Indian Bank - Annual Report - 2008-2009

INDIAN BANK

ANNUAL REPORT 2008-2009

DIRECTOR'S REPORT

To
The Members,

Your Directors have great pleasure in presenting the Bank's Annual Report
along with the Audited Financial Statement of Accounts and the Cash flow
statement for the year ended 31st March 2009.

FINANCIAL HIGHLIGHTS

The Bank took forward its growth story with Operating profit increasing to
Rs.2,228.83 crore as against Rs.1,659.30 crore for 2007-08, registering a
growth of 34.32%.

* Net profit for 2008-09 was at Rs.1,245.32 crore as compared to
Rs.1,008.74 crore for 2007-08, showing a growth of 23.45% in the current
year.

* Net Interest Margin improved to 3.54% from 3.45%.

* Return on average assets was at 1.620/a and 1.64% for 2007-08.

* Capital Adequacy Ratio stood at 13.27% as against 12.74% as of March
2008. The Bank is Basel II compliant.

* Return on Net worth for 2008-09 was at 23.35% as against 24.51% for 2007-
08.

* Earnings per share as of March 2009 was Rs.27.96 and Book value per share
was Rs.127.52 during the current year.

* Global Business of the Bank stood at Rs.1,24,413 crore registering a
growth of 22.85%.

* Total Deposits grew by Rs.11,536 crore to Rs.72,582 crore, a growth of
18.90% for the year 2008-09.

* Gross Advances were at Rs.51,831 crore; registering an increase of
Rs.11,603 crore (28.84%) as on 31.3.2009. Overall Credit Deposit ratio was
at 71.41%.

* Priority Sector Advances at Rs.18,426 crore, grew by Rs.3,297 crore
(21.79%).

* Agriculture Credit grew by Rs.1,544 crore (24.53%) to Rs.7,838 crore and
accounted for 20.51% of Adjusted Net Bank Credit.

* During 2008-09, total recovery of NPA including Accounts Under Collection
amounted to Rs.457.10 crore.

* Gross NPA was at 0.89% as against 1.21% for March 2008 and Net NPA was
lower at 0.18% as against 0.24% for March 2008.

* Financial Inclusion: During 2008-09, 17.04 lakh accounts were opened
under the scheme, of which Over draft was extended in 52,545 accounts for
Rs.10.91 crore.

* Total Branch network of the Bank in India increased to 1642 as on
31.3.2009 and all the branches are under CBS.

* Total number of ATMs increased to 755 which included 205 offsite ATMs and
customers can have access to 32000 ATMs in the shared network.

INCOME AND EXPENDITURE

* During the year, total income of the Bank increased to Rs.7,865.77 crore
with a strong growth in interest income to the tune of Rs.1,617.40 crore or
31.03%. Net interest income registered a rise of Rs.554.62 crore (27.00%).

* Other Income at Rs.1,035.44 crore registered an increase of 2.96%.

* On the Expenditure side, the Bank's interest expenditure was at
Rs.4,221.81 crore an increase of Rs.1,062.70 crore or 33.64%.

* Total operating expenses at Rs.1,415.13 crore for 2008-09 has shown an
increase of Rs.14.84 crore, an increase of 1.06%, when compared to the
level of Rs.1,400.29 crore in 2007-08.

The income and expenditure for the period 2008-09 are given hereunder:

(Rs. in crore)

Particulars 2007-08 2008-09 Absolute %
Growth Growth

Total Interest 5212.97 6830.33 1617.40 31.03
Income
Total Interest 3159.07 4221.81 1062.70 33.64
Expenditure
Net Interest 2053.90 2608.52 554.62 27.00
Income
Profit on sale of 179.01 194.77 15.76 8.80
investments
Net operating 3059.59 3643.96 584.37 19.10
Income
Operating 1400.29 1415.13 14.84 1.06
Expenses
Operating Profit 1659.30 2228.83 569.53 34.32
Provisions and 650.56 983.51 332.95 51.18
Contingencies including
depreciation on account
of transfer of securities
to HTM category

Net Profit 1008.74 1245.32 236.58 23.45

SPREAD ANALYSIS

* The Bank's Net Interest income improved to Rs.2,608.52 crore in 2008-09
from Rs. 2,053.90 crore in 2007-08, thereby registering a growth of 27%.
The increase is attributed to the substantial increase in interest income
arising from volume growth in advances.

* The increase in interest income led to a marginal increase in Net
Interest Margin to 3.54% as of March 2009.

The Spread analysis is as under:

(Rs. in crore)

Parameters 2007-08 2008-09 Growth
Absolute %

Total Interest 5212.97 6830.33 1617.40 31.03
Income
Total Interest 3159.07 4221.81 1062.70 33.64
Expended
Spread 2053.90 2608.52 554.62 27.00
Yield on Funds 8.49 8.90
Cost of Funds 5.14 5.50
Net Interest 3.45 3.54
Margin

IMPORTANT RATIOS
(in per cent)
Parameters 2007-08 2008-09

Yield on Advances 10.59 11.02
Yield On Investment 7.68 7.61
Cost of Deposits 5.85 6.27
Return on Assets 1.64 1.62
Cost Income ratio 45.77 38.83
Business per employee (Rs in lakh) 488.16 616.78
Profit per employee (Rs in lakh) 4.91 6.23

PROVISIONS AND CONTINGENCIES

* Provision for Depreciation on Investments including amortisation of
premium on Held to Maturity category and one time shifting of securities
from AFS to, HTM category is to the tune of Rs.265.99 crore as compared to
a provision of Rs.114.49 crore in 2007-08.

* Provision for Standard Assets amounted to Rs.40.87 crore in March 2009 as
against Rs.95.59 crore in March 2008 in compliance with RBI regulations.

* Profit before tax for 2008-09 is at Rs.1,786.10 crore as against
Rs.1,234.98 crore for 2007-08. Profit after tax is at Rs.1,245.32 crore as
against Rs. 1,008.74 crore in 2007-08.

DIVIDEND

* The Board of Directors is pleased to recommend a final dividend of 30%
for 2008-09, thus making the total dividend for 2008-09 to 50%. The
dividend for financial year 2008-09 shall be subject to tax on dividend to
be paid by the Bank. The total outflow on account of dividend for 2008-09
is Rs.295.27 crore including dividend tax. The payout ratio works out to
20.27%.

NET WORTH AND CRAR

* The Net worth of the Bank improved to Rs.5,880.30 crore as on 31.3.2009
from Rs. 4,653.07 crore as on 31.03.2008 reflecting a growth of 26.37% due
to plough back of profits.

* The Capital to Risk (Weighted) Assets Ratio (CRAB) is 13.27% as of March
2009, compared to 12.74% as of March 2008, against the requirement of 9%.

* The CRAB of Tier I capital was 11.28% as of March 2009 as against 11.29%
as of March 2008.

As on As on
March 2008 March 2009

Tier-I Capital 11.29 11.28
Tier-II Capital 1.45 1.99
Total 12.74 13.27

In accordance with the priorities accorded by the Government of India, the
Bank's Advances to SC/ST increased by Rs.312.78 crore to reach Rs. 1,315.96
crore as of 31st March 2009 covering 3.51 lakh individuals and constituted
7.14% of total Priority Sector advances, representing 31 % growth over the
previous year's position.

Also as per Government guidelines, during the process of Direct Recruitment
and Internal Promotions, Prerecruitment and Pre-promotion training's are
offered to SC/ST employees.

Periodical Quarterly Meetings are conducted and grievances, if any are
resolved then and there. The SC/ST Cell also ensures prompt disposal of
grievances/representations of SC/ST employees. A Chief Liaison Officer in
the rank of General Manager is nominated for this purpose.

CHANGES IN THE BOARD DURING THE YEAR

During the period under review, Shri Anup Sankar Bhattacharya assumed
charge as Executive Director on 15.10.2008. Prof. Narendra Kumar Agrawal
and Shri C K Ranganathan joined the Board as Directors representing the
shareholders on 30.06.2008 and Shri Kumar Sanjay Krishna I.A.S., Joint
Secretary, Department of Economic Affairs, Ministry of Finance, Government
of India, joined the Board as Director on 13.01.2009 representing the
Government in the place of Shri V S Senthil. Shri G Charath Chandran
retired from the Board on 31.01.2009 as he completed his term of three
years.

DIRECTORS' RESPONSIBILITY STATEMENT

The Directors confirm that in the preparation of the annual accounts for
the year ended March 31, 2009:

* The applicable accounting standards have been followed along with proper
explanation relating to material departures, if any;

* The accounting policies framed in accordance with the guidelines of the
Reserve Bank of India, were consistently applied;

* Reasonable and prudent judgment and estimates were made so as to give a
true and fair view of the state of affairs of the Bank at the end of the
financial year and of the profit of the Bank for the year ended March 31,
2009.

* Proper and sufficient care were taken for the maintenance of adequate
accounting records in accordance with the provisions of applicable laws
governing banks in India; and

* The accounts have been prepared on a going concern basis.

ACKNOWLEDGEMENT

The Board expresses its gratitude to the Government of India, Reserve Bank
of India and Securities It Exchange Board of India for the valuable
guidance and support received from them. The Board also thanks the
financial institutions and correspondent banks for their co-operation and
support. The Board acknowledges the unstinted support of its customers and
shareholders. The Board records its sincere appreciation for the valuable
contribution made by Shri V S Senthil and Shri G Charath Chandran who
ceased to be member effective from 13.01.2009 and 01.02.2009 respectively.
The Board wishes to place on record its appreciation of the dedicated
services and contribution made by members of staff for the overall
performance of the Bank.

For and on behalf of Board of Directors

CHAIRMAN AND MANAGING DIRECTOR

MANAGEMENT DISCUSSION AND ANALYSIS

ECONOMIC ENVIRONMENT

Worldwide, the Financial Year 2008-09 witnessed volatility with high degree
of uncertainty. In the Indian economy the year started off with highly
optimistic note on the backdrop of the strong fundamentals of the economy
which was completely reversed as the year drew to a close.

After five years of spectacular growth posted by the Indian economy, there
were perceptible signs of deceleration in FY'09. A number of factors
inimical to growth intensified and these include global economic slowdown
associated with the financial crisis in developed economies and tightening
of equity and credit markets. There has been substantial shrinkage of the
export market and capital flows dried up. Consequently, a vicious cycle of
weak demand and falling output developed in the Indian economy.

In the beginning of the year, overall sentiment prevalent in the economy
was optimistic backed by high GDP growth, rising savings and investment
rates, and increase in manufacturing activity through investments in
capacity expansions. As the global economic environment started to
deteriorate owing to simultaneous turmoil in food, energy and financial
sectors, the Indian economy which was expected to remain insulated was
impacted due to increased integration of the Indian economy and its
financial markets with the rest of the world; and the ripple effect of the
global crisis was transmitted to the domestic economy via the trade and
finance channels.

REAL SECTOR

* As per Central Statistical Organisations' advance estimates, the real GDP
growth for 2008-09 is estimated to be 7.1 per cent. This is based on the
expected higher growth of over 5 per cent in the sectors of 'construction',
'trade, hotels, transport and communication', 'financing, insurance, real
estate, business services', and 'community, social and personal services'.

* Agriculture, forestry and fishing' sector is likely to show a growth rate
of 2.6 per cent as against the previous year's growth rate of 4.9 per cent,
mainly on account of anticipated growth rates in horticultural crops,
livestock products and fisheries.

* The output in the industrial sector is expected to moderate to 4.82% in
FY09 as against 8.10% in the previous year.

* The services sector which has been the key growth driver is expected to
show a reduced growth of 9.65% as against 10.85% in the previous year. The
estimated growth in GDP for the trade, hotels, transport and communication
sectors during 2008-09 is placed at 10.3 per cent. Financing, insurance,
real estate and business services are expected to show a,growth rate of 8.6
per cent during 2008-09 and the growth rate of 'community, social and
personal services' during 2008-09 is estimated to be 9.3 per cent.

* The National Income is likely to rise by 7.1 per cent during 2008-09 in
comparison to the growth of 9.1 per cent in 2007-08.

* The per capita income in real terms (at 1999-2000 prices) is estimated to
grow at 5.6 per cent during 2008-09, as against the previous year's
estimate of 7.6 per cent.

INDUSTRIAL SECTOR

* The global turbulence and its impact on the Indian economy were apparent
with the contraction in the industrial output which turned negative from
January 2009 onwards. The index has recorded a y-o-y fall of 1.2% during
February, mainly due to a combination of high base effect and sluggish
external demand as reflected by continuously falling exports.

* While mining and manufacturing output declined by 1.6% and 1.4%
respectively, electricity sector registered a marginal growth of 0.7%.
However capital goods and consumer durables registered a firm growth of
10.4% and 5.7% respectively during the period under review.

* The Core industries also were in the slowdown registering a growth of 2.9
per cent in March 2009, same as that of March 2008. For the period
April-March 2008-09, the six core industries registered a growth of 2.7 per
cent as against 5.9 per cent during the corresponding period of the
previous year.

EXTERNAL SECTOR

* On the external front, in the beginning of 2008-09, India's merchandise
trade remained resilient. Demand conditions worsened as India's key trading
partners and the global economy witnessed a crisis of confidence. India's
exports lost momentum since Sep. 2008 and declined for the consecutive
months of Oct, Nov, Dec '08, Jan'09, Feb'09 and Mar. '09.

* Exports during March 2008-09 were valued at US $ 11.51 billion which was
33.3 per cent lower than the level of US $ 17.25 billion during March,
2008. The Cumulative value of exports for the period April-March, 2008-09
was at US$ 168.7 billion as against US $ 163.1 billion, registering a
growth of 3.4 per cent in Dollar terms over the same period last year.

* Imports during March 2008-09 were valued at US $ 15.56 billion
representing a decrease of 34 per cent over the level of imports valued at
US $ 23.57 billion in March 2007-08. The Cumulative value of imports for
the period April- March 2008-09 was at US $ 287.76 billion as against US $
251.65 billion registering a hike of 14.3 per cent in Dollar terms over the
same period last year.

* Oil imports during April-March 2008-09 were valued at US $ 93.17 billion
which was 16.9 per cent higher than the oil imports of US $ 79.71 billion
in the corresponding period last year. Non-oil imports during April- March
2008-09 were valued at US $ 194.58 billion which was 13.2 per cent higher
than the level of such imports valued at US $ 171.94 billion in April-
March 2007-08.

* The trade deficit for April-March 2008-09 was estimated at US $ 119.05
billion which was higher than the deficit at US $ 88.52 billion in the

previous year.

* During the year, the rupee depreciated to record low of 52.06 against the
US dollar due to strong FII outflows.

* India's Balance of Payments deteriorated sharply in the third quarter of
2008-09 with both current and capital account running into deficits.
Exports contraction resulted in the current account deficit widening to USD
14.6 billion the highest since 1990. Capital account balance turned
negative showing outflows of USD 3.7 billion for the first time since Q1 of
1998-99.

Price Scenario:

* At the start of the year, surge in food and fuel prices created
inflationary pressures causing the WPI inflation to reach a double digit of
12.90% in Aug'08 - the potential threat being the steady rise in oil
prices. From Aug 08, Global commodity prices started receding and this
provided some respite to the overall price situation in the economy. Thus,
driven by receding international commodity prices viz., crude oil, the
headline inflation began to moderate from Sep 2008. Inflation rate slumped
to a low of 0.26% for the week ended 28th March 2009. The inflation rate of
manufactured products stood at 1.42%, while that of primary articles and
fuel group stood at 3.46% and -6.11 % respectively.

Fiscal Position:

* India's fiscal deficit increased to 94.1 % of the revised estimates to
Rs. 3,071.33 billion in the 11 months of 2008-09 much higher than the 73.4%
witnessed during April'07-Feb'08. The revenue deficit was 101.3% of the
revised estimates amounting to Rs.2,445.13 billion.

Equity Markets:

* Persistent weakness in the global markets due to the financial market
crisis and weak economic indicators resulted in domestic markets recording
a sharp decline in their trading volume and turnover.

* The combined market valuation of all the listed companies in the country
dropped to Rs. 30,86,075 crore on the last day of this fiscal as against
Rs. 49,72,953.37 crore on March 31st 2008, leading to a loss of over Rs.
18,86,000 crore during the period.

* The Bombay Stock Exchange's benchmark index 'Sensex', which accounts for
around 48 per cent of the market capitalisation of all the listed
companies, suffered a loss of nearly Rs. 10,00,000 crore for the fiscal
ending March 31, 2009.

MONETARY DEVELOPMENTS

* The FY 2008-09 was significant in view of the global meltdown. RBI
changed its approach significantly from a tight monetary policy stance in
the beginning of the year to easing monetary measures.

* In the beginning of the year (Jan-Aug 2008), high inflation and mounting
liquidity pressures induced the Reserve Bank to tighten its monetary stance
to rein in inflation expectations and to decrease demand-side pressures.

* However, as the gradual intensification of the global financial crisis
took place, its ripple effects on the real sector across the globe began to
adversely affect the Indian economy via the financial as well as trade
channels. This prompted RBI to shift its policy focus from inflation
control to demand stimulation and growth enhancement since Oct 2008.

* With inflation and money supply growing far above RBI's target, the RBI
raised the CRR and Repo rate to 9% during April - August 2008 to control
excess liquidity and to rein in inflationary expectations.

* The substantial FIl outflows from domestic stock markets coupled with
tight monetary policy followed by the RBI till Aug 08 led to significant
liquidity crunch in the market.

* Tight liquidity conditions in the banking system was evident from firming
up of call rates to 19.74% (weighted average call rates) in October'08 and
increasing recourse to LAF window by banks.

* As the downward risks to the growth prospects of the economy increased in
the second half of 2008-09 and some moderation in inflation was observed,
the focus of monetary policy shifted from inflation control to stimulating
growth and easing liquidity pressures. Thus, in an endeavour to maintain
domestic macroeconomic and financial stability amidst the turmoil in the
global financial markets, the RBI announced a slew of measures, which
included cuts in CRR, Repo and Reverse Repo rates by 400 bps, 350 bps and
200 bps respectively during Oct 08-Jan 09.

* Foreign institutional investors pulled out close to Rs. 50,000 crore
(Rs.500 billion) at the domestic stock market in 2008-09. A major chunk of
Fil selling over $3 billion took place in October 2008 alone, which saw the
Sensex touching its lowest level in the last three years. The benchmark
index plunged to a low of 7,697 points in October amid sharp outflow from
FIIs. It rallied to 9,709 points at end March, 2009.

Banking Sector:

* As of 27th March 2009, aggregate deposits of All Scheduled Commercial
Banks grew by 19.8 per cent year-on-year as against 22.4 per cent in the
corresponding period in the previous year. Credit growth during the same
period was at 17.3 per cent as against 22.3 per cent in the previous year.

* Credit Deposit Ratio was at 72.32 per cent as on March 27, 2009.

DETAILED BUSINESS OVERVIEW OF THE BANK

GLOBAL BUSINESS

Global Business of the Bank increased to Rs.1,24,413 crore as on March 31,
2009 from Rs.1,01,274 crore as on March 31, 2008 registering an increase of
Rs. 23,139 crore and a growth of 22.85%. Domestic Business of the Bank
increased by Rs. 21,411 crore to Rs.1,18,520 crore as on that date from Rs.
97,109 crore as on 31.3.2008, registering a growth of 22.05%.

RESOURCE MOBILISATION

Global Deposits of the Bank improved to Rs.72,582 crore as on 31.3.2009
from Rs.61,046 crore as on 31.3.2008, with an accretion of Rs.11,536 crore
and growth of 18.90l0.

Domestic Deposits of the Bank increased by Rs.10;754 crore to Rs.69,659
crore as on 31.3.2009 from Rs. 58,905 crore as on 31.3.2008 registering
growth of 18.26%.

Current Deposits reached a level of Rs.5,252 crore as on 31.3.2009 as
against Rs. 4,704 crore as on 31.3.2008, an increase of 11.65%. Savings
Bank Deposits grew by 17.69% to Rs.17,667 crore as on 31.3.2009 as against
Rs. 15,011 crore as on 31.3.2008. The share of low cost deposit in total
deposits was at 31.58% as on 31.3.2009.

'Banyan Vriksh' Movement:

To commemorate the 101st year of founding of the Bank, a movement named
'Banyan Vriksh' was launched on 18.08.2008 to bring in 1.1 million
customers in 101 days to our fold. The movement was successful.

CREDIT DEPLOYMENT

Gross Advances of the Bank touched the level of Rs.51,831 crore as on
31.3.2009 as against Rs.40,228 crore as on 31.3.2008 recording a growth of
28.84%. Domestic Credit increased by Rs.10,657 crore (27.89%) to Rs.48,861
crore as on 31.3.2009 as against Rs.38,204 crore as on 31.3.2008. The
growth mainly accrued from Non-food credit.

Domestic Non-food credit increased by Rs.10,626 crore (28.63%) to Rs.47,744
crore as on 31.3.2009 as against Rs. 10,076 crore as on 31.3.2008.

The CD ratio of the, Bank as on 31.3.2009 stood at 71.41%. The Bank
continues Fits thrust on improving its yield on advances and asset quality.

Priority Sector advances with an outstanding of Rs.18,426 crore constituted
48.23% of the Adjusted Net Bank Credit and registered an increase of
Rs.3,297 crore.

Bank's Retail credit grew at 22.95% and the outstanding as on 31.3.2009 was
at Rs.9,664.14 crore.

Export Credit recorded a growth of Rs.246.91 crore or 19,23% from
Rs.1,284.27 crore to Rs.1,531.18 crore as on 27.03.2009:

BRANCH NETWORK AND EXPANSION

As on 31.03.2009, the Bank had 1642 domestic branches comprising of 480
Rural, 414 Semi Urban, 410 Urban and 338 Metropolitan branches. There were
63 Extension Counters, 29 Satellite Offices, 1 Collection Counter, 20 Rural
Banking Service Centres and 1 Forex Bureau. During the year, the Bank
opened 101 branches. The Bank opened 37 branches in minority dominated and
unbanked areas during 2008-09. Besides, the Bank has 2 foreign branches in
Colombo and Singapore.

Treasury Branch was opened at Chennai for integrated treasury transactions
and Forex transactions.

Twenty Banking Service Centres (BSC) are operational in various parts of
the country to increase outreach under financial inclusion.

SEGMENT-WISE PERFORMANCE

Priority Sector Credit

Priority Sector advances increased by Rs.3,296.47 crore to reach
Rs.18,425.70 crore as at 31st March 09 and recorded a growth of 21.79%. It
constituted 48.23 % of Adjusted Net Bank Credit.

Agriculture credit

Agriculture advances increased by Rs.1,543.82 crore to reach Rs.7,837.52
crore as on 31st March 2009 recording a growth of 24.53%. It constituted
20.51 % of Adjusted Net Bank Credit.

Special Agricultural Credit Plan

Under the Special Agricultural Credit Plan, the Bank during 2008-09
disbursed farm loans to the tune of Rs.6,324.77 crore against a target of
Rs.4,925 crore recording an achievement ratio of 128%. Out of the above,
Rs. 1,680.20 crore has been disbursed to 4.20 lakh new farmers. The number
of new farmers financed during 2008-09 averaged to 470 per rural semi urban
branch against the norm of 250/branch.

Provision of farm loans under interest subvention scheme

In pursuance of the policy of the Government of India, The Bank has
operationalised the scheme of providing short term agricultural loans to
farmers at 7% p.a. with interest subvention of 3% provided by Government of
India. Under the scheme, the Bank disbursed Rs. 2,963.04 crore during 2008-
09, as short term agricultural loans at 7% rate of interest benefiting 9.51
lakh farmers accounting for 79% of total crop loans disbursed (Rs. 3,773.54
crore).

Advances to Weaker Sections

Advances to weaker sections increased by Rs.440.43 crore during 2008-09 and
stood at Rs.4,118.95 crore as on 31st March 2009 and constituted 10.78% of
Adjusted Net Bank Credit as against a norm of 10% set in this regard. The
performance under major categories of Weaker Section advances is as
follows:

* Rs.2,373.22 crore to 6.49 lakh Small / Marginal Farmers which constituted
45.54% of direct credit provided to farmers as against 40% norm suggested
by RBI.

* 10,577 new tenant farmers / oral lessees / share croppers have been
financed during the year amounting to Rs. 30.08 crore which constituted
2.52% in terms of number of farmers to total new farmers financed during
the year, as against 2.50% suggested by Government of India.

* Weaker Section campaign (between 19.07.08 & 01.08.08 and between 09.02.09
& 14.02.09) were conducted with focus on DRI lending. As a result,
outstanding level under DRI improved from Rs. 3.05 crore in March 2008 to
Rs. 11.44 crore in March 2009, recording 275% growth rate.

* Advances to SC/ST increased by Rs.312.78 crore to reach Rs.1,315.96 crore
as of 31st March 2009 covering 3.51 lakh individuals and constituted 7.14%
of total Priority Sector advances representing 31% growth over the previous
year position. The recovery position of SC/ST borrowers has been 65.37% as
on 31.3.2009.

* To increase credit flow to Minority Communities, the Bank organized
sensitization programme for Officers in-charge of special cells (for
Minorities / SC-ST welfare) formed at Circle Offices on 31.10.2008.
Advances to Minority communities increased from Rs.774.05 crore in March
2007 and Rs.1,544.69 crore in March 2008, to Rs.2,442.45 crore registering
an increase of Rs.897.76 crore during 2008-09 and constituted 13.26% of
total Priority Sector advances.

Education loan

To assist needy and deserving students to pursue education, the Bank
continued the thrust towards extending education loans and the Bank's
exposure to education loan portfolio increased by Rs.563.66 crore to reach
Rs.1,712.99 crore as on 31st March 2009 with 1.33 lakh students forming a
part of the Bank's customer base. During 2008-09, the Bank disbursed a sum
of Rs.540.17 crore as education loans to 66280 students. The Bank has also
implemented 'Web based on-line education loan application system' to
facilitate early disposal of applications.

INITIATIVES TAKEN UP FOR ENHANCING RURAL CREDIT

Intensive Farm Credit Campaigns

In order to provide timely credit coinciding with monsoon, intensive farm
credit campaigns were conducted during the Kharif and Rabi seasons. During
both these campaign periods, a total of 62710 farmers were assisted to the
tune of Rs.362.65 crore.

Micro credit initiatives

Bank has disbursed Rs.1,054.04 crore as credit assistance to 90421 Self
Help Groups (SHGs) during 2008-09 compared to Rs.814.86 crore disbursed
covering 75381 groups during 07-08. Outstanding under Micro Finance (SHGs)
increased by Rs.363.70 crore to reach Rs.1,350.86 crore as of 31st March
2009.

MICROSATE Branches: In its endeavor to contribute towards urban financial
inclusion, the Bank has established Specialized Microfinance Branches
called MICROSATE Branches across the country. During the year ended March
2009, 13 Microsate Branches were opened, taking the total to 25 branches.
(12 in Tamil Nadu, 4 in Andhra Pradesh, 2 in Kerala and one each in UT of
Puducherry, New Delhi, Bihar, West Bengal, Gujarat, Maharashtra, Orissa,
Karnataka and Madhya Pradesh). These Microsate Branches serve as the one-
stop-shop, catering to the credit requirements of SHGs, NGOs and MFIs,
providing not only credit, but also hand holding services like skill
upgradation, product promotion, market facilitation etc. A total of
Rs.276.95 crore have been disbursed during the year ended March 2009,
covering 16,355 SHGs through these Microsate Branches.

Market facilitation: To ensure market facilitation through publicity and
sale, the Bank along with Indian Bank Trust for Rural Development (IBTRD)
arranged for an 'Exhibition cum Sale' exclusively for SHG Products at
Chennai on 28.02.09 fr 01.03.09. A total of 146 SHGs participated in the
exhibition. During the two days of exhibition, a total cash sale of Rs.4.21
lakh was registered besides booking of orders worth around Rs.16 lakh.

Financial Inclusion Initiatives

Besides achieving total financial inclusion (involving all Banks) in UT of
Puducherry, Cuddalore (TN) & Kollam (Kerala), the Bank has implemented 100%
Financial Inclusion in 9 other lead districts. 100% FI has also been
completed by the Bank in Nilgiris (ST concentrated), Tiruvarur (SC
concentrated) and Kaniyakumari (minorities concentrated) districts.

Covering 4637villages,theBankundertheFinancial Inclusion Project, opened
17.04 lakh No Frills SB accounts and provided Overdraft and GCC facilities
to 52545 individuals with a total sum of Rs.10.91 crore.

The Bank has taken up initiatives to popularize Micro Insurance products
like Janashree Bima Yojana (JBY), launched in association with LIC of
India, intended for providing life cover to SHG members. The Bank has
provided insurance cover to 83,033 members of 8579 SHGs. In this regard our
Branches observed February 09 as JBY Month. During the month, 5393 groups
were brought under the scheme covering 57860 members.

Efforts were taken up to popularize Under Universal Health Care Policy
(UHCP), the micro insurance scheme launched association with United India
Insurance Company Ltd (UIIC) intended for providing health cover to Below
Poverty Line families. The Bank has so far provided insurance cover to
16,220 BPL members.

Rural Technology Initiatives

Banking Service Centre (BSC): To enable door step banking, by providing
basic banking services at villages level, the Bank has introduced a new
banking delivery channel viz. Banking Service Centre (BSC). 20 Banking
Service Centers have so far been opened by the Bank in rural areas across
the country on a pilot basis.

For Self Help Groups, an exclusive software application has been developed
for enabling dual biometric authentication of SHG members (i.e. with finger
print). So far 18 Biometric ATMs have been installed by the Bank.

Farmers' Clubs

The Bank has so far sponsored 342 farmers clubs. The farmers' club play
important role in identification of potential in the command area. These
clubs are instrumental in improving quality of lending, deposit
mobilization, recovery of overdue loans, and formation of SHGs etc.

Agricultural Debt Waiver and Debt Relief Scheme

In terms of the announcement made by the Government of India in the Union
Budget 2008, the Bank has provided debt waiver amounting to Rs.457.40 crore
benefiting 2.36 lakh Small and Marginal Farmers. Besides 0.43 lakh other
farmers were eligible for relief of Rs.84.57 crore as at the close of the
scheme.

Fresh loans are being issued to the beneficiaries of the Debt Waiver scheme
from 01.07.08. Rs.283.19 crore has been provided covering 97357 accounts.

Other Initiatives

The Bank is participating in Rural Training Centre, Karaikudi, Tamil Nadu
(jointly with IOB and NABARD) and Andhra Pradesh Bankers' Institute of
Rural & Entrepreneurship Development -APBIRED, Hyderabad (jointly with
Government of Andhra Pradesh, and four other Banks). These two training
institutes offer wide range of skill oriented training programmes with a
focus on rural population.

As a step towards getting closer to the rural people, a Trust by name
'Indian Bank Trust for Rural Development' (IBTRD) has been established with
a corpus fund of Rs.10 crore from the Bank with the objective of
undertaking various developmental activities in rural areas.

Under the umbrella of this trust, the Bank has established a Financial
Literacy and Credit Counseling (FLCC) centre at Dharmapuri on 13.01.2009
and at Puducherry on 28.03.2009.

The Bank has also established RUDSETI Model Training institutes named as
'Indian Bank Self Employment Training Institute (IND SETI) at Salem on
25.03.2009 and at Puducherry on 28.03.2009 for providing training to rural
youth.

Lead bank

Besides State Level Lead Bank responsibility in the Union Territory of
Puducherry, the Bank holds lead responsibility in 13 districts (10 in Tamil
Nadu, 1 in Kerala 2 in Andhra Pradesh) for coordinating the efforts of all
credit institutions in the allotted districts/UT to increase the flow of
credit to priority sector.

With respect to achievement under 'Annual Credit Plan 2008-09', our Lead
Districts have registered 70% as at the end of Dec 2008. During the same
period, the Bank in above Lead Districts have registered an achievement of
80%. For the year 2009-10, our Lead Districts have already launched the
District Credit Plans, with a total projection of Rs.22,075.20 crore, with
an increase of 17.43% over the 2008-09 Plan.

FOREX BUSINESS

The Bank handled forex business turnover of Rs. 23,588 crore during the
year. Of this, export and other inward remittances amounted to Rs. 10,905
crore while imports and other outward remittances amounted to Rs. 12,683
crore. 92 Branches are authorized to handle forex business, of which 68
branches are provided with SWIFT connectivity. The Bank has correspondent
arrangements with 190 banks in 69 countries.

348 branches are authorized to handle Foreign Currency Non-Resident (FCNR)
Accounts. Non Resident Indian (NRI) Deposits as on March 31, 2009 amounted
to Rs.3,242 crore.

Towards facilitating remittance facility for NRI community worldwide, the
Bank has two products named 'Xpress Money' and 'Money Gram'. This is in
addition to the existing -hannels available for remittance to India in the
form of DD hawing arrangements with 3 prominent Exchange Houses the Middle
East, internet based 'IndRemit' platform for VRIs in U.S.A and Speed Remit
from Singapore besides normal SWIFT based Money Transfer.

CREDIT FLOW TO SMALL AND MEDIUM ENTERPRISES (SME)

The Bank achieved Rs.5,471 crore as on 31.03.2009 and registered year-on-
year growth of 25.62%.

* SME CPUs have been established at 9 key centres at Chennai, Mumbai,
Kolkata, New Delhi, Ahmedabad, Bangalore, Pune, Coimbatore and Kanchipuram
for quick and quality appraisal of SME proposals.

* Fifty nine General Banking Branches across the country have been
identified for conversion into Specialised SME Branches for focused
attention and growth of SME portfolio and approval for the same from RBI
has also been obtained. Two Specialised SME Branches are already
functioning in Peenya Industrial Estate, Bangalore and Coimbatore.

* Central Consultancy Cell has been set up at HO: SMEDD to study the
developments in Industrial and Govt. initiated projects in different areas
of the country and to provide vital feed back to Circle Offices.

* The revised Restructuring Policy for SME borrowers has been implemented
and the Bank restructured 1934 SME units and the amount involved in these
accounts was Rs.388.36 crore.

* During the year the Bank has launched two new structured loan products
under SME viz., IB Caterers and IB Tours Et Travels to assist the SME
service sector units in Catering and Travel services.

PERSONAL SEGMENT LOANS

During the year, the Bank kept on its focus on Personal Segment Loans. The
Bank has a Retail Banking Centre at each of its 28 Circle Offices for
processing and sanctioning of Personal Segment Loans. Personal loans
consist mainly of Home Loans, Automobile Loans, Personal Loans, Education
Loans, Rent Encash, Ind Mortgage, Reverse Mortgage and loans against
financial securities like Deposits / NSCs. As of 31.03.2009, Home Loans
constituted 53% of the total Personal Segment Loans.

During the year, fresh disbursements in Personal Segment Loans amounted to
Rs. 4,040.64 Crore. The total amount outstanding under Personal Segment
Loans stood at Rs.9,664.14 Crore at the end of March 2009 (Rs. 7,860.25
Crore in the previous year), registering a growth of 22.95%. The year-on-
year growth registered under Home Loan during 2008-09 amounted to Rs.989.70
Crore (24.10%).

The segment wise exposure is given below:

(Rs.in Crore)
Sl. Product Exposure
No. as on 31.03.09

1 Home Loan 5096.58
2 Automobile 220.20
3 Consumer Loan 12.99
4 Personal Loan 441.25
5 Education Loan 1695.90
6 Rentencash 206.59
7 Indmortgage 244.14
8 Reverse Mortgage 2.79
9 Others 1743.70
Total 9664.14

Tie-up Arrangements:

During the year, a tie-up was made with Tata Motors for financing their
Cars, including latest Nano Car Booking Financing. A tie-up was also made
with Reliance Capital AMC for distribution of Reliance Mutual Fund
products.

Bancassurance and Mutual Fund Business

The Bank has Corporate Agency Agreement with United India Insurance Co.
Ltd. (UIICO) to provide insurance cover for the assets mortgaged to the
Bank. Besides, the Bank has Corporate Agency Agreement with HDFC Standard
Life for life insurance apart from Distribution Agreement with UTI AMC and
Reliance AMC for their mutual funds.

Bank has 'Arogya Raksha' Scheme in conjunction with UIICO for providing
group cover for its customers for health insurance.

Product specific life cover is made available by way of group cover from
LIC for borrowers under Mortgage related products and Educational Loans.

OTHER FINANCIAL PRODUCTS

IB Swarna Mudra Scheme

The Bank is in to the sale of Gold Coins and Bars since 24.03.2006. These
products are available in 2g, 4g, 5g, 8g, 10g, 20g, 50g coins/bars
currently at 1198 branches. Buoyed by the response, the Point of Sale
branches were increased from 886 as of 31.03.2008 to 1198 as of 31.03.2009.

Credit Card

The Credit Card of the Bank viz. IB Global Card and Bharat Card for the
common man with many insurance features launched on 30.01.2006 and
24.03.2006 respectively isbeing pursued aggressively. The Cards and related
services are priced competitively along with lower interest rate/insurance
cover/cash back reward points, etc. Bharat Card meets the aspirations of
common man and benefits the large lower income group population. Both the
cards are well accepted by the segments for which these are issued.

Wealth Management Services

The Bank launched Wealth Management Services (WMS) on 7th February 2009 on
a pilot basis in Chennai. Under this, the Bank offers Financial Advisory
Services to High Networth Individuals (HNI) clients. Wealth Management
Services involve structuring of suitable financial plans for customers,
depending upon their risk tolerance, life goals, cash flows and investment
horizon and also includes regular monitoring and rebalancing of the
client's portfolios. WMS is a highly personalised service, wherein a
dedicated team of Client Relationship Managers and Wealth Managers interact
regularly with HNI customers for all their financial needs. Upon
stabilisation of the pilot phase, the Services are envisaged to be rolled
out to other potential centres, later in 2009.

Depository Participant Services

The Depository Participant Services launched on 22.05.2006 are being
offered through 300 branches as on 31.03.2009. The Bank has a tie up with
Indbank Merchant Banking Services Limited for on-line trading facility for
the customers who can also have access through internet banking to view
their holdings.

ASSET QUALITY MANAGEMENT

Consistent focus on quality assets along with prudent risk management has
improved the Bank's asset quality. Under NPA Management, the Bank focused
on arresting the slippages of standard assets to NPA category. In this
regard, the Bank took timely action, by identifying and monitoring the
Special Mention Accounts.

* Bank continued the good performance in NPA Recovery Management during the
Financial Year 2008-09 as well.

* Bank achieved an aggregate Global Recovery of Rs.457.10 crore.

Of which, Contribution to Income was Rs 340.41 crore.

* Bank has been proactive in recovering the money staked in Stressed
Assets.

* All the fora available for the Bank, like Lok Adalat, DRT, SARFAESI,
Negotiated Settlement, Sale of assets to ARCs have been effectively used
for resolution of NPAs.

* In tune with the emerging scenario of the economy, the Recovery Policy
was refined further and front officers sensitized for scaling up recovery
performance further.

* OTS policy for small loans NPAs upto Rs.2.00 lakh was implemented to
address the issue of small loan NPAs.

* Bank's Gross NPA and Net NPA ratios have been significantly brought down
and they are one of the best in the industry.

RISK MANAGEMENT

The Bank has complied with the guidelines of the Reserve Bank of India on
creation of Risk Management architecture. The Bank is BASEL II compliant
w.e.f 31.03.2008. Bank has geared up to maintain time schedule for moving
towards advanced approaches under BASEL II as suggested by RBI.

An independent Risk Management department is functioning for effective risk
management enterprise wide. Risk is managed through following three Apex
committees viz.,

(i) Credit Risk Management Committee (CRMC)

(ii) Asset and Liability Management Committee (ALCO) and

(iii) Operational Risk Management Committee(ORMC)

These committees work within the overall guidelines and policies approved
by the Risk Management Committee of the Board / Board.

The Bank has put in place various policies to manage the risk. To analyse
the risk enterprisewide and with the objective of integrating all the risks
of the Bank Integrated Risk Management Policy has also been put in place.
The important risk policies comprise of Credit Risk Policy, Asset and
Liability Management Policy, Operational Risk Management Policy, Business
Continuity Planning, Whistle Blower Policy and Policy on Corporate
Governance.

The risk management systems are in place to identify and analyse the risks
at the early stage, set and maintain prudential limits and manage them to
face the changing risk environment. Software driven rating mechanism is in
place to confirm the rating to ensure credit quality. An entry level
scoring system is also put in place.

Loan Review Management Committee reviews the Loan Review Mechanism and
Credit Audit functions periodically. In addition, Standard Assets
Monitoring Committee reviews the Special Mention Accounts to initiate
timely action to prevent slippage of standard assets to non-performing
assets.

The liquidity risk is managed through studying structural liquidity on a
daily basis, which is being discussed in the Funds and Investments
Committee and reviewed every month by ALCO. The interest rate risk is
managed through monthly interest rate sensitivity statements monitored by
ALCO. The mid office, directly reporting to Risk Management Department,
monitors treasury transactions independently. Operational risk is managed
by integrating the operational risk management systems into day to day
management processes and adopting various risk mitigating strategies. The
risk perception in various products / procedures is critically analysed.
Stress tests are conducted periodically for the credit risk, liquidity risk
and interest rate/exchange rate risk.

Policy on Internal Capital Adequacy Assessment Process (ICAAP) is put in
place whereby the Bank identifies/measures and allocates Capital for
various residual risks identified under Pillar II on quarterly basis and is
reviewed by the Board half yearly. The CRAB position of the Bank is
reviewed by the

Board on a half yearly basis and assessment for the next three years is
also provided based on projected business position.

In compliance with the Reserve Bank of India guidelines on Basel II -
Pillar 3 - Market Discipline, the Bank has put in place a Disclosure Policy
duly approved by the Board and the disclosures on Quarterly / Half-yearly /
Annual basis as per the policy are made in the Bank's Website / Annual
Report.

HUMAN RESOURCES MANAGEMENT

An intensely competitive Industry Structure and the resultant new market
dynamism necessitate leveraging HR through constant upgradation of
knowledge both in soft and hard skills. Bank is committed to a long term HR
Plan for creation of a congenial working environment duly recognizing the
talents, rights and dignity of each employee.

Manpower Position

The position of manpower in the Bank as on 31.03.2009 is as follows:

CATEGORY TOTAL SC ST MALE FEMALE

OFFICERS 7755 1280 451 7061 694
CLERKS 9145 2170 236 6328 2817
SUB STAFF 3014 1073 133 3005 9
TOTAL 19914 4523 820 16394 3520

Recruitment and Promotion

As a part of succession planning, recruitment and promotion in the Bank are
aimed at the future growth and expansion of the Bank. Process of
Recruitment is carried out periodically to inject fresh blood and also to
infuse variety in skills and talents in all fields of activities to suit
emerging business needs. In tandem with the long term man-power planning
process of the Bank, for retaining talented man-power, career progression
was offered to all members of staff. Bank proposes to recruit 700 clerical
staff to align with the fast changing business needs.

To identify and deploy the existing Human Potential to achieve excellence
in varied operational areas, the Bank has for the first time put in place
an 'On-line Appraisal System' and promotions to various cadres are effected
through Online Tests. The process has been set in motion through an 'In-
House Software' developed by the Bank.

Welfare Measures For SC/ST Employees

As per Government guidelines, during the process of Direct Recruitment and
Internal Promotions, Pre-recruitment and Pre-promotion trainings are
offered to SC/ST employees.

Periodical Quarterly Meetings are conducted and grievances if any are
resolved then and there. The Cell also ensures prompt disposal of
grievances/representations of SC/ST employees. A Chief Liaison Officer in
the rank of General Manager is nominated for this purpose.

Upgradation Of Skills

The Bank's training infrastructure constitutes the State-of the art
Training College by name 'Indian Bank Management Academy for Growth and
Excellence' and 8 Staff Training Centres across the country enabling the
staff and the officers to upgrade their skills.

An automatic software on 'e-learning' enabling the staff / officers to
manage their entire training from off-the-shelf library on various topics
and to gain knowledge in various fields is hosted by the Bank.

Industrial Relations

The Top Management of the Bank interacts with leaders of Employees' Unions,
Officers' Associations and their response is positive resulting in desired
growth and harmonious industrial relations during the year.

SAP

This robust HR Software being put in use by the Bank has been immensely
useful in the retrieval of data and providing uninterrupted service to all
Circles/Branches addressing all HR functionalities. SAP is also effectively
used as a decision support system in critical areas like promotion, On-line
PF Loan disbursal to staff etc. As a measure of extending technological
advancement to the entire workforce and in aiming to achieve a paperless
processing of HR related issues and reducing the transit time, a cohesive
website for Human Resources Management through intranet has been hosted.

Staff Welfare Measures

The Central Welfare Committee of the Bank has made notable improvements to
the existing welfare schemes for the employees. Bank has introduced a
master heath checkup for employees above 45 years of age and also
introduced a comprehensive mediclaim policy to the retired employees by
providing a cover of Rs. 1.00 Lakh.

The SC/ST cell functioning at HRM Department ensures prompt disposal of
grievances/representations of SC/ST employees under the guidance of a Chief
Liaison officer in the rank of General Manager.

House Magazine

To build up an effective two way communication which is dital for the
organisation and to share knowledge, gauge progress, know limitations,
learn from failures, solve problems, innovate and support, the Bank
publishes quarterly house journal 'IND IMAGE'. HRM Department has launched
a House Magazine - 'HR Active-it is' from September 2008 onwards.

Visit of Parliamentary Committees

The following Parliamentary Committees had arrived during the year 2008-09
for which the Bank acted as the Nodal Agency.

1. Parliamentary Committee (Rajya Sabha) on Subordinate Legislation to
Udagamandalam from 24.05.2008 to 30.05.2008.

2. Parliamentary Committee on Subordinate Legislation to Chennai from
01.07.2008 to 03.07.2008.

3. Parliamentary Committee on Subordinate Legislation (Rajya Sabha) to
Puducherry and Chennai from 14.09.2008 to 19.09.2008.

Apart from the above the following Parliamentary Committees had arrived
during the year 2008-09 for which the Bank is one of the participating
organizations.

1. Parliamentary Committee on Industry to Chennai from 01.06.2008 to
04.06.2008.

2. Parliamentary Committee on Personnel Public Grievances, Law and Justice
to Chennai from 22.06.2008 to 24.06.2008.

3. National Commission for Safai Karamcharis to Chennai from 21.08.2008 to
25.08,2008.

4. Parliamentary Standing Committee on Industry to Chennai from 29.09.2008
to 01.10.2008.

CUSTOMER SERVICE

Customer Service and redressal of complaints/ grievances continued to
receive the highest focus during the year too. With a systematised
complaint/ grievance redressal mechanism in the Bank, branches were
sensitised on the importance of customer service and were also directed to
strengthen the Branch level customer service committee by including
customers, preferably senior citizens. With a view to motivating the Bank's
front line staff members, they were advised to attend to customers'
requirements across the counter, promptly and with personal care. A session
on customer service has been included in the various training programmes
conducted by Staff College (IMAGE) and other training centers of the Bank.

Being a member of Banking Codes and Standards Board of India (BCSBI), we
have made a commitment to our customers that we would act fairly and
reasonably in all our dealings with them and would ensure that our dealings
with the customers rest on ethical principles of integrity and
transparency.

We have also adopted the Code of Bank's Commitment to Micro and Small
Enterprises and given a commitment for providing speedy and efficient
credit service delivery.

Customers of the Bank are provided with a copy of the Code of Bank's
Commitment to customers and both the Codes are also ported in our website
www.indianbank.in for information to viewers.

For the first time in the history of the Bank, a pension adalat was
conducted by the Bank in Chennai covering all branches in Chennai city,
which was well received by the pensioners. Also first time in the history
of the Bank, a Pension Grievance Desk was established during December 2008
and January 2009, immediately after implementation of VI Pay Commission
with an exclusive toll free number between 7.00 am and 7.00 pm to attend to
more than 1000 pensioners during the above period. Pensioners have
appreciated the efforts taken by Bank for senior citizens. Centralised
Pension Processing Centre established covering PAN INDIA for affording
credit to all the pensioners and to give instantaneous effect of revision
in dearness and other relief.

The following measures were also initiated during the period for the
benefit of customers:

* Utility bill payment made easier under tie up with AP Online for the
customers of the Bank in Andhra Pradesh.

* Payment of electricity bills of TNEB for customers of Chennai through
net-banking.

* Electronic disbursement of scholarship for AP government for students.

* Electronic transfer of funds to the beneficiary's account under AP Govt.
Scheme 'Indiramma Housing Scheme' for poor.

* Coin vending machines established in religious places.

* E-payment facility extended to OLTAS customers, Guruvayur Devoswom.

To ensure that customers derive the benefit of usage of electronic
payments and to create awareness FAQs on RTGS, NEFT, ECS have been placed
on Bank's website. The transactions under RTGS and HEFT have improved
substantilally. In case of NEFT, the growth was 664% and in RTGS, the
growth was 270%. The target set for NEFT outward transactions has been
surpassed.

* Soiled note exchange melas conducted in many places

* Tied up with number of private, public, foreign banks for correspondent
banking arrangements.

* Enlisted corporates for Cash Management System 'Plus' arrangements.

Customers Meet arranged at 701 branches during the year and most of the
suggestions emanated from the survey conducted by the Bank were
implemented.

Customer Satisfaction Surveys

Surveys have been conducted by Customer Service Cell on the directions of
Customer Service Committee of the Board and also by IMAGE on the directions
of the Governing Body of the Bank. More than 76% of the customers have
given Excellent/ Very Good rating on our services.

IBA on the directions of their Managing Committee, conducted a survey
through M/s Gallup India (P) Ltd., in 53 member banks. Customers rated the
Bank FIRST in Retail Banking and SECOND in Savings Account.

Right to Information (RTI) Act

A separate desk attached to customer service cell is handling the requests
and appeals received by the Bank under the RTI Act. Since the inception,
the Bank is adopting a single window approach which has been suggested by
Parliamentary Committee on implementation of RTI Act.

The Bank received 965 applications and 146 Appeals under RTI Act during the
period 2008-09. All the applications were disposed of within the stipulated
time frame.

INTERNATIONAL OPERATIONS

The Bank has two foreign branches located at Singapore and Colombo. Total
Deposits and Advances (gross) of the overseas branches as on 31.03.2009 was
Rs.2,923 crore and Rs.2,969 crore respectively.

Singapore branch, established in 1941, has carved a niche in offering a
variety of banking services using the latest technology and enjoys enormous
goodwill and customer loyalty. The branch is presently maintaining its
business in two accounting units, Domestic Banking Unit (DBU) for Singapore
Dollar business and Asian Currency Unit (ACU) for business in currencies
other than Singapore Dollar.

Colombo branch, established in the year 1932, has active market presence
extending trade finance. The Foreign Currency Banking Unit (FCBU), Colombo
is engaged in offshore banking operations.

INFORMATION & COMMUNICATION TECHNOLOGY

IT plays the part of an enabler in the true sense of the word in today's
market conditions and facilitates organizations to stay ahead in a highly
competitive environment. Technology savvy service providers are better
placed in providing quality customer service and retain customer loyalty.
Technology empowers operational efficiency. By leveraging Technology a
mosaic of products could be introduced to meet the Banking requirements of
different segments of banking public.

Various IT initiatives were taken by the Bank during 2008-09 keeping in
view the need to be competitive and to meet the requirements of existing as
well as potential customers of the organization.

Core Banking Solution

* All the 1642 branches and 66 Extension counters in India are now on CBS.

* Both the overseas branches at Singapore & Colombo have been connected to
CBS network.

* Bank has adopted versatile approach for ensuring uninterrupted
connectivity like Leased line with ISDN Back-up, VSATs. , GPRS etc.

* CBS implemented in 62 administrative offices (including departments in
Head Office, Circle offices, IMAGE, STCs, Inspection Centers, Stationery
Departments, etc.).

* All the 28 Circle Offices and IMAGE have Video Conferencing facility.

Services available to customers under CBS

* Roaming Account Facility - Through Multicity cheques & 'Sweep' facility.

* Cash Management Services.

* Inward remittance facility in all CBS branches through 'Moneygram'
'Xpressmoney' etc.

* E-payment for Central Excise collection; Payment of Customs Duty, Service
Tax through Internet Banking.

* Depository Services made available at 300 branches at select centres.

* Interbank remittance facility through RTGS, National Electronic Funds
Transfer.

* Payment of fees / charges to Registrar of Companies.

* IND CORP NET BANKING (Corporate Internet Banking) facility extended to
corporate customers.

Live data replication is done between Data Centre and Disaster Recovery
Site. The connectivity as well as the hardware provided to DR site has been
upgraded so as to have link redundancy as well as equipment redundancy.

Disaster Recovery (DR) Drill

In accordance with RBI guidelines, Disaster Recovery drills for the
critical system have been conducted two times in the period 2008-09 as per
details below:

System 1st Drill 2nd Drill

Core Banking Solution 14.08.2008 25.01.2009
& Internet Banking
RTGS, NDS, CFMS by RBI 08.11.2008 -
ATM 29.09.2008 25.01.2009

Centralization of Activities for customer benefit:

ATM Service Centre: Centralized ATM Service centre established to take care
of reconciliation, accounting and redress customer grievances regarding ATM
transactions.

Centralized Pension Processing: Centralized Pension Processing successfully
implemented.

Centralized Deposit Processing Centres: Specialized branches established at
Chennai, Bangalore, Delhi and Mumbai Circles for processing of applications
for opening of accounts, issue of statement of accounts, issue of cheque
books, etc.

Centralized clearing operations: Outward clearing operations have been
Centralized in all Service Branch locations. Inward clearing Operations
have been centralized in Chennai and Delhi using 'in house' software.

Centralized Storage of TBC data: 'In house' program has been developed for
conversion of erstwhile TBC data into Oracle & centralized storage. Web-
based software has also been developed for generation & downloading of
Statement of Account by branches.

ATMs:(Automated Teller Machines)

* 755 ATMs (Including 205 offsite ATMs) are in operation. All ATMs are
interconnected for online ATM transactions.

* 22 biometric ATMs opened for extending 240 services to Self Help Groups
(SHG). ATM operations by Joint Account holders introduced first by the
bank, enabling round the clock ATM services for SHGs.

* Voice interface provided in ATMs installed during 2008-2009 guiding the
user.

* ATM card-base of the Bank is 31.72 lakh including 'Maestro' branded cards
of 26.44 lakh.

* The Maestro cards can be used in the Mastercard branded Point of Sale
terminals internationally.

* All the Maestro, Cirrus and MasterCard branded cards can be used in the
ATMs for balance enquiry and cash withdrawal.

* More than 32000 ATM are available to the customers Consortium
arrangements with other banks.

* Collection of fees for Vellore Institute of Technology (VIT), Ramakrishna
College, Coimbatore and GRD Matriculation School, Coimbatore; booking of
air tickets for Kingfisher Airlines and booking of railway tickets through
IRCTC are enabled through the ATM by using the Bank's ATM card/Debit card.

* ATM installed at 45 Railway Stations, of which ATM with Kiosk(for online
reservation of train tickets) installed at 32 Railway Stations.

* Collection of Electricity Bill charges of TNEB through internet enabled
from 04/01/2009.

Other initiatives:

* GPRS (General Packet Radio Service) channel used for connecting of online
ATM. 29 offsite ATM locations are connected through GPRS. GPRS channel is
provided as backup connectivity for leased line in lieu of ISDN / PSTN
(wired channel) at 64 branches.

* The Bank has implemented 'Fin DNA'-software developed by M/s. TCS Ltd as
an upgrade to the CBS software, for AML monitoring. As of now, AML
implemented in 1571 CBS branches and it will be extended to other CBS
branches shortly.

* The Bank is one of the 5 banks identified to implement MCA21 programme
for Ministry of Company Affairs. 17 Branches of the Bank have been
identified by MCA for collection of fees.

* The Bank has been authorized by AP Online' for payment of Electricity
Bills, Water Tax, Property Tax, Trade License, UC premia, etc., by the
customers using Internet Banking services.

* Common Gateway Server established at the HO RTGS Cell and connected to
INFINET through both leased line and VSAT. This is the common gateway for
all inter-Bank, Systemically Important Payment System (SIPS) applications
developed by Reserve Bank of India.

* The following interbank applications like Negotiated Dealings Settlement
System (NDS),Real Time Gross Settlement System (RTGS), Structured Financial
Messaging Solution (SFMS), Centralised Funds Management System (CFMS),
Collateralised Borrowing and Lending Obligations (CBLO) SW, FXClear for
Foreign Exchange operations, National Electronic Funds Transfer (NEFT) ,On-
line Tax Accounting System (OLTAS), Electronic Accounting System in Excise
and Service Tax (EASIEST), implemented in all designated branches.

* Electronic Clearing Service ECS both debit and credit enabled in all CBS
branches.

* Electronic Data Interchange (EDI): EDI between Harbour branch and Chennai
Sea Customs (for payment of import duty and disbursement of duty drawback
amounts) and between Port Trust Chennai (for payment of shippers' charges)
and Harbour branch have been implemented and running successfully. EDI also
implemented with Hyderabad Inland Container Depot, Cochin Airport, Airport
Chennai and Visakhapatnam Port Trust for collection of customs duty.

* Cheque Truncation Project: The Bank has implemented Cheque Truncation
System in NCR Delhi on pilot basis. All the Banks in NCR are participating
in CTS. All the 53 branches in NCR are participating in CTS.

* Touch Screen Kiosks for Information Dissemination: Bank has installed
Touch Screen Kiosk with bi-lingual option on pilot basis at 7 branches for
dissemination of information to the customers / public.

* Web based 'Loan application status' query and response facility
introduced for loan applications of Rs.10 lakh and above.

Information Systems Security

* Separate Information Systems Security Department has been established.

* IS audit of Core Banking Solutions software, Network infrastructure of
the Bank, Internet Banking and ATM network has been done by external agency
M/s Paladion Networks P Ltd.

* Guidelines issued to observe Computer Security on ongoing basis.

* Security Operation Center (SOC) housed at HO: TMD for monitoring of all
the existing and proposed security devices on a 24x7x365 basis. Under this
project Firewalls, Network Intrusion Prevention System (NIPS), Host
Intrusion Detection System (HIDS) have been deployed in CDC and DR site.

* Implementation of Asset and Patch Management Solution: As part of the
enterprisewide security project, the Asset and Patch Management Solution is
being implemented, through which the computer hardware / assets can be
identified, tracked and maintained by deploying the necessary operating
system patches. For deploying this solution, servers have been installed in
the Circle Offices as relay points being the network convergence point for
the branches in each of the circles.

MANAGEMENT INFORMATION SYSTEM

To derive full benefit of automation through 100% Core Banking Solution,
the M I S Department has been providing various reports/data for furnishing
to different agencies and departments. Further, valuable information is
being provided for decision making process. Internally the MIS acts to
relieve the various tiers from preparation of data. Ultimately the accent
is to push applications further and maximize fruits of technology.

INTERNAL CONTROLS

During the year, Risk Based Internal Audit was carried out in 1304
branches. In addition 1760 Information Systems Audit and 1646 ATM Audit was
carried out, as some branches were subjected to two or more I S Audit/ATM
audit. Credit audit covering 376 accounts and Revenue audit covering all
branches with credit exposure of Rs. 2 crore and above were carried out.
Management audit of 28 Circle Offices, 3 subsidiaries and various
departments at Head Office were completed. Time Management Audit of credit
proposals handled in all Circle offices / Retail Banking Segment (RBS)
centres for better turnaround time in sanction / disposal of credit
proposals, was carried out. Information Systems (IS) Audit of Information &
Communication Technology (ICT) infrastructure - CBS application suite, Data
Centre and CBS project office was carried out by an external audit firm.

CONSTRUCTION OF NEW HEAD OFFICE BUILDING AT ROYAPETTAH, CHENNAI

The Bank proposes to construct a modern Hi Tech office building in the land
owned by it at Royapettah, Chennai, to meet the requirements of its growing
business. The foundation stone for the new building was laid by Shri P.
Chidambaram, Union Home Minister on 9th July 2008, in the presence of the
Chairman and Managing Director, Shri. M.S. Sundara Rajan and Executive
Director, Shri. A. Subramanian, distinguished guests and valuable customers
of the Bank.

The New building is designed for a builtup area of 1.85 lakh sq.ft having
Basement+Ground+3 upper floors. The building is also designed to have 2
additional upper floors in future.

COMPLIANCE FUNCTION IN THE BANK

The Bank has Compliance Policy duly approved by the Board. In accordance
with the Reserve Bank of India guidelines, an independent Compliance
Department headed by a Deputy General Manager has been set up in the Bank.
The Department monitors adherence to various statutory and regulatory
guidelines governing the Bank's functioning:

* Various legislations such as Banking Regulation Act, Reserve Bank of
India Act, Foreign Exchange Management Act, Prevention of Money Laundering
Act etc.

* Regulatory guidelines issued by Reserve Bank of India (RBI), Securities
and Exchange Board of India (SEBI), Insurance Regulatory and Development
Agency (IRDA) etc.

* Voluntary standards and codes prescribed by industry Associations such as
Indian Banks' Association (IBA), Banking Codes and Standards Board of India
(BCSBI), Foreign Exchange Dealers' Association of India (FEDAI), Fixed
Income Money Market Dealers Association (FIMMDA) etc. and

* The Bank's internal policies, codes of conduct, guidelines etc. issued by
way of Circulars, manuals etc.

VIGILANCE

A well structured vigilance system is in placeand isfunctioning in a
proactive manner in disposing of all vigilance cases in line with the
Central Vigilance Commission's guidelines.

During the year, Vigilance Inspection was carried out in 75 identified
Branches. A team from the Central Vigilance Commission conducted a
Vigilance Audit of the Bank during the third quarter of the Financial Year.
Vigilance Awareness Week was observed from 3rd November 2008 to 7th
November 2008. An exclusive in-house training programme was held for
Disciplinary Authorities and Inquiring Authorities / Presenting Officers
during the year. The Bank also brought out a video presentation on 'Mock
Inquiry', as an educative tool covering various aspects of holding a
domestic inquiry.

In the area of preventive vigilance, the Bank, through its quarterly News
Letter 'Ind-Chetana' and'Preventive Vigilance Awareness Series' Circulars,
shared with all the members of staff in the organization, the details of
adverse incidents that took place in the branches, so as to inculcate
preventive measures against recurrence of frauds.

SECURITY

The Bank has a well established security mechanism synergized with the
operational risk management system. Modern security system has been put in
place, to protect Bank's assets including personnel, information and
property. Unobtrusive security systems installed in the branches have made
them more and more customer friendly and welcoming.

Training and motivation of human resource to improve security awareness
have been regularly implemented.

IMPLEMENTATION OF OFFICIAL LANGUAGE

The Bank is actively implementing Official Language based on the Official
Language Act 1963 and Rules 1976. Official Language is implemented as per
the Annual Programme issued by the Ministry of Home Affairs, Government of
India and guidelines issued from time to time by the Ministry of finance
and the Reserve Bank of India.

In keeping with the Bank's objective of 'Taking Banking Technology to the
Common Man' the facility of Hindi in CBS has been provided and entries in
Hindi in Pass Book have been made possible. The Facility of Hindi screens
has been made available in ATMs also. Touch screen material is made
available in Hindi which gives information about various products of the
Bank. All computers of the Bank have the facility of word processing in
Hindi.

Special emphasis is continued to be given by the Bank to train staff
Members through workshops. Hindi workshops are also conducted at various
Circle Offices. The first spoken Hindi workshop was conducted at Head
Office on 18.03.2009. Hindi website is available alongwith Home Page in
Hindi. Hindi section has been made available in Bank's intranet.

The external inspection on Implementation of OL Policies at Head Office
done on 02.03.2009 by the Ministry of Finance. Government of India
appreciated the initiatives taken by the Bank in promoting use of Hindi in
Bank's official work.

Bilingual CBS Software: The Bank is the first Bank to implement bilingual
facility in CBS branches whereby branches can view all CBS screens in
Hindi. They can print SB pass Books and account statements in Hindi.

CORPORATE SOCIAL RESPONSIBILITY

Voluntary Blood Donation

The Bnkk sponsored 3740 blood donors during the year 2008-09 by organizing
29 blood donation camps. The Bank was awarded as Best Donor Organisation by
the Tamilnadu State AIDS Control Society on National Voluntary Blood
Donation Day and the award was presented by His Excellency Shri Surjith
Singh Barnala, the Governor of Tamilnadu.

Health Camp

Medical Camp was organized to check body fat and visceral fat, BMI & BMR
during June 2008 and 450 persons benefited at the camp.

Eye Screening Camp

Free Eye Screening Camp was organized for the school children and senior
citizens through Venkatapuram branch, Kannigaiper and Periapalayam wherein
900 people were screened for various eye problems and 160 senior citizens
were treated for cataract Surgery.

Social Responsibility

Shri M S Sundara R'ajan, Chairman & Managing Director, Indian Bank donated
uniforms to the Children of Seva Chakra Orphanage who are totally
destitute. The Bank has also donated 2 computers to the orphanage in order
to facilitate the children to have technical computer knowledge.

Uniforms, Note Books, Stationery items, Fans etc. were donated to 2 needy
organizations viz., SEERS-an organization working for uplifting street
children and Corporation School, Chindatripet, Chennai by the Employees
service movement by name called 'CONCERN'.

Achievement in Sports

Indian Bank is a familiar name in Indian Sports. It has teams in 9
disciplines like athletics, basketball, carrom, chess, cricket, football,
hockey, table tennis, and volleyball. There are 100 active sports persons
out of which more than 25 represented the country in junior/senior
international competitions. The Bank has a recruitment policy to recruit
talented sports persons and also a promotion policy to promote the
achievers in the national and international events.

The Bank's Athletic team won 5 Gold Medals in the 81st Senior State
Athletic Championship 2008 held at Tirunelveli on 17th and 18th of May
2008. The team also won 4 Bronze Medals in the 48th National Interstate
Senior Athletic Championship 2008 held at Madurai from 15th to 18th June
2008. The Bank's players represented the Tamil Nadu State in the National
Basketball Championship held at Surat from 31.12.2008 to 07.01.2009, Indo-
Srilanka Carrom Test Series at Colombo, Indo - UK Test Series held at
London, 12th SAARC Carrom Championship at Srilanka and C S Sharma Memorial
International Rating Chess Tournament at Delhi from 22nd to 29th March
2009.

SUBSIDIARIES & REGIONAL RURAL BANKS

Subsidiaries

The Bank has three Subsidiaries viz., Ind Bank Merchant Banking Services
Ltd., Ind Bank Housing Ltd., and Indfund Management Ltd.

Regional Rural Banks

The Bank has sponsored three RRBs, namely Saptagiri Grameena Bank head
quartered at Chittoor, Pallavan Grama Bank head quartered at Salem and
Puduvai Bharathiar Grama Bank head quartered at Puducherry.

* Sapthagiri Grameena Bank has 127 branches with a total business of
Rs.2,091.76 crore.

* Pallavan Grama Bank has 82 branches with a total business of Rs. 913.71
crore.

* Puduvai Bharathiar Grama Bank, established on 26.03.2008 has 11 branches
with a total business of Rs.10.45 crore.

Awards & Accolades

* Indian Bank has been ranked by 'The Financial Express' as the BEST
NATIONALISED BANK - NUMBER 1 in the country based on the Bank's performance
for 2007-08. This evaluation is based on the performance of the Bank on
five major parameters, viz, Strength & Soundness, Growth, profitability,
Efficiency and Credit Quality. The ranking has been improved from second in
2006-07 to the first position.

* Indian Bank is also one among the 19 Indian Banks/ financial institutions
which are in the top 500 Global Financial Brands 2009 based on a study made
by Brand Finance Plc in Association with the Banker magazine.

* Indian Bank is in the list of Forbes 2000 - 2009 (1659th position).

* The Bank has been rated as the No. 1 South Based Service Brand in the
Brand Equity's Most Trusted Brands 2008 survey (conducted by the Economic
Times Intelligence Group and AC Nielsen ORG-MARG). The Bank retains the
No.1 spot among the South Based Service Brands for the 5th year in
succession.

* One important achievement of the Bank was the assigning of BBB(-) long
term and A-3 short term counterparty rating by the international rating
agency Standard & Poor's to Indian Bank. The rating assigned to the Bank is
the same as Sovereign rating. As per the agency's assessment 'the rating on
Indian Bank reflects the Bank's sound capitalisation, adequate earnings and
comfortable liquidity and funding profile'.

* The Bank has been conferred with Skoch Challenger Award-2008 for
Financial Inclusion for its path breaking financial inclusion initiatives
in Puducherry and Dharavi in banking sector. The award is instituted by
Skoch

* Consultancy Services Private Limited, a premier financial consultancy
organisation in India.

* The Bank was awarded First Prize for Excellent Performance under SHG-Bank
Linkage Programme by NABARD during the year 2006-07 in Tamil Nadu. The
Award carried a shield and a citation.

* The First three Prizes for the Best performing Commercial Bank Branches
under SHG -Bank Linkage Programme in Tamilnadu were awarded to Usilamppatti
Branch, (Madurai Circle), Tirupathur Branch (Vellore Circle) and Nehru
Nagar Branch (Madurai Circle) respectively for the year 2006-07.

* A best performing Farmers' Club in each state is selected every year for
National Award by NABARD. For the year 2006-07, two clubs one in Tamil Nadu
(Vasinagar Farmers' Club) and another from Andhra Pradesh (Abhudaya Karshak
Parishad Farmers' Club) sponsored by the Bank bagged this prestigious
award. The award was given away by Honourable Union Finance Minister Shri P
Chidambaram at a meeting held on 08.02.2008 at New Delhi.

* Tamil Nadu Government has granted Award in appreciation of the Bank's
contribution in providing Revolving Fund assistance to SHGs in Chennai
Corporation. The award was received by the Chairman and Managing Director
from Hon'ble Chief Minister of Tamil Nadu on 25.11.2008 at Chennai.

* In Tamil Nadu, Indian Bank has been awarded the first prize by NABARD,
under PSU Banks on 10.02.2009 for the excellent performance under SHG-Bank
linkage for 2007-08.

* Similarly, our Microsate Branches in Orissa (Bhubaneswar), Pune and Patna
have received awards in recognition of best performance under SHG lending
in the respective States during 2007-08, from NABARD.

* The Bank has been awarded 4 Rolling shields by the Madras Voluntary Blood
Bank for its highest performance among the institutions for the 18th
consecutive year in the state of Tamil Nadu.

YEAR AHEAD

The Bank is clearly in a branch expansion mode by opening more than 100
branches during the last 2 years giving equal emphasis on improvement in
customer service as well. While we are going ahead with opening more number
of branches in different parts of the country during the coming years, our
endeavour is to maintain the trust and goodwill the customer/stakeholder is
having with us and also enhance the shareholders' value through volume
growth in business and better profitability.