 29940.74
B: Cumulative Outflows 3479.18 4080.29 5566.81 7228.73 10263.08 17139.93 21003.09 29940.74
Inflows
1. Cash 208.02 0.00 0.00 0.00 0.00 0.00 0.00 0.00 208.02
2. Balance with RBI 0.00 109.00 89.18 67.43 122.27 299.43 154.97 277.45 1119.73
3. Balance with other Banks 856.85 0.00 0.00 0.00 0.00 0.00 0.00 0.00 856.85
4. Investments 670.52 153.28 543.33 433.58 755.78 3016.09 1960.75 4282.31 11815.64
5. Advances 2301.24 318.58 738.04 613.19 703.06 2591.75 1932.80 2598.61 11797.27
6. Fixed Assets 0.00 0.00 0.00 0.00 0.00 0.00 0.00 239.58 239.58
7. Other Assets 624.97 0.00 0.00 0.00 188.28 253.70 126.85 2.76 1196.56
8. Interest Accrued 0.00 0.00 116.67 233.66 233.66 0.00 0.00 0.00 583.99
9. Foreign exposure 171.31 22.67 -34.51 -27.96 -54.09 -64.92 0.00 0.00 12.50
10. Accumulated Loss 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1751.16 1751.16
C: Total Inflows 4832.91 603.53 1452.71 1319.90 1948.96 6096.05 4175.37 9151.87 29581.30
D: Cumulative Inflows 4832.91 5436.44 6889.15 8209.05 10158.01 16254.06 20429.43 29581.30
E: Mismatch (C-A) 1353.73 2.42 -33.81 -342.02 -1085.39 -780.80 312.21 214.22 -359.44
F. Cumulative
Mismatch (D-B) 1353.73 1356.15 1322.34 980.32 -105.07 -885.87 -573.66 -359.44
F: Cum. Mismatch/total
liabilities 5.00% 5.00% 4.00% 3.00% 0.00% -3.00% -2.00% -1.00%
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UCO BANK
MATURITY PROFILE OF THE ASSET AND LIABILITY AS ON MARCH 31, 2001
(Rs. in crores)
Maturity 1-14 days 15- 29 days- 3- 6 6 -12 1- 3 yrs. 3- 5 yrs. Over Total
28 days 3 mths mths mths 5 yrs.
Outflows
1. Capital 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2264.52 2264.52
2. Reserve & Surplus 0.00 0.00 0.00 0.00 0.00 0.00 0.00 240.37 240.37
3. Deposits 2393.41 363.41 1017.68 1674.88 2942.17 4620.27 2128.76 4865.08 20005.66
4. Borrowings 384.87 0.00 0.00 0.00 0.00 0.00 0.00 0.00 384.87
5. Interest Accrued 94.08 56.20 157.37 197.76 354.15 587.51 229.75 139.81 1816.63
6. Other Liability and
Provision 527.23 0.00 0.00 84.66 253.98 123.78 150.15 54.80 1194.60
A: Total Outflows 3399.59 419.61 1175.05 1957.30 3550.30 5331.56 2508.66 7564.58 25906.65
B: Cumulative Outflows 3399.59 3819.20 4994.25 6951.55 10501.85 15833.41 18342.07 25906.65
Inflows
1. Cash 170.20 0.00 0.00 0.00 0.00 0.00 0.00 0.00 170.20
2. Balance with RBI 346.26 166.20 109.78 134.00 206.03 335.42 185.57 386.21 1869.47
3. Balance with other Banks 851.45 0.00 0.00 0.00 0.00 0.00 0.00 0.00 851.45
4. Investments 909.38 124.32 291.72 502.68 775.76 1688.00 2627.57 3466.91 10386.34
5. Advances 3339.03 98.74 341.18 835.11 1058.42 879.60 607.58 1793.71 8953.37
6. Fixed Assets 0.00 0.00 0.00 0.00 0.00 0.00 0.00 250.09 250.09
7. Other Assets 586.47 0.00 0.00 0.00 76.95 96.54 48.27 3.19 811.42
8. Interest Accrued 7.56 4.48 8.81 4.91 8.28 44.10 112.71 310.78 501.63
9. Foreign exposure 134.26 25.91 -112.40 174.03 -135.96 -82.58 0.00 0.00 3.26
10. Accumulated Loss 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1774.19 1774.19
C: Total Inflows 6344.61 419.65 639.09 1650.73 1989.48 2961.08 3581.70 7985.08 25571.42
D: Cumulative Inflows 6344.61 6764.26 7403.35 9054.08 11043.56 14004.64 17586.34 25571.42
E: Mismatch (C-A) 2945.02 0.04 -535.96 -306.57 -1560.82 -2370.48 1073.04 420.50 -335.23
F. Cumulative
Mismatch (D-B) 2945.02 2945.06 2409.10 2102.53 541.71 -1828.77 -755.73 -335.23
F: Cum. Mismatch/
total liabilities 11.00% 11.00% 9.00% 8.00% 2.00% -7.00% -3.00% -1.00%
Note: The above tables are prepared as per the guidelines of Reserve Bank of India and it reflects behavioural pattern. The above tablesincorporate certain estimated amounts such as unavailed cash-credit balances/overdraft/demand loan component of working capital onthe outflow side and foreign exchange contracts on the inflow side, which are not a part of the Balance Sheet. The figures of total liabilitiesand assets given in the Statement of Assets & Liabilities under the Auditor’s Report will not match with the Asset-Liability Maturity MismatchStatement as the same is for the domestic operations, whereas, Statement of Assets & Liabilities under the Auditor’s Report pertains to theglobal operations, which inturn has been recast in terms of the note appended to the Statement of Assets & Liabilities.
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UCO BANK
FINANCIAL RATIOS AND OTHER FINANCIAL INFORMATION OF THE BANK FOR THE LAST FIVE YEARS
Financial Year ended March 31st, 1999 2000 2001 2002 2003
Average Interest Earning Assets (Rs. in crores) 14387.07 16836.30 20317.96 24283.52 27958.83
Interest Income (Rs. in crores) 1692.76 1977.50 2274.70 2541.78 2792.70
Average Interest Bearing Liabilities (Rs. in crores) 15645.31 17659.28 19651.73 23585.16 28550.47
Total Interest Expense (Rs. in crores) 1246.29 1424.93 1612.64 1812.03 1910.68
Ratio of Avg. Interest Earning Assets to Avg. Interest Bearing Liabilities (times) 0.92 0.95 1.03 1.03 0.98
Interest Expense apportioned to Interest EarningAssets (Rs. in crores) 1146.06 1358.52 1667.31 1865.68 1871.09
Net Interest Income (Rs. in crores) 446.47 552.57 662.06 729.75 882.02
Ratios
Earnings per Share (EPS) (Rs.) -0.38 0.07 0.51 1.00 4.06
Cash Earnings per Share (Rs.) -0.24 0.13 0.61 1.17 4.75
Return on Networth (%) -25.48 4.09 25.60 28.26 26.78
Net Asset Value per Share (Rs.) 1.48 1.68 1.98 3.57 15.18
Net Interest Margin (%) 2.36 2.71 2.83 2.66 2.79
Gross Yield (%) 11.77 11.75 11.20 10.47 9.99
Average Cost of Loan Funds (%) 7.97 8.07 8.21 7.68 6.69
Yield Spread (%) 3.80 3.68 2.99 2.78 3.30
Net NPA to Net Advances ratio (%) 10.83 8.75 6.35 5.45 4.36
Interest income/ Average working fund (%) 8.93 9.69 9.71 9.27 8.82
Non-Interest income/ Average working fund (%) 0.99 1.22 1.27 2.13 1.92
Return on Average Assets (%) -0.45 0.08 0.49 0.83 0.77
Net Profit/ Average working fund (%) -0.45 0.08 0.49 0.83 0.77
Business per employee ( Rs. in crores) 0.73 0.88 1.13 1.61 1.97
Net Profit per employee ( Rs. in crores) -0.0027 0.0005 0.0040 0.0092 0.0100
Capital Adequacy ratio (%) 9.63 9.15 9.05 9.64 10.04
Tier I 7.22 6.59 5.36 4.89 5.19
Tier II 2.41 2.56 3.69 4.75 4.85
Credit/Deposit Ratio (%) (net) 43.82 46.06 48.67 48.45 52.91
Avg. Share Capital Reserves to Avg. Total Assets 0.01:1 0.02:1 0.02:1 0.02:1 0.03:1
Interest spread/Average working fund (%) 2.36 2.71 2.83 2.66 2.79
Gross profit/Average working fund (%) 0.00004 0.66 0.88 1.81 2.09
Operating profit/ Average working fund (%) 0.00004 0.66 0.88 1.81 2.09
Return on average Networth (%) -29.92 4.36 27.70 36.36 28.35
Yield on Advances (%) 9.92 9.76 10.14 10.25 9.90
Yield on Investments (%) 11.29 11.52 11.28 10.64 9.92
Cost of Deposits (%) 8.12 8.05 8.02 7.40 6.61
Cost of Borrowings (%) 11.94 10.99 8.78 8.25 5.45
Gross profit per employee ( Rs. in crores) 0.00003 0.0044 0.0073 0.0200 0.0272
Business per Branch ( Rs. in crores) 13.02 15.19 18.60 23.23 27.88
Gross profit per Branch ( Rs. in crores) 0.0005 0.0758 0.1200 0.2888 0.3840
Notes:
1. Interest earning assets consist of performing loans, investments in approved and unapproved securities, proportionate cash withReserve Bank of India, call money/term money lent, deposits kept abroad, etc.
41
UCO BANK
2. Interest bearing liabilities consist of deposits, call money borrowings, refinances, subordinate debts, Tier II bonds, etc.
3. Interest expenses apportioned to interest earning assets are calculated by multiplying total interest expenses by the ratio of averageinterest earning assets to average interest bearing liabilities.
4. Gross yield equals interest income divided by average interest earning assets.
5. Average cost of loan funds equals interest expenses divided by average interest bearing liabilities.
6. Yield spread represents the difference between gross yield and average cost of loan funds.
7. Return on average assets is the net profit for the year divided by average total assets.
8. All financial ratios, capital adequacy ratios are computed in conformity with RBI norms.
CAPITAL ADEQUACY RATIO
The RBI’s guidelines on Capital Adequacy Ratios (CAR) generally conform to the guidelines adopted by the Committee on BankingRegulations and Supervisory Practices of the Bank of International Settlements (“BIS”). The RBI requires that assets, non-funded items andother off-balance sheet exposures are assigned weights according to prescribed risk weights and that each Bank must maintain capitallevels equivalent to a prescribed ratio to such risk weighted assets.
Capital
For the purpose of calculating the CAR, capital of a Bank is divided into two classes i.e. Tier I capital and Tier II capital. Tier I capital, alsoknown as core capital, represents amounts readily available to support the Bank against unexpected losses. Tier-I capital consists of paidup capital, statutory reserves and other disclosed free reserves. Tier-II capital comprises elements that are less permanent in nature andthus less readily available. Tier II capital consists of subordinated debt (with a minimum maturity of five years), undisclosed reserves,cumulative perpetual preference shares, revaluation reserves (to the extent of 45% of the total amount of revaluation reserves on the Bank’sbook), general provisions and hybrid capital. The total capital for the calculation of CAR is the sum of Tier I capital and Tier II capital andis taken, with the condition that the Tier II capital should not exceed Tier I capital. RBI vide its circular dated October 31st, 1998 prescribedthat banks should achieve a minimum CAR of 9% with effect from the year ending March 31st, 2000.
Risk Weighted Assets
Each class of assets of the Bank (including off-balance sheet assets) is assigned a risk weight (following certain norms laid down by RBI).The value of risk weighted assets for each class of assets is obtained by multiplying the amount of each asset class by its risk weight. Thetotal risk weighted assets are obtained by summing up the individual risk weighted assets.
An International Committee of Banking Regulations and Supervisory Practices of the BIS released an agreed framework on internationalconvergence of CAR for commercial Banks. The minimum CAR was set at 8%. The capital adequacy norms are to be enforced by theBanking Supervisory Authority of the respective country. RBI being the Central Bank of the country had issued guidelines and prescribedthat Indian Banks should achieve CAR of 9%, by March 31st, 2000.
42
UCO BANK
Position of Capital Adequacy from FY99 to FY03
(Rs. in crores)
Computation of Capital Base FY99 FY00 FY01 FY02 FY03
Paid up capital 2264.52 2264.52 2264.52 2264.52 599.36
Reserves & Surplus unallocated 15.91 34.45 61.00 116.27 269.73
Core Capital Gross 2280.43 2298.97 2325.52 2380.79 869.09
Less Losses of the prior years (1736.13) (1803.90) (1797.44) (1774.19) (86.00)
Less Losses in the current year (67.77)
A. Core (Tier I) Capital (Net) (CC) 476.53 495.97 628.08 600.60 783.08
Property Revaluation Reserve 150.64 145.38 141.76 138.19 133.18
Undisclosed Reserve
Investment Fluctuation Reserve 8.56 1.60 4.77 96.61 126.61
Hybrid Capital
Cumulative Perpetual Preference Shares 30.06 66.68 83.69 120.28
General Provisions 150.15 270.12 360.09
Sub-ordinated term Debt Tier II Capital Gross Total
(Less) Head-room deductions 159.20 192.14 363.38 588.88 730.16
B. Supplementary (Tier II) Capital 159.20 192.14 363.38 588.88 730.16
C. Total Capital (A+B) (Capital Base) 635.73 687.21 891.44 1196.40 1513.25
Risk Weighted Assets
Assets (funded) 5758.73 6770.00 9110.13 11216.94 13439.38
Contingent Credit Exposure 833.78 728.65 966.99 1160.57 1599.61
Contracts/Derivatives Exposure 8.71 11.34 42.14 27.85 35.55
Total Risk Weighted Assets (TRWAs) 6601.22 7510.07 9851.93 12405.36 15074.54
Ratios
CRAR (%TC/TRWA) 9.63 9.15 9.05 9.64 10.04
Core CRAR (% CC/TRWA) 7.22 6.59 5.36 4.89 5.19
Tier II CRAR (Tier II Capital /TRWA) 2.41 2.56 3.69 4.75 4.84
Requirement of enhancement of capital
The Bank expects to post a growth in business in the years to come. As a result, Risk weighted assets of the Bank are also expected toincrease over the years. Increase in Tier I capital through retained earnings alone may not be sufficient to enable the Bank to maintain anadequate capital adequacy ratio. In view of the likely expansion of loan assets, the Bank proposes to augment its net worth in order tosustain a healthy CAR.
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UCO BANK
The Bank has not made any issue of Equity Shares / Debentures / Preference shares by way of Public / Rights Issue through an OfferDocument. However, the Bank has raised Tier II Capital by way of Private Placement of unsecured, redeemable bonds in the nature ofPromissory Notes to augment capital adequacy as under:
Sr. no Particulars Outstanding Interest Rate Period Date of RepaymentBalance (%) Repayment terms
(Rs. in crores)
1 Tier II Bond Sr. I 150.15 11.00 63 months 30.6.06 Bullet
2 Tier II Bond Sr. II 150.00 9.50 63 months 7.4.07 Bullet
3 Tier II Bond Sr. III 150.00 7.50 66 months 8.5.08 Bullet
RISK MANAGEMENT
General
The Bank recognises that management of risk is fundamental to thebusiness of banking. The Bank’s approach to risk management isproactive. The primary goal of risk management is not to avoid risksinherent in business but to steer them consciously and actively. Thebasic objective is to strike a balance between risk and returns andachieve growth with appropriate risk management policy. The Bankhas formulated Risk Management Policy in October 2002 based onthe guidelines issued by RBI in this regard.
Organisation for Risk Management
The Board of Directors of the Bank shall have a primary responsibilityfor establishing Risk Management and Control systems and lay downvarious risk parameters. The Bank has formed Corporate RiskManagement Committee (CRMC) to design and implement RiskManagement processes and their integration with basic operationsof the Bank. CRMC consists of CMD, Executive Director, and GeneralManager in charge of the functional department. CRMC shall overseethe functions of Asset Liability Management, Market RiskManagement, Credit Risk Management and Operational RiskManagement. The Risk Management Policy has identified andoutlined specific functions of CRMC in relation to Risk Managementand Asset Liability Management.
Risk Management Architecture
The Bank’s Risk Management architecture is based on three pillars
1. Limiting Risk Exposure: To achieve the objectives of RiskManagement policy, the Bank’s has set exposure limits keepingin mind prudential guidelines issued by RBI.
2. Guidelines for Risk Acquisition: As a part of the Risk ManagementPolicy, the Bank shall set guidelines for taking new assets andmaintenance of assets on the books of the Bank. The risksassociated with credit, investment and treasury including foreignexchange, shall be taken into account and managed inaccordance with the policy.
3. Risk Measurement Process: Risk measurement process that theBank has initiated includes development of credit risk ratingframework, integrated treasury management package thatprovides the base to develop VaR based market riskmanagement model, putting in place a system to capturematurity mismatch and interest rate risk. The Bank is improvingits MIS in this regard.
Under the Risk Management Policy, the Bank has set exposure limitsfor single borrower, group borrower, exposure on banks andfinancial institutions, unsecured borrowing, lending to capital marketsetc. The Bank has outlined industry and sectoral exposure guidelines.
Policy to control Credit Risk
All credit exposures will be taken up only in accordance with theLoan Policy of the Bank (for more details on loan policy refer pageno. 31). Credit rating of the borrowers forms an integral part of thecredit decision and shall be followed unless exempted by the Loanpolicy. Pricing for credit facility in excess of Rs 25 lacs shall bebased on credit rating of the borrower. All the credit accounts shallbe monitored as per the detailed procedures set out. The Bank hasalso outlined policy with regard to off balance sheet exposure andloan review and credit audit for comprehensive credit riskmanagement.
Policy to control Investment Risk
All investment exposures will be taken up only in accordance withthe Investment policy of the Bank (for more details on InvestmentStrategy refer page no. 32). Credit Rating from recognised ratingagency shall form the basis of investment decision. Proper controlmechanisms shall be put in place for investments without creditrating. The Bank will set up a product wise exposure limit forinvestment and trading and a stop loss limit for all mark-to-marketrisk taking activities (excluding investments held under Available forSale category) with the approval of the Board. Investment activitieswill be audited once every month. The Bank has also set out policyfor equity exposure risk management, establishment of middle officefor independent assessment of market risk.
Policy to control Foreign Exchange Risk
The Bank has set limit for open foreign exchange position ceiling ofRs. 20 crores. The Bank has also set limit on the aggregate Gapposition including maturity mismatch of foreign currency positions.In order to manage the risk, the Bank shall allocate these limitsamong different centers and dealers at different operating centres.The policy specifies allowing trading by dealers within Daylightlimit specified. The Bank shall use forward contracts and options tohedge its foreign exchange risk. The Bank has specified code ofconduct for dealers.
Interest Rate Risk Management
Interest rate variation affects Banks’ net interest income/margin, theextent of which depends on mismatches in cashflow and re-pricingdates. In order to manage the risk on account of trading book will be
44
UCO BANK
covered under the policies with regard to volume, maximum maturity,holding period, duration, stop loss, default period, and ratingstandards. The securities in the trading book will be marked tomarket. As regards managing interest rate risk on the banking book,the Bank shall follow simple maturity and repricing gaps in controllinginterest rate risks after taking into account interest rate scenario.
Operational Risk Management
All risks other than market and credit risks are grouped underoperational risk and it includes risk of losses arising out of businessinterruptions, breakdowns or disruptions in internal control,deficiencies in information system, human error, system failures,non adherence to systems and procedures and administrative andlegal reasons etc. To control the operational risk, bank uses guidelinesand instructions issued under manual of instructions to branchesand other circulars issued from time to time. The Bank also uses thefeedback received from annual inspection reports and various auditreports. Systemic deficiencies in system and procedures, design ofnew systems and procedure, modification of systems and proceduresshall be examined by Systems and Procedure Committee and therecommendations of the committee shall be approved by the TopManagement Committee of the Bank.
Risk Based Supervision by R.B.I
The Reserve Bank of India has announced its intention to switch overto Risk Based Supervision (RBS) of banks. Bank has initiated necessarysteps in this direction.
INTERNAL CONTROL SYSTEM IN THE BANK
Internal Inspection
Branches / Offices of the Bank are subjected to Regular Inspection byinternal inspecting Officials at periodical intervals of 12 to 18 months.During FY03, 1365 branches were subjected to regular inspection.The Inspection Reports of branches / offices under the jurisdiction ofRegional Offices are scrutinised and the broad thrust areas are takenup with the Regional Offices concerned for speedy rectification. Inrespect of Branches rated ‘Unsatisfactory’, or very unsatisfactory abrief summary is placed before the higher authorities, and theobservations of the higher authorities are taken up with the branchesfor compliance. Similar is the case with Special Reports, which theInspecting Officials submit from the spot itself in case of some serioustype of irregularity observed during the course of inspection, forwhich urgent remedial steps are warranted to protect the interest ofthe Bank. Moreover, the progress towards upgradation of‘Unsatisfactory Branches’ is placed before the Audit Committee ofthe Board and observations / suggestions are promptly taken up forimplementation.
EDP Audit
EDP Audit of all computerised branches are conducted at intervalsof 12 months. During the year FY03, EDP audit was conducted at 602branches. Irregularities pointed out, if any, are required to be rectifiedwithin three months from the date of report as per the Bank’s policy.
Concurrent Audit
As per the extant guidelines of RBI, it is mandatory on the part of theBank to bring branches under the concurrent audit so as to coveratleast 50% of deposit and 50% of advances. The Bank has brought
296 branches under the concurrent audit system covering 47.91% ofdeposits and 68.74% of advances. The Bank has revamped itsconcurrent audit procedures w.e.f. January 1st, 2002 and hasintroduced number of new measures including introduction ofquarterly reporting system.
Revenue Audit
Revenue Audit is conducted every year to detect revenue leakageand prompt recovery thereof in branches other than those coveredby concurrent audit. The Bank has issued detailed guidelines in thisregard in January 2003. In FY03, 1080 branches were covered underrevenue audit.
Dealing Room Inspection
The Forex Dealing Rooms of the Bank are inspected every quarterby the Ex-Dealers of the Bank. The Bank has succeeded in drasticallyreducing the outstandings in Nostro Accounts and the Export ImportSuspense A/cs over the last couple of years.
RBI Inspection Report
Reserve Bank of India conducts the Annual Financial Inspection ofthe Bank under Section 35 of the Banking Regulation Act, 1949. TheRBI Inspection for the year ended March 31st, 2002 has beencompleted. The Bank has replied to RBI Inspection report inNovember 2002. RBI Inspection report has identified certaindeficiencies in capital adequacy, quality of assets, investments, fundsand ALM Management, systems and controls, foreign exchangebusiness and working of overseas branches. RBI Inspection report isconfidential in nature.
Statutory Audit
The statutory audit of the Bank for the year ended March 31st, 2003was carried out by M/s P.A. & Associates, M/s N.C. Mitra & Co., M/sM. Choudhury & Co., M/s H.K. Chaudhry & Co., M/s Vinod Kumar &Associates And M/s L.B. Jha & Co. Statutory Auditors were appointedby RBI/GOI as per the extant regulations.
Rating of Branches based on Inspection reports:
As per the guidelines formulated by the Bank issued in January2002, the rating system for the branches have been rationalised toreflect the true position of the branches which are exposed to highlevel operational risk or where irregularities exists including poorhouse keeping. The overall rating of individual branches could bereduced by one notch where the branch secures less than 50%score in qualitative aspects.
Other Special Investigation
Whenever warranted, Special Investigation is also conducted at theBranch / Office concerned, to unearth any fraud / forgery etc. andplug the loophole.
Vigilance Mechanism
The Bank has a well-organised vigilance set-up to take care of thevigilance issues efficiently and effectively. Vigilance mechanismpursued by the Bank to contain fraud/forgery and malpractices inthe Bank has been quite effective. The guidelines emanated fromCentral Vigilance Commission/RBI/GoI in respect of vigilance mattersare promptly implemented and adhered to. Special emphasis is
45
UCO BANK
given to expeditious completion of disciplinary cases. Specialemphasis is also laid on Preventive Vigilance and EducativeVigilance so as to ensure observance of the prescribed systems andprocedures at field level and augment awareness about the needand implication of Preventive Vigilance among the rank and file.Apart from routine inspection/audit, Surprise Vigilance Inspectionof branches is conducted on an ongoing basis.
Housekeeping
Housekeeping, which includes Balancing of Books, is constantlymonitored and is generally satisfactory. Inter-branch reconciliationwas given focussed attention during the year and the lead-time wasmaintained at less than three months. The Bank has establishedsystems and procedures for balancing of books of accounts forwhich specific guidelines have been provided to the field functionariesfor proper house keeping. As on March 31st, 2003, 0% of thebranches are carrying arrears in balancing of books for rectificationmeasures are being taken. The Bank has centralised system of dataprocessing and reconciliation of inter-branch transaction. Now withthe decentralised process, the data creation for inter-branchtransaction is done at regional level. Matching reconciliation is doneon a monthly/quarterly basis through IBR software at its Head Office.
SUBSIDIARY COMPANY & SPONSORED GRAMINBANKS (RRBS)
Subsidiary Company
UCO Bank does not have any subsidiary company.
Associate Company
UCO Bank does not have any associate company.
Regional Rural Banks sponsored by UCO Bank
There are 11 Regional Rural Banks sponsored by the Bank operatingin 5 states, 3 each in West Bengal and Bihar, 2 each in Rajasthan andOrissa and 1 in Madhya Pradesh. These RRBs with their 799 branchesare catering to the needs of rural banking in 28 districts of which 18are Lead Districts of the Bank. The total deposit of the eleven RRBsstood at Rs. 2435.80 crores and total advances of Rs 806.95 croresas of March31st, 2002.
The financial and other operational details of 11 RRBs of the Bankare as under:
1. Jaipur Nagaur Aanchalik Gramin Bank
Jaipur Nagaur Aachalik Gramin Bank was incorporated on 02.10.1975and is responsible for development of banking activity in Jaipur/Nagaur/Dausa districts. The bank has Rs.12.41 crores Capital & totalbusiness of Rs.516.90 crores as on March 31st, 2002. The following
table summarises financial performance of the bank.
(Rs. in crores)
Items 1999 2000 2001 2002
Capital 1.00 1.00 1.00 1.00
Additional Share Capital 10.81 11.41 11.41 11.41
Reserve & Surplus 0.04 0.21 5.58 9.94
Deposits 286.74 314.24 346.12 402.10
Advances 66.61 92.32 106.63 114.80
Priority SectorAdvances 45.77 61.28 74.15 82.85
Profit (+)/Loss (-) 4.52 8.28 5.37 4.37
Productivity perEmployee 0.54 0.61 0.68 0.79
Deposit with SponsorBank 116.25 171.05 209.79
Refinance Outstanding 0.34 — —
There are four litigations pending against the RRB amounting toRs. 98,000.
2. Mayurakshi Gramin Bank
Mayurakshi Gramin Bank was incorporated on 16.08.1976 and isresponsible for development of banking activity in Birbhum district.The bank has Rs.16.82 crores Capital & total business of Rs.390.63crores as on March 31st, 2002. The following table summarisesfinancial performance of the bank.
(Rs. in crores)
Items 1999 2000 2001 2002
Capital 1.00 1.00 1.00 1.00
Additional Share Capital — 14.82 15.82 15.82
Reserve & Surplus — — — —
Deposits 160.52 193.94 228.61 269.26
Advances 59.52 63.98 87.36 121.37
Priority SectorAdvances 33.46 33.21 38.93 55.62
Profit (+)/Loss (-) (-) 3.51 (-) 4.94 1.55 1.25
Productivity perEmployee 0.47 0.56 0.68 0.84
Deposit withSponsor Bank 6.67 91.59 88.24
Refinance Outstanding 0.79 0.90 0.08
There are no litigations pending against Mayurakshi Gramin Bank.
46
UCO BANK3. Cuttack Gramya Bank
Cuttack Gramya Bank was incorporated on 11.10.1976 and isresponsible for development of banking activity in Cuttack/Kendrapara/Jagatsinghpur/Jajpur districts. The bank has Rs.1.06crores Capital & total business of Rs.688.80 crores as on March 31st,2003. The following table summarises financial performance of thebank.
(Rs. in crores)
Items 1999 2000 2001 2002
Capital 1.00 1.00 1.00 1.00
Reserve & Surplus 0.06 0.06 0.06 0.06
Additional Share Capital 36.28 44.61 44.61 45.21
Deposits 195.51 244.63 299.17 384.72
Advances 92.16 113.49 125.10 209.06
Priority SectorAdvances 70.86 84.50 84.54 168.33
Profit (+)/Loss (-) (-) 4.59 (-) 2.09 (-) 2.09 (-) 9.99
Productivity perEmployee 0.39 0.39 0.58 0.81
Deposit withSponsor Bank 121.36 156.13 94.17
Refinance Outstanding 0.62 1.12 1.16
There are 35 litigations pending against Cuttack Gramya Bankamounting to Rs. 13 Lacs.
4. Monghyr Kshetriya Gramin Bank
Monghyr Kshetriya Gramin Bank was incorporated on 12.10.1977and is responsible for development of banking activity in Monghyr/Jamui/Lakhisarai/Khagaria/Sheikhpura districts. The bank hasRs.28.22 crores Capital & total business of Rs.408.58 crores as onMarch 31st, 2003. The following table summarises financialperformance of the bank
(Rs. in crores)
Items 1999 2000 2001 2002
Capital 1.00 1.00 1.00 1.00
Reserve & Surplus — — — —
Additional Share Capital 22.17 25.71 25.71 27.22
Deposits 208.23 239.02 272.26 309.90
Advances 48.70 53.28 57.39 54.72
Priority SectorAdvances 40.58 42.54 42.68 38.44
Profit (+)/Loss (-) (-) 13.11 (-) 0.71 (-) 2.81 (-) 0.56
Productivityper Employee 0.65 0.73 0.82 0.70
Deposit withSponsor Bank 1.54 157.78 182.78
Refinance Outstanding 4.31 — —
There is one litigations pending against Monghyr Kshetriya GraminBank, which does not amount to any monetary claim.
5. Balasore Gramya Bank
Balasore Gramya Bank was incorporated on 06.08.1980 and isresponsible for development of banking activity in Balasore/Bhadrakdistricts. The bank has Rs.1.00 crores Capital & total business ofRs.170.97 crores as on March 31st, 2003. The following tablesummarises financial performance of the bank:
(Rs. in crores)
Items 1999 2000 2001 2002
Capital 1.00 1.00 1.00 1.00
Reserve & Surplus — — — —
Additional Share Capital — — — —
Deposits 55.38 76.49 95.41 112.47
Advances 29.80 26.72 28.40 30.71
Priority SectorAdvances 25.61 19.11 18.35 20.73
Profit (+)/Loss (-) (-) 9.55 (-) 8.33 (-) 9.26 (-) 10.57
Productivityper Employee 0.28 0.34 0.41 0.48
Deposit withSponsor Bank 17.99 29.25 30.03
Refinance Outstanding 0.13 0.79 0.73
There are 8 litigations pending against Balasore Gramya Bankamounting to Rs87,000/-.
6. Bardhaman Gramin Bank
Bardhaman Gramin Bank was incorporated on 25.11.80 and isresponsible for development of banking activity in Howrah/Hooghlydistricts. The bank has Rs.9.21 crores Capital & total business ofRs.436.68 crores as on March 31st, 2002. The following tablesummarises financial performance of the bank:
(Rs. in crores)
Items 1999 2000 2001 2002
Capital 1.00 1.00 1.00 1.00
Reserve & Surplus — — — —
Additional Share Capital 8.21 8.21 8.21 8.21
Deposits 222.82 253.09 288.73 334.87
Advances 62.06 72.84 90.21 101.81
Priority Sector Advances 42.94 45.09 48.10 46.94
Profit (+)/Loss (-) 0.21 1.00 0.68 3.23
Productivity perEmployee 0.58 0.67 0.78 0.90
Deposit withSponsor Bank 82.49 139.42 175.49
Refinance Outstanding 0.85 0.97 —
47
UCO BANKThere are no litigations pending against Bardhaman Gramin Bank.
7. Howrah Gramin Bank
Howrah Gramin Bank was incorporated on 12.06.82 and isresponsible for development of banking activity in Howrah/Hooghlydistricts. The bank has Rs.14.82 crores Capital & total business ofRs.416.12 crores as on March 31st, 2003. The following tablesummarises financial performance of the bank:
(Rs. in crores)
Items 1999 2000 2001 2002
Capital 1.00 1.00 1.00 1.00
Reserve & Surplus 0.01 - 1.52 4.51
Additional Share Capital 5.65 5.65 5.65 5.65
Deposits 160.17 196.65 232.97 292.99
Advances 42.38 50.16 46.18 63.52
Priority Sector Advances 25.96 29.83 21.82 27.10
Profit (+)/Loss (-) 1.09 0.30 1.22 2.99
Productivityper Employee 0.66 0.80 0.91 1.18
Deposit withSponsor Bank 71.97 147.62 179.77
Refinance Outstanding 1.00 2.00 -
There are no litigations pending against Howrah Gramin Bank.
8. Thar Aanchalik Gramin Bank
Thar Aanchalik Gramin Bank was incorporated on 31.01.83 and isresponsible for development of banking activity in Jodhpur/Barmer/Jaisalmer districts. The bank has Rs.13.43 crores Capital & totalbusiness of Rs.222.77 crores as on March 31st, 2003. The followingtable summarises financial performance of the bank:
(Rs. in crores)
Items 1999 2000 2001 2002
Capital 1.00 1.00 1.00 1.00
Reserve & Surplus — — 0.03 0.67
Additional Share Capital — 12.00 12.00 12.00
Deposits 66.54 72.82 89.27 113.93
Advances 26.76 33.27 41.63 50.12
Priority Sector Advances 21.57 25.86 32.09 36.70
Profit (+)/Loss (-) (-)1.85 (-)1.22 0.05 0.58
Productivityper Employee 0.35 0.40 0.50 0.63
Deposit withSponsor Bank 29.94 37.76 47.55
Refinance Outstanding 0.06 0.09 0.07
There are four litigations pending against Thar Aanchalik GraminBank, amounting to Rs. 11.51 lacs.
9. Mahakaushal Kshetriya Gramin Bank
Mahakaushal Kshetriya Gramin Bank was incorporated on 01.04.84and is responsible for development of banking activity in Jabalpur/Katni/Narsinghpur districts. The bank has Rs.1.00 crores Capital &total business of Rs.119.08 crores as on March 31st, 2003. Thefollowing table summarises financial performance of the bank:
(Rs. in crores)
Items 1999 2000 2001 2002
Capital 1.00 1.00 1.00 1.00
Reserve & Surplus — — — —
Additional Share Capital 0.00 0.00 0.00 0.00
Deposits 33.12 44.69 59.26 71.77
Advances 7.17 10.00 15.90 20.16
Priority Sector Advances 4.47 5.47 8.06 10.96
Profit (+)/Loss (-) (-) 2.59 (-) 2.40 (-) 1.90 (-) 2.84
Productivityper Employee 0.24 0.32 0.44 0.54
Deposit withSponsor Bank 19.09 27.32 30.54
Refinance Outstanding — 0.02 0.02
There are no litigations pending against Mahakaushal KshetriyaGramin Bank.
10. Bhagalpur Banka Kshetriya Gramin Bank
Bhagalpur Banka Kshetriya Gramin Bank was incorporated on22.03.85 and is responsible for development of banking activity inBhagalpur/Banka districts. The bank has Rs.4.65 crores Capital &total business of Rs.109.13 crores as on March 31st, 2002. Thefollowing table summarises financial performance of the bank:
(Rs. In crores)
Items 1999 2000 2001 2002
Capital 1.00 1.00 1.00 1.00
Reserve & Surplus — — — —
Additional Share Capital 1.83 3.10 3.10 3.65
Deposits 48.29 61.07 72.00 83.74
Advances 21.09 21.58 21.90 25.39
Priority Sector Advances 15.99 16.50 16.62 2.76
Profit (+)/Loss (-) (-) 0.93 (-) 1.21 0.83 0.02
Productivityper Employee 0.89 1.09 1.23 1.44
Deposit withSponsor Bank 39.77 52.91 50.57
Refinance Outstanding — — 0.11
There are no litigations pending against Bhagalpur Banka KshetriyaGramin Bank.
48
UCO BANK11. Begusarai Kshetriya Gramin Bank
Begusarai Kshetriya Gramin Bank was incorporated on 23.03.85 andis responsible for development of banking activity in Begusaraidistrict. The bank has Rs.5.53 crores Capital & total business ofRs.75.34 crores as on March 31st, 2002. The following tablesummarises financial performance of the bank:
(Rs. in crores)
Items 1999 2000 2001 2002
Capital 1.00 1.00 1.00 1.00
Reserve & Surplus - - 0.11 1.35
Additional Share Capital 2.00 2.83 2.83 3.18
Deposits 38.19 41.54 51.25 60.05
Advances 7.06 8.04 10.93 15.29
Priority Sector Advances 5.26 5.08 6.77 8.37
Profit (+)/Loss (-) 0.03 0.47 2.16 1.24
Productivityper Employee 0.56 0.61 0.77 0.93
Deposit withSponsor Bank 20.43 25.30 28.52
Refinance Outstanding - - 0.04
There are two litigations pending against Begusarai Kshetriya.Gramin Bank, amounting to Rs. 1.29 lacs.
NICCO UCO ALLIANCE CREDIT LTD.
UCO Bank made a portfolio investment in 1989 in NICCO-UCO AllianceCredit Ltd, by acquiring 30% equity shares, which has subsequentlycome down to 5.74% at the end of March 2003. Details regardingNICCO-UCO Alliance Credit Ltd are as under:
Date of Incorporation: 18.06.1984 (originally) 10.05.1999 (SubjectCompany after merger of ACIL with NUFSL).
Registered Office: Nicco House, 2, Hare Street, Kolkata-700 001
Main Business: Financial services
The Company was originally incorporated on June 18th, 1984 underthe name and style of M/s Furmanite Nicco Investment Limited, as aninvestment company with the main objective of carrying with thebusiness of dealing in shares, stocks, debentures etc. Thereafter theCompany has been renamed as M/s Nicco Uco Financial ServicesLimited. RBI approval was obtained on June 2nd, 1989. Subsequently,IFC (Washington), Sanpaolo Bank, Italy and Hambros Bank, Londonwas inducted with equity participation. During 1995-96, NiccoInvestments Limited was amalgamated with the subject company.In 1997-98, another NBFC Alliance Credit & Investment Limited wasalso merged with Nicco Uco Financial Services Limited. The nameof the company was rechristened as Nicco Uco Alliance CreditLimited, a non-banking financial company. Being a NBFC, companyadheres to guidelines issued by RBI from time to time.
Thereafter, a Chennai based finance company – M/s Overseas SanmarFinancial Services Limited further merged with the company. Thecompany has exposure in general plant and machinery, medicalequipment, commercial vehicles, consumer finance and agricultural
equipment.
Share holding pattern as on No. of shares % holdingMarch 31st, 2003
Nicco Group 11700994 29.15
UCO Bank 2314285 5.76
IFC(W) 1542857 3.84
SG Ambros Bank 1560000 3.89
Other FII/foreign shareholding/NRI/OCB’s 3196443 7.96
Goodricke Group Ltd. 780545 1.94
Domestic Companies 8769993 21.84
Directors and relatives 7881 0.02
Indian Overseas Bank 1485000 3.70
FI/SFC/Bank/MFs 1527633 3.81
Public 7261142 18.09
Brief Financial details of NICCO-UCO Alliance Credit Ltd
(Rs. In Lakhs)
Particulars 31.3.00 31.3.01 31.3.02
Equity share capital 4010.12 4010.12 4010.12
Reserve Bank surplus 637.88 762.67 1012.88
Total income 4887.00 5084.38 3942.96
PAT 385.00 339.13 148.22
Dividend (%) 4% 4% 4%
Earning Per Share (Rs.) 7.35 9.80 7.10
Net Asset Value (Rs.) 25682.33 23892.69
Charges paid to UCO Bank by Nicco-UCO Alliance Credit Ltd are asfollows :-
(Rs. in lakhs)
Year ended March 31st 2002 2003
Interest 389.40 431.64
Others 14.50 11.37
OVERVIEW OF ORGANISATION STRUCTURE,MANAGEMENT AND SUPPORT FUNCTIONS
Organisation structure & Management
Hierarchy and Responsibilities
The Bank functions under the supervision of the Board of Directorsconsisting of the Chairman and Managing Director, the ExecutiveDirector and other Directors as nominated by the Government ofIndia. The Bank has a management structure comprising Head Office,the Regional Office and the branches, covering major geographicalareas. The Bank has 34 regional offices spread across the countryand is headed by senior officers of the Bank.
49
UCO BANK
Board of Directors
Sr. Name, Age and Experience Date of Date of Expiry Residential OtherNo. Appointment of current term Address Directorships
1 Shri V. P. Shetty October 6th, 2000 October 5th, 2005 5A, UCO House, National Insurance Co.Chairman & Managing Director 1/1, Alipore Avenue, Ltd.Age : 55yrs 9 Months Kolkata 700027Experience : 34 years
2 Shri B. K. Datta April 3rd, 2003 November 30th, 4A, UCO House, NilExecutive Director 2005 1/1, Alipore Avenue,Age: 57 yrs 4 months Kolkata 700027Experience : 29 years
3 Shri Sudesh Kumar March 20th, 2002 Until Further W. Q. 291, M. Basti NilDirector Order Sheikh, JalandharAge : 49 yrs 7 months City 144002
4 Shri B. Ghosh July 31st, 2003 Until Further RD’s Residence, NilDirector Order IVth Floor,Age: 55 years RBI Building,
16,Rajaji Salai,Chennai. 600001
5 Shri Arumugam Sakthivel March 27th, 2001 March 26th, 2004 Poppy’s Knitwear, i. Poppy’s SpinningDirector 33 M. P. Nagar, Mills (P) Ltd.Age: 54 yrs 3 months Tirupur – 641607 ii. Poppy’s Tours
Pvt. Ltd.iii. Poppy’s Hotel Pvt.
Ltd.iv. Poppy’s Inn Pvt. Ltd.v. Bay Resource Ltd.
6 Shri Bhalachandra March 27th, 2001 March 26th, 2004 A-3, Bageshree NilMahadev Bhide Shankar GhanekarDirector Marg, Prabhadevi,Age: 64 years 4 months Mumbai 400025
7 Shri Sanat Kumar Dutta March 27th, 2001 March 26th, 2004 1A, Raja Subodh Sterlite Projects Ltd.Director Mullick Square,Age: 71 yrs 7 months 6th Floor,
Kolkata - 700013
8 Dr. Ram Avtar Yadav March 27th, 2001 March 26th, 2004 D-176, Ashok Vihar, NilDirector Phase – I,Age: 53 yrs 5 months Delhi - 110052
9 Shri Mahesh Kumar Bhagchandka March 27th, 2001 March 26th, 2004 Bhagchandka, i. Negolice India Ltd.Director 23-B, Old Ballyganj ii. International PanaceaAge: 44 yrs 7 months Road, Ltd.
Kolkata - 700019
10 Prof. Mousumi Ghosh March 27th, 2001 March 26th, 2004 115M, Rashbehari i. Bien Artium Group ofDirector Avenue, 3rd Floor, CompaniesAge: 44yrs 3 months Chandrani Jewellers ii. Mastermind Systems
Building, (P) Ltd.Kolkata - 700029 iii. IT Research &
Development Co.
11 Shri K. Vijayan December 31st, December 30th, No. 1, 3rd Street, NilDirector 2001 2004 ParamgswariwagarAge: 54 yrs 10 months Adyar,
Chennai - 600020
12 Shri Soumendra Roychowdhury February 18th, November 30th, F-29, Jayashree Park, NilDirector 2002 2003 Behala,Age: 59 yrs 3 months Kolkata – 700034
13 Shri Suresh Chand Gupta April 24th, 2002 April 23rd, 2005 16, Paschim Vihar PNB Asset ManagementDirector Extension, Rohtak Rd, Co. Ltd.Age: 49 yrs 5 month New Delhi - 110063
50
UCO BANK
There is no termination benefit accruing to the Board of Directors, upon termination of their Directorship from the Bank.
The Bank has taken initiatives in furthering corporate governance practices leading to greater transparency and better coordinationbetween the Board and Management and the members of the organisation. The Bank has constituted various Committees of the Directorsin keeping with the existing guidelines of the Govt. of India and RBI as follows:
Management Committee of the Board of Directors
The Committee exercises delegated authority for sanction of credit proposals, loan compromise / write-off proposals, major capital andrevenue expenses and reviews exercise of delegated authority by the Chairman & Managing Director and the Executive Director. TheCommittee also reviews the performance of key areas like investments portfolio, non-performing assets and other important managementdecisions referred to the Committee by the Board.
Top Management Committee
Top Management Committee (TMC) of the Bank consists of Chairman & Managing Director, Executive Director and all other Executives ofthe Bank posted in Kolkata, where the Bank has its headquarters. The Committee meets every Saturday in Kolkata. Apart from usual calendaritems covering the entire gamut of Bank’s functions, the Committee also discusses and decides upon issues, which have important andimmediate bearing on Bank’s performance. All the important decisions of TMC are immediately communicated to the concerned quartersof the Bank for timely implementation of the same. Monitoring of implementation of the decisions is also undertaken by the TMC by wayof compliance reports obtained from the concerned member.
Audit Committee of the Board of Directors
This Committee of the Board oversees and provides direction to the internal audit/inspection function in the Bank in order to ensure andenhance the effectiveness of audit and inspection as a strong management tool. The Committee is constituted with five members of theBoard of Directors. Chairman & Managing Director is not a member of this Committee. In respect of internal audit, the Audit Committee ofthe Board reviews the internal inspection/audit function in the Bank – the system, its quality and effectiveness in terms of follow up. Asregards Statutory Auditors, the Committee follows up on all the issues raised in the Long Form Audit Report. It also interacts with theExternal Auditors before finalization of the Annual/Semi-Annual Financial Accounts and Reports. The Committee meets at least once inquarter, and not less than six times a year.
Management of the Bank
The day to day affairs of the Bank is managed by the Chairman & Managing Director, Executive Director and the General Managers who areassisted by a team of competent professionals. The management structure comprises of the Head Office, Regional offices and the branchesspread across major geographical areas. All the Regional offices are headed by senior officials of the Bank.
Key Managerial Personnel
Name & Qualification Date of Experience in Position Held FunctionalJoining the the Industry ResponsibilityBank
Shri V.P. Shetty, 06.10.2000 34yrs Chairman & Managing Chairman & ManagingB.Com., CAIIB Director DirectorShri B. K. DattaM.Sc. 03.04.2003 29 years Executive Director Executive DirectorShri U. S. SinghM.Sc. 25.11.1974 28yrs 6 months General Manager Operation- IIShri S. JhaB.Sc. 01.01.1969 34yrs General Manager Operation IMs. S Lahiri 18.11.1971 31yrs. 6 months General Manager Treasury & International WingB.E. (Elec)Shri K. Mukherjee 01.11.1969 33yrs. 6 months General Manager Personnel WingB.A. (Hons.), CAIIB-I, MBAShri S. C. Dash 20.12.1971 31yrs 5 months General Manager Operation – IIIB.Sc. (Engg.), B.Com., CAIIBShri D. K. Roy 06.12.1971 31yrs 5 months General Manager Credit WingM.Sc.Ms. N. Biswas 01.06.1987 27yrs General Manager Legal & Recovery WingB.A. (Hons.), LLBShri C. R. Ghosh, M.Sc. 04.10.1971 31yrs 6 months General Manager Planning & Development WingShri K. C. Paliwal , M.Sc. 15.10.1970 32yrs 6 months General Manger Credit (Priority Sector) WingShri R. Mendiratta 01.04.2001 19yrs General Manager Chief Vigilance OfficerM.Sc., LLB
51
UCO BANK
The Key Managerial Personnel are on the roll of the Bank as permanent employees, except Shri V. P. Shetty, Chairman & Managing Directorand Shri B.K. Datta, Executive Director of the Bank who have been appointed by the Government of India.
The Key Managerial Personnel are entitled to the Compensation & benefits as applicable to all the permanent employees of the Bank. Allthe Key Managerial Personnel are of the General Manager and higher grade and hence that compensation falls in the scale of Rs. 19,340 –Rs. 21,300 p.m. The other benefit includes the festival loan housing loan reimbursement of certain expenses etc. as per employees’ servicerules.
Changes in the Key Managerial Personnel (During last three years from January 1st, 2000)
Name Position Held Reason for Change
Shri V. P. Shetty Chairman & Managing Director Appointed by the Govt. of India w.e.f. 6.10.2000.He was Executive Director in this Bank
Shri V. Sridar Executive Director Resigned on 09.11.2002 and appointed by theGovt. of India as Chairman of NHB
Shri B. K. Datta Executive Director Appointed by Govt. of India w.e.f. 3.4.2003 Hewas General Manager in this Bank
Shri R. M. Choubey General Manager Retired on 01.01.2003
Shri G. K. Gupta General Manager Retired on 01.08.2000
Shri P. C. Wahi General Manager Retired on 01.08.2000
Shri I. M. Sharma General Manager VRS on 01.04.2001
Shri R. Gangadharan General Manager Retired on 01.08.2000
Shri P. S. Raghupathi General Manager Retired on 01.02.2002
Shri S. B. Khandelwal General Manager Retired on 01.04.2002
Shri Dinesh Mishra General Manager Retired on 01.06.2000
Shri B. L. Garg General Manager Retired on 01.07.2001
Shri V. P. Jindal General Manager Retired on 01.10.2001
Shri J. P. Singh General Manager Retired on 01.11.2001
Shri L. S. Raman General Manager VRS on 01.04.2001
Shri U. S. Singh General Manager Promoted w.e.f. 21.02.2000
Shri R. Mendiratta General Manager & CVO On deputation from RBI w.e.f. 1.4.2001
Shri S. Jha General Manager Promoted w.e.f. 10.5.2001
Ms. S. Lahiri General Manager Promoted wef 10.5.2001
Shri K. Mukherjee General Manager Promoted wef 1.07.2001
Shri S. C. Dash General Manager Promoted wef 01.10.2001
Shri D. K. Roy General Manager Promoted wef 01.11.2001
Ms. N. Biswas General Manager Promoted wef 01.02.2002
Shri M. Ramani General Manager Promoted wef 01.11.2002. Retired w.e.f. 01.06.2003
Shri C. R. Ghosh General Manager Promoted wef 01.01.2003
Shri K. C. Paliwal General Manager Promoted wef 05.04.2003
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UCO BANK
Human Resources
The total manpower of the bank as on March 31st, 2003 was 25,060comprising 6,730 officers, 12,940 clerks and 5,390 substaff. Themanpower position of the Bank for the last five years is as under:
As on Officer Clerical Sub- Total no. ofStaff Staff Employees
March 31st, 1999 8437 16739 6910 32086
March 31st, 2000 8078 16448 6697 31223
March 31st, 2001 8327 14561 6278 29166
March 31st, 2002 6405 13382 5780 25567
March 31st, 2003 6730 12940 5390 25060
The business per employee of the bank has been on the increasingtrend. The position as on March 31st, during the last five years isdepicted in the table below:
(Rs. in crores)
Year 1999 2000 2001 2002 2003
Business peremployee 0.73 0.88 1.13 1.61 1.97
Voluntary Retirement Scheme
In order to bring about rightsizing the manpower, the Bankintroduced the Voluntary Retirement Scheme in the year 2001. Inresponse to the scheme, altogether 5526 applications were received,out of which 4890 were accepted by the bank. By reduction of theseemployees, the operations and the performance of the Bank havenot been affected.
Human Resources Development Management – Training &Industrial Relations
In the present day context, new strategies have been laid forreorientation and upgradation of skill of the staff members workingin different branches/offices. Emphasis has been laid to developskill and competence in various specialised functional areas, suchas, Information Technology, Foreign Exchange operations, Treasuryand Investment Management, Asset Liability management, RiskManagement including Credit Risk Management, Appraisal andMonitoring of Commercial and Industrial Credit, Retail banking withspecial emphasis on mid-market segment, Marketing of Bank’sproducts, Reorientation of Customer Service and Managerialeffectiveness.
To cater to the needs of changed circumstances, the Bank’s CentralStaff College, Kolkata and 4 Regional Training Centres at Ahmedabad,Bhubaneswar, Chennai and Jaipur conduct different trainingprogrammes in the thrust areas. Programmes are held in both in-house and on locational basis. Apart from in-house training, theBank has been nominating the Executives and officers for training
programmes organised by reputed Institutes/Colleges to upgradetheir knowledge in order to meet the emerging challenges in theBanking industry.
Transfers, placements, job rotations of different category employeesare effected on regular basis as per extant policy guidelines. Tobuild up a regiment of segment specialised officers, the Bank hasidentified officers with requisite qualification and experience to workin the area of Credit, Treasury Functions, Foreign Exchange,Information Technology and Human Resource Development. Suchofficers have been given extensive training in the Training Collegeas well as on the job training. With this move the Bank’s competitiveability has improved to a considerable extent. After abolition ofBanking Service Recruitment Board, the Bank has framed itsRecruitment Policy.
To commemorate the Bank’s Diamond Jubilee Celebration, twostaff Welfare Schemes namely UCO Diamond Jubilee ScholarshipScheme and UCO Diamond Jubilee Prize Scheme have beenintroduced to encourage merit in academics amongst children ofthe employees/officers. Industrial relations climate in the Bank ishealthy and cordial with both management and Unions sharing aco-operative attitude. Over the years, there has been steady growthin the per-employee business, which now stands at Rs. 1.97 crores.
Information Technology
In September 2001, with the help of a technology consultant, Shri A.G. Prabhu, the Bank drew up a Technology Road Map, coveringautomation and computerization plans of the bank for the next fiveyears. As at the end of March 31st, 2003 the Bank had 684computerized branches out of which 244 branches are FullyComputerized and 440 branches are Partially Computerized underALPMs. Total business captured by computerisation is 75% as onMarch 31st, 2003. The Bank has planned to take the total number ofcomputerized branches to 1100 by March 31st, 2004 covering 92%of Bank’s business. The Bank has also plans to initiate ‘Core BankingProject’ during the current year.
At present, almost the entire segment of MIS is driven by computersystem. Most of these MIS applications are LAN based solutionsrunning on Oracle RDBMS platform. These applications are nowbeing ported on the Web Server of the Bank so that the authorizedusers from any part of the country can access these.
The Bank had 14 ATMs on Stand-alone basis. As of now 9 ATMs areconnected through a central switch. The Bank has initiated a projectfor networking the existing Stand alone ATMs and installing a largenumber of additional ATMs in the Networked environment under acentral switch. The Bank has plans to commission additional ATMson connected basis.
The Bank has adopted the Very Small Aperture Terminals (VSAT)network of IDRBT, Hyderabad, to connect to all its Regional Officesand strategic branch locations on the INFINET backbone. At the end
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UCO BANK
of March 2003, the Bank has brought 57 of its sites under its VSATnetwork. The Bank has a gateway to Society for Worldwide InterbankFinancial Telecommunication (SWIFT) network at Treasury Branch,Mumbai. Fourteen other branches are connected to the SWIFT-CBT.The Bank has also implemented PDO-NDS, CFMS and SFMS projectsover the INFINET backbone of IDRBT, Hyderabad. Bank hasimplemented the Electronic Clearing System of RBI which enablesthe customer’s designated account to be automatically credited fordividends / interest receipts etc. The bank has also implementedRBI’s Electronic Funds Transfer facility to enable a customer to effectintra/inter bank/city transfer of funds electronically.
SIGNIFICANT REGULATORY MATTERS RELATED TOTHE BANK
Janakiraman Committee Report and Joint ParliamentaryCommittee Report
The Committee to enquire into the securities related transactions ofBanks and Financial Institutions (Jankiraman Committee) submittedreports giving details of various irregularities committed by Banksand FIs. UCO Bank’s name was mentioned in following irregularsecurities related transactions:
1. Unauthorised issuance of Bankers Receipt under single signatureand unauthorisedly inviting funds from a PSU under PMS.
2. Bills discounting transactions of Rs. 50 crores pertaining tocertain group companies.
3. Unauthorised transfer of funds received from Corporates tocertain brokers in Mumbai.
4. Purchase of shares as investment for the Bank at inflated price,conferring benefit of Rs. 87.5 lakhs to a broker firm.
5. Irregularities in issuance of Banking Receipt, transfer of PSUfunds of certain PSUs, as also wrong credit of SGL to BrokersClients account and lack of control and supervision.
On the basis of internal investigations as also investigations conductedby the Reserve Bank of India and Central Bureau of Investigations,necessary disciplinary action has been initiated against all thoseemployees who were found to be involved in such irregulartransactions. The Central Bureau of Investigation has also initiatedcases against some of the employees in the designated SpecialCourt at Mumbai.
Verma Committee Recommendations
The Verma Committee was set up to identify weak and potentiallyweak banks in the country and for making recommendations forstrengthening these banks and reducing systemic risk
The Verma Committee has suggested seven parameters for assessinga bank’s strength/weakness covering three major areas namely
1. Solvency
2. Earning Capacity
3. Profitability
These parameters are as follows:
Solvency Capital Adequacy RatioCoverage Ratio
Earning Capacity Return on AssetsNet Interest Margin
Profitability Ratio Ratio of operating profit to averageworking fundsRatio of cost to incomeRatio of staff cost to net interest income(NII) + all other income.
The above ratios are well known parameters on which banks’performance and sustainability are judged. A study of these ratios inrespect of a bank, historically or in comparison with its peers, givesa view of its growing strength or weakness over a period as also itsability to complete against others in the market. The working groupobserved that based on the above analysis, public sector bankscould be classified in terms of their strengths or weakness underthree broad categories.
1. Banks where none of the seven parameters are met.
2. Banks where all the parameters are met.
3. Banks where some of the seven parameters are not met.
UCO Bank had been placed amongst nine banks in the third categoryfor compliance with Capital Adequacy Ratio (CAR) but non-compliance with five or six of the remaining efficiency parametersfor FY98 and FY99.
Inspection by RBI
RBI conducts an annual inspection of the Bank based on the auditedaccounts. Simultaneously, RBI carries out inspection of branch/controlling offices on a selective basis. RBI also conducts offsitesurveillance of the branches of the Bank on a quarterly basis.Discussions with the management of the Bank also form a part of theinspection and surveillance process.
An inspection of UCO Bank under section 35 of the Banking RegulationAct, 1949 was conducted by Reserve Bank of India with reference toits position as on March 31st, 2002. The Annual Inspection Report ofthe Reserve Bank of India has identified certain weaknesses in thesystem, operational and other deficiencies in their internal controls.The inspection of the Bank by RBI is a regular exercise and is carriedout periodically for all the banks and Financial Institutions. The reportsof RBI are strictly confidential and the Bank has informed the RBIabout the actions already taken and measures that are underimplementation in respect of observations made by RBI. The issuesraised by RBI in the aforesaid report have been replied to by theBank.
STOCK MARKET DATA
This being the Bank’s maiden Public offer, its shares are not listed onany Stock Exchange.
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UCO BANK
VI. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL PERFORMANCE
Financial Highlights of the Bank for the last four financial years as per the adjusted balance sheets of the Bank are as given in the followingtable.
(Rs. in crores)
Year ended March 31st 2000 2001 2002 2003 % change from % change from2001 to 2002 2002 to 2003
Total Income 2226.41 2572.41 3124.78 3401.99 21.47 8.87
Interest Income 1977.50 2274.70 2541.78 2792.70 11.74 9.87
Other Income 248.91 297.71 583.00 609.29 95.83 4.51
Expenditure 2092.60 2365.95 2629.24 2741.84 11.13 4.28
Interest Expenditure 1424.93 1612.64 1812.03 1910.68 12.36 5.44
Operating Expenditure 667.67 753.31 817.21 831.16 8.48 1.71
Profit before provisions & contingencies 133.81 206.46 495.54 660.15 140.03 33.22
Provisions & Contingencies 118.22 91.69 267.01 416.55 191.21 56.01
Net Profit 15.59 114.77 228.53 243.60 99.14 6.59
Significant items of income and expenditure during 2002-03(comparison of financials for the year ended March 2003 withMarch 2002)
Net Profit: Net Profit of the Bank increased from Rs 228.53 Crore inFY02 to Rs 243.60 Crore in FY03 showing a growth of 6.59%
Interest Income: Interest income from advances improved from Rs1170.40 Crore in FY02 to Rs 1394.56 Crore in FY03. Gross GlobalAdvances of the Bank increased by 27.48% from Rs.13008.84 Croreas on FY02 to Rs.16583.24 Crore as on FY03.
Gross investments of the Bank increased by 11.36% from Rs 12695.34Crore as on FY02 to Rs 14137.51 Crore as on FY03. Interest earnedon investment also went up to Rs 1319.84 Crore in FY03 from Rs1250.65 Crore in FY02.
The Bank keeps a close watch on market interest rates and iscontinuously engaged in proactive management of bank’s interestrate risk with the objective to maintain optimum spread. The netinterest income of the Bank improved from Rs.729.75 Crore in 2002to Rs 882.02 Crore in FY03.
Other Income: In view of increasing pressure on interest spread, theBank considers income from non interest business as the most vitalarea for generating additional income to improve profitability. Otherincome of the Bank comprises income from commission, exchangeand brokerage, income from investment trading and forexoperations, dividend income and miscellaneous income. Theseincomes are earned in the normal course of business of the Bank.Total other income of the Bank increased by 4.51% from Rs 583.00Crore in FY02 to Rs 609.29 Crore in FY03. During FY02-03, the fallinginterest rates created favourable market conditions for stepping upinvestment trading activities. The bank capitalized on theopportunities present in the market and substantially increased profitfrom sale of investment from Rs 346.36 Crore in FY02 to Rs 354.61Crore in FY03. The profits earned by the bank from investment tradingare realized profits and not notional entries.
The Bank has exercised prudence in booking investment profit andits investment portfolio still has substantial appreciation, which willact as a cushion for future adverse movement in interest rates.However, in future sustaining high income from investment tradingwill be a challenging task. The modified duration of the portfolio atpresent is 4.66 years.
Interest Expenses: Interest paid on deposits increased from Rs1700.08 Crore in FY02 to Rs 1838.00 Crores in FY03 due to growth indeposits from Rs 26848.77 Crore as on FY02 to Rs 31343.39 Crore ason FY03. In spite of increased competition, the Bank could bringdown its average cost of deposits from 7.40% in FY02 to 6.61% inFY03.
Operating Expenses: During FY02-03 the Bank could effect savingin expenses on salaries and allowances, but there was an increase inoverall establishment expenses. The Bank has embarked on stringentcontrol of other operating expenses and could contain the growthof controllable expenses. But due to higher depreciation oncomputers and writing-off of investment accrued/amortization, totalother operating expenses increased Rs 817.21 Crore in FY 2002 toRs 831.16 Crores in FY2003.
Significant items of income and expenditure during 2001-02(comparison of financials for the year ended March 2002 withMarch 2001)
Net Profit: Net Profit of the Bank increased from Rs 114.77 Crore inFY 2001 to Rs 228.53 Crore in FY 2002 mainly due to reasons explainedbelow.
Interest Income: Interest income from advances improved from Rs952.06 Crore in FY 2001 to Rs 1170.40 Crore in FY 2002. GrossAdvances of the Bank increased by 24.12% from Rs 10480.85 Croreas on FY 2001 to Rs 13008.84 Crore as on FY 2002.
Gross investments of the Bank increased by 14.76% from Rs 11062.62Crore as on FY 2001 to Rs 12695.34 Crore as on FY 2002. Interest
55
UCO BANKearned on investment also went up to Rs 1250.65 Crore in FY 2002from Rs 1168.13 Crore in FY 2001. Average yield on investmentdeclined from 11.28% in 2001 to 10.64% in 2002. The net interestincome of the Bank improved from Rs.662.06 Crore in 2001 to Rs729.75 Crore in 2002.
Other Income: Total other income of the Bank increased from Rs297.71 Crore in FY 2001 to Rs 583 Crore in FY 2002. The Bank isaware of the need to increase non-interest income in order to improveoverall profitability and is exploring various avenues to increasefee-based income.
Interest Expenses: Interest paid on deposits increased from Rs1544.13 Crore in FY 2001 to Rs 1700.08 Crore in FY 2002 due togrowth in deposits from Rs 21535.66 Crore as on FY 2001 to Rs26848.77 Crore as on FY 2002. However, through proactivemanagement of interest rates, the Bank could substantially bringdown its average cost of deposits from 8.02% in 2001 to 7.40% in2002.
Operating Expenses: There was an increase in operating expensesfrom Rs. 753.31 Crore in FY 2001 to Rs 817.21 Crore in FY 2002representing normal growth in expenses due to inflation and risingbusiness volume.
Analysis of reasons for changes in significant items of income:
(a) Unusual or Infrequent events and transactions
No Unusual or Infrequent events and transactions occurred inthe last 3 years.
(b) Significant economic changes that materially affected or arelikely to affect income from continuing operations
(c) Known trends or uncertainties that have had or are expectedto have a material adverse impact on income from operations.
The introduction of prudential accounting norms during 1992by Reserve Bank of India affected all banks operating in thecountry. The Bank with its established systems of bankingpractices was able to adapt to the deregulated climate. Thoughthe Bank suffered initial setbacks, the Bank has been postingconsistent profits in the last four years.
(d) Future changes in relationship between costs and revenues
(e) Extent to which material increases in net revenues are due toincreased volume, introduction of new products or prices
The increase in revenues of the Bank is on account of increasedlevel of business operations and its treasury operations. TheBank has also introduced number of new products, which hasresulted in increased revenues.
(f) Total revenue by major industry segment
All the revenues of the Bank accrue from normal bankingbusiness.
(g) Status of an publicly announced new products or businesssegments
(h) Seasonality of business
Bank’s business is not likely to be affected by seasonality
(i) Concentration of business
The Bank has a diversified credit portfolio to prevent any
concentration in exposures both industrywise and clientwise.The Bank has a Risk Management Policy and Credit Policy toensure non-concentration of credit portfolio.
(j) Competitive conditions
The Bank has presence in all metros and major urban and semi-urban locations. The Bank faces competition from other banksin it’s day to day business. However, the Bank has achievedgrowth in its business and profits.
Material Developments
In the opinion of the Directors of the Bank, there have been nomaterial developments after the date of the last financial statementsas disclosed in the Offer Document, which would materially andadversely affect or are likely to affect the trading or profitability ofthe Bank or the value of its assets, or its ability to pay its liabilitieswithin the next twelve months, other than what has been already setout elsewhere in this Offer Document.
PARTICULARS REGARDING LISTED COMPANIES
There are no listed companies under the same management.
VII. BASIS OF ISSUE PRICE
Qualitative factors
1. Rich tradition of 60 years of banking experience.
2. The Bank is professionally managed having a track record ofprofitability
3. The Bank has a large network of branches spread throughoutthe country, which may enable it to raise deposits at competitiverates and also provide lending opportunities at better rates toeffectively mange the spreads.
4. The domestic network of the Bank stood at 1,887 offices as onMarch 31st, 2003, which includs1,705 branches, 172 extensioncounters and 10 service branches.
5. The Bank has opened specialised branches to cater to the needsof special sectors like industrial finance, international banking,integrated treasury operations and small scale industries.
6. Diversified loan portfolio (other than food credit) spread overmany industries having exposure not more than 10% to anysingle industry.
7. Capital Adequacy Ratio of 10.04% as on March 31st, 2003 isabove the minimum level of 9% as prescribed by RBI.
8. Product portfolio includes schemes for trade finance, homeloan, educational loan, personal loans, schematic lending andKisan credit cards etc.
9. The Bank has an integrated treasury at Mumbai capable ofhandling forex, debt and money market transactions.
10. The Bank has set up training colleges at Jaipur, Bhubaneswar,Chennai, Ahmedabad and Staff Training College at Kolkata toimpart modern training to its employees.
11. Consistent deposits growth – Deposits have grown by a CAGRof 17.85% during the last 5 years.
12. Consistent advances growth – Gross Advances have grown bya CAGR of 23.53% during the last 5 years.
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UCO BANK
13. Bank has computerised about 75% of its total business and has14 ATMs as on March 31st, 2003
Quantitative factors
The accounting and financial information and ratios mentioned inthe Offer Document are based on Auditor’s Report dated June 15th2003. Auditors have adjusted changes in accounting policies,changes arising out of Audit Qualifications and for the adjustmentsrelating to previous years. Therefore Accounting & Financialinformation and ratios may not match with the published annualreports of the Bank. The ratios used in the quantitative analysis forthe purpose of justification of issue price are based on the Auditors’Report (Part I to Part IX) as set out in the Part II of the Offer Document.
Earning per Share (EPS)
Financial Year EPS (Rs.) Weight used
2000-01 0.51 1
2001-02 1.00 2
2002-03 4.06 3
Weighted Average 2.44
Weighted Average for last three years: Rs. 2.44
EPS on post issue fully diluted equity base on FY 2003 earnings:Rs. 3.05
Price Earnings Ratio (P/E Ratio) in relation to the Offer price
At Issue price ofRs 12 per share
On Equity as at 31st March 2003 basedon FY 2003 earnings 2.96
On fully diluted equity base post issueon FY 2003 earnings 3.94
Industry P/E Ratio
Highest 8.9
Lowest 2.5
Average (Industry Composite) 5.7
(Source: Dalal Street Vol. XVII No.14 dated July 13, 2003 (Banks-Public Sectors))
Return on Networth
Financial Year RoNW (%) Weight used
2000-01 25.60 1
2001-02 28.26 2
2002-03 26.78 3
Weighted Average 27.07
Weighted average for the last three years: 27.07%
Minimum required return on post issue Networth to maintain preissue EPS
Offer Price At Issue price ofRs 12 per share
Adjusted Networth as on March 31st, 2003 909.70
Issue proceeds 240.00
Post Issue Networth 1149.70
Pre Issue EPS (Rs) 4.06
Minimum RONW required tomaintain pre issue EPS (%) 28.23%
Net Asset Value (NAV) per share
Offer Price At Issue price ofRs 12 per share
As at March 31st, 2003 Rs 15.18
After the issue based on FY 2003 profits Rs 14.38
P/NAV on capital base as at FY 2003 0.79
P/NAV on fully diluted capitalbase (post issue) as at FY 2003 0.83
Comparison of accounting ratios of Bank with industry averageand accounting ratios of peer group for FY03:
Bank EPS (Rs) P/E RONW (%) NAV (Rs)
Allahabad Bank 4.70 4.05 19.70 27.10
Andhra Bank 9.80 3.65 40.30 27.90
Indian Overseas Bank 10.61 2.47 41.98 29.44
Syndicate Bank 7.10 4.15 26.70 27.10
Peer Group Average 8.05 3.58 32.17 27.88
UCO Bank 4.06 NA 26.78 15.18
Source: Capital Market Magazine Vol XVII/08 dated July 6, 2003.
P/E calculation based on closing market prices as on July 16, 2003as per Bloomberg.
Peer Group average is simple average of above multiples.
The Lead Managers believe that the issue price of Rs. 12 /- is justifiedin view of the above qualitative and quantitative parameters. Theinvestors may also want to peruse the risk factors and the financialsof the Bank including important profitability and return ratios, as setout in the Auditors Report in Part II of the offer document to have amore informed view about the investment proposition.
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UCO BANK
VIII. OUTSTANDING LITIGATION, DEFAULTSAND MATERIAL DEVELOPMENTS
The litigation in which the Bank and/or its subsidiaries and sponsoredinstitutions are involved are classified into three categories:
A) Cases filed against the Bank
B) Cases filed against the Bank’s subsidiaries and sponsoredinstitutions
C) Disputed tax liabilities
A) Cases filed against the bank
As on June 30th, 2003, there were 872 cases including writ petitionfiled by employees/ex-employees, suits/writs by customers andconsumer cases with aggregate claim of Rs. 722.17 crore for whichRs. 15.62 crore has been provided as contingent liability as onMarch 31st, 2003. Out of these cases:
1. 228 pertain to consumer protection including 1 for premisesmatter.
1. Details of Suits filed against Bank not acknowledged as debts where money claim exceeding Rs. 50 lakhs has been raised andshown as contingent liability as on March 31st, 2003
Sr. No. Suit No. /Forum & Date ofFiling
Complainant/BranchName
Claim Amt.(Rs. In Lacs)
Subject Matter Remarks
1. 37/1983, Delhi High Court/No.22 (OS-E) transferred to DRT
Senative Ind Corp &Chemi-Kleen (I) Pvt Ltd,Punjabi Bag, New Delhi
409.00 Suit is for declaration that theentire dues of the Bank standsfully satisfied and the Bank isnot entitled to claim anyfurther amount directly orthrough SBI. Deft No. 2 andUCO Bank is not entitled toretain any securities, stocks,etc.
Matter fixed forevidence on August11th, 2003. No. 22 (OS-E) transferred to DRT
2. Suit No. 1028/78, High Court,Mumbai
Bihar State Food & CivilSupplies Corpn. &Others, Frazer Road,Patna
269.60 Suit against Godrej Soap &Others regarding claim arisingout of L/C matter
Suit pending atargument stage
3. TS No. 23/02,1st Court of Sub-Judge, Khagaria
Mukesh Raj Re-RollingMills, Khagaria, Bihar
284.00 Suit claiming damages fornon enhancement of W/CLimit
Pending
4. MS 09/89, Asst. Dist. Judge,Asansol, West Bengal
Gupta Biscuits Pvt. Ltd.,Asansol (M)
300.00 Suit for alleged damages fornot honouring the cheques
Suit is pending
5. Suit No. 297-72, High Court,Kolkata
General Electric Co.,Kolkata Main Branch
273.80 Suit relates to guarantee givenby Bank favouring of Plaintiff.on account of RenusagarPower Co. Ltd. Claim deniedby Bank on the grounds thatthe plaintiff entered intoagreement with RenusagarPower Co. Ltd withoutconsent of the Bank
Suit pending
6. Suit No. 123 of 1992 beforeCalcutta High Court.
Southern PetrochemicalInd. Corpn. Ltd., KolkataMain Branch
750.00 Suit relates to L/C opened by Bankon account of SambhabamiEnterprises favouringSouthernPetrochemicals
Bank’s SLP BeforeSupreme Court ispending
2. 36 relates to Banking Ombudsman.
3. 235 pertain to recovery of dues including 6 premises matter inthe Civil Court.
4. 84 relates to other premises/eviction matter.
5. There are 135 instances wherein criminal cases have beenoutstanding against the officials of the Bank in connection withthe transactions of the Bank.
6. There are 151 cases filed by employees/ex-employees againstthe Bank claiming service benefits such as withdrawal of VRSapplications and reinstatement in services/challenging orderof dismissals from services/non-payment of terminal benefitslike gratuity, non-payment of family pension, not giving duepromotion etc., which are pending before the Supreme Court/various High Courts/Civil Courts/Labour Courts/Tribunals etc.None of the above claims relates t pecuniary out o flow as wellas not quantified.
7. There are outstanding litigations in regard to 3 cases involvingcivil offences and security related offences.
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UCO BANK
7. Suit No. 19/98 High Court,Kolkata
Birla Corporation Ltd.,Kolkata Main Branch
470.12 Plaintiff ’s account withKolkata Main Branch wasoperated through theirauthorized signatories. Theplaintiff alleged diversion offunds.
Suit is pending
8. Suit No. 145/02,High Court,Kolkata
BCL Finance, Sarat BoseRoad, Kolkata
468.11 Guarantee matter WS to be filed
9. Suit no. 29 of 1997 before CivilJudge, Sr. Divn-II, Agartala,West Tripura.
Mahindra Nath Saha,Agartala, Tripura
70.00 Alleged that Bank did notprovide required financialassistance and he sufferedhuge financial loss.
Pending before DRT
10. Summary Suit 810/92 HighCourt, Mumbai
Bank of Credit &Commerce InternationalLtd., Mandvi, Mumbai
74.98 Suit relates to A/c SteelUdyog Virgo Group withregard to BoE drawn underan L./C allegedly issued bythe Bank.
Suit is pending
11. Summary Suit 451/93 beforeHigh Court, Mumbai
Bank of Credit &Commerce InternationalLtd., Mandvi, Mumbai
74.65 Suit relates to A/c Steel UdyogVirgo Group with regard toBoE drawn under an L./Callegedly issued by the Bank.Bank has denied that
Suit is pending
12. Summary Suit 4510/93 beforeHigh Court, Mumbai
Bank of Rajasthan,Mandvi, Mumbai
63.90 Suit relates to A/c BCCL withregard to BoE drawn underL/C allegedly issued by Bank.
Appeals are pending
13. Summary Suit No. 4513/93,High Court Mumbai
Bank of Rajasthan,Mandvi, Mumbai
257.19 Suit relates to A/c BCCL withregard to BoE drawn underL/C allegedly issued by Bank.
Pending
14. Summary Suit No. 2265/94,High Court Mumbai
Bank of Rajasthan,Mandvi, Mumbai
178.05 Suit relates to A/c BCCL withregard to BoE drawn underL/C allegedly issued by Bank.
Affidavit in reply filed
15. Summary Suit No. 226/94,High Court Mumbai
Bank of Rajasthan,Mandvi, Mumbai
465.32 Suit relates to A/c BCCL withregard to BoE drawn underL/C allegedly issued by Bank,
Affidavit in reply filed
16. Suit No. 4660/93 before HighCourt, Mumbai Transferred toDRT, Mumbai, No. 1558 of 2001
Mashreque Bank,Madam Cama Road,Mumbai
77.00 Underwritting matter Transferred to DRT,Mumbai, No. 1558 of2001
2. Details of three Consumer cases filed against Bank not acknowledged as debts where money claim exceeding Rs. 50 lacs has beenraised and shown as contingent liability as on March 31st, 2003
Sr. No. Suit No. /Forum & Date ofFiling
Complainant/BranchName
Claim Amt.(Rs. In Lacs)
Subject Matter Remarks
1. 229/2002 National ConsumerDisputes Redressal Commission,New Delhi
CG Worldwide (I) Pvt.Ltd. Gorakhpur, UttarPradesh
103.78 L/C was opened by theBranch. Later on theconditions were not fulfilledby the concerned party. SoBank dishonoured the L/C
Pending
2. 95/2000, National ConsumerDisputes Redressal Commission,New Delhi
Pohila Carpets,Mirzapur, Uttar Pradesh
58.83 Loan amount was not adjustedby the party and the A/C becameNPA. Bank filed recoveryproceedings before DRT. Partyfiled counter case beforeNational Consumer DisputesRedressal Commission, NewDelhi
Reply filed by Branch
3. 242 of 1996 before NationalConsumer Disputes RedressalCommission, New Delhi
State of Gujarat, DefenceColony Branch, NewDelhi
311.00 Claim of interest for latepayment of 20 guarantees infavour of State of Gujarat onbehalf on ContinentalConstruction
Pending
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UCO BANK
3. Details of Show Cause Notices issued to the Bank
There are no show cause notices issued against the Bank.
4. There is no Disciplinary action against the Bank by Regulatory Authorities
5. There are 36 complaints filed against the Bank through Banking Ombudsman. Detail of One complaint filed before Banking Ombudsmanagainst Bank not acknowledged as debts where money claim exceeding Rs. 50 lakhs have been raised and show as contingent liabilityas on March 31st, 2003 are as below:
Sr. No. Complaint No. & Date of Filing Complainant/BranchName
Claim Amt(Rs. In Lakhs)
Subject Matter Remarks
1. Complaint no. 290 of 2001before Banking Ombudsman,Patna
Bihar State Food & CivilSupplies Corporation,Frazer Road Branch,Patna
71.00 Claim for release of moneyheld in SB A/c
Award passed againstBank. Review Petitionbefore RBI is pending
B) CASES FILED AGAINST THE BANK’S ASSOCIATES
UCO Bank does not have any Associate Company
C) DISPUTED TAX LIABILITIES
Income Tax Matters (as on March 31st, 2003)
Appeal Pending Before CIT(A)
AY Nature of dispute/Issues under dispute Amount Latest Position(Rs. In Crore)
1960-61 Interest Suspense 0.02 Hearing not started
1976-77 Provision for Bad Debts 1.11 The mater is being pursued with CIT(A)
Weighted deduction u/s 35-B 0.68
1978-79 Weighted deduction u/s 35-B 0.60 The matter is being pursued with CIT(A)
DIT Relief 0.17
1981-82 Interest suspense 3.16 Hearing started. Order not yet received
Weighted deduction u/s 35-B 0.97
Provision for bad debts 2.33
40(A)(5) 0.02
Profit on trading (Foreign) 0.04
Other Expenses 0.14
Provision for Bad Debts 0.45
Carry over loss 0.30
1989-90 Interest u/s 220 (2) 0.02 Hearing started. Order not yet received
1990-91 Club Fees 0.03 Hearing started
Expenditure of earlier years 6.57
Provision for fraud 0.05
Bonus twice taken 2.75
Gratuity Fund 1.08
TDS 0.90
1991-92 Additional expenses for ready forward transactions 0.99 Hearing started
Payment for clubs 0.01
Provision for bad debts 37.43
Provision for fraud 1.16
TDS 2.08
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UCO BANK
AY Nature of dispute/Issues under dispute Amount Latest Position(Rs. In Crore)
1992-93 Entertainment Expenses 0.01 Hearing started
T.A. 0.02
Profit on securities 5.09
Interest Tax 0.20
Profit on shares 27.34
Provision for Fraud 3.72
Provision for Bad Debts 48.64
Transit House 0.02
TDS 1.62
1995-96 Loss on trading 215.06 Hearing started
Provision for wages 35.17
Payment for clubs 0.01
Guest House expenses 0.01
Bad Debts u/s 36(1)(vii) 165.06
1997-98 Payments to clubs 0.01 Matter is being pursued with CIT(A)
Expenses of earlier years 1.16
36(1)(viia) 74.80
Bad Debts written off 220.57
Interest paid on “Interest cum securities” 25.58
Transfer to capital reserve 34.52
36(1)(viia) 7.22
TDS 0.21
1998-99 Loss on trading 71.01 Matter is being pursued with CIT(A)
Expenses of earlier years 0.57
36(1)(viia) 80.57
Bad Debts written off 176.34
Interest paid in “Interest cum Securities” 5.42
Dividend Income 4.01
TDS 0.08
Taxes, duties paid 0.01
Depreciation disallowed 0.60
1999-00 Club Fees 0.01 Hearing Started. Order not yet received
Expenses of earlier years 0.48
36(1)(viia) 85.08
Bad Debts written off 176.74
Interest paid in “Interest cum Securities” 6.53
Depreciation disallowed 3.32
Dividend Income 3.93
TDS 1.31
Interest u/s 244-A twice taken to income 25.99
TOTAL 1571.10
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UCO BANK
Appeal Pending Before I.T.A.T
AY Nature of dispute/Issues under dispute Amount Latest Position(Rs. In Crore)
1967-68 Devaluation profit wrongly taken as income 0.71
1987-88 Petty inadmissible 0.10
40(A)-3 0.01
1998-89 Petty inadmissible 0.09 Permission sought from COD for clearance
Bonus withdrawal 0.67
Payment to clubs 0.02
Interest twice added 0.02
TDS 0.33
Tax u/s 115-J 0.96
1989-90 Tax u/s 115-J 1.68 Permission sought from COD for clearance
1992-93 Additional Income Tax 0.42 Permission sought from COD for clearance
Adjustment u/s 143(1)(a) 4.11
Interest Tax 0.2
Inadmissible 3.5
1996-97 Payment to clubs 0.01 Permission sought from COD for clearance
Provision for Bad Debts 71.08
TOTAL 83.91
Interest Tax Matters
There are Interest Tax demands pertaining to past periods, involving a disputed amount of Rs. 47.07 crores and a disputed tax amountthereon are Nil. The claims are contested in appeals before various appellate authorities. Except the provisions as mentioned above, noother provisions have been made by the Bank and any adverse ruling may affect the financials of the Bank.
CASES RELATING TO INTEREST TAX PENDING WITH HIGH COURT
Assessment Year Nature of dispute/ Amount Latest PositionItems of dispute. (Rs. in crore)
1975-76 Interest suspense 0.08
1976-77 - Do - 1.80
1977-78 - Do - 0.38
1978-79 - Do - 2.28
1979-80 - Do - 0.27
1981-82 - Do - 12.32 Appealed filed with Hon’ble High Court, Kolkata on 25.07.2002
1982-83 - Do - 6.55
1983-84 - Do - 7.33
1984-85 - Do - 8.17
1985-86 - Do - 6.53
1986-87 - Do - 1.36
No proceedings have been launched against the Bank for any of the offences under any enactment, irrespective of whether specified inParagraph 1 of Part I of Schedule XIII to the Companies Act. No such litigation or disputes are pending as on today and there are no defaultsor outstanding statutory dues.
There are no pending proceedings initiated for economic offences.
Details of past cases, where any penalties have been imposed by the concerned authorities (if any) are as under:
62
UCO BANKNo disciplinary action/ investigation has been taken by the Securitiesand Exchange Board of India/ Stock Exchange against the Bank andits Directors
The Bank has not defaulted in meeting statutory dues, Institutionaldues and has made all payments/refunds on debentures/fixeddeposits. It has not defaulted on dues to holders of other DebtInstruments.
No penalty has been imposed by SEBI against the Bank & its branchessave and except two branches were deauthorised by SEBI to act asCollecting Bankers for a period of 3 months in 1999 and in 1999,another branch was also debarred from acting as Collecting Bankersfor any Issue for a period of 1 year with effect from August, 1999.
There are no Small-scale undertakings/ creditors to which the Bankowes any sum exceeding one lakh where payment is outstandingfor a period of more than 30 days.
Servicing Behaviour
There has been no default in meeting statutory dues, institutionaldues and dues towards payment of interest or principal on duedates to holders of Bonds and Fixed Deposits.
AGAINST THE DIRECTORS OF THE BANK
There are no outstanding litigations, disputes or penalties againstthe Directors of the Bank, including tax liabilities, economic offences,criminal or civil prosecution for any offence, irrespective of whetherspecified under any enactment in Paragraph 1 of Part I of ScheduleXIII, of the Companies Act, 1956 or any other liability in their personalcapacities or as Director/ Partner/ Sole Proprietor in the Companyor any other company/firm.
There are no litigations against the Directors involving violation ofstatutory regulations or criminal offences. No disciplinary actionhas ever been taken by the Securities and Exchange Board of Indiaor Stock Exchanges and no penalty has been imposed by anyauthority. There is no suit pending against the Directors in capacityas director or partner or sole proprietor in any other company/firm.
Other than as stated above, there are no disputes/ litigations towardstax liabilities or any criminal or civil prosecutions against the Bankfor any offence – economic or otherwise. No criminal proceedingshave been launched against the Bank under any of the enactmentirrespective of whether specified in paragraph 1 of part I of ScheduleXIII of the Companies Act.
INTEREST OF DIRECTORS OF THE BANK
The Directors of the Bank are interested to the extent of shares heldby them and/ or by their friends and relatives or which may besubscribed by them and/ or allotted to them by the Bank.
The Directors of the Bank are interested to the extent of fees, if any,payable to them for attending meetings of the Board or Committeeand reimbursement of travelling and other incidental expenses, ifany, for such attendance as per the rules of the Bank.
The Directors of the Bank are not interested in the appointment of oracting as Underwriters, Registrars and Bankers to the Issue or anysuch intermediary registered with SEBI.
The Directors of the Bank are not interested in any property acquiredby the Bank within two years of the date of Offer Document or
proposed to be acquired by it.
Save as stated above, no amount or benefit has been paid or givento the Bank’s Directors or Officers since its incorporation nor isintended to be paid or given to any Directors or Officers of the Bankexcept the normal remuneration and/or disbursement for servicesas Directors, Officers or Employees of the Bank.
IX. INVESTOR GRIEVANCE & REDRESSALSYSTEM
As the Bank is raising Equity through the Capital Markets for the firsttime, there are no grievances from Investors. To ensure that theInvestor grievances are handled expeditiously and satisfactorily theBank shall set up a Committee headed by the Bank’s ComplianceOfficer to handle all investor grievances. The Bank has already setup an Initial Public Offering Cell and proposes to set up a ShareDepartment and also proposes to appoint a Registrar and TransferAgent to effectively deal with Investor complaints. The agreementbetween the Bank and the Registrars to the Issue provides for theretention of issue records with the Registrars for a period of at leasttwelve months from the last date of dispatch of Letters of Allotment/ Share Certificates / Refund Orders to enable the investors toapproach the Registrars for redressal of their complaints.
COMPLIANCE OFFICER
Shri B. K. ChoudhuryDeputy General ManagerUCO BankHead Office: (T & IM Department),10, B.T.M. Sarani, Kolkata-700 001.Tel no.: (033) 22343278,Fax no.: (033) 22254538E-mail: [email protected],Web site: www.ucobank.com
The investors can also contact the Registrars to the Issue, M/s KarvyConsultants Limited at their office at Karvy House, 46, Avenue IV,Street No 1, Banjara Hills, Hyderabad 500 034. Tel.: (040) 2331 2454,Fax: (040) 2331 1968, Email: [email protected] in case of queries/complaints, if any, regarding this issue.
RISK FACTORS, MANAGEMENT PROPOSALS (MP)THEREOF & NOTES TO RISK FACTORS
The following are certain considerations, which the investors shouldspecifically peruse through before taking an investment decision inthe offer. In some of the risk factors and their management proposals,reference page numbers have been provided, which can be used toobtain more details about the said risk.
INTERNAL RISK FACTORS
1. Accumulated losses in the past
The Bank had incurred financial losses from FY90 to FY99 andthe accumulated losses of the Bank were Rs. 1751.16 crores atthe beginning of FY03. The Bank has written off accumulatedlosses to the extent of Rs.1665.16 crore from its paid up capitaland Rs. 86 crore from profit for FY03.
MP: The losses mainly arose on account of making provisionsin line with RBI guidelines. Such losses have since been
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UCO BANKaccounted for and Bank at present carries no accumulatedlosses. The Bank has introduced number of new deposit andadvances products to achieve higher level of business growthand is also implementing action plan for improving marketshare and profitability. The senior management of the Bankreview the progress of the Bank on an ongoing basis. For moredetails refer para Business and Activities of the Bank on pageno. 23.
2. Decline in return ratios
Interest Income to Average Working Fund declined from 9.27%in FY02 to 8.82% in FY03. Further Non Interest Income to AverageWorking Fund declined from 2.13% in FY02 to 1.92% in FY03.As a result, ROA declined from 0.83% in FY02 to 0.77% in FY03and ROANW declined from 36.36%in FY02 to 28.35% in FY03.
MP: The slowdown in growth of net interest income and therelated ratios can be mainly attributed to downward trend inthe interest rates, which has resulted in the squeeze on themargins of the entire banking sector. Also, the Bank has beenable to bring down its average cost of funds by 79 bps (7.4% inFY02 to 6.61% in FY03). While focusing on its core activity ofcommercial banking, the Bank is also taking steps to diversifyits income stream and enhance the proportion of fee-basedincome to provide stability to its future income stream.
3. Non Performing Assets (NPAs)
As on March 31st, 2003, the net NPAs of the Bank stood at 4.36%of its net advances amounting to Rs. 697.14 crores in absoluteterms. In the event of non-recovery of these assets, the Bankmay have to provide for these NPAs in future, which mightaffect the profitability of the Bank. For details, investors areadvised to refer to para on Asset Classification , IncomeRecognition and Provisioning on page 33 of the offer document.
MP: The Net NPAs of the Bank have consistently been decliningin percentage terms, from 5.45% as on March 31st, 2002 to4.36% in March 31st, 2003 and the Bank has provided for itsNPAs in conformity with RBI guidelines and provision for NPAas a percentage of gross NPA stood at 47.52%.
4. Regional concentration of the Bank
UCO Bank has a regional concentration in Eastern, Northernand North-Eastern Region, which constitutes of 64.25% ofDeposits and 50.01% of Advances.
MP: The network of branches is spread throughout the country.There are 36% of the branches in East, 24% in North, 18% inWest, 9% in South and remaining 13% in Central and NorthEast. The businesses are also spread over the different zones.The Bank proposes to effectively utilise technology to increaseits reach and presence in every corner of the country.
5. Asset Liability Position
A large portion of the funding of the Bank is in the form of shortand medium term deposits. The asset liability position of theBank could be affected if the depositors do not roll over thedeposits.
MP: Assets have been created in line with maturity of liabilitiesand prudential guidelines on the matter as given by ReserveBank of India/determined by Board of Directors. As on March
31st, 2003, 64.98% the Bank’s total deposits were term deposit.Bank has put in place an asset liability management system anda high power committee reviews the position every fortnight.For more details please refer page no 36.
6. Credit Risk
The Bank’s main business of lending carries an inherent creditrisk, which involves inability or unwillingness of a customer orcounterparty to meet commitments in relation to lending,trading, hedging, settlement and other financial transactions.
MP: Bank has taken steps to deal with credit risk aspects of itsbusiness. For the purpose Bank has formulated guidelines foracquiring loan assets and it’s monitoring. Credit Administrationand Credit Risk Management has been segregated. Effectivecoordination is being created through corporate level RiskManagement Committee of the Bank. Bank is in the process ofintroducing credit rating of accounts. For more details pleaserefer page no. 43.
7. Asset Concentration
The top 5 industries account for 14.57% of the gross domesticcredit exposure of the Bank as on March 31st, 2003. Also, thetop ten non-food credit borrowers of the Bank account forabout 13.55% of the total domestic advances of the Bank as onMarch 31st, 2003. The borrower specific and industry specificbehaviour may potentially affect the overall asset quality of theBank.
MP: Group/individual borrower concentration is well withinthe prudential norm set by Reserve Bank of India and Bank’sBoard of Directors. The Bank’s exposure to single industry innon-food segment is less than 5% of domestic net bank credit.For more details please refer page no. 29.
8. Outstanding Litigations against the Bank
As on June 30th, 2003, there were 872 cases including writpetitions filed by employees/ ex-employees, suits/ writs bycustomers and consumer cases with aggregate claim of Rs.72.17 crores, for which no contingent liability has been provided.Out of these, the claim amount was above Rs. 50.00 lakhs in 20cases. Further, there are 135 instances, wherein criminal caseshave been outstanding against the officials of the Bank inconnection to the transactions of the Bank. In addition, there are151 cases filed by the employees/ ex-employees or familymembers of deceased employees against the Bank claimingservice benefits such as withdrawal of VRS application andreinstatement in service/challenging order of dismissal fromservice/non-payment of terminal benefit like gratuity, nonpayment of family pension/not giving due promotion etc. whichare pending before the Supreme Court/various High Courts/Civil court/ Labour Court /Tribunals etc. None of the aboveclaims relates to pecuniary benefits as well as is not quantified.For more details, investors are advised to refer to para on‘Outstanding Litigations, Defaults and Material Developments’on page 57 of the Offer Document.
9. Tax Disputes
As on March 31st, 2003 proceedings against the Bank related toIncome Tax (total disputed amount of Rs. 1655.01 crores arepending in appeal with the Income Tax authorities from
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UCO BANK
65
UCO BANKReserve Fund a sum equivalent to not less than twenty fivepercent of such profit.
(iv) In terms of Section 19 of The Banking Regulation Act, 1949there are some restrictions on the banking companiesregarding opening of subsidiaries which may deny theBank from exploiting emerging business opportunities.
(v) In terms of Section 23 of The Banking Regulation Act, 1949there are certain restrictions on the banking companiesregarding opening of new place of business and transferof existing place of business, which may hamper theoperational flexibility of the Bank.
(vi) In terms of Section 25 of The Banking Regulation Act, 1949each banking company has to maintain assets in Indiawhich is not less than 75% of its demand and time liabilitiesin India which in turn may prohibit the Bank from creatingoverseas assets and exploiting overseas businessopportunities.
(vii) There are restrictions in the Banking Regulation Actregarding,
a) Management of a bank including appointment ofdirectors
b) Borrowings and creation of floating charge therebyhampering leverage.
c) Expansion of business as the branches need to belicensed
d) Disclosures in the profit & loss account and balancesheet
e) Production of documents and availability of recordsfor inspection by shareholders
f) Reconstruction of banks through amalgamation
g) Further issues of capital including issue of bonusshares/rights shares for which prior MoF approval isrequired
(viii) The financial disclosures in the offer document may not beavailable to the investors after listing on a continuous basis.
(ix) Various rights/powers of shareholders available under theCompanies Act in this behalf are not available to theshareholders of the banks. These rights include rights suchas calling for general meetings, inspection of minutes andother material records, application for relief in cases ofoppression and mismanagement, voluntary winding upetc.
(x) As per Section 3 (2E) of the Bank Nationalisation Act, “noshareholder other than Central Government shall be entitledto exercise voting rights in respect of any equity sharesheld by him/her in excess of one per cent of the totalvoting rights of all the shareholders of the Bank”.
(xi) No banking company shall pay dividend on its shares untilall its capitalised expenses (including preliminary,organisational expenses, share selling commission,brokerage, amounts of losses and any other item notrepresented by tangible assets) have been completelywritten off. The Bank has received an exemption from GoI,
Ministry of Finance, Department of Economic Affairs(Banking Division) vide gazette notification F. No. 11/6/2003-BOA dated July 18th, 2003 from the provisions of thesaid Section 15(1) relating to the payment of dividend, fora period of five years from the date of the notification.
2. Sensitivity to the economy and extraneous factors
The Bank’s performance is highly correlated to the performanceof the economy and the financial markets. The health of theeconomy and the financial markets in turn depends on thedomestic economic growth, state of the global economy andbusiness & consumer confidence, among other factors. Anyevent disturbing the dynamic balance of these diverse factorswould directly or indirectly affect the performance of the Bankincluding the quality and growth of its assets.
3. Competition from existing and new Commercial Banks
Competition in the financial sector has increased with the entryof new players and is likely to increase further as a result offurther deregulation in the financial sector. The Bank may facecompetition both in raising resources and in deploying them.
MP: The Bank has an established broad-based presence andhas been taking steps to enhance customer satisfaction byupgrading skills, systems and technology to meet suchchallenges. The Bank is attempting to add quality assets oncompetitive terms. The Bank is also taking steps to broad baseits product bouquet with a special emphasis on enhancementin the non-fund based income. On the resource-raising front,the Bank is actively endeavouring to broaden its reach andraise resources through its wide distribution network of 1709branches, 10 service branches and 172 extension counters. Formore details on the business environment of the Bank, investorsare advised to refer to the para on ‘Management Discussionand Analysis of Financial Results’ on page 54.
4. Changes in regulatory Policies
Major changes in Government/ RBI policies relating to bankingsector may have an impact on the operations of the Bank.
MP: The Policy changes may provide both opportunities andchallenges for the Bank. The Bank has a long presence in thebanking sector for more than 60 years and does not perceivepolicy changes to be a major threat.
5. Disintermediation in the financial markets:
Development of Capital Markets may result in disintermediationby current and potential borrowers whereby many companiesmay access the markets directly, thereby reducing theirdependence on the Banking system.
MP: The Bank has, in recent years, launched several retail lendingschemes so as to broaden its borrower base and distribute itsrisk concentration. Further, disintermediation brings with it theopportunity for the Bank to expand its fee-based activities. TheBank has been endeavouring to develop a presence in severalfinancial services to earn fee based income by focussing onbusinesses such as foreign exchange, treasury, investments,cash management, Bancassurance and depository participants,thus taking advantage of the disintermediation phenomenon.
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UCO BANK
6. Forex risk
Exchange Rate fluctuations may have an impact on the Bank’sfinancial performance.
MP: As per RBI guidelines, banks are not allowed to keep openposition on their foreign exchange transactions beyondprescribed limits on a daily basis. Foreign exchange transactionsbeyond such limits, if any, must be squared off at the end ofeach day. Hence, the risk from exchange rate fluctuations isminimised. The Board of Directors of the Bank has alsoprescribed limits for gaps or mismatches in maturities of bank’sforeign currency assets & liabilities and forward transactions inforeign exchange. The Bank operates within the limits fixed forgaps or mismatches in maturities of Bank’s foreign currencyassets and liabilities and forward transactions in foreignexchange, thus minimising the risks of mismatches in maturitiesand interest rates.
7. Interest rate risk
Interest rate volatility exposes the Bank to an interest rate risk ormarket risk. Such interest rate risk has a potential impact on netinterest income or net interest margin as well as on the marketvalue of the fixed income securities held by the Bank in itsinvestment portfolio.
MP: These risks are inherent in the banking business. However,the Bank has put in place a system of regular review of lendingand deposit rates in order to minimise the interest rate risk. TheCorporate Risk Management Committee of the Bank reviewsthe risk on a regular basis. Continuous Risk Managementmeasures are initiated depending upon the movement in themarket interest rates. The movement in the interest rates is closelymonitored for appropriate action. For more details on the RiskManagement procedures, investors are advised to refer to paraon ̀ Risk Management’ on page 43 of the offer document.
8. Operational Risk
Operational risk is a result of failure of operating system in abank due to certain reasons like computer break-downs, powerdisruptions, fraudulent activities, natural disaster, human erroror omission or sabotage.
MP: For mitigating and controlling the operational risk, theBank has established a strong internal control system. Apartfrom that, the Bank also has a separate administrative structureto formulate, implement and monitor systems and procedures.
9. Financial Statements in the offer document
The financial statements and derived ratios therefrom containedin the offer document are prepared/computed as per thepermissible accounting practices. The investors may want tomake their own adjustments to the same before arriving at aninvestment decision in the offer.
MP: The financial statements and the derived ratios have beenprepared in conformity to the extant guidelines and the samehave been certified by the statutory auditors of the Bank. TheBank is also governed by the prudential norms of RBI for incomerecognition, NPA provisioning etc.
NOTES TO RISK FACTORS
1. Networth of the Bank as on March 31st, 2003 is Rs. 909.70 crores.
2. The present Initial Public Offering (IPO) of the Bank aggregatesto Rs. 240 crores.
3. The Book Value of the share as on March 31st, 2003 is Rs. 15.18per share (face value of Rs.10/- per share)
4. Cost per share of the Bank to the Government of India is Rs. 10/-.
5. During FY03, the Bank had adjusted accumulated losses of Rs.1665.16 crores, from its paid-up capital as on March 31st, 2002by setting off the same against the paid-up capital of the Bank
6. Section 3(2B)(c) of the Bank Nationalisation Act provides thatthe paid-up capital may, from time to time, be increased bysuch amounts as the Board of Directors of the Bank may, afterconsultation with the RBI and with the previous sanction of theCentral Government, raise by Public Issue of equity shares asmay be prescribed, so however, that the Central Government,at all times, hold not less than fifty-one per cent of the paid-upcapital of each of the Corresponding New Bank. The BankingCompanies (Acquisition & Transfer of Undertakings) andFinancial Institutions’ Laws (Amendment Bill 2000) proposes toreduce the minimum stake of the Government from 51% to33%.
7. The shareholders of the Bank do not have a right to receivedividend within 30 days as is available to companies under theCompanies Act.
8. The financial information (Auditors Report) as contained underPart I to Part VII of PART II of this Offer Document including thenotes to accounts, significant accounting policies has beenduly certified by the statutory auditors of the Bank. As far aspossible, these audited numbers have been used forcomputation or derivation of other financial informationcontained in the offer document. However, such other financialinformation contained in the offer document, except as containedin Auditors Report under PART II has been certified by themanagement of the Bank.
9. The Bank would like to clarify that inspection by RBI is a regularexercise and is carried out periodically by RBI for all Banks andFinancial Institutions. The reports of RBI are strictly confidential.The Bank is in dialogue with RBI in respect of observationmade by RBI in their report for previous years. RBI does notallow disclosure of its inspection report and that all thedisclosures in the Offer Document are on the basis of managementand audit reports of the issuer.
GENERAL RISK
Investment in equity and equity related securities involve a degreeof risk and investors should not invest any funds in this offer unlessthey can afford to take the risk of losing their investment. Investorsare advised to read the risk factors carefully before taking aninvestment decision in this offering. For taking an investment decisioninvestors must rely on their own examination of the issuer and theoffer including the risk involved. The securities have not beenrecommended or approved by Securities and Exchange Board ofIndia nor does Securities and Exchange Board of India guaranteethe accuracy or adequacy of this document.
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UCO BANK
PART II
A. GENERAL INFORMATION
CONSENTS
Consents in writing of the Lead Managers to the Issue, Directors,Auditors, Legal Advisor, Compliance Officer, Co-Managers to theIssue, Bankers, and Registrars to the Issue to act in their respectivecapacities have been obtained and filed, along with a copy of theOffer Document with the Stock Exchanges, and such consents havenot been withdrawn up to the time of delivery of the Offer Documentwith the said Stock Exchange. The Auditors of the Bank have giventheir written consent to the inclusion of their Report in the form andcontext in which they appear in the Offer Document, and also the taxbenefits available to the Bank and its Shareholders, and such consentsand reports have not been withdrawn up to the time of delivery ofthe Offer Document.
EXPERT OPINION
Save as stated else where in the Offer Document, the Bank has notobtained any other expert opinion.
CHANGES IN DIRECTORS
The changes that have taken place in the Board of Directors sinceApril 1st, 2000 are as follows:
Name of Director Reasons for change Date of change
Shri C. K. Krishnan Directorship ceased April 30th, 2001as per Govt.notification
Shri Tapan Kakati Retired from Bank’s January 1st, 2002service
Shri G. R. Summan Directorship ceased March 20th, 2002as per Govt.notification
Shri P. K. Mishra Directorship ceased June 11, 2002as per Govt.notification
Shri V. Sridar Promoted to November 10th,CMD of NHB 2002
Shri N. H. Siddiqui Directorship ceased July 31st, 2003as per Govt.notification
Shri B. Ghosh Appointed as per July 31st, 2003Govt. Notification
CHANGES IN AUDITORS
Given below are the changes in the Bank’s Auditors during the pastthree years. Since the RBI appoints Auditors each year, these changeshave been effected as per RBI’s approval.
Year Added/ Name of the Auditor ReasonRetired
31-03-2000 Retired M/s S. K. Mittal & Co. As per RBIInstruction
31-03-2000 Added M/s Salarpuria Jajodia & Co. As per RBIInstruction
31-03-2001 Retired M/s Suri & Co. As per RBIInstruction
31-03-2001 Retired M/s V. Khanna & Co. As per RBIInstruction
31-03-2001 Retired M/s Amit Ray & Co. As per RBIInstruction
31-03-2001 Retired M/s Salarpuria Jajodia & Co. As per RBIInstruction
31-03-2001 Added N. C. Mitra & Co. As per RBIInstruction
31-03-2001 Added M/s S. Ghose & Co. As per RBIInstruction
31-03-2001 Added M/s P & A Associates As per RBIInstruction
31-03-2001 Added M/s Vinod Kumar & Associate As per RBIInstruction
31-03-2002 Retired M/s B. R. Maheshwari & Co. As per RBIInstruction
31-03-2002 Retired M/s M. Chatterjee & Co. As per RBIInstruction
31-03-2002 Added M/s K. Banerjee & Co. As per RBIInstruction
31-03-2002 Added M/s V. Khanna & Co. As per RBIInstruction
31-03-2003 Retired M/s S. Ghose & Co. As per RBIInstruction
31-03-2003 Retired M/s V. Khanna & Co. As per RBIInstruction
31-03-2003 Retired M/s K. Banerjee & Co. As per RBIInstruction
31-03-2003 Added M/s M. Chowdhury & Co. As per RBIInstruction
31-03-2003 Added M/s H. K. Chowdhury & Co. As per RBIInstruction
31-03-2003 Added M/s L. B. Jha & Co. As per RBIInstruction
AUTHORITY FOR THE PRESENT ISSUE
The issue of equity shares is being made pursuant to the sanction ofGovernment of India (GoI) in consultation with the Reserve Bank ofIndia (RBI) vide its letters no. F. No. 11/6/2003-BOA dated June 9th,
68
UCO BANK2003, under Section 3(2B)(c) of the Banking Companies (Acquisitionand Transfer of Undertakings) Act 1970, as amended and theResolution passed at the meeting of the Board of Directors of theBank (the Board), held on March 20th, 2003.
It is to be distinctly understood that the sanction/ approval of the GoIand RBI should not in any way, be deemed or construed that theOffer Document has been cleared or approved by them nor do theytake any responsibility either for the financial soundness of the Bankor the correctness of the statements made or opinions expressed inthe Offer Document.
The Bank can undertake the activities proposed by it in view of thepresent approvals, and no further approvals from any Governmentauthority are required by the Bank to undertake the proposedactivities.
DISPOSAL OF APPLICATIONS AND APPLICATIONMONEY
The Board of Directors reserves in its full, unqualified and absolutediscretion without giving any reason, the right to accept or rejectany application in whole or in part. If any application is rejected infull, the whole of the application money received will be refunded tothe applicant and where an application is rejected in part, the excessapplication money received would be refunded to the applicantsby registered post/speed post (Refund orders up to Rs.1500/- will besent under certificate of posting) as far as possible within 30 daysfrom the date of closing of the subscription list. Any delay beyond30 days will entail payment of interest at 15% per annum.
The subscription received in respect of Public Issue will be kept in aseparate bank account and the Bank shall not have access to suchfunds unless approvals for dealing from all the Stock Exchanges,where listing has been proposed and approval of the DesignatedStock Exchange for allotment has been obtained.
No separate receipt will be issued for the application money.However, the nominated branches of the Bankers to the Issue or theCollection centres receiving the application form will acknowledgereceipt of application by stamping and returning theacknowledgement slip given at the foot of each application form.
PROCEDURE AND TIME SCHEDULE FOR ALLOTMENT/REFUND
In the event of oversubscription, allotment will be on a proportionatebasis and made in consultation with the Designated Stock Exchange.
The Bank shall as far as possible complete allotment of shares offeredto the public within 30 days of the closure of the Issue. If allotment isnot made and/or the refund orders have not been despatched to theinvestors within 30 days from the date of closure of the Issue, theBank will pay interest @ 15% per annum for any delay beyond 30days till the date of allotment/despatch of refund orders. The Bankwill despatch refund orders in excess of Rs.1500/-, by RegisteredPost/Speed Post at the applicant’s sole risk. Refund orders up toRs.1500/- will be sent under certificate of posting, at the sole risk ofthe applicant. The Bank will provide adequate funds to the Registrarsto the Issue for this purpose. The Bank shall despatch the sharecertificates/refund orders /cancelled stockinvests and completedemat credit within 2 working days of finalisation of the basis ofallotment. The Bank shall submit listing documents to the Stock
Exchange within 7 working days of finalisation of the basis ofallotment. It shall despatch the Letter(s) of Allotment/ Letter(s) ofRegret/ Cancelled Stockinvests/ Share Certificates by Registered Postwithin 10 weeks of closure of subscription list.
In case of joint applications, refund/pay orders, if any, will be madeout in the first name and all communications will be addressed tothe person whose name appears first in the application form.
ALLOTMENT/ REFUND IN CASE OF APPLICATIONSMADE BY STOCKINVEST
The procedure for disposal of Applications made in cash/cheques/Stockinvests/Bank drafts will apply, mutatis mutandis, except thefollowing:
1. In case of non-allotment, the Registrars to the Issue shall returnthe Stockinvest directly to the investors.
2. On allotment/partial allotment, Registrars to the Issue shall fill inthe amount, which would be less than or equal to the amountfilled in by the investor before presenting the Stockinvest to therespective issuing Bank for payment to the extent of allotment.
3. The Registrars to the Issue, pursuant to a Resolution of theBoard of the Bank on July 18th, 2003 have been authorised tosign on behalf of the Bank for realising the proceeds ofStockinvest of the allottees from the issuing Bank or to cancelthe Stockinvests of the non/partial allottees. The Registrars shallreturn the cancelled instruments with non-allotment advice tothe investors directly by registered post within 10 weeks of thedate of closing of the subscription lists.
4. Multiple applications received with a single Stockinvest areliable to be rejected.
OVERSUBSCRIPTION AND BASIS OF ALLOTMENT
In the event of the present issue of equity shares beingoversubscribed, the allotment will be made on a proportionatebasis and the basis of allotment will be finalised in consultation withthe Designated Stock Exchange.
The drawal of lots (where required) to finalise the basis of allotment,shall be done in the presence of a Public Representative on thegoverning board of the Designated Stock Exchange. The ExecutiveDirector/Managing Director of the Designated Stock Exchange alongwith the post-issue Lead Managers and the Registrars to the Issueshall be responsible to ensure that the basis of allotment is finalisedin a fair and proper manner in accordance with the SEBI Guidelines.
The allotment shall be on proportionate basis under the reservationfor employees category as well as under the net public offer category,subject to allotment of Shares in lot size of 100 shares, and the basisof allotment would be arrived at as explained below:
1. Applicants will be categorised according to the number ofshares applied for.
2. The total number of shares to be allotted to each category, as awhole shall be arrived at on a proportionate basis i.e. the totalnumber of shares applied for in that category (number ofapplicants in the category x number of shares applied for)multiplied by the inverse of the oversubscription ratio.
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UCO BANK
3. Number of shares to be allotted to the successful allottees willbe arrived at on a proportionate basis i.e. total number ofshares applied for by each applicant in that category multipliedby the inverse of the oversubscription ratio.
4. In all the applications where the proportionate allotment worksout to less than 100 shares per applicant, the allotment shall bemade as follows:
a. Each successful applicant shall be allotted a minimum of100 shares.
b. The successful applicant out of the total applicants for thatcategory shall be determined by draw of lots in such amanner that the total number of shares allotted in thatcategory is equal to the number of shares worked out asper 2 above.
5. If the proportionate allotment to an applicant works out to anumber that is more than 100 but is not a multiple of 100 wouldbe rounded off to the higher multiple of 100 if that number is 50or higher. If that number is lower than 50, it would be roundedoff to the lower multiple of 100. All applicants in such categorieswould be allotted shares arrived at after such rounding off.
6. If the shares allocated on a proportionate basis to any categoryare more than the shares allotted to the applicants in thatcategory, the balance available shares for allotment shall befirst adjusted against any other category where the allocatedshares are not sufficient for proportionate allotment to thesuccessful applicants in that category. The balance shares, ifany, remaining after such adjustment will be added to thecategory comprising of applicants applying for minimumnumber of shares.
7. A minimum 50% of the net Issue to the Indian public will bemade available for allotment in favour of those retail individualinvestors who have applied for shares for a value of Rs.50,000or less. This percentage may be increased in consultation withthe Designated Stock Exchange depending on the extent ofresponse to the Issue from investors in this category. The balanceof the net Issue to the Indian public shall be made available forallotment to investors, including Corporate Bodies, Institutionsand individual applicants who apply for shares for a value ofmore than Rs. 50,000. The unsubscribed portion of the net Issueto any one of the above two categories shall be made availableto the applicants in the other category, if so required andallotment made on a proportionate basis as per the relevantSEBI guidelines.
In the event of oversubscription, in the process of rounding off toensure allotment in lot size of 100 shares, the Bank will makeadjustments in the basis of allotment as may be necessary inconsultation with the Designated Stock Exchange, such that the Issuesize does not exceed 110% of net offer to the public.
The Designated Stock Exchange reserves the right to modify theabove stated Basis of Allotment within the overall conformity tothe extant regulations in this regard.
INTEREST ON EXCESS APPLICATION MONEY
Payment of interest at the rate of 15% per annum on the excessapplication money, after adjusting the amount due on allotment will
be made to the applicants, if the refund orders are not despatchedwithin 30 days from the date of closure of the subscription list as perthe Guidelines issued by the Government of India, Ministry of Financevide their letter No. F-8/6/SE/79 dated 21st July 1983 and as amendedvide their letter F/14/SE/85 dated 27th September 1985 addressed tothe Stock Exchanges and as further modified by SEBI’s circularSMD/RCG/33/1819/96 dated 15th May 1996.
SHARE CERTIFICATES
Share Certificates will be issued in market lots of 100 shares of FaceValue of Rs. 10 each and despatched through Registered Post within10 weeks from the closure of the issue. Investors who opt for sharesin electronic mode will be intimated regarding allotment of sharesand their respective accounts with their Depository Participants (DPs)will be credited.
ISSUE MANAGEMENT TEAM
Lead Managers to the Issue
SBI CAPITAL MARKETS LTD.202, Maker Tower ‘E’,Cuffe Parade, Mumbai – 400 005Tel: (022) 2218 9166Fax: (022) 2218 8332Email: [email protected]
DSP MERRILL LYNCH LIMITEDMafatlal Centre, 10th Floor, Nariman Point,Mumbai – 400 021Tel: (022) 5632 8131/8118Fax: (022) 2204 8518/ 2283 2008Email: [email protected]
ENAM FINANCIAL CONSULTANTS PRIVATE LIMITED801, Dalalmal Towers, Nariman Point,Mumbai – 400 021Tel: (022) 5638 1874/1962Fax: (022) 2284 6824Email: [email protected]
JM MORGAN STANLEY PRIVATE LIMITED141, Maker Chamber III, Nariman Point,Mumbai – 400 021.Tel: (022) 5630 3030Fax: (022) 5630 1694/2204 2137Email: [email protected]
KOTAK MAHINDRA CAPITAL COMPANY LIMITEDBakhtawar, 3rd Floor,229, Nariman Point,Mumbai – 400 021Tel: (022) 5634 1100Fax: (022) 2282 6632Email:[email protected]
Co-Managers to the Issue
ALLIANZ SECURITIES LIMITEDC-2, Green Park Extension,New Delhi - 110 116.Tel: (011) 2656 8613/8618Fax: (011) 2696 9478
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UCO BANK
A. K. CAPITAL SERVICES LIMITEDFlat No. N, Sagar Aptts.,6 Tilak Marg,New Delhi – 110 001Tel: (011) 2338 5704/8235,Fax: (011) 2238 5189
CENTRUM FINANCE LIMITEDBombay Mutual Fund Bldg,2nd Floor, Dr. D. N. Road,Fort,Mumbai – 400 001Tel: (022) 2266 2434Fax: (022) 2266 3458
KARVY INVESTOR SERVICES LIMITED“Karvy House”,46, Avenue IV,Street No. 1,Banjara Hills,Hyderabad – 500 034Tel: (040) 2331 2454Fax: (040) 2331 1968
Registrar to the Issue
KARVY CONSULTANTS LIMITEDKarvy House,46, Avenue IV, Street No 1Banjara Hills,Hyderabad 500 034Tel.: (040) 23312456Fax: (040) 2331 1968Email:[email protected]
Legal Advisor to the Issue
M/S. SANDERSONS & MORGANSRoyal Insurance Buildings,5, Netaji Subhas Road,Kolkata – 700 001.Tel: (033) 2248 2644-47Fax: (0033) 2248 2648Email: [email protected]
Auditors to the Issue
P. A. & ASSOCIATESChartered Accountants20, Govinda Vihar, Bamikhal,Cuttack Road, Bhubaneswar -751 010.
N. C. MITRA & CO.Chartered Accountants10, Old Post Office Street,Room No.23 & 28, lst flr.,Kolkata-700 001.
M. CHOUDHURY & CO.Chartered Accountants19, R.N.Mukherjee Road,(East Block) 2nd. Floor, Kolkata-700 001.
H. K. CHAUDHARY & CO.Chartered Accountants1/9 B, Jindal House,Asaf Ali Road,New Delhi – 110002
VINOD KUMAR & ASSOCIATESChartered Accountants4696-Brij Bhawan, 21A-Ansari Road,Darya Ganj, New Delhi – 110002
L. B. JHA & CO.Chartered AccountantsDG1 & EG3-Gillander House,8, Netaji Subhas Road,Kolkata-700 001.
Bankers to the Issue
UCO Bank10, B.T.M. Sarani,Kolkatta – 700 001Tel (033) 22343600/61Fax: (033) 22254538
Brokers to the Issue
All Brokers who are members of recognised Stock Exchanges canact as Brokers to the Issue.
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UCO BANK
B. FINANCIAL INFORMATION
AUDITORS’ REPORT
The Board of Directors,UCO Bank,10, B.T. M. Sarani,Kolkata – 700 001
Dear Sirs,
In terms of appointment for the purpose of certification of the statement of accounts to be incorporated in the Offer Document proposedto be issued by the Bank in connection with the Initial Public Offer of Equity Shares, we report as follows:
1. We have examined the audited accounts of the Bank for the five consecutive financial years ended 31st March, 2003 being the last dateupto which the accounts of the Bank have been made up and audited by the Auditors of the Bank of those respective years.
2. a) The Profit & Loss Account of the Bank for each of the five consecutive financial years from year ended 31st March, 1999 to yearended 31st March, 2003 are set out in Part I enclosed and the Statement of Assets & Liabilities as at the respective year ends setout in Part II enclosed. These Profit & Loss Accounts and Statements of Assets & Liabilities have been adjusted for changes inAccounting Policies, for changes arising out of audit qualifications and for adjustments relating to previous years.
b) The aforesaid Profit & Loss Accounts and Statements of Assets & Liabilities, read with Significant Accounting Policies set out inPart III, Material Notes on Accounts set out in Part IV and subject to adjustment not having been carried out in respect of changesin accounting policy, in respect of incorrect accounting practices and adjustments for previous years which have not beenquantified set out in Part V:
i. have been drawn up by the Bank after giving effect to adjustments and regroupings as and where, in our opinion, consideredappropriate and
ii. have been prepared by the Bank in accordance with the directives issued by Reserve Bank of India from time to time and aresubject to the limitations of disclosure required under the Banking Companies (Acquisition and Transfer of Undertakings)Act, 1970.
3. The Bank did not declare any dividend for the years ended 31st March 1999, 31st March 2000, 31st March, 2001 and 31st March, 2002.For the year ended 31st March, 2003 the Bank has declared a dividend of Rs. 1,00,00,000/-.
4. We have also examined the accompanying statement of Key Accounting Ratios set out in Part VI for the five consecutive financial yearsupto the year ended 31st March, 2003 and the Statement of Capitalisation, Tax Shelter and Net Worth set out in Part VII and report thatin our opinion, subject to qualifications set out in Part V, they have been correctly computed.
For P.A. & ASSOCIATES For N.C. MITRA & CO. For M. CHOUDHURY & CO.Chartered Accountants Chartered Accountants Chartered Accountants
(A. Mohapatra) (A. K. Mitra) (D. Choudhary)Partner Partner Partner
For H.K. CHAUDHRY & CO. For VINOD KUMAR & ASSOCIATES For L.B. JHA & CO.Chartered Accountants Chartered Accountants Chartered Accountants
(Inderjit Soni) (D. C. Garg) (Dipankar Chatterji)Partner Partner Partner
Dated: June 15th, 2003
Place: Kolkata
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UCO BANK
PART I
STATEMENT OF PROFIT & LOSS ACCOUNT
(Rs. in crores)
Financial Year ended March 31st 1999 2000 2001 2002 2003
INCOME
1 Interest Earned 1692.76 1977.50 2274.70 2541.78 2792.70
1.1 Interest and Discount on Advance 650.83 763.45 952.06 1170.40 1394.56
1.2 Income on Investment 907.55 1077.01 1168.13 1250.65 1319.84
1.3 Interest on Balances with RBI and other inter-bank lendings 91.01 88.99 94.35 103.34 67.43
1.4 Interest on Income Tax 25.99 34.78 30.82 5.78 4.33
1.5 Others 17.38 13.27 29.34 11.61 6.54
2 Other Income 187.27 248.91 297.71 583.00 609.29
2.1 Commission, Exchange & Brokerage 99.23 105.99 118.98 122.90 136.41
2.2 Profit on Exchange Transactions (Net) 22.02 12.64 17.57 25.30 22.79
2.3 Profit on Sale of Investments -5.37 40.28 73.37 346.36 354.61
2.4 Profit on Sale of Land, Building & Other Assets (Net) 0.08 5.81 0.02 0.10 0.17
2.5 Income from Dividends 5.08 5.51 8.26 7.27 7.33
2.6 Miscellaneous Income 66.23 78.68 79.51 81.07 87.98
Total Income 1880.03 2226.41 2572.41 3124.78 3401.99
EXPENSES
1 Interest Expended 1246.29 1424.93 1612.64 1812.03 1910.68
1.1 On Deposits 1180.37 1349.00 1544.13 1700.08 1838.00
1.2 On RBI/ Inter- Bank Borrowings 37.09 55.16 44.21 53.82 15.96
1.3 On Others 28.83 20.77 24.30 58.13 56.72
2 Payments to and Prov. for employees* 521.49 549.26 574.74 535.27 521.58
3 Amortisation of VRS expenditure - - 50.53 131.90 132.00
4 Rent, Taxes & Lighting 31.39 32.42 33.37 36.55 39.735 Insurance 7.95 8.34 10.18 11.54 13.66
6 Printing & Stationery 6.93 8.20 7.59 8.04 10.27
7 Advertisement 0.90 1.23 0.98 1.70 1.82
8 Postage, Telegrams, Telephones etc. 2.50 2.56 2.92 5.82 6.92
9 Repairs & Maintenance 2.82 2.60 3.07 4.04 4.75
10 Law Charges 1.15 1.53 1.13 1.19 1.17
11 Directors’ Fees, Allowances Expenses 0.18 0.14 0.05 0.23 0.37
12 Auditors Fees & Expenses (Including Branch Auditors) 3.47 3.02 3.26 4.79 5.07
13 Other Expenditure 43.10 44.91 47.18 53.89 57.39
14 Depreciation on Bank’s Properties 11.01 13.46 18.31 22.25 36.43
Total Expenses 1879.18 2092.60 2365.95 2629.24 2741.84
* Includes payment on account of Gratuity
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UCO BANK
Financial Year ended March 31st 1999 2000 2001 2002 2003
Gross Profit before provision for tax & Extraordinary items 0.85 133.81 206.46 495.54 660.15
Less: Extraordinary items - - - - -
Gross Profit before provision for tax 0.85 133.81 206.46 495.54 660.15
Less: Provision for Contingencies ** 86.15 118.22 91.69 267.01 416.55
Net Profit -85.30 15.59 114.77 228.53 243.60
Balance of Profit/Loss Brought forward -1879.43 -1964.73 -1979.33 -1874.31 -1787.27
Less: Loss Adjusted against Bank’s Capital(in terms of Govt. of India approval) - - - - 1665.16
Prior Period Adjustment - - - - -
TOTAL -1964.73 -1949.14 -1864.56 -1645.78 121.49
Profit Available for Appropriation - 15.59 114.77 228.53 243.60
APPROPRIATION * - - - - -
Transfer to Statutory Reserve - 9.16 8.25 41.13 51.87
Transfer to Revenue & Other Reserve - 2.93 - 14.36 29.68
Transfer to/from Investment Fluctuation reserve - 18.10 1.50 86.00 30.00
Dividends to Central Govt. - - - - 1.00
Dividend Tax - - - - -
Balance carried to Balance Sheet -1964.73 -1979.33 -1874.31 -1787.27 8.94
TOTAL -1964.73 -1949.14 -1864.56 -1645.78 121.49
* Appropriation has been shown as per published Balance Sheet.
NOTE : Adjustment resulting from Audit Qualifications, Material amounts relating to items for previous years and Changes inAccounting Policies.
1. The figures of payment to and provision for employees have been adjusted in respect of arrear salary/wages for officers and awardstaff for the period 1.11.1997 to 30.6.2000, which were not provided for in the respective years but were charged to Profit and LossAccount on payment basis.
2. Accumulated Liability on account of Pension, determined as per actuarial valuation on 31.3.1997 had been amortised over a periodof 5 years. The figure of accumulated loss has been re-computed by charging off fully the liability for pension in the year ended 31stMarch, 1997.
** Details of Provision for Contingencies
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UCO BANK
(Rs. in crores)
Financial Year ended March 31st, 1999 2000 2001 2002 2003
1 Bad & Doubtful Debts 85.08 97.99 73.99 182.89 224.72
2 Depreciation on Investment/(Written Back) - -22.34 9.41 1.09 -1.33
3 Gratuity - - - - 37.00
4 Fraud & Forgery 0.47 0.90 - 1.00 2.00
5 Wealth Tax 0.08 0.08 0.08 0.08 0.08
6 Pension - - - 19.90 29.44
7 Interest Tax 10.30 11.54 -0.35 - -
8 Income Tax -15.11 3.71 2.97 5.00 24.39
9 Standard Advances - 17.49 4.04 9.03 9.24
10 Others 5.33 8.85 1.55 48.02 91.01
TOTAL 86.15 118.22 91.69 267.01 416.55
(Rs. in crore)
Financial Year ended March 31st, 1999 2000 2001 2002 2003
Profit Available for Appropriation - 15.59 114.77 228.53 243.60
APPROPRIATION
Transfer to Statutory Reserve - 9.16 8.25 41.13 51.87
Transfer to Revenue & Other Reserve - 2.93 - 14.36 29.68
Transfer to/from Investment Fluctuation reserve - 18.10 1.50 86.00 30.00
Dividends to Central Govt. - - - - 1.00
Dividend Tax - - - - -
Balance carried to Balance Sheet -1964.73 -1979.33 -1874.31 -1787.27 8.94
TOTAL -1964.73 -1949.14 -1864.56 -1645.78 121.49
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UCO BANK
PART II
STATEMENT OF ASSETS & LIABILITES
(Rs. in crores)
As on March 31st 1999 2000 2001 2002 2003
A. Assets
1 Cash in Hand 159.89 163.26 175.26 214.08 249.90
2 Balances with RBI 1532.88 1322.27 1869.48 1119.72 1883.91
3 Balances with Banks in India 152.22 335.49 709.71 847.13 725.43
Balances with Banks outside India 458.48 270.30 180.64 246.29 226.59
Total Balances with Banks 610.70 605.79 890.35 1093.42 952.02
4 Money at Call & Short Notice 324.61 488.47 278.61 330.96 51.59
5 Investments in India 8471.32 9705.00 10602.22 12204.55 13454.22
Investments outside India 368.96 369.27 460.40 490.79 683.29
Total Investments 8840.28 10074.27 11062.62 12695.34 14137.51
6 Advances in India 5195.47 6485.05 8732.43 11403.72 14880.10
Advances outside India 925.28 1004.89 1132.54 1008.15 1043.00
Total Advances 6120.75 7489.94 9864.97 12411.87 15923.10
7 Fixed Assets* 65.57 78.57 92.77 88.08 77.51
8 Other Assets 2923.88 3194.63 2882.22 3156.91 1342.58
Total (A) 20578.56 23417.20 27116.28 31110.38 34618.12
*Net of Revaluation Reserves
B. Liabilities
1 Demand Deposits from Banks 97.51 126.27 121.85 190.73 159.33
Demand Deposits from Others 1894.39 2188.73 2469.08 2877.00 2924.36
2 Savings Deposits 4419.39 5044.03 5810.83 6812.32 7891.29
3 Term Deposits From Banks 874.29 1027.82 1323.33 1515.80 1431.58
From Others 8965.63 9973.10 11810.57 15452.92 18936.83
Total Deposits (1+2+3) 16251.21 18359.95 21535.66 26848.77 31343.39
4 Borrowings in India 312.07 594.51 384.27 388.21 246.34
Borrowings outside India 7.72 3.49 25.21 8.10 160.87
Total Borrowings 319.79 598.00 409.48 396.31 407.21
5 Other Liabilities 1708.11 2129.61 2708.11 1110.78 1507.67
6 Subordinated Debts 0.00 0.00 150.15 300.15 450.15
Total (B) 18279.11 21087.56 24803.40 28656.01 33708.42
C Net Assets (C=A-B) 2299.45 2329.64 2312.88 2454.37 909.70
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UCO BANK
Represented by
D Capital 2264.52 2264.52 2264.52 2264.52 599.36
E Reserves & Surplus
1. Statutory Reserve 14.74 23.90 32.15 73.28 125.15
2. Capital Reserve 1.17 1.17 2.67 15.53 44.21
3. Investment Fluctuation Reserve 19.02 37.12 10.61 96.61 126.61
4. Revenue & Other Reserves 0.00 2.93 2.93 4.43 5.43
5. Balance of Profit & Loss Account (Adjusted) 0.00 0.00 0.00 0.00 8.94
TOTAL (E) 34.93 65.12 48.36 189.85 310.34
TOTAL (D+E) 2299.45 2329.64 2312.88 2454.37 909.70
Contingent Liabilities
(Rs. in crores)
As on March 31st, 1999 2000 2001 2002 2003
1. Claims against the Bank not acknowledged as Debts 58.02 44.56 138.27 41.73 72.17
2. Disputed Income Tax Demand under appeal/references etc 85.00 46.15 32.86 32.86 34.61
3. Liability for partly paid investments 4.19 0.44 7.19 0.31 0.31
4. Liability on account of outstanding ForwardExchange Contracts 2481.17 2475.87 5272.76 1841.69 2387.01
5. Guarantees given on behalf of constituents 1003.47 873.39 1032.50 1256.23 1582.71
6. Acceptance, endorsements and other obligations 444.11 555.79 673.36 881.74 1034.79
7. Other items for which the Bank is contingently liable 34.67 87.72 34.94 40.13 537.28
8. Bills for Collection 821.68 883.31 906.62 943.82 1183.63
TOTAL 4932.31 4967.23 8098.50 5038.51 6832.51
NOTE: Adjustments resulting from Audit Qualifications, Material Amounts relating to items for Previous Years and changes in Accountingpolicies:
1) The figures of Other Liabilities and Provisions have been adjusted in respect of arrear salary/wages for officers and award staff for theperiod1.11.1997 to 30.6.2000 which were not provided for in the respective years but were charged on payment basis and the figuresof Other Assets and Reserves & Surplus have been consequently adjusted
2) Accumulated Liability on account of Pension, determined as per actuarial valuation on 31.3.1997 had been amortised over a periodof 5years. The figure of accumulated loss has been re-computed by charging off fully the liability for pension in the year ended 31st
March 1997.
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UCO BANK
PART III
SIGNIFICANT ACCOUNTING POLICIES AND SIGNIFICANT CHANGES IN ACCOUNTING POLICIES
A. Significant Accounting Policies
1. General
1.1 The financial statements are prepared on going concern concept at historical cost basis, except as otherwise stated, and conformto the prevailing practices and statutory provisions, including directives of Reserve Bank of India. (RBI).
1.2 Items of Income and Expenditure are accounted for on accrual basis, except as otherwise stated.
2. Transactions Involving Foreign Exchange
2.1 Overseas Branches: Monetary Assets & Liabilities are translated as per FEDAI guidelines at the rates prevailing at the close of theyear. The net exchange difference on assigned capital and unremitted profit/loss of foreign branches between Head Office figuresand corresponding figures of foreign branches, if profit, is carried over and if loss, is taken to the Profit & Loss Account. Non-monetary Assets are carried in the books at the historical/revalued cost and are also translated at the aforesaid rates.
2.2 Indian Branches:
(i) Transactions relating to FCNR/EEFC/RFC Accounts: Foreign Currency Deposits in FCNR/EEFC/RFC Accounts including interestaccrued and also the corresponding assets are recorded at market related notional rates. Assets & Liabilities at the year-endare revalued at the rates quoted by FEDAI.
(ii) Transactions other than FCNR/EEFC/RFC Accounts: Foreign Currency Balances both under assets and liabilities and outstandingforward exchange contracts and swaps are evaluated at the year-end at rates quoted by FEDAI. The resultant profit/loss isshown as Income/Expenditure. Income/Expenditure items have been translated at the exchange rates ruling on the dates ofthe transactions. Contingent Liabilities on account of acceptances, endorsements and other obligations including guaranteesand letters of credit issued in Foreign Currencies shown in the Balance Sheet are valued at the exchange rates prevailing atthe year-end.
3. Investments
3.1. Investments are classified under three categories viz. Held to Maturity, Available for Sale and Held for Trading as per RBIguidelines.
3.2.
3.2.1. Investments classified as Held to Maturity are carried at cost. Wherever the cost price is higher than the face value, thepremium is amortised over the remaining period of maturity. Profit on sale is initially taken to Profit & Loss Account and thenappropriated to Capital Reserve Account. Loss on sale is charged to the Profit & Loss Account.
3.2.2. The following investments, classified under Held to Maturity, but not considered for the purpose of determining the ceilingspecified for this category, are valued at cost:
a) Special Securities and Re-capitalisation Bonds received from Govt. of India.
b) Investments in debentures/bonds, which are deemed to be in the nature of an advance.
3.3. Investments, classified as Available for Sale are marked to market at the year-end. Scripwise appreciation/depreciation isaggregated classification wise. While net depreciation in respect of each classification is charged to Profit & Loss Account, netappreciation in respect of any classification is ignored. These are shown, net of depreciation, in the Balance Sheet.
3.4. In respect of securities included in any of the above three categories where interest/ principal is in arrears for more than 180 days,income is not recognised as per prudential norms.
3.5. Investments in RRBs, Commercial Papers and Treasury Bills are valued at carrying cost.
3.6. Investments that are marked to market at the year-end are valued as per the norms prescribed by RBI.
4. Advances
4.1 In respect of advances in India, Non-Performing advances are ascertained as per the Prudential Norms of RBI and provisions aremade upon classifying the same into ‘Sub-Standard’, ‘Doubtful’ and ‘Loss’ assets after considering the claim Received/Receivablefrom ECGC.
4.2 Provisioning on advances at foreign branches is made on the basis of local requirements and RBI guidelines.
4.3 A general provision on Standard Assets has been made on global portfolio basis as per RBI guidelines.
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UCO BANK
4.4 In respect of Central Government guarantees invoked and suit filed by the Bank, wherever the Government does not repudiate, thedues are considered good as per RBI guidelines.
4.5 In respect of compromise and settlement proposal the accounting for write-off is done on complete realisation.
5. Fixed Assets
5.1 Fixed assets are stated at historical cost/revalued amount less accumulated depreciation. Surplus arising on revaluation iscredited to Revaluation Reserve.
5.2 Advance payments/part payments made towards acquisition of fixed assets are included under Other Assets.
5.3 Depreciation on Premises (including cost of land wherever inseparable/not segregated) and other fixed assets (excludingcomputers) in India is provided on written down value method at the rates prescribed in Schedule XIV to the Companies’ Act,1956. Depreciation on Computers is provided at the rate of 33.33% on Straight Line Method in terms of RBI Directives. Depreciationis provided at the full rate on additions made upto 30th September and at half the rate on additions made thereafter.
5.4 Depreciation in respect of fixed assets situated outside India is provided on straight line/written down value method as per thelocal laws of that country.
5.5 Depreciation on the surplus amount arising out of revaluation is set off against Revaluation Reserve.
5.6 In respect of leasehold properties, the lease premium is amortized over the period of lease.
6. Staff Benefits
6.1 Gratuity liability is accounted for:
(a) On actuarial basis, as ascertained by Life Insurance Corporation of India under the Group Gratuity Scheme for staff in Indiaat the year- end.
(b) At Overseas branches, as per local laws.
6.2 Pension Fund liability is ascertained on actuarial basis at the year-end and provided for.
6.3 Leave encashment benefits are accounted for on the basis of actuarial valuation at the year-end.
7. Voluntary Retirement Scheme
Expenditure in respect of employees whose applications under Voluntary Retirement Scheme have been accepted is treated asdeferred revenue expenditure to be written off in five equal annual instalments.
8. Income Recognition
8.1.1 Income on performing assets is recognised on accrual basis and Income from non-performing assets is accounted for onrealisation.
8.1.2 In case of Loans under UCO Shelter, recognition of Income is done on the basis of allocation of equated monthly Instalmentsaccording to the predetermined formula.
8.2 Commission, Exchange, Locker Rent, Rent, Brokerage and incentives are accounted as income on realisation.
9. Net Profit
i) The net profit has been arrived at after accounting for following -
(a) Provision for Income & Wealth taxes in accordance with the statutory requirement.
(b) Provision for loan losses/investment.
(c) Provision for Standard Assets.
(d) Provision for Contingency funds.
(e) Write off certain non-performing advances.
(f) Other usual or necessary provisions.
ii) Legal expenses in relation to suit filed against borrowers are charged to Profit and Loss Account on decision of Court or ondeciding compromise/settlement.
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UCO BANK
B. Significant Changes in Accounting Policy
During the previous 5 consecutive financial years commencing from the year ended 31st March, 1999 to the year ended 31st March,2003 various guidelines issued by RBI for compliance have been implemented by the Bank.
The significant changes in Accounting Policies are in respect of:
(i) Income Recognition and Asset Classification of Advances.
(ii) Reclassification and Disclosure of Investments and Valuation thereof
(iii) Amortisation of Voluntary Retirement Expenditure
(iv) Provisioning in respect of Standard Assets
(v) Special provisioning in respect of advances for 90 days delinquency norms
(vi) Provision for liability accrued on account of Leave Encashment benefits on the basis of actuarial valuation
(vii) Provisions for risk on exposure in countries other than home country.
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UCO BANK
PART IV
MATERIAL NOTES ON ACCOUNTS
1) a) The reconciliation of entries in the Inter branch/Inter office accounts is under process. The net aggregate credit in Inter Branchentries amounting to Rs.29.04 crores and Rs.357.45 crores as on 31st March, 2002 and 31st March, 2003 respectively has beenshown under the Head ‘Other Liabilities & Provisions’. This also includes credit entries amounting to Rs.154.01 crores andRs.194.92 crores as on 31st March 2002 and 31st March 2003 respectively which are more than 5 years old and kept separatelyunder ‘Blocked Account’ in terms of Reserve Bank of India (RBI) circulars.
b) At a few branches, balancing and/or reconciliation of number of accounts in the General Ledger with those of subsidiary ledgersis in progress and confirmation/reconciliation of balances with foreign and other banks has generally been obtained except ina few cases.
2) During the year 2002 – 03, the Bank has carried out reduction of capital with the approval of Government of India by setting off theaccumulated loss of Rs. 1665.16 crores against the Capital.
3) DICGC / ECGC receivable has been considered realisable for the purpose of computing provision against advances upto year ended31.3.2002. The year wise break up of such claims receivable is given below:
(Rs. in crores)
March 1999 March 2000 March 2001 March 2002
175.25 94.22 68.98 46.62
4) Based on various Appellate decisions on identical issues, provision has not been considered necessary against disputed demand ofIncome tax and Interest tax against which deposit has been made under protest:
March 1999 March 2000 March 2001 March 2002 March 2003
Income Tax Demand 85.00 46.15 32.86 32.86 34.61
Income Tax Paid 63.08 44.48 31.19 31.19 34.61
5) The total liability of the Bank under Voluntary Retirement Scheme aggregating to Rs.659.97 crores is being amortised equally over aperiod of 5 years. Accordingly, a sum of Rs.50.53 Crores, Rs.131.90 Crores & Rs.132.00 Crores has been charged to the Profit & LossAccount for the years ended 31st March 2001, 31st March2002 & 31st March 2003 respectively. The balance unamortised amount of Rs.345.54 crores is included under ‘Other Assets’ in Schedule 11 of the Balance Sheet.
6) During the year 2002 – 03, the Bank has raised subordinated debt of Rs. 150.00 crores in addition to Rs.150.15 crores raised during theyear ended 31st March 2001 and Rs.150.00 crores raised during the year ended 31st March 2002 by issue of unsecured redeemablebonds under Tier-II Capital and the same is included under “Other Liabilities & Provisions – Others” in Schedule 5 of the Balance Sheet.
7) a) Premises of the Bank situated outside India were revalued as of 31.3.1995 and premises situated in India were revalue as of31.12.1995 on the basis of valuation at Market Price by independent qualified valuers. Consequently, an amount of Rs.363.04crores had been credited to the Revaluation Reserve.
b) Premises include Assets with Written Down Value of Rs.4.16 crores as on March 31st, 2003 in respect of which documentation /registration is pending.
8) Certain shares purchased during 1991-92 & 1992-93 at Rs.3.89 crores are yet to be registered in the Bank’s name as the transfer deedsbear the names of the notified brokers. The petitions filed by the Bank in the Special Court to obtain appropriate orders for registeringthe shares amounting to Rs 2.49 crores are pending for disposal. However, the necessary order has been issued by the Special Courtfor the shares, amounting to Rs.1.40 crores, which are pending for registration in Bank’s name. The aforesaid shares are consideredas Investment of the Bank and are valued in accordance with the Accounting Policy.
9) Investment Fluctuation Reserve:
Pursuant to the circulars issued by the Reserve Bank of India, the Bank has built up Investment Fluctuation Reserve amounting toRs.126.61 crores upto the year-ended March 31st, 2003 by way of transfer from revenue profit as follows:
(Rs. in crore)
March 2001 March 2002 March 2003
10.61 86.00 30.00
This represents 1.36 % of the aggregate investment of the Bank excluding held to maturity category.
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UCO BANK10) Investment: Investment was classified as “ Permanent ” and “ Current ” till 30.9.2000 in terms of the RBI Guidelines applicable thereto.
Subsequent to the above date, the investment has been classified as “ Held to Maturity ”, “ Available for Sale ” and “ Held for Trading” category and valued in terms of the RBI Guidelines. The category wise position of the Investment as on 31.3.2001, 31.3.2002 and31.3.2003 are as follows:
(Rs. in crore)
March 2001 March 2002 March 2003
Held to Maturity – exempted category 4018.39 3455.40 4859.16
Available for Sale 6647.72 8798.20 9140.25
Held for Trading 216.21 89.63 179.73
11) a) The details of prior period expenses in excess of 1% of gross total expenditure in the year 2002 – 03, identified and disclosed interms of RBI guidelines, are as below:
i. Arrear Salary — Rs. 76.58 crores
ii. Leave Encashment Salary — Rs. 55.85 crores
b) Since there is no item of prior period Income which exceeds 1% of the Gross Total Income, the same has not been disclosedon the basis of materiality in terms of RBI guidelines.
12) During the year 2002 – 03, the Bank has changed the accounting policy for leave encashment from “pay as you go” basis to accrualbasis in conformity with the RBI directives. The accrued liability determined on actuarial valuation has been charged to Profit & LossAccount during the year amounting to Rs.62.55 crores including accrued liability upto 31.03.2002 amounting to Rs.55.85 crores.Consequently the Profit for the year 2002-03 is lowered by Rs.55.85 crores.
13) Segment Reporting under Accounting Standard 17 prescribed by the Institute of Chartered Accountants of India have been disclosedbelow in the format prescribed.
Part A: Business segments
(Rs. in crore)
Business Segments Treasury Other banking Residual TotalOperations Operations
Particulars 2002 – 03 2002 – 03 2002 – 03 2002 – 03
Revenue 1789.01 1612.98 3401.99
Result 413.11 275.93 689.04
Unallocated Expenses 65.00
Operating Profit 624.04
Income taxes 18.42
Extraordinary profit/Loss 398.01
Net profit 207.61
OTHER INFORMATION
Segment assets 17674.22 16873.08 34547.30
Unallocated assets 373.46
Total assets 34920.76
Segment Liabilities 17608.39 17000.95 34609.34
Unallocated Liabilities 311.42
Total liabilities 34920.76
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UCO BANK
Part B: Geographic segments
(Rs. in Crore)
Domestic International Total
2002 – 03 2002 – 03 2002 – 03
Revenue 3303.96 98.03 3401.99
Assets 32759.92 2160.84 34920.76
Previous Year’s figures have not been furnished, as the Accounting Standard has been made applicable only from the year 2002 – 03.
14) Related party disclosure for the year 2002 – 03 as required by Accounting Standard 18 issued by The Institute of Chartered Accountantsof India and as per the formats prescribed by RBI are as below:
Sl.No. Name Designation Item Period Amount (in rupees)
1. Shri V. P. Shetty Chairman & Remuneration 01.04.2002 to 31.03.2003 4,60,797.00Managing Director Borrowings Combined balance of 7,39,649.00
House Building Loan andVehicle Loan at the year-end
2. Shri V. Sridar Executive Director Remuneration Till 09.11.2002 2,53,081.30
15) In view of the uncertainty of adjustment of accumulated losses in terms of tax laws, no deferred tax asset is being recognised in termsof Accounting Standard 22 in the year 2002 – 2003.
16) The following additional disclosures are furnished:
31.3.99 31.3.00 31.3.01 31.3.02 31.3.03
i) Percentage of Shareholding of Govt. of India 100% 100% 100% 100% 100%
ii) Percentage of Net NPA to Net Advances 10.83 8.75 6.35 5.45 4.36
iii) Provision and Contingencies as per Profit &Loss Account (Rs. in crore)
a) Provision for Standard Assets - 17.49 4.04 9.04 9.24b) Provision made towards NPA 85.08 97.99 73.99 182.89 224.72c) Provision/Depreciation on Investment - (24.13) 9.41 1.08 (1.33)d) Provision for Income Tax/Wealth Tax/
Interest Tax (4.73) 15.33 2.70 5.08 24.47e) Others 25.80 33.51 90.64 113.37 159.44
iv) Amount of subordinated debts raisedas – Tier-II Capital - - 150.15 300.15 450.15
v) Capital Adequacy Ratio 9.63 9.15 9.05 9.64 10.04
Tier I Capital 7.22 6.59 5.36 4.89 5.19
Tier II Capital 2.41 2.56 3.69 4.75 4.85
vi) Business Ratio:a) Interest Income as percentage to
Average Working Funds 9.33 9.09 9.71 9.27 8.84b) Non-Interest Income as percentage
to Average Working funds 1.03 1.14 1.27 2.13 1.93c) Operating Profit as percentage to
Average Working Funds 0.21 0.81 0.91 1.74 1.97d) Return on Assets 0.36 0.18 0.14 0.60 0.66e) Business per Employee 0.73 0.89 0.97 1.63 1.97f) Profit per Employee (0.002) 0.0012 0.0012 0.0066 0.0085
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UCO BANK
Movement of NPAs: As on 31.3.00 As on 31.3.01 As on 31.3.02 As on 31.3.03
Gross Net Gross Net Gross Net Gross Net
NPAs Beginning of the year 1716.18 715.63 1651.41 683.88 1275.37 650.88 1332.65 723.59
Additions during the year 276.68 - 249.54 224.59 430.68 313.86 391.07 332.52
Reduction during the year 341.45 31.75 616.93 252.55 373.40 241.15 357.23 358.97
NPAs Closing of the year 1651.41 683.88 1284.02 655.92 1332.65 723.59 1366.49 697.14
viii) Lending to sensitive sectors:
31.3.2000 31.3.2001 31.3.2002 31.3.2003
a) Capital Market Sector 4.99 77.55 1.58 5.67
b) Real Estate Sector 227.40 412.69 97.70 155.89
c) Commodities Sector 264.75 311.37 389.92 466.88
ix) Maturity pattern as on 31.3.2003:
(Rs. in crore)
Deposit Advance Investment Borrowing Foreign Currency
Assets Liabilities
1-14 days 5341 4934 1422 388 927 754
15-28 days 652 447 258 0 153 137
29 days upto 3 months 1718 1277 625 0 430 223
Over 3 months upto 6 months 2415 726 731 0 295 219
Over 6 months upto 12 months 4134 864 1245 0 40 215
Over 1 year upto 3 years 6737 1911 4048 0 313 344
Over 3 years upto 5 years 2868 1856 1919 0 362 296
Over 5 years 5876 2865 3211 0 260 407
TOTAL 29741 14880 13459 388 2780 2595
x) Total Investment made in shares, convertible debentures and units of equity oriented mutual funds as also advances againstshares aggregate to Rs.103.02 crores and to Rs.97.60 crores in the year ended 31.3.2002 and year ended 31.3.2003 respectively.
xi) (A) Restructuring undertaken during the year.
(Rs in crore)
2000-01 2001-02 2002-03
A Total amount of loan assets subjected to restructuring 44.18 193.45 295.77
B Amount of Standard assets subjected to restructuring 44.18 193.45 295.77
C Amount of Sub-standard assets subjected to restructuring 0.00 0.00 0.00
(B) Corporate Debt Restructured: CDR
2001-02 2002-03
a. Total amount of loan assets subjected to restructuring 0.00 67.99
b. Total amount of Standard assets subjected to restructuring 0.00 67.99
c. Total amount of sub-standard assets subjected to restructuring 0.00 0.00
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UCO BANK
xii) Provisions for NPAs and Depreciation on Investment (Rs. in crore)
Provision for NPAs Provision for(excluding Provision Depreciationon Standard Assets) on Investment
Opening Balance as on 1.4.02 582.49 27.49
Add: Provision made during the year 221.75 3.03
Less: Write off/Write back of excess Provision during the year 154.93 16.64
Closing Balance as on 31.3.03 649.31 13.88
xiii) Finance extended for Margin Trading NIL NIL
xiv) Foreign Currency Assets & Liabilities
Maturity Profile
(Rs. in crores)
March 2002 March 2003
Assets Liabilities Assets Liabilities
1-14 days 919 681 927 754
15-28 days 199 409 153 137
29 days upto 3 months 303 439 430 223
Over 3 months upto 6 months 348 224 295 219
Over 6 months upto 12 months 11 168 40 215
Over 1 year upto 3 years 168 66 313 344
Over 3 years upto 5 years 377 0 362 296
Over 5 years 244 277 260 407
TOTAL 2569 2264 2780 2595
Note: The figures in the above additional disclosures are furnished as per the published Annual Accounts of the respective years.
17) The Bank has taken a stock of its exposure on Countries other than the home country as on31st March, 2003 except in respect ofSingapore. Banks exposure to all other countries is below 2% of its assets. In case of Singapore, the total exposure amounts toRs.1179.50 crores. Out of this, exposure having maturity of less than six months amount to Rs.638.77 crores while exposure havingmaturities of over six months amount to Rs.540.73 crores. The Bank holds a provision of Rs.1.75 crore against its exposure inSingapore in terms of extant RBI guidelines, which came into effect in 2002-2003.
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UCO BANK
PART V
CHANGES IN ACCOUNTING POLICY, ADJUSTMENT FOR PREVIOUS YEARS, AND/ OR INCORRECT ACCOUNTINGPOLICIES EFFECT OF WHICH HAS NOT BEEN QUANTIFIED AND FOR WHICH ADJUSTMENTS COULD NOT BECARRIED OUT IN PART I & II.
1) a) Adjustments of outstanding entries in various inter-branch / inter-office accounts and ‘Other Assets – Others’ are under process.The consequential effect of the same on the accounts due to the above remains unadjusted.
b) At a few branches, balancing and/or reconciliation of number of accounts in the General Ledger with those of subsidiary ledgersis in progress and confirmation/reconciliation of balances with foreign and other banks has generally been obtained except in afew cases.
2) Income on Commission, Exchange, Locker Rent, Rent, Brokerage and Incentives, Income from non-performing assets have beenaccounted for on realisation basis which is not in accordance withAs-9 issued by Institute of Chartered Accountants of India, the impactwhereof is not quantifiable.
3) Income on Commission, Exchange, Locker Rent, Rent, Brokerage and incentives, Income from non-performing assets have beenaccounted for on realisation basis which is not in accordance with AS-9 issued by Institute of Chartered Accountants of India, theimpact whereof is not quantifiable.
4) Monetary Assets & Liabilities of Overseas branches and transactions relating to items other than FCNR/EEFC/RFC Accounts of Indianbranches are translated as per FEDAI guidelines approved by RBI which is not in accordance with AS-11 issued by Institute ofChartered Accountants of India, the impact whereof is not quantifiable.
5) In respect of the years upto 31.3.2002 the ultimate realisability of claims under DICGC and upto 31.3.2003 realisability of claims underECGC were not ascertainable and hence, provision, if any, required in respect of claims lodged and pending settlement was not made.However, during the year ended 31.3.2003, the DICGC claims to the extent unrealised have been provided for in full.
6) a) Accounting Policy in respect to Leave Encashment benefit has been changed from’ pay as you go’ basis to accrual basis duringthe year ended 31.3.2003 the impact whereof on the previous years’ profit / loss was not quantified.
b) The impact of non compliance of AS-15 issued by Institute of Chartered Accountants of India pertaining to accounting of gratuityfrom the year ended 31st March 1999 to year ended 31st March, 2002 was not quantified in the accounts.
7) The impact on profit/loss of the bank in respect of non-registration of shares in the name of the bank and related matters thereof wasnot quantified.
8) The impact on profit/loss of the bank due to change in RBI guidelines regarding classifications and valuations of investments in theyears 1998-99 and 1999-2000 was not ascertained.
9) The impact on profit/loss of the bank for changes in RBI guidelines on Prudential Norms on Income Recognition & Asset classificationand Provision with respect to Standard Advances and Delinquency Norms for 90 days was not been quantified with retrospectiveeffect from the year ended 31.03.1999.
10) Provision for risk in exposure to countries other than the home country has been made in accordance with RBI guidelines, which cameinto effect from the year ended 31st March 2003. The impact on provision on account of such exposure for the earlier years has not beenascertained.
11) The effect of observations in the foregoing paragraphs on the accounts as also capital adequacy and other ratios/disclosures is notquantifiable.
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UCO BANK
PART VI
KEY ACCOUNTING RATIOS
Financial Year ended March 31st, 1999 2000 2001 2002 2003
Earnings per Share (EPS) (Rs.) -0.38 0.07 0.51 1.00 4.06
Cash Earnings per Share (Rs.) -0.24 0.13 0.61 1.17 4.75
Return on Networth (%) -25.48 4.09 25.60 28.26 26.78
Net Asset Value per Share (Rs.) 1.48 1.68 1.98 3.57 15.18
Other Ratios
Net NPA to Net Advances ratio (%) 10.83 8.75 6.35 5.45 4.36
Interest income/ Average working fund (%) 8.93 9.69 9.71 9.27 8.82
Non-Interest income/ Average working fund (%) 0.99 1.22 1.27 2.13 1.92
Return on Assets (%) -0.45 0.08 0.49 0.83 0.77
Net Profit/ Average working fund (%) -0.45 0.08 0.49 0.83 0.77
Business per employee ( Rs. in crores) 0.73 0.88 1.13 1.61 1.97
Net Profit per employee ( Rs. in crores) -0.0027 0.0005 0.0040 0.0092 0.0100
Capital Adequacy ratio (%) 9.63 9.15 9.05 9.64 10.04
Tier I 7.22 6.59 5.36 4.89 5.19
Tier II 2.41 2.56 3.69 4.75 4.85
Credit/Deposit Ratio (%) (net) 43.82 46.06 48.67 48.45 52.91
Interest spread/Average working fund (%) 2.36 2.71 2.83 2.66 2.79
Gross profit/Average working fund (%) 0.00004 0.66 0.88 1.81 2.09
Operating profit/ Average working fund (%) 0.00004 0.66 0.88 1.81 2.09
Return on average networth (%) -29.92 4.36 27.70 36.36 28.35
Yield on Advances (%) 9.92 9.76 10.14 10.25 9.90
Yield on Investments (%) 11.29 11.52 11.28 10.64 9.92
Cost of Deposits (%) 8.12 8.05 8.02 7.40 6.61
Cost of Borrowings (%) 11.94 10.99 8.78 8.25 5.45
Gross profit per employee ( Rs. in crores) 0.00003 0.0044 0.0073 0.0200 0.0272
Business per Branch ( Rs. in crores) 13.02 15.19 18.60 23.23 27.88
Gross profit per Branch ( Rs. in crores) 0.0005 0.0758 0.1200 0.2888 0.3840
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UCO BANK
Definition Of Key Ratios
1 Earnings per Share Net Profit after Tax / Number of Shares *
2 Cash earnings per Share (Net Profit after Tax + Depreciation+Loss on sale of Fixed Assets +Loss on sale of Investment) / Number of Shares *
3 Net Worth Capital+Free Reserves +Unallocated Surplus-Accumulated Loss
4 Net Asset Value per Share Net Worth / Number of Shares *
5 Net NPA Gross NPA net of Provisions
6 Net Advances Gross Advances net of Provisions
7 Average Working Fund (AWF) Average Total Assets Less Accumulated Loss
8 Return on Assets Net Profit / (Average Total Assets – Accumulated Loss)
9 Business per Employee (Total Deposits + Total Advances) / Number of Employees
10 Net Profit Profit after Provisions and Contingencies
11 Capital Adequacy Ratio (Tier I + Tier II) Capital/Total Risk Weighted Assets
12 Tier I Capital Paid up Capital + Reserves – Accumulated Losses
13 Tier II Capital Fixed Assets Revaluation Reserve + Investment Fluctuation Reserve + SubordinatedDebts
14 Credit/Deposit Ratio Total Advances/ Total Deposits
15 Interest Spread / AWF (%) Interest Spread = (Interest earned less Interest expended) / AWF
16 Operating Profit/AWF (%) Profit prior to Provisions & Contingencies /AWF
17 Gross Profit Operating Profit
18 Return/AWF (%) Net Profit (After Tax) / AWF
19 Return on Average Net Worth (%) Net Profit / Average of opening and closing Net Worth
20 Yield on Advances Interest Earned on Advances /Average Advances
21 Yield on Investments Interest Earned on Investments / Average Investments
22 Cost of Deposits Interest Expended on Deposits / Average Deposits
23 Cost of Borrowings Interest paid on Borrowings / Average Borrowings
24 Gross Profit per Employee Profit prior to Provisions and Contingencies / Number of Employees.
25 Business per Branch (Total Deposits + Advances) / Number of Branches.
26 Gross Profit per Branch Operating Profit / Number of Branches.
* The number of shares is based on the notional value of Rs. 10/- per share.
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UCO BANK
PART VII
A. CAPITALISATION STATEMENT
(Rs. in crore)
Pre-issue as at Adjusted for the 31.03.2003 Public Issue
Borrowings
Short-Term Debt 172.63 172.63
Long –Term Debt 684.73 684.73
Total Debt 857.36 857.36
Shareholders’ funds
Share Capital 599.36 799.36
Equity
Less:
Calls-in-arrears
Preference
Share premium
Reserves & Surplus * 310.34 310.34
Less: Miscellaneous Expenditure not Written off - 10.00
Total of Reserve & Surplus 310.34 300.34
Total Shareholders Funds 909.70 1099.70
Long Term Debt / Equity Ratio 0.75:1 0.62:1
* Excluding Revaluation Reserve 295.95 295.95
Note:
1) Long Term Debt is debt repayable beyond one year.
2) The bank carries in its Other Assets unamortised balance of payment made under Voluntary Retirement Scheme as per RBI Guidelines.Such balance has not been deducted from Reserves & Surplus.
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UCO BANK
PART VII
B. TAX SHELTER STATEMENT
(Rs. in crore)
As at March 31st, 1999 2000 2001 2002 2003
Tax Rate 35% 38.50% 39.55% 35.70% 36.75%
Tax at Actual Rate on profit (excluding tax on Book Profit) NIL NIL NIL NIL NIL
Adjustments:Permanent Differences:
Dividend (4.52) (5.50) (8.26) (7.27) NIL
Rent on Singapore Property (1.34) (1.19) (1.11) (1.28) (1.23)
Profit/Loss on valuation of Investments (8.73) 65.47 0.69 131.52 *
Provision for Wealth Tax 0.08 0.08 0.08 0.08 0.08
TOTAL (14.51) 58.86 (8.60) 123.05 (1.15)
Timing DifferenceDifference between Tax & Book depreciation (21.09) (25.86) (24.50) (17.03) *
Difference between Provision for Bad & Doubtfuldebts and Bad Debts written off (176.74) (132.27) (135.85) (136.15) 68.42
Other Adjustments (Miscellaneous) 10.67 19.80 13.21 58.91 119.96
TOTAL (187.16) (138.33) (147.14) 94.27 188.38
Net Adjustments (201.67) (79.47) (155.74) 28.78 187.23
Tax Saving thereon (70.58) (30.59) (61.59) -
Total Tax Provision for the Year(excluding tax provision on Book Profit) NIL NIL NIL NIL NIL
Taxation on extra ordinary items NIL NIL NIL NIL NIL
Tax before extra ordinary items NIL NIL NIL NIL NIL
Note:
1) Figures in brackets indicate reduction of tax liability.
2) * Indicate figures not ascertained.
3) The figures for the financial years 1999, 2000, 2001 and 2002 have been computed as per relevant Assessment Orders and / or IncomeTax Return filed with the Income Tax Department. For the Financial Year 2003, pending finalisation of filing of Return of Income, certainfigures are calculated on an estimated basis.
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UCO BANK
PART VII
C. STATEMENT OF NET WORTH (EXCLUDING REVALUATION RESERVES ON FIXED ASSETS)
(Rs. in crores)
As at March 31st, 1999 2000 2001 2002 2003
Share Capital 2264.52 2264.52 2264.52 2264.52 599.36
RESERVES & SURPLUS
i) Statutory Reserve 14.74 23.90 32.15 73.28 125.15
ii) Capital Reserve (Others) * 1.17 1.17 2.67 15.53 44.21
iii) Investment Fluctuation Reserve 19.02 37.12 10.61 96.61 126.61
iv) Revenue & Other Reserves 2.93 2.93 4.43 5.43
v) Balance of Profit 8.94
TOTAL 2299.45 2329.64 2312.88 2454.37 909.70
Less : Accumulated Loss 1856.26 1870.87 1765.85 1678.81 -
NET WORTH: 443.19 458.77 547.03 775.56 909.70
* Excluding Revaluation Reserve 334.75 323.06 315.02 307.10 295.95
Contingent Liabilities
1. The Bank has the following contingent liabilities for which no provision has been made in the books of account of the Bank as at31.3.2003
Sr. Particulars AmountNo. (Rs. in crores)
1 Claims against the Bank
Not acknowledged as debts * 72.17
2 Liability for partly paid Investments 0.31
3 Liability on account of outstanding
Forward Exchange Contract 2387.01
4 Guarantees given on behalf of Constituents -
a) In India 1554.78
b) Outside India 27.93
5 Acceptances, Endorsements and other obligations 1034.79
6 Other items for which the Bank is contingently liable 537.24
TOTAL 5614.23
* Provision to the extent of Rs. 15.62 crores is held.
2. We have examined all the contracts, claims and litigations against the Bank and have analysed the likely impact of the same asindicated above. We certify that apart from the contingent liabilities indicated above, the Bank does not have any other contingentliability.
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UCO BANK
Details of Unsecured Loans as On March 31st, 2003
(Rs. in crore)
Sr. Name of the Lender Amount Repayment ScheduleNo. Date Amount
1 Lender A 14.40 Within 6 months 14.40
2 Subordinated Debts:
a) Tier II Bond Series I 150.15 30.06.2006 150.15
b) Tier II Bond Series II 150.00 07.04.2007 150.00
c) Tier II Bond Series III 150.00 08.05.2008 150.00
3 Overdrawn amount in Nostro Accounts. 146.47 On going 146.47
4 Borrowing under TT Discounting Facility from SBI 11.76 On going 11.76
1) Age-wise analysis of Sundry Debtors as on March 31st, 2003
Age-wise Break up Amount (Rs. in crores)
Less than six months 20.18
Six months and above 25.44
Total 45.62
2) Certificate regarding Investments held as on March 31st, 2003
A. In India (Rs. in crore)
Sl. Details of Investment Book Value Market Value/ Diminution inNo. Quoted Value Value
1 Govt. Securities 9478.93 10234.53 NIL
2 Other Approved Securities 550.71 624.02 NIL
3 Shares 82.40 82.40 NIL
4 Debentures & Bonds 2556.18 2731.00 NIL
5 Others 785.99 785.99 NIL
B. Outside India (Rs. in crore)
Sl. Details of Investment Book Value Market Value/ Diminution inNo. Quoted Value Value
1 Govt. Securities 391.96 398.00 NIL
2 Shares 7.16 7.16 NIL
3 Debentures 284.17 286.42 NIL
Note: Subordinated Debt raised by issue of unsecured redeemable bonds under Tier II Capital has been shown under “Other Liabilities& Provisions - Others” in Schedule 5 in the Audited Accounts as per RBI directives on its classification. However, for the purpose of thiscertificate the same has been considered under unsecured loans being in the nature of Borrowings.
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Capitalisation statement reproduced below is as per certificate issued by M/s Chattopadhyay, Pal, Sengupta &Co., Chartered Accountants dated August 19th, 2003.
CAPITALISATION STATEMENT (based on Issue Price of Rs. 12 per share)
(Rs. in crore)
Pre-issue as at Adjusted for the 31.03.2003 Public Issue
Borrowings
Short-Term Debt 172.63 172.63
Long –Term Debt 684.73 684.73
Total Debt 857.36 857.36
Shareholders’ funds
Share Capital 599.36 799.36
Equity
Less:
Calls-in-arrears
Preference
Share premium 40.00
Reserves & Surplus * 310.34 350.34
Less: Miscellaneous Expenditure not Written off - 10.00
Total of Reserve & Surplus 310.34 340.34
Total Shareholders Funds 909.70 1139.70
Long Term Debt / Equity Ratio 0.75:1 0.60:1
* Excluding Revaluation Reserve 295.95 295.95
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C. STATUTORY AND OTHER INFORMATION
Minimum Subscription
If the Bank does not receive the minimum subscription of 90% of theissue amount, till the date of closure of the Issue, or if the subscriptionlevel falls below 90% after the closure of the Issue on account ofcheques having been returned unpaid or withdrawal of application,the Bank shall forthwith refund the entire subscription amountreceived. For delay beyond 78 days, if any, in refund of suchsubscription, the Bank shall pay interest as per Section 73 of theCompanies Act, 1956.
Expenses of the Issue
The expenses of the Issue payable by the Bank inclusive of brokerage,fees payable to the Lead Managers to the Issue, Co-Managers to theIssue, Legal Advisor, Auditors, reimbursement of expenses to theRegistrars, stamp duty, printing, advertising and distributionexpenses, listing fees and other expenses are estimated to bemaximum of Rs. 10 crores and will be met out of the proceeds of theIssue.
The following table gives a break-up of the estimated issue expensesand contingencies:
Particulars Rs. in crores
Lead Managers fees, Out of PocketExpenses and Brokerage 5.00
Advertisement budget 2.00
Printing & Stationery 2.00
Registrar fees 0.05
Travelling for conference and other expenses 0.50
Contingencies 0.45
Total expenses 10.00
Fee payable to the Lead Managers to the issue
The fees payable to the Lead Managers to the Issue is as set out in therelevant documents, copies of which are kept open for inspection atthe Head Office of the Bank.
Fee payable to the Co-Managers to the issue
The fees payable to the Co-Managers to the Issue is as set out in therelevant document, a copy of which is open for inspection at theHead Office of the Bank.
Fee payable to the Registrars to the issue
The fees payable to the Registrars to the Issue is as set out in therelevant documents, copies of which are kept open for inspection atthe Head Office of the Bank.
Brokerage
As per Section 13 of the Banking Regulation Act 1949, no Bankingcompany can directly or indirectly pay by way of commission,brokerage, discount in any form in respect of any shares issued by it,any amount exceeding in the aggregate 2.5% of the paid up value ofthe said shares.
The Bank has got an exemption from GoI, Ministry of Finance,Department of Economic Affairs (Banking Division) vide letter no. F.No. 11/6/2003-BOA dated June 9th, 2003 from the provisions of thesaid section 13 relating to payment of brokerage, commission,discounts upto 5 years.
Accordingly brokerage would be paid to the Brokers as per Bank’scommunication to the Calcutta Stock Exchange, the Stock ExchangeMumbai and National Stock Exchange. No brokerage is payable onapplications procured from QIBs.
Brokerage at the rates specified above will be paid by the Bank onthe basis of allotments made against applications bearing the stampof a member of any recognised Stock Exchange in India in thebrokers/agents column.
The Bank, at its sole discretion, may also consider payment ofadditional incentive in the form of kitty or otherwise to the performingbrokers on such terms and mode as may be decided by the Bank.
In any case, the overall brokerage expenditure would not exceed1.5% of the issue size.
In case of tampering or overstamping of broker codes on theApplication Form, the Bank’s decision to pay brokerage in this respectwill be final and no further correspondence will be entertained in thematter.
Underwriting commission
Since the Issue is not being underwritten, no underwritingcommission is payable.
PREVIOUS ISSUES BY THE BANK
The Bank has not made any issue of equity shares/ Debentures/Preference Shares by way of Public/Rights Issue through an OfferDocument since the date of its nationalisation on July 19, 1969.However, the Bank has raised Tier II capital by way of privateplacement to augment capital adequacy as under:
Sr. Particulars Outstanding Interest Period Date of RepaymentNo. Balance (Rs. Rate Repay- terms
in crores) (%) ment
1 Tier II 150.15 11.00 63 30.6.06 BulletBond Sr. I months
2 Tier II 150.00 9.50 63 7.4.07 BulletBond Sr. II months
3 Tier II 150.00 7.50 66 8.5.08 BulletBond Sr. III months
Issues for consideration other than for Cash
There have not been any issues for consideration other than cash.
Previous Commission and Brokerage
No sum has been paid or is payable as commission or brokeragefor subscribing to or agreeing to subscribe to or procuring oragreeing to procure subscription for any of the shares of the Banksince its nationalisation on July 19, 1969.
OPTION TO SUBSCRIBE
Save as otherwise stated in this Offer Document, the Bank has notgiven any person nor does it propose to give any person any optionto subscribe to the shares of the Bank.
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The investor shall have the option to subscribe to securities to bedealt with in a depository. The investor shall have the option toeither to receive the security certificates or to hold the securities indemat form with a depository.
PURCHASE OF PROPERTY
There is no property which the Bank has purchased or acquired orproposes to purchase or acquire, which is to be paid for, wholly orpartly, out of the proceeds of the present Issue or the purchase oracquisition of which has not been completed on the date of issue ofthis Offer Document, other than:
a) the contracts for the purchase or acquisition whereof wereentered into, or may be entered into, in the ordinary course ofthe Bank’s business, such contracts not being made incontemplation of the Issue or in consequence of the contract;or
b) property in respect of which the amount of the purchaseconsideration is not material.
The Bank has not purchased any property in which any of its Directorshad or have any direct or indirect interest or in respect of any paymentthereof.
The Bank has no plans, at present, to acquire any running businessout of the proceeds of the Issue.
TERMS OF APPOINTMENT OF CHAIRMAN ANDMANAGING DIRECTOR
In exercise of the powers conferred by clause (a) of sub-section (3)of section 9 of the Banking Companies (Acquisition and Transfer ofUndertakings) Act, 1970, read with sub-clause (1) of clause 3, clause6, clause 7 and sub-clause (1) of clause 8 of the Nationalised Banks(Management and Miscellaneous Provisions) Scheme 1970, theCentral Government, after consultation with RBI, has appointed ShriV. P. Shetty as Chairman and Managing Director of the Bank uptoOctober 5th, 2005 vide notification F. No. 9/32/2000–B.O.I datedOctober 6th, 2000. His compensation details are as follows:
Salary: Rs. 39,392.50 per month in the scale of Rs. 24,050 – 26,000with effect from October 6th, 2000.
Other benefits: Allowances and Perquisites as per Government ofIndia guidelines such as dearness allowance, city compensatoryallowance, housing, Leave Travel Allowance, Contribution toProvident Fund, Gratuity, Superannuation, Reimbursement of medicalexpenses, entertainment expenses and others
TERMS OF APPOINTMENT OF EXECUTIVE DIRECTOR
In exercise of the powers conferred by clause (a) of sub-section (3)of section 9 of the Banking Companies (Acquisition and Transfer ofUndertakings) Act, 1970, read with sub-clause (1) of clause 3 andsub-clause (1) of clause 8 of the Nationalised Banks (Managementand Miscellaneous Provisions) Scheme 1970, the CentralGovernment, after consultation with RBI, has appointed Shri B. K.Datta as Whole time Director (designated as Executive Director) ofthe Bank upto November 30, 2005 vide notification F.No. 9/27/2002-B.O.I. dated April 3rd, 2002. His compensation details are as follows:
Salary: Rs. 34,477.50 per month in the scale of Rs. 22,050 – 24,050with effect from April 3rd, 2003.
Other benefits: Perquisites as per Government of India guidelinessuch as housing, Leave Travel Allowance, Contribution to ProvidentFund, Gratuity, Superannuation, Reimbursement of medicalexpenses, entertainment expenses
PAYMENT OR BENEFIT TO THE DIRECTORS ANDOFFICERS OF THE BANK
No amount or benefit has been paid or given or is intended to bepaid or given to any Director or Officer of the Bank except theirnormal remuneration and/or reimbursement for the services renderedto the Bank to which they are entitled to or may become entitled tounder the provisions of the Bank Nationalisation Act or otherwise inaccordance with the Law.
The cumulative expenditure on Travelling Allowance (T.A.), Hotel/Halting Expenses (H.A.) and fees for Directors in the last one-year isas follows:
(Rs. in lakhs)
Year ended March 31, 2003 Amount
Travelling Allowance 25.87
Hotel/Halting Allowance 9.35
Fees 1.22
Except the benefits as provided under the relevant rules framed bythe Government of India from time to time, the Directors of the Bankare not eligible to any additional benefits upon termination ofemployment.
The Key Managerial Personnel are entitled to the Compensation &benefits as applicable to all the permanent employees of the Bank.All the Key Managerial Personnel are of the General Manager andhigher grade and hence that compensation falls in the scale of Rs.19,340 – Rs. 21,300 p.m. The other benefit includes the festival loanhousing loan reimbursement of certain expenses etc. as peremployees’ service rules.
NATURE AND INTEREST OF DIRECTORS
No Director of the Bank is interested in the appointment of any of theManagers, Registrars and Bankers to the Issue. No Director of theBank is interested in any property acquired by the Bank within twoyears of the date of the Offer Document or proposed to be acquiredby it.
The Directors are not interested in any loan or advance given by theBank to any person(s)/ Company (ies) nor is any beneficiary of suchloan or advance related to any of the Directors of the Bank.
CAPITALISATION OF RESERVES OR PROFITS
The Bank has not capitalised its reserves or profits in the last fiveyears.
REVALUATION OF ASSETS
The Bank revalued its premises located at various centres duringMarch 31st, 1995 and December 31st, 1995 and the difference between
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UCO BANK
market value and book value of the premise was credited toRevaluation Reserve and debited to Revalued Premise Account.The total amount credited to Revaluation Reserve is as under:
Year Amount (Rs. In crores)
1994-95 139.56
1995-96 226.31
D. MAIN PROVISIONS OF THE BANKNATIONALISATION ACT
Relevant provisions of the Banking Companies (Acquisition andTransfer of Undertakings) Act, 1970/1980 as amended by the BankingCompanies (Acquisition and Transfer of Undertakings) AmendmentAct, 1994 & Banking Companies (Acquisition and Transfer ofUndertakings) Amendment Act, 1995 & 1996 hereinafter collectivelyreferred to as the Bank Nationalisation Act are:
AUTHORISED CAPITAL
As per the provisions of Section 3 (Sub-Section 2A) of the BankingCompanies (Acquisition) Act, 1970 the Authorised Capital of theBank shall be Rs. 1500 crores to be divided into 150 crore of fullypaid-up equity shares of Rs.10/- each.
Provided that the Central Government may, after consultation withthe Reserve Bank of India and by notification in the Official Gazette,increase or reduce the authorised capital as it thinks fit, so howeverthat after such increase or reduction, the authorised capital shall notexceed Rs. 3000 crore, or be less than Rs. 1500 Crores.
ISSUED CAPITAL
Section 3 (Sub-Section 2B) of the Banking Companies (Acquisition)Act, 1970 provides that the paid-up capital may from time to time beincreased by
(a) Such amounts as the Board of Directors of the correspondingnew Bank may, after consultation with the Reserve Bank of Indiaand with the previous sanction of the Central Government transferfrom the reserve fund established by such Bank to such paid-upcapital;
(b) Such amounts as the Central Government may, after consultationwith the Reserve Bank, contribute to such paid-up capital;
(c) Such amounts as the Board of Directors of the correspondingnew Bank may, after consultation with the Reserve Bank andwith the previous sanction of the Central Government, raise byPublic Issue of shares as may be prescribed, so however, thatthe Central Government shall at all times hold not less than 51%of the paid-up capital of each corresponding new Bank.
The entire paid-up capital of the corresponding new Bank, exceptthe paid-up capital raised by public Issue under clause (c) of Sub-Section 2B shall stand vested in, and allotted to, the CentralGovernment.
Sec 3 (2BB) of Banking Companies (Acquisition) Act, 1970 providesthat “notwithstanding anything contained in subsection (2), the paidup capital of a corresponding new Bank constituted under subsection(1) may from time to time and before any paid up capital is raised byPublic Issue under clause (c) of sub section (2B) be reduced by
(a) the Central Government after consultation with the Reserve Bankby cancelling any paid up capital which is lost, or isunrepresented by available assets;
(b) the board of directors, after consultation with Reserve Bank andwith the previous sanction of the Central Government, by payingoff any paid up capital which is in excess of the wants of thecorresponding new Bank.......”
(2BBB) “Notwithstanding anything contained in sub section (2BB) orsub-sub section (2BBA), the paid up capital of a corresponding newBank shall not be reduced at any time so as to render it below twentyfive percent of the paid up capital of that Bank as on date ofcommencement of the Banking Companies (Acquisition and Transferof Undertakings) Amendment Act, 1995.”
RIGHTS OF EQUITY SHAREHOLDERS
As to Dividend
Section 10(7): After making provision for bad and doubtful debts,depreciation in assets, contributions to staff and Superannuationfunds and all other matters for which provision is necessary underany law, or which are usually provided for by Banking companies, acorresponding new Bank may, out of its net profits, declare a dividendand retain the surplus, if any.
Voting Rights
Section 3(2E): No shareholder of the corresponding new Bank, otherthan the Central Government, shall be entitled to exercise votingrights in respect of any shares held by him in excess of one per centof the total voting rights of all the shareholders of the correspondingnew Bank.
Meeting of Shareholders
Section 10A: A General Meeting (in this Act referred to as an annualgeneral meeting) of every corresponding new Bank which has issuedcapital under clause (c) of sub-section (2B) of Section 3 shall be heldat the place of the head office of the Bank in each year at such time asshall from time to time be specified by the Board of Directors:
- Provided that such annual general meeting shall be held beforethe expiry of six weeks from the date on which the balancesheet together with the profit and loss account and auditors’report is under sub-section (7A) of section 10, forwarded to theCentral Government or to the Reserve Bank, whichever date isearlier.
- The shareholders present at an annual general meeting shall beentitled to discuss the balance sheet and the profit and lossaccount of the corresponding new Bank made up to the previous31st day of March, the report of the Board of Directors on theworking and activities of the corresponding new Bank for theperiod covered by the accounts and the auditor’s report on thebalance sheet and account.
TRANSFER OF SHARES AND SHARE REGISTERS
Section 3 (2D): The shares of every corresponding new Bank notheld by the Central Government shall be freely transferable.
Section 3 (2F): Every corresponding new Bank shall keep at its headoffice a register, in one or more books, of the shareholders (in thisAct referred to as the Register) and shall enter therein the following
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particulars:
(i) the names, addresses and occupations, if any, of the shareholdersand a statement of the shares held by each shareholder,distinguishing each share by its denoting number;
(ii) the date on which each person is so entered as a shareholder;
(iii) the date on which any person ceases to be a shareholder and
(iv) such other particulars as may be prescribed
Section 3 (2G): Notwithstanding anything contained in sub-section(2F), it shall be lawful for every, corresponding new Bank to keep theregister in computer floppies or diskettes subject to such safeguardsas may be prescribed.
Section 3 (3): Notwithstanding anything contained in the IndianEvidence Act, 1872, a copy of, or extract from, the Register, certifiedto be a true copy under the hand of an officer of the correspondingnew Bank authorised in this behalf by it, shall in all legal proceedings,be admissible in evidence.
Section 3A: Notwithstanding anything contained in sub-section (2F)of Section 3, no notice of any trust, express, implied or constructive,shall be entered on the register, or be receivable, by thecorresponding new Bank.
BOARD OF DIRECTORS AND THEIR POWERS
Constitutions of the Board of Directors:
Section 9 (3): Every Board of Directors of a corresponding newBank, constituted under any scheme made under Section (1), shallinclude:
(i) not more than two whole time directors to be appointed by theCentral Government after consultation with the Reserve Bank;
(ii) one director who is an official of the Central Government to benominated by the Central Government provided that no suchDirector will be a Director of any other corresponding newBank as in terms of the Banking Companies (Acquisition) Act,1970;
(iii) one director who is an officer of the Reserve Bank to benominated by the Central Government on the recommendationof the Reserve Bank.
Explanation: For the purpose of this clause “an officer of theReserve Bank” includes an officer of the Reserve Bank who isdeputed by the Bank under Section 54AA of the Reserve Bankof India Act, 1934 to any institution referred to therein.
(iv) Not more than 2 directors to be nominated by the CentralGovernment from amongst SEBI established under Section (3)of SEBI Act 1992 (15 of 1992), the National Bank for Agriculture& Rural Development established under section (3) NABARDAct 1981 (61 of 1981), Public financial institutions as specified insubsection (1) or notified from time to time under Sub-Section(2) of Section (4A) of Companies Act 1956 (1 of 1956) and otherinstitutions established or constituted by or under any CentralAct or incorporated under the Companies Act 1956 and havingnot less than 51% of the paid-up share capital held or controlledby the Central Government.
(v) one director, from among such of the employees of the
corresponding new Bank who are workmen under clause(s) ofSection 2 of the Industrial Disputes Act, 1947 to be nominatedby the Central Government in such manner as may be specifiedin a scheme made under this section;
(vi) one director, from among the employees of the correspondingnew Bank, who are not workmen under clause (S) of Section 2of the Industrial Disputes Act, 1947, to be nominated by theCentral Government after consultation with Reserve Bank;
(vii) one director who has been a Chartered Accountant for not lessthan 15 years to be nominated by the Central Government afterconsultation with the Reserve Bank;
(viii) subject to the provisions of clause (i), not more than six directors,to be nominated by the Central Government;
(ix) where the capital issued under clause (c) of sub-section (2B) ofSection 3 is -
- not more than twenty per cent, of the total paid up capital,not more than two directors.
- more than twenty per cent but not more than forty per cent,of the total paid-up capital, not more than four directors.
- more than forty per cent, of the total paid-up capital, notmore than six directors to be elected by the shareholdersother than the Central Government, from amongstthemselves.
Provided that on the assumption of charge after election of any suchdirectors under this clause, equal number of directors nominatedunder clause (h) shall retire in such manner as may be specified inthe scheme.
(3A): The directors to be nominated under clause (h) or to be electedunder clause (i) of Sub-Section 3 shall -
(A) have special knowledge or practical experience in respect ofone or more of the following matters, namely:
(i) agricultural and rural economy
(ii) Banking
(iii) Co-operation
(iv) economics
(v) finance
(vi) law
(vii) small scale industry
(viii) any other matter the special knowledge of, and practicalexperience in which would in the opinion of the ReserveBank, be useful to the corresponding new Bank;
(B) represent the interest of depositors; or
(C) represent the interests of farmers, workers and artisans.
REMOVAL OF DIRECTORS
Section 9 (3B): Where the Reserve Bank is of the opinion that anydirector of a corresponding new Bank elected under clause (i) ofSub-section (3) does not fulfil the requirements of the Sub- Section(3A), it may, after giving to such director and the Bank a reasonable
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UCO BANKopportunity of being heard, by an order remove such director andon such removal, the Board of Directors shall co-opt any otherperson fulfilling the requirements of sub-section 3(A) in place of theperson so removed till a Director is duly elected by the shareholdersof the corresponding new Bank in the next Annual General Meetingand the person so co-opted shall be deemed to have been dulyelected by the shareholders of the corresponding new Bank as adirector.
POWERS OF BOARD OF DIRECTORS
Section 19:
(1) The Board of Directors of a corresponding new Bank may, afterconsultation with the Reserve Bank and with the previoussanction of the Central Government by notification in the OfficialGazette make the regulations, not inconsistent with theprovisions of this Act or any scheme made thereunder, toprovide for all matters for which provision is expedient for thepurpose of giving effect to the provisions of this Act.
(2) In particular, and without prejudice to the generality of theforegoing power, the regulations may provide for all or any ofthe following matters, namely:
i the powers, functions and duties of local boards andrestrictions, conditions or limitations, if any, subject towhich they may be exercised or performed, the formationand constitution of local committees and committees oflocal boards (including the number of members of anysuch committee) the powers, functions and duties of suchcommittees, the holding of meetings of local committeesand committees of local boards and the conduct ofbusiness there at;
ii the manner in which the business of the local boards shallbe transacted and the procedure in connection therewith.;
(a) the nature of shares of the corresponding new Bank,the manner in which and the conditions subject towhich shares may be held and transferred andgenerally all matters relating to the rights and dutiesof shareholders.
(b) the maintenance of register, and the particulars to beentered in the register in addition to those specified insub-section (2F) of Section 3, the safeguards to beobserved in the maintenance of register on computer,floppies or diskettes, inspection and closure of theregister and all other matters connected therewith.
(c) the manner in which general meetings shall beconvened, the procedure to be followed thereat andthe manner in which voting rights may be exercised.
(d) the holding of meetings of shareholders and thebusiness to be transacted thereat.
(e) the manner in which notices may be served on behalfof the corresponding new Bank upon shareholders orother persons.
(f) the manner in which the directors nominated underclause (g) of sub-section (3) of Section 9 shall retire.
(c) the delegation of powers and functions of the Board ofDirectors of a corresponding new Bank to the generalmanager, director, or other employee of that Bank.
(d) the conditions or limitations subject to which thecorresponding new Bank may appoint advisors, officersor other employees and fix their remuneration and otherterms and conditions of service.
(e) the duties and conduct of advisors, officers or otheremployees of the corresponding new Bank.
(f) the establishment and maintenance of Superannuation,pension, provident or other funds for the benefit of officersor other employees of the corresponding new Bank or ofthe dependants of such officers or other employees andthe granting of Superannuation allowances, annuities andpensions payable out of such funds.
(g) the conduct and defence of legal proceedings by or againstthe corresponding new Bank and the manner of signingand pleadings.
(h) the provision of a seal for the corresponding new Bankand the manner and effect of its use.
(i) the form and manner in which contracts binding on thecorresponding new Bank may be executed.
(j) the conditions and the requirements subject to which loansor advances may be made or bills may be discounted orpurchased by the corresponding new Bank.
(k) the persons or authorities who shall administer any pension,provident or other fund constituted for the benefit of officersor other employees of the corresponding new Bank ortheir dependants.
(l) the preparation and submission of statements ofprogrammes of activities and financial statements of thecorresponding new Bank and the period for which and thetime within which such statements and estimates are to beprepared and submitted; and
(m) generally for the efficient conduct of the affairs of thecorresponding new Bank.
E. MATERIAL CONTRACTS AND DOCUMENTSFOR INSPECTION
The contracts referred to below (not being contracts entered into inthe ordinary course of business carried on by the Bank or enteredinto more than two years prior to the date of the Offer Document)which are or may be deemed to be material have been entered intoby the Bank. Copies of these contracts, together with the copies ofthe documents referred to below, all of which have been attached toa copy of the Offer Document, which has been delivered to theDesignated Stock Exchange, may be inspected at the Head Office ofthe Bank between 10.00 A.M. and 12.00 Noon on any working day ofthe Bank from the date of the Offer Document until the date of closingof the subscription list.
A. MATERIAL CONTRACTS
1. Memorandum of Understanding between the Bank and the LeadManagers to the Issue viz. SBI Capital Markets Limited, DSP
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Merrill Lynch Limited, Enam Financial Consultants PrivateLimited, JM Morgan Stanley Private Limited and Kotak MahindraCapital Company Limited and UCO Bank specifying the termsof the engagement and the Inter-se Allocation of Responsibilitiesbetween the Lead Managers.
2. Memorandum of Understanding dated July 18th, 2003 betweenthe Bank and registrars to the Issue Karvy Consultants Limited,specifying the terms and conditions of the engagement.
3. Letter from UCO Bank appointing A. K. Capital Services Limited,Allianz Securities Limited, Centrum Finance Limited and KarvyInvestors Services Limited as Co-Managers to the issue.
4. Agreement dated July 10th, 2001 between UCO Bank andNational Securities Depository Limited (NSDL)
5. Agreement dated September 16th, 2002 between UCO Bankand Central Depository Services (India) Ltd. (CDSL)
B. MATERIAL DOCUMENTS
1. Copy of the resolution of Board of Directors of the Bank at theBoard Meeting held on March 20, 2003.
2. Copy of the letters no. F. No. 11/6/2003-BOA dated June 16th,2003, regarding lock in of GoI Shares.
3. Copy of the letters no. F. No. 11/6/2003-BOA dated June 9th,2003, under Section 3(2B)(c) of the Banking Companies(Acquisition and Transfer of Undertakings) from Ministry ofFinance (Department of Economic Affairs) in consultation withthe Reserve Bank of India (RBI) .
4. Consent dated June 15th, 2003 from M/s P. A. Associates, M/s N.C. Mitra & Co., M/s M. Choudhury & Co., M/s H. K. Chaudhary &Co., M/s Vinod Kumar & Associates and M/s L. B. Jha & Co. toact as auditors of the Bank and to the inclusion of their report ontax benefits in the offer document of the Public Issue.
5. Audit Report dated June 15th, 2003 from M/s P. A. Associates,M/s N. C. Mitra & Co., M/s M. Choudhury & Co., M/s H. K.Chaudhary & Co., M/s Vinod Kumar & Associates and M/s L. B.Jha & Co.
6. Tax benefit report dated June 27th, 2003from For M/s S. Ghose& Co.
7. Copies of the Balance Sheet and Profit and Loss Accounts ofUCO Bank for the five years ended March 31st, 1999, 2000, 2001,2002 and 2003.
8. Copies of the Balance Sheet and Profit and Loss Account of
eleven Regional Rural Banks (RRBs) of the Bank for the fiveyears ended March 31, 1999, 2000, 2001, 2002.
9. Consents from the Lead Managers, Co Managers, Registrars,Advisors, Legal Advisors and Compliance Officer to the Issue.
10. Copy of Initial Listing Applications dated July 21st, 2003 madeto the Stock Exchanges at the Calcutta Stock ExchangeAssociation Limited, The Stock Exchange Mumbai, and theNational Stock Exchange of India Limited for listing of equityshares of the Bank.
11. Government of India, Ministry of Finance, Department ofEconomic Affairs (Banking Division), letter no. F. No. 11/22/2001-BOA dated September 6th, 2002, permitting the Bank toreduce its paid-up capital by adjusting accumulated losses Rs.1665.16 crores from its paid-up capital.
12. The GoI, Ministry of Finance, Department of Economic Affairs(Banking Division) gazette notification ref. F. No. 11/6/2003-BOAdated July 18th, 2003 from the provisions of the said Section15(1) of the Banking Regulation Act, 1949, relating to the paymentof dividend, for a period of five years from the date of thenotification.
13. Copy of the Gazette of India notification no. F. No. 9/32/2000-B.O.I dated October 6th, 2000 appointing Shri V. P. Shetty asChairman and Managing Director of UCO Bank.
14. Copy of the Gazette of India notification F. No. 9/27/2002-B.O.Idated April 3rd, 2003 appointing Shri B. K. Datta as the ExecutiveDirector of UCO Bank.
15. Copy of Verma Committee Report and relevant extract ofJanakiraman Committee Report.
16. Copy of the Observation letter no. CFD/DIL/SNB/15645/2003dated August 19th 2003 from Securities & Exchange Board ofIndia
17. Copy of the letter dated August 8th, 2003 from the Calcutta StockExchange Association Limited, letter dated August 13th, 2003from the Stock Exchange, Mumbai and letter dated August 13th,2003 from the National Stock Exchange Ltd. Granting In-principleLisitng approval.
18. Copy of letter from Reserve Bank of India (letter no. RPCD No.Plan 730/04.09.01/2002-03 dated December 23, 2002) regardinglending to Priority Sector – Achievement of Targets.
19. Statement regarding ALM mismatch dated July 30th, 2003.
20. Note dated August 1st, 2003 of UCO Bank regarding Lead Bankresponsibilities.
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UCO BANK
PART IIIDECLARATION
All relevant provisions of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 and Banking Companies (Acquisitionand Transfer of Undertakings) Amendment Act, 1994 & Banking Companies (Acquisition and Transfer of Undertakings) Amendment Act,1995 and Banking Companies (Acquisition and Transfer of Undertakings) Amendment Act, 1996 and the guidelines issued by the Governmenthave been complied with and no statement made in this Offer Document is contrary to the provisions of the said Act/ Regulations/Guidelines and rules framed thereunder. Further we certify that all the disclosures made in the Offer Document are true and correct.
Signed by
Shri V. P. Shetty, Chairman & Managing Director
Shri B. K. Datta, Executive Director
Shri Sudesh Kumar, Director
Shri B. Ghosh, Director
Shri Arumugam Sakthivel, Director
Shri Bhalachandra Mahadev Bhide, Director
Shri Sanat Kumar, Director
Dr. Ram Avtar Yadav, Director
Shri Mahesh Kumar Bhagchandka, Director
Prof. Mousumi Ghosh, Director
Shri K. Vijayan, Director
Shri Soumendra Roychowdhury, Director
Shri Suresh Chand Gupta, Director
Place: Kolkata
Dated: August 21st, 2003
100
UCO BANK
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