Annual Report - Corporation Bank - 2009-2010

CORPORATION BANK

ANNUAL REPORT 2009-2010

DIRECTOR'S REPORT

1. The Board of Directors have pleasure in presenting the Annual Report
together with Balance Sheet and Profit and Loss Account of the Bank for the
year ended 31st March, 2010.



2. Performance at a glance:

2.1 The aggregate business of the Bank crossed another milestone mark of
Rs. 150,000 crore during the financial year 2009-10. The total business of
the Bank increased by Rs.33,440 crore to reach Rs.155,936 crore at the end
of the year 2009-10, from Rs.122,496 crore at the end of previous financial
year 2008-09, recording a growth rate of 27.30%.

2.2 The total deposits of the Bank have grown by Rs.18,750 crore from
Rs.73,984 crore as on 31st March, 2009 to Rs.92,734 crore as on 31st March,
2010, registering a growth rate of 25.34%.

[Rs. in Crore]
Mar-08 Mar-09 Mar-10

Deposits 55424 73984 92734

2.3 The Bank continued its prudent approach in expanding quality credit
assets in line with its policy on Credit Risk Management. The advances of
the Bank increased by Rs.14,691 Crore from Rs.48,512 crore as on 31st
March, 2009 to Rs.63,203 crore as on 31st March, 2010, registering a growth
rate of 30.28%. During the year, focused attention was given for
accelerated lending under agriculture, SSI and midsize corporate segments
for expansion of credit.
[Rs. in Crore]
Mar-08 Mar-09 Mar-10

Advances 39186 48512 63203

2.4 The performance of the Bank under recovery of NPAs during the year
continued to be good. During the year, the Bank effected a cash'recovery
and up gradation of NPAs of Rs.320.08 crore compared to Rs.278.45 crore in
the previous year.

2.5 While the encouraging performance in different functional areas during
the year 2009-10 resulted in increased earnings in absolute terms, the
margins were under pressure and the interest spread declined to 2.41% as on
31st March, 2010 compared to 2.43% during the previous year.

3. Income Analysis:

3.1 Interest income of the Bank recorded a growth of Rs.1,227.25 crore
(20.23%) from Rs.6,067.35 crore in the year 2008-09 to Rs.7,294.60 crore,
as against the interest expenses which grew by 16.18% from Rs.4,376.37
crore during the year 2008-09 to Rs.5,084.35 crore during the sear 2009-10.
The Net Interest Income recorded a growth of Rs.519.27crore [30.71%] during
the same period.

[Rs. in crore]
2008-09 2009-10 Change

Interest Income 6,067.35 7,294.60 20.23

Interest Expenditure 4,376.37 5,084.35 16.17

Net Interest Income 1,690.98 2,210.25 30.71

Fees, Commission & Other 1,107.22 1,186.43 7.15
Revenue

Operating Income 2,798.20 3,396.68 21.38

Operating Expenses 1,046.58 1,259.95 20.39

Operating Profit 1,751.61 2,136.73 21.98

Provisions & Contingencies 365.37 474.43 29.85
Excl. Tax

Profit before Tax 1,386.25 1,662.30 19.91

Provision for Tax 493.48 492.05 (-)0.29

Net Profit 892.77 1,170.25 31.08

3.2 The total income [total of interest income and non-interest income] of
the Bank improved to Rs.8,481.03 crore during the year 2009-10 from
Rs.7,174.57 crore in the previous year recording a rise of Rs.1,306.46
crore [18.21 %].

3.3 Non-interest Income increased by Rs.79.21crore [7.15%] from Rs.1,107.22
crore in the financial year 2008-09 to Rs.1,186.43 crore in the financial
year 2009-10. The share of total Non-Interest Income to Total Income stood
at 13.99%. The Non-Interest Income from the core areas (viz. commission,
exchange and brokerage etc.) increased from Rs.448.90 crore to Rs.645.82
crore in FY 2009-10 recording a growth rate of 43.87%.

3.4 The Net Income from operations [Interest Spread plus Non-interest
Income] has increased to Rs. 3,396.68 crore in the financial year 2009-10
from Rs. 2,798.20 core in the financial year 2008-09 recording a growth of
21.39%.

3.5 The Operating Expenses have shown an increase of 20.39% during the
financial year 2009-10 and stood at Rs.1,259.95crore as compared to
Rs.1,046.58 crore in 2008-09.

3.6 The Cost to Income ratio (operating expenses to Net Operating Income)
has come down from 37.40% for the financial year 2008-09 to 37.09% in the
financial year 2009-10.

4. Spread Analysis [Rs. in crore]

2008-09 2009-10 Growth
Absolute %

Average 69,500.00 91,750.00 22,250.00 32.01
Working Funds

Total Interest 60,67.35 7,294.60 1,227.25 20.23
Income

Total Interest 4,376.37 5,084.35 707.98 16.18
Expended

Interest Spread 1,690.98 2,210.25 519.27 30.71

Yield on Funds 8.73% 7.95%

Cost of Funds 6.30% 5.54%

Net Interest 2.43% 2.41%
Margin

5. Operating Profit:

5.1 The Operating Profit for the financial year 2009-10 stood at
Rs.2,136.73 crore as compared to Rs.1,751.62 crore in the financial year
2008-09 registering an increase of Rs.385.11 crore [21.99%].

5.2 The Asset Utilisation Ratio [percentage of Operating Profit to Average
Working Funds] stood at 2.33% for the financial year 2009-10 compared to
2.59% for the financial year 2008-09.

6. Provisions:

6.1 The Provision for Loan Losses, Provision on Standard Assets, Taxation
and others aggregated to Rs.966.48 crore in the financial year 2009-10 as
compared to Rs.858.85 crore in the financial year 2008-09.

7. Net Profit and Dividend:

7.1 The Bank registered a Net Profit of Rs.1170.25 crore for the financial
year 2009-10 compared to Rs.892.77 crore in the financial year 2008-09.

Year Net Profit Growth
[Rs. in
crore]

2007-08 734.99 37.09
2008-09 892.77 21.47
2009-10 1,170.25 31.08

7.2 The Board of Directors has recommended a dividend of 165% for the
financial year 2009-10 which works out to Rs.16.50 per fully paid-up share
of Rs.10/- each.

7.3 In terms of extant guidelines, the Bank will pay the dividend
distribution tax for the financial year 2009-10. Accordingly the total
outflow on account of Dividend for the year 2009-10 will be Rs.276.89 crore
including the dividend distribution tax.

7.4 Out of the Net Profit a sum of Rs.580.13 crore was transferred to
Statutory & General Reserves and Rs.15 crore was set-aside for Staff
Welfare Fund.

8. Net Worth and CRAB:

8.1 The Net Worth of the Bank improved to Rs.5,775 crore as on 31st March,
2010 from Rs.4,897 crore as on 31st March 2009.

8.2 For the year ended 31.03.10, the Bank has raised bonds aggregating to
Rs.2,050 crore [Rs.500 crore under Tier-I and Rs:1,550 crore under Tier-II]
for strengthening the capital adequacy and enhancing the long term
resources of the bank.

8.3 The Capital to Risk Adjusted Assets Ratio (CRAR) stood at 15% (Basel I)
as on 31st March, 2010 as against 13.66% as on 31st March, 2009 which is
much above the norm of 9% stipulated by Reserve Bank of India. The CRAB as
per Basel II guidelines works out to 15.37%

8.4 The Tier-I component of CRAR under Basel I is 9.030l0 as on 31st March,
2010 compared to 8.93% as on 31st March, 2009.

Basel I Basel II
March March March March
2009 2010 2009 2010

Tier-I Capital 8.93% 9.03% 8.89% 9.25%
Tier-II Capital 4.73% 5.97% 4.72% 6.12%

Total 13.66% 15.00% 13.61% 15.37%

8.5 The Return on Equity, Earnings Per Share and Book Value per Share for
the Financial Year 2009-10 stood at 20.26%, Rs.81.58 and Rs.402.60
respectively, against 18.23%, Rs.62.24 and Rs.341.36 respectively for the
previous year.

9. Consolidated Accounts:

9.1 As per RBI guidelines, the Bank has consolidated the financial accounts
as at 31st March, 2010 with those of its wholly owned Subsidiary viz., Corp
Bank Securities Ltd. As per the consolidated statement as on 31st March,
2010, the Net Worth of the Corp Bank group stood at Rs.5832 crore as
compared to Rs.4,942 crore as at 31st March, 2009. The consolidated
Operating Profit and Net Profit for the year 2009-10 is Rs.2,146.03 crore
and Rs.1,181.35 crore, respectively compared to Rs.1,805.79 crore and
Rs.900.32 crore, respectively for the year 2008-09. The Bank has complied
with the RBI guidelines and the Accounting Standards prescribed by the
Institute of Chartered Accountants of India.

10. Branch Network:

10.1 The Bank's network spread across 3,434 functional units comprises of
1,155 branches, 1,079 ATMs and 1,200 Branchless Banking Units across the
country. Out of which 101 branches, 48 ATM units and 411 Branchless banking
Units opened during the year. The Bank is also having its representative
offices at Hongkong and Dubai.

11. Advertising and Publicity:

11.1 During the year, concerted efforts were made for brand building and
the Bank continued to communicate messages on its products, services,
interest rates and the performance to the customers, shareholders and the
general public through advertisements and outdoor publicity units.

12. Government Business:

12.1 Tax collections of the Bank for the year ended March, 2010 stood at
Rs.33,149 crore as against Rs.37,659 crore during the corresponding period
of the previous financial year. Number of challans in Indirect Tax and
Sales Tax has registered increase when compared to previous year.

12.2 In the area of Tax collections and others (E-stamping', Pensions etc.)
for the year ended March, 2010, the bank has earned an income of 6.62
crore.

13. Corporate Social Responsibilities - CSR Activities:

13.1 The Bank initiated several welfare measures focusing on the society at
large, to fulfill its commitment to social priorities as a responsible
corporate citizen.

13.2 The Bank launched Corp-Compassion scheme in 2008, with a societal
concern to extend compassionate support to various humanitarian and social
welfare activities of charitable institutions all over the country by
donating Rs.10/- per new Savings Bank account opened during the Savings
Bank Campaign, 2008 and the corpus thus mobilised is used for helping 40
identified charitable institutions across the country were considered to
support their activities.

13.3 As part of its Centenary celebrations, the Bank had launched the
project of setting up of 100 rural libraries, to be developed as Rural
Knowledge Centres, in association with Village Panchayats/Educational
institutions in a phased manner. The project, which culminated with the
setting up of 100 rural libraries, has been well received by the rural
users. The Bank, as per the scheme, also supplied additional sets of books
worth Rs.10,000/- each during 2009-10 to all 100 libraries.

13.4 As part of its Rural Development scheme, the Bank supported 15
eligible economically backward students of identified villages across the
country- with educational scholarships to pursue higher/technical
education.

13.5 The Bank instituted The Best Outgoing Student Awards' in 25
identified educational institutions under its Corp Bank Gold Medal Scheme
for promoting excellence, both in the academic and extra-curricular
activities. As per the scheme, Medal weighing 8 grams gold [99.9 pure] have
been awarded to the Best Outgoing Students of the identified institutions
across the country.

13.6 The Bank extended donation towards fully equipped Ambulance to
Chirantana Charitable Trust Regd., Suratkal and Little Sisters of the Poor,
Mangalore, construction of additional building of Dr. Giridhar Rao-Sanjeevi
Bai Vriddhashrama, Mangalore, Shree Navchetan Andhjan Mandal, Madhapar and
Saanidhya'- Residential School for Special Children, Mangalore, and
sponsoring of 40 wheel chairs to the needy poor patients through Mata
Amritanandamayi Math.

13.7 The Bank took initiatives to help providing quality medical facilities
with modern medical equipments, upgrading of the existing facilities and
innovative calipers for Polio victims, with an aim to benefit the needy
economically weaker section of the society, in hospitals serving at
Chennai; Ernakulam, Haridwar, Bangalore and Hyderabad.

13.8 The Bank organised voluntary Blood Donation camps at its Corporate
Office, Mangalore and at the 19 Zonal Office centres in association with
the local Red Cross Society, Hospitals and other NGO's as part of the
Foundation Day Celebrations and collected blood for donation to the needy
patients.

13.9 The Bank has also involved in several initiatives in the field of
Education, development of infrastructure, Rural Development, Health and
Hygiene, promotion of Art and Culture.

13.10 The Bank supported many institutions who have been serving the Dumb
and Deaf, Blind and Physically Challenged, Destitutes and Orphans, Senior
Citizens and Special Children, all over the country by funding their
rehabilitation projects.

13.11 The Bank funded several projects for providing basic hygienical
facilities like toilets, clean drinking water facilities in schools/
colleges. Several institutions were provided with Computers, LCD projectors
and I.T related accessories to provide modern computer education to rural
students.

14. Corporation Bank Self-Employment Training Institute [COBSETI]:

14.1 The Corporation Bank Self Employment Training Institute [COBSETI]
established at Chikmagalur in 1996 is an institute sponsored by the Bank to
cater to the training needs of the rural unemployed youth hailing from the
districts

of Chikmagalur and Kodagu where the Bank has the Lead Bank responsibility
The training is imparted free of cost with free boarding and lodging to the
trainees. Since inception to till 31.03.2010, the Institute has conducted
519 training programmes and trained 15,857 candidates, of which 8,084
candidates under Skill Development/regular programme and 7,773 under Govt.
sponsored programmes like SHG, SGSY, PMRY etc. Out of 8,084 candidates
under Skill development, 5,285 have become self-employed/settled,
indicating a success rate of 65%. Out of 15,857 candidates, 10,463 are
women, 1,072 are from minority communities and 2,884 belong to SC/ST
communities. The process of establishment of one more COBSETI in Kodagu
district is under progress for which the Government of Karnataka has
recently granted about one acre of land near Kushalnagar.

15. Corporation Bank Economic Development Foundation 15.1 The Corporation
Bank Economic Development Foundation ) was launched in the year 1992 as a
non-profit economic outfit of the Bank and continues to fulfill its social
obligation. Financial grants to the extent of Rs.29.61 lakh were disbursed
during the year for execution of various projects of social concerns: The
areas of assistance during the financial year included providing life
saving equipments to Government hospital, infrastructure facilities such as
clean drinking water, malaria control project, health and sanitary to
schools, class rooms, computers, furniture; midday meal projects at various
schools etc.

16. Progressive use of Official Language:

16.1 The Bank achieved high standard in the matter of implementation of
official language in its working. The Bank has received various awards and
recognition from Reserve Bank, Government of India for the exemplary work
in this direction. The Bank has been awarded Rajbhasha Shield for better
implementation of official language. The quarterly Hindi house magazine of
the Bank 'Mangala' continues to get prize under RBI's Inter Bank Hindi
House Magazine competition.

16.2. The Bank made substantial progress in the matter of bilingualisation
of its computer applications. the computers of the branches/Offices of the
Bank have bilingual word processing facility.

16:3 The Bank regularly conducts Hindi workshops and training through Video
Conference and computer training for all the O.L. Officers.

16.4 The Bank is the convener of the Town Official Language Implementation
Committee, Mangalore. The committee has been awarded First Prize for the
year 2008-09 for excellent performance in O.L. Implementation in Southern
region by the Department of Official Language, Ministry of Home Affairs,
and Government of India. The Bank is also the convener of the Official
Language Committee of South Based Public Sector Banks. The committee has
been conducting half yearly meetings regularly.

17. Performance of Subsidiaries and other units sponsored by the Bank

17.1 Corp Bank Securities Limited:

The Bank's wholly owned subsidiary, Corp Bank Securities Limited, (CBSL)
has earned total income of Rs.9.40 crore, posted Profit before tax of
Rs.9.20 crore and Profit after tax of Rs.10.99 crore (after setoff various
Tax Liabilities available provided to the tune of Rs.1.79 crore pertain to
earlier years) for2009-10while it was Rs.8.64 crore, Rs.8.29 crore and
Rs.6.67 crore respectively for 2008-09. Income from its business operations
has gone up to Rs.8.11 crore from Rs.0.97 crore. The Paid up Equity Share
Capital remained at Rs.75 crore as on 31.3.10, while the tangible net worth
after plough back of surplus has gone up to Rs.91.45 crore and the Return
on Average Tangible Net worth improved to 12.61% for March 2010 as against
5.91% for March 2009. The Earning Per Share for fiscal ended March, 2010
was Rs.1.47 while it was Rs.0.77 for fiscal ended March 2009. The Company
is in the process of setting up Equity Broking Activity and would also
pursue other business activities in the ensuing fiscal 2010-11 after
securing approvals from its Board and other regulatory authorities.

17.2 Chikmagalur-Kodagu Grameena Bank [CHIKO Bank]:

The Chikmagalur-Kodagu Grameena Bank, a Regional Rural Bank [RRB] sponsored
by the Bank and established on 28.04.1984 has 52 branches. This year the
Bank has celebrated 25 years of its fruitful existence. The deposits of the
Bank stood at Rs.300.14 crore and advances at Rs.211.91 crore [gross
advances] as at 31.03.2010. The Bank has posted a net profit of Rs.0.76
crore as at the year-ended 31.03.2010.

18. Constitution of Board of Directors:

18.1 The following changes have taken place in the Board of Directors of
the Bank during the year ended 31st March, 2010.

18.2 Shri Narendra Singh has been appointed as the Executive Director of
the Bank by Central Government and assumed office on 7th December, 2009.

18.3 Shri Lalit Kumar has joined the Board as the Government of India
nominee director on 9th December, 2009.

18.4 Shri Kaushik Kumar Ghosh joined the Board as the Officer Employee
Director on 16th April, 2010.

18.5 Shri Raj Kumar Agrawal also joined the Board. as Chartered Accountant
category Director on 14th May, 2010.

18.6 The following members of the board retired from the Board during the
period.

18.7 Shri Mukul Singhal retired from the Board on 8th December, 2009.

18.8 Shri T Ramachandra Bhat retired from the Board of the Bank effective
from 31.12.2009.

18.9 Shri S. Ravi resigned from the Board on 24.06.2009.

18.10 The Board places on record its appreciation for the guidance and
counsel received from Shri, Mukul Singhal, Shti T Ramachandra Bhat, Shri S.
Ravi during deliberations of the Board/Committees of the Board and also in
the conduct of the Bank's business during their tenure of office as
Directors of the Bank.

19. Directors Responsibility Statements:

The Directors confirm that in the preparation of the Annual Accounts for
the year ended 31st March, 2010:

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

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

19.3 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 on 31st
March, 2010.

19.4 Proper and sufficient care was 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.

20. Acknowledgements:

20.1 The Directors thank the valued customers, shareholders, well-wishers
and correspondents of the Bank in India and abroad for their goodwill,
patronage and support.

20.2 The Directors acknowledge with gratitude the valuable and timely
advice, guidance and support received from Government of India, Reserve
Bank of India, Securities and Exchange Board of India (SEBI), Stock
Exchanges, various State Governments, Financial Institutions and the
Statutory Central Auditors of the Bank in the functioning of the Bank.

20.3 The Directors place on record their deep appreciation of the valuable
contribution of the members of the staff at all levels for the progress of
the Bank during the year and look forward to their continued co-operation
in realisation of the corporate goals in the years ahead.

For and on behalf of the Board of Directors

Place: Mangalore (J.M. Garg)
Date : 01-06-2010 Chairman & Managing Director

MANAGEMENT DISCUSSION AND ANALYSIS

1.0 Monetary and Credit Policy for 2009-10:

1.1 The annual monetary policy 2009-10 was conceived at a time when the
effects of the sub-prime crisis were still being felt globally. The IMFs
March '09 forecast had projected that global growth would shrink by 0.5% to
1.0%, in 2009. Unemployment rate in the US had risen to 8.5%, the highest
since 1983. The RBI's effort was to see that the magnitude of the external
shocks and the spill over effect of the same on our economy could be
restricted, as far as possible.

1.2 The various initiatives taken by the regulator aimed at providing
enough liquidity while ensuring that inflationary expectations were kept
subdued.

1.3 Real GDP growth for the year 2009-10 was projected in the range of 6.0%
keeping in mind (a) fiscal and monetary stimulus measures initiated during
2008-09, (b) projected contraction in global demand and trade, (c) subdued
private investment demand, and (d) normal monsoon conditions within the
country.

1.4 The regulator indicated that WPI inflation would be 4.0% to 4.5% by
Mar. '10, against the March '09 figure of 0.26%.

1.5 Money supply was expected to grow around 17.0% during 2009-10.

1.6 Growth in aggregate deposits during 2009-10 was placed at around 18.0%.
Growth of non-food credit including investment in bonds/debentures/shares
of public sector undertakings/private corporate sector, and commercial
papers (Cps), was placed at 20.0%.

1.7 The overall stance of monetary policy in 2009-10 was as under:

* Ensure a policy regime that will enable credit expansion at viable rates
while preserving credit quality so as to support the return of the economy
to a high growth path.

* Continuously monitor the global and domestic conditions and respond
swiftly and effectively through policy adjustments as warranted so as to
minimise the impact of adverse developments and reinforce the impact of
positive developments.

* Maintain a monetary and interest rate regime supportive of price
stability and financial stability taking into account the emerging lessons
of the global financial crisis.

1.8 Bank Rate kept was left unchanged at 6.0%. The Cash Reserve Ratio (CRR)
of scheduled banks was kept unchanged at 5.0%. However, Reverse Repo Rate
and Repo Rate were reduced to 3.25% and 4.75%, respectively.

1.9 Some of the other measures included:

- A Working Group would be constituted to review the present BPLR system
and suggest changes to make credit pricing more transparent.

- Payment of interest on savings bank accounts by scheduled commercial
banks (SCBs) would be calculated on a daily product basis with effect from
1 April ' 10.

- Special refinance facility to provide funding to scheduled commercial
banks (excluding regional rural banks) up to 1.0% of their net demand and
time liabilities as on 24 October'08, at the repo rate was extended upto 31
March ' 10.

- Special 14-day term repo facility for banks was extendedupto 31 March
'10.

-The limit of the standing liquidity facility to banks in terms of export
credit refinance (ECR), which was raised, from 15.0% of the eligible
outstanding rupee export credit as on the preceding fortnight to 50.0% in
November '08 would be reviewed in March ' 10.

- The all-in-cost ceilings for ECBs, which had been dispensed with up to 30
June '09 - were extended until 31 December '09.

- Indian companies would be allowed, under the approval route, to buy back
FCCBs out of internal accruals with a minimum discount of 25% of book value
for redemption amount of up to US $ 50 million, 35% of book value for
redemption amount more than US $ 50 million and up to 75 million; and 50%
of book value for redemption amount more than US $ 75 million and up to US
$ 100 million.

- The cap of Rs.20 lakh as limit of loan given by Authorized Dealer
Category-I and authorized banks against the security of funds held in
NR(E)RA and FCNR(B) deposits would be enhanced to Rs. 1 crore.

- In currency futures, the position limits on the clients and trading
members were doubled from US $ 5 million and US $ 25 million, respectively,
to US $ 10 million and US $ 50 million. However, the upper limits of 6% and
15% of the total open interest on the clients and trading members remained
unchanged. The position limit for banks would continue at 15% of total open
interest or US $100 million, whichever is higher.

2.0 Macro-Economic Scenario in 2009-10:

2.1 As per the advance estimates of CSO, the GDP at factor cost at constant
(2004-05) prices is expected to reach a growth of 7.2% in the year 2009-10
as against a growth of 6.7% attained in FY 2008-09. However, the RBI has
estimated the real GDP growth for 2009-10 to be slightly higher at 7.5%.

2.2 The 2009-10 growth of the index of industrial production (IIP) during
the period April '09-February '10 was higher at 10.1% compared to the
growth rate of 3.0% achieved during the same period last year. The growth
rate achieved by Mining, Manufacturing and Electricity sectors during April
'09February ' 10, over corresponding period of 2008-09, have been 9.7%,
10.5% and 5.8%, respectively, which moved the overall growth in the General
Index to 10.1%. The year before, growth in the same period for these three
sectors was 2.6%, 3.1 % and 2.4%, respectively.

2.3 WPI inflation, as measured by year-on-year variations in the wholesale
price index (WI), increased sharply from 0..5% in September '09 to a high
of 9.9% in the month of March ' 10, exceeding the RBI's baseline projection
of 8.5% for March ' 10 set out in the Q3 Review. WPI non-food manufactured
products (weight: 52.2%) inflation, which was (-) 0.4% in November'09,
turned marginally positive to 0.7% in December '09 and rose sharply
thereafter to 3.3% in January' 10 and further to 4.7% in March ' 10. Thus,
the inflationary situation, initially driven by food prices, has now become
more generalised.

2.4 The country's exports during the first 11 months of 2009-10 have slowed
down by 11.3%, at $ 152.98 billion against $ 172.38 billion in the
corresponding months of 2008-09. During the same period imports registered
a decline of 13.5%, to reach a figure of $ 248.40 billion ($ 287.10
billion). The country's trade deficit for April-February '10, however, fell
to $ 95.42 billion, against $ 114.72 billion during April- February '09.

2.5 During 2009-10, India's foreign exchange reserves increased by US$ 27.1
billion to reach US$ 279.1 billion as at end-March 2010.

2.6 Output in the advanced economies is now expected to expand by 2.1% in
2010, following a sharp decline in output in 2009. In 2011, this growth is
projected to edge up further to 2.5%. In spite of the revised forecast,
recovery in advanced economies is still expected to be weak by historical
standards, with real output remaining below its pre-crisis level until late
2011.

2.7 Growth in emerging and developing economies, on the other hand, is
expected to rise to about 6A/o in 2010, following a modest 2.1 % in 2009.
In 2011, output is projected to accelerate further. Global financial market
conditions have also improved, notwithstanding the unease in relation to
Dubai & Greece.

2.8 Indian GDP growth in the third quarter of 2009-10 showed a significant
recovery, at 6.0%, in spite of the negative growth of -2.8% in agriculture.
The growth has, however, remained lower than the average 8.8% achieved
during five year period 2003-08. With the recovery process setting in, it
is expected that the average growth for FY 2010-11 would go up further from
2009-10 level of around 7.5% to 8.5%.

3.0 Banking Trends during 2009-10:

3.1 To provide stability to the economy and continue with its stance of
maintaining price stability with growth, the regulator kept the policy
rates stable until February'10. However, owing to the rapidly rising
inflation, the regulator had to use the tool of monetary tightening and it
increased the CRR by 75 bps to 5.75% and now the same has been further
increased to 6% in the Annual Policy Statement for 2010-11. The repo and
reverse repo rates were also increased to 5.25% and 3.75%, respectively
indicating the reversal of its crisis driven expansionary monetary policy
stance.

3.2 SCBs credit growth remained subdued during the first half of FY 10,
however, it expanded steadily during the second half of the year. The year-
on-year non-food credit growth recovered from its intra-year low of 10.3%
in October '09 to 16.7% by March '10, which is lower than the 17.5% growth
registered last year in the same period, and 21.6% in 2006-07.

3.3 Aggregate deposits also witnessed a similar trend. The growth of 17.0%
in 2009-10 was less than the growth rates of 19.9% and 22.2% in the
preceding two years.

3.4 During 2009-10, money supply (M3) growth decelerated from over 20.0% at
the beginning of the, financial year to 16.8% by March '10, slightly above
the RBI's projection of 16.5%.

3.5 RBI is considering giving some additional banking licenses to private
sector players. Non Banking Financial Companies could also be considered,
if they meet the RBI's eligibility criteria. This move may make the banking
sector still more competitive and bring banks closer to some more of the
financially excluded population.

3.6 Rs.16,500 crore would be provided as capital infusion to select Public
Sector Banks to ensure that the Public Sector Banks are able to attain a
minimum 8% Tier-1 capital by 31st March ' 11. Higher capital for banks is
good news, as it will help banks, especially those with government holding
already near 510/A', to get additional capital for growth of assets.

3.7 Government will also provide further capital to strengthen the Regional
Rural Banks (RRBs) so that they too have adequate capital base to support
increased lending to the rural economy.

3.8 The period for repayment of the loan amount by farmers was extended by
six months from 3.1 December '09 to 30 June'10, under the. Debt Waiver and
Debt Relief Scheme for Farmers.

3.9 Some changes announced in 2009-10 but which would impact banks in 2010-
11 include the implementation of the new Base Rate system of charging
lenders (from 1 July '10) borrowing rates may effectively increase for
larger corporates as they may no longer get funds at sub-BPLR rates. On the
other hand, some others, such as agriculturists, SMEs and services may have
more Funds trade available to them as the lamer corporates try to tap
alternative channels of finance at lower rates. Banks having a large share
of savings deposits would also be likely to payout 15-20 bps more to their
savings depositors, on account of payout of interest on daily balance basis
(from 1 April ' 10), instead of the minimum balance maintained during the
10th to the last day of each month. NIM would accordingly be impacted.

4. Banks Operational Performance:

4.1 Deposit Mobilisation:

4.1.1 During the year 2009-10 emphasis was laid on clientele expansion with
strategy of lining up a series of campaigns for CASA growth. The campaigns
saw opening of over 4.75 lakh Current and Savings accounts. Key Branches

and new branches were focused for retail deposits. The premium Savings Bank
product - Corp Classic - was slightly re-packaged bringing back some of the
earlier customer friendly options for targeting not only High Net worth
Individuals but also for all type of individuals and to improve the CASA
base.

4.1.2 Representative Offices in Dubai and Hong Kong are provided with
required back up and guidance to increase the NRI deposits especially under
Savings portfolio. The bank is guiding the Rep. offices for opening large
number of accounts under the centralized accounting system with the help of
Doha Bank and UAE Exchange which will help the Bank in showing a
considerable growth under this portfolio in the coming days.

4.1.3 Performance Highlights:

i] The Non Bank Deposits of the Bank has registered a net accretion of
Rs.11,372 crore to reach Rs.79,932 crore as at 31 st March, 2010
registering a growth of 17% during the year.

ii] The average Non Bank Deposits of the Bank increased by Rs.13,511 crore
and stood at Rs.67,744 crore as at 31 st March, 2010 compared to Rs.54,233
crone as at 31st March, 2009, recording a growth of 25%.

iii] The Share of Demand Deposits in total Non Bank Deposits stood at 33%.
Demand Deposits grew from Rs.23,243 crore to Rs.26,491 crore as at 31st
March, 2010, registering a growth of 13.97%.

iv] The Term Deposits increased by Rs.8,125 crore and stood at Rs.53,507
crore at a growth rate of 18%.

v] The Savings Bank deposit portfolio registered a growth rate of 29% to
close at Rs.13,025 crore as at 31st March, 2010.

vi] The Bank has added 8,64,761 New 'Deposit Accounts during the year.

4.2 Credit Growth:

4.2.1 The credit portfolio of the Bank recorded a growth of 30.3% during
the financial year ended 31.03.2010. Growth in credit was achieved through
intense marketing of various loan products of the Bank both under retail
and corporate segments: The level of advances increased from Rs.48,512
crore as on 31.03.2009 to Rs.63,203 crore (net of provision) as on
31.03.2010, thus registering an absolute growth of Rs.14,691 crore.

4.2.2 The Average Advances grew by Rs.9,776 crore from Rs.40,520 crore in
2008-09 to Rs.50,290 crore in 2009-10 at a growth rate of 24.1%. The CD
ratio as on 31.03.2010 stood at 68.15%.

4.2.3 Infrastructure Lending:

The Bank has been endeavouring to participate more in the nation-building
activities by extending credit to infrastructure sector. During the FY
2009-10, Bank could deploy 22.1% of the incremental credit to
Infrastructure sector. Bank's credit exposure to infrastructure increased
from Rs.53G3 crone as at March-2009 to Rs.861G crone as at March-2010,
thereby showing a Y o-Y growth of Rs.3253 crone [60.7%]. The infrastructure
exposure works out to 13.6% of the Bank's Credit portfolio as at March-
2010.

4.2.4 SME Credit:

The Bank's thrust for lending to SME segment continued. During the
financial year 2009-10, the SME credit has improved from Rs. 5205 crone to
Rs.6485 crone, showing Y o-Y growth of Rs.1280 crone [24.6%]. SME Credit
constitute 10.3% of the Net Bank Credit of the Bank as at 31st March, 2010.
MSME Care Centers have been established at all Zonal Offices of the Bank to
ensure hassle-free flow of credit to this sector.

Mar-08 Mar-09 Mar-10

GME CREDITS 4025 5205 6485

4.3 Priority Sector Lending:

4.3.1 Sectoral Deployment:-

4.3.1.1 The aggregate funds deployed in Priority Sector by way of credit
and other forms of support such as contribution to Rural Infrastructure
Development Fund, and investment in eligible bonds moved up from Rs.16,131
crore as at 31st March, 2009 to Rs.21,059 crore as at 31st March; 2010,
recording an increase of Rs.4,928 crore i.e. a growth of 30.55%. The
Priority Sector advances of the Bank stood at 43.41 percent of the Adjusted
Net Bank Credit as against RBI norm of 40% of ANBC.

4.3.1.2 Under the Special Agricultural Credit Plan [SACP], the Bank
disbursed Rs.4,617 crore (excluding investments) as against the Annual Plan
of Rs.4,500 crore, registering an achievement of 102.60%.

4.3.1.3 The agricultural credit witnessed a growth of 43 Percent during the
fiscal, i.e., from Rs.4,323 crore as at March, 2009 to Rs.6,175 crore as at
31st March, 2010. Funds deployed under Agriculture [both credit and
eligible investments put together] constituted 12.73 percent of ANBC as at
31st March, 2010. Concerted efforts have been made for effective
implementation of Annual Credit Plan.

4.3.1.4 Credit to Micro and Small Enterprises (MSE) increased from Rs. 3965
crore as at March 2009 to Rs. 5707 crore as at March 2010, witnessing
growth of 43.93%. Bank bears the One Time Guarantee Fee and also the Annual
Service Fee in respect of all loans upto Rs. 5.00 lakh to Micro & Small
Enterprises covered under the Credit Guarantee Scheme.

4.4 Social Lending:

4.4.1 Dispensation of credit under various Government Sponsored Social
Lending/Poverty Alleviation Schemes and to Weaker sections of the society
was given due importance so as Weaker fulfil the Bank's socio-economic
obligations.

4.4.2 Lending to micro finance sector witnessed accelerated momentum during
this year. Number of Self Help Groups credit linked increased from 66984 as
at March 2009 to 98274 as at March 2010. Likewise, credit to micro finance
sector increased from Rs.291.94 crore as at March 2009 to Rs.537.43 crore
as at March 2010, registering a growth of 84%. Finance to women
beneficiaries has improved from Rs.2017 crore to Rs.2450 crore at a growth
rate of above 21%. At 5.05% of ANBC, the performance is more than the
stipulated 5% of ANBC.

4.4.3 As at March 2010, out of total priority sector credit of Rs.20,394
crore, the outstanding credit to Scheduled Caste/ Scheduled Tribes is
Rs.338.24 crore whereas the advances to Weaker Sections stood at
Rs.2,938.26 crore.

4.5 Retail Lending:

4.5.1 Retail lending continued to be a focus area of the Bank during the
year 2009-10. The outstanding credit under Retail Lending improved from
Rs.9,339 crore as on 31.3.2009 to Rs.11,696 crore as on 31.3.2010,
recording a growth of Rs.2,357 crore (25.24%). The share of the Retail
Lending to the Net Bank Credit stood at 18.51%.

4.5.2 Growth under Corp Schemes during the Financial Year 2009-10 was
Rs.1,191 crore at 19% over the March 2009 figures whereas growth during
EY2008-09 was Rs.638 crore at 11 % growth over March 2008.

4.5.3 Under Housing Loan scheme Chome Plus' (housing loan upto Rs.20 lacs
and upto 20 years), 4,076 new housing loans were sanctioned, with a
sanctioned limit of Rs.363 crore. Under Corp Home Delight, the variant of
Corp Home Scheme, with 8% ROI in the first year, 4,813 loans were
sanctioned with a limit of Rs.824 crore. During the FY 2009-10, total
Sanctions under housing loans was Rs.1,385 crore from 10,063 accounts
whereas previous year, 7,471 housing loans were sanctioned amounting to
Rs.727 crore.

4.5.4 Sanctions under Corp Vehicle Plus, a new variant of vehicle loan,
with 8% ROI in the first year, is Rs.229 crore from 6,321 accounts. During
the F.Y. 2009-10, total sanctions under Corp Vehicle Scheme was Rs.643
crore from 15,664 accounts, whereas previous year 10,918 vehicle loans were
sanctioned amounting to Rs.341 crore.

4.6 Education Loan:

4.6.1 Under in-principle approval of On-line education loan applications,
during the financial year, 1194 in-principle approvals were accorded
amounting to Rs.43.05 crore, whereas during the previous F.Y. 789 in-
principle approvals were accorded amounting to Rs.40.02 crore.

4.7 Retail Asset Hubs:

4.7.1 At present 18 Retail Hubs are operating in the Bank. The hubs ensure
quality credit appraisal and speedy dispensation of credit to the
customers. The Bank has also outsourced due diligence for select retail
schemes at the Hubs as a risk containment measure. Retail Asset Hubs have
sanctioned 38,180 applications under various Corp Schemes amounting to
Rs.2,298 crore from April, 2009 to March, 2010, whereas previous year only
22,034 Corp Scheme applications aggregating to Rs.947 crore were
sanctioned.

4.8 Credit Assets Quality and Classification:

The Bank has maintained high standard in Asset quality as evidenced by
lower NPA levels over the years. Close surveillance and initiation of
prompt remedial action in borrowal accounts, ensured the quality of assets
of the Bank.

The classification of the loan assets in terms of Prudential Dorms issued
by the RBI is as follows:
[Rs. in crore]
As on As on As on
31.03.2008 31.03.2009 31.03.2010
%to % to % to
Amount total Amount total Amount total
asset asset asset

Standard 39,079.56 98.53 48,367.90 98.86 62,978.11 98.98

Sub-Standard 132.85 0.33 145.20 0.30 268.98 0.42

Doubtful 239.52 0.60 236.26 0.48 181.38 0.28

Loss 212.05 0.54 177.76 0.36 200.58 0.32

Gross Loan 39,663.98 100.00 48,927.12 100.00 63,629.05 100.00
Assets

The high quality of the loan assets is evidenced by the fact that the
Standard assets constitute 98.98% of the Bank Credit.

4.9 Financial Inclusion & Branchless Banking - 'Corp Grameen Vikas Kendras'

4.9.1 In order to provide easy access to banking facilities and to
encourage the hitherto unbanked rural and semi-urban customers to open and
operate their bank accounts Corporation Bank had introduced the branchless
banking concept in the remote villages of the country where brick and
mortar banking facilities are not available/feasible. Corporation Bank
being a pioneer in this area, provides basic banking facilities through its
Branchless Banking initiative and the Bank has branded the Business
Correspondent locations as 'Corp Grameena Vikas Kendras' and is
aggressively covering all unbanked service area villages of the Bank apart
from villages where the population exceeds 2000.

4.9.2 Corp Grameena Vikas Kendras or the Branchless Banking model is an
alternate delivery channel that has the potential to extend the
distribution of basic banking products to the poor people at their
doorsteps through the use of innovative technology products and services.
It is secure, robust and provides banking services at affordable costs to
the vast sections of the under served and low-income groups at timings
convenient to the villagers.

4.9.3 Realizing the potential of this delivery channel in transforming the
rural landscape by bringing a vast majority of the population to the
banking fold, the Bank started financial inclusion way back in July 2006.
The Bank has conducted village surveys in 1498 villages in the states of
Karnataka, Andhra Pradesh, TamilNadu, Kerala, Goa, Maharashtra, West Bengal
and Madhya Pradesh which enables the branches to prepare a Household
Business model and a Village Credit Plan consolidating all the credit needs
of the identified village. The Bank has opened about 5.5-lakh no-frill
Savings Bank accounts and has issued more than 21000 General Credit Cards.

4.9.4 The Bank identified Business Correspondents in these villages are
provided with a hand held terminal and the individual customers would be
provided with Smart/ Radio Frequency Identification Cards (RFID) which
contain their photograph,, name and address and also serves as an e-purse
containing the latest balance in their accounts. The device,also provides
voice guidance in the local language for the benefit of illiterate
customers to understand the nature of transaction. The device can
communicate to the server using the landline or the mobile phones for
updating the data.

4.9.5 The Bank has 1200 Business Correspondents as on 31.03.2010 spread
over various states and they collectively clock nearly 22000 transactions a
month. Customers can transact their Savings Accounts, Loan Accounts, Self
Help Group Accounts or General Credit Card Accounts.

4.9.6 The Bank is handling the NREG Wage payouts and the Social Security
Pension Payments in the states of Andhra Pradesh and Karnataka and has
commenced enrollments in Haryana and Gujarat also. The Bank has started
providing micro-insurance premium collections through Corp Grameena Vikas
Kendras.

4.9.7 The Bank has been awarded the 'Inclusion Champion of theYear-2009'
bySKOCH Foundation, New Delhi. The Bank had also won the 'Use of Technology
for Financial Inclusion' award from the Institute for Development and
Research in Banking Technology (IDRBT), Hyderabad and the IBA Awards 2007
for the Best use of IT in Retail Banking for its Branchless Banking and
Financial Inclusion initiative.

5. Recovery:

5.1 The Bank has been complying with the RBI guidelines relating to Income
Recognition, Asset classification and Provisioning. The Bank continue to
apply a three pronged strategy for better NPA Management:

1. Preventive Actions
2. Recovery and Upgradation 3. Resolution and Settlement

5.2 The Gross NPA of the Bank was Rs.650.94 Crore as on 31.03.2010 compared
to Rs.559.22 crore as at the end of the previous financial year. The Gross
NPA %age was 1.02 % of the Gross Advances as on 31st March, 2010 as against
1.14% at the end of the corresponding previous financial year.

5.3 The Net NPA of the Bank was Rs.197.25 crore as on 31st March, 2010
compared to Rs.138.30 crore as at the end of previous financial year. The
net NPA ratio of the Bank against the Net Advances has slightly increased
from 0.29% of the previous year to 0.31% as at 31.03.2010. As a matter of
prudence, the Bank provides in full for all NPA accounts with borrower wise
aggregate liability of less than Rs.25,000/irrespective of the nature and
extent of securities held.

5.4 The cash recovery and up-gradation during the financial year 2009-10
stood at Rs.320.08 crore, compared to Rs.278.45 crore in the previous
financial year. The improvement in recovery is mainly due to continuous
monitoring and close follow up of borrowal accounts at Branch/Zonal
Offices, effective implementation of OTS schemes/ Compromise settlements.,
The SARFAESI Act has been used as enabling tool to take vigorous steps for
bringing improvement in Recovery performance.

5.5 A OTS scheme called 'Corp Rhuna Mochan' for small NPA accounts with
balance inclusive of Rs.1 lakh was in operation between 01.05.2009 and
31.03.2010. The Bank has recovered Rs.472.90 lakhs from 4,061 eligible
accounts. In the process 4,013, eligible accounts for Rs.743.06 lakhs were
closed.

5.6 A special non-discretionary OTS scheme for NPA loan accounts under
Micro & Small Enterprises was operational from 01.08.2009 till 31.03.2010.
Under this OTS scheme 882 eligible accounts for Rs.437.35 lakhs were
approved, of which Rs.374.25 lakh recovered from 830 accounts , thereby 806
NPA accounts were closed.

The Bank, held 12 'Lok Adalats' in select centers to recover small and
chronic NPAs.

6. Treasury and Investment Operations:

6.1 The aggregate Investments of the bank as on 31st March 2010 were
Rs.34522.63 crore with maturity mix of securities consistent with risk
perceptions and investment policies of the Bank.

6.2 The Bank is an active player in the Corporate/PSU Bonds segment and
commercial paper market.

6.3 The average yield on investments during the report year stood at 6.75%
compared to the previous year's level of 7.68%.

6.4 The net profit from sale of investments was Rs.308.83 crore for the
year-ended 31.03.2010 as compared to Rs.442.47 crore in the previous year.

6.5 The Bank has put in place the risk management tools like Duration,
Modified Duration and Value at Risk for all interest bearing securities.

7. International Banking:

7.1 During the year 2009-10, the total forex turnover registered a growth
of 12.22%. Out of the total forex turnover, interbank turnover was
Rs.3,86,344 crore during the year recording a growth of 10.38%. Merchant
turnover increased from Rs.47,684 crore to Rs.59,973 crore.

7.2 The Bank has 45 'B' category branches, which cater to the foreign
exchange business. There is an encouraging growth in the area of Merchant
turnover, fee based income, clientele growth and export credit in all these
branches.

7.3 In order to increase forex business, Exporter-importer meets were
conducted at important trade centress.

7.4 Executives from Corporate Office and Investment & International Banking
Division (IIBD) of the Bank addressed meeting of NRIs and also met Foreign
Institutional Investors during their visit to Dubai, Hong Kong and Taiwan.

7.5 Straight Through Processing, which was implemented in all 45 Designated
Branches during the previous year, has helped the bank to streamline the
reconciliation process, reduce staff cost and has resulted in improved
efficiency and customer service. During the year FCNR transactions have
also been brought under STP ambit. Furthermore, SWIFT payment messages is
now being relayed to the concerned Designated Branches along with the
Nostro transactions for efficient handling of Nostro credits.

7.6 Sustained focus and improvement in Reconciliation has helped in
bringing down the outstanding Nostro entries substantially.

7.7 During the year the Bank has set up currency futures desk in its
dealing room and has started proprietary trading in NSECD and MCX-SX
Exchanges.

7.8 Bank has entered into a tie up with Al Zaman Exchange WLL to facilitate
inward remittances from NRIs based in Gulf. With this the total number of
tie up arrangements with Gulf based Exchange houses has reached 11.

7.9 Bank has entered into an agreement with Deutsche Bank and Citi Bank for
multi-currency arrangement, which will facilitate outward remittances in
about 140 currencies world over.

8. Merchant Banking Activities:

During the year Bank handled 37 dividend payout and 55 issue collection
assignments successfully.

9. Precious Metal Business:

9.1 During the year, the aggregate turnover and Income from Precious Metals
Business was Rs.3,874.61 crore and Rs.6.70 crore respectively excluding
from gold loans.

9.2 Gold coins in the denominations of 2, 4, 5, 8, 20 and 50 grams are
being sold at over 700 branches.

10. Designated Branches:

10.1 Integrated Treasury Management System (ITMS) Software is fully
operationalised and interfaced to RTGS. The IIBD has been migrated to Core
Banking System on 26.12.2007. All the Forex Designated Branches are enabled
for Straight Through Process (STP) and Chat Module with IIBD.

i) During this financial year, STP between Forex Service Branch and other
link branches, in line with ABB was enabled. Link Branches were provided
with a simple entry program and the master creation at Forex Service Branch
was eliminated. Direct credit/debit for the transactions done on behalf of
Link Branches was enabled.

ii) Straight Through Processing was enabled between IIBD and Designated
Branches for FCNR opening/closure during this financial year. As a result
of this, the data entry at IIBD, IBR reconciliation, maintaining suspense
for FCNR opening and subsequent follow up by Designated Branches were
eliminated.

iii) During the Financial Year, Bank has developed and has made operational
a Trade Credit Module in DB Package. Thus all operations pertaining to
Buyer's Credit including the submission of monthly and quarterly data to
Regulators have been mechanized which has reduced the time consumed for
manual operations.

iv) Bank also has developed and made operational a Cross Currency Module in
DB package which enables the conversion of any currency to any currency
mechanically for facilitating booking and utilization of cross currency
forward contracts and other foreign exchange transactions involving cross
currency operations.

11. Collection and Payment Services (CAPS):

11.1 The Bank, a preferred CMS Banker in Corporate sector continues to
retain its premier position under Cash Management Services. The Bank has
shown consistent performance under

Turnover, Income and Clientele growth during the year.

11.2 As pro-active CMS Banker, the Bank has initiated host of customer
centric' New Product/technological initiatives during the year.

11.3 Amongst them are:

i) Automated Channel Financing Facility: Under this facility, the Bank will
finance against invoice to the dealers of the OEMs/Suppliers. The
uniqueness of this product is that the entire process is fully automated
right from invoice generation to settlement of funds on due dates.

ii) The bank has set-up Electronic Payment Gateway (ePG) for facilitating
card based online payments. The payment gateway accepts all Visa/Master
credit/debit cards issued by any bank.

iii) RTGS /NEFT based collection facility from any branch of the Bank (core
enabled) in the country.

iv) The local cheque collection centres have been increased to 433 in order
to expand the reach under collection management.

v) The above initiatives have improved the service delivery standards
through operational efficiency to stay ahead in the highly competitive CMS
market.

12. Inter-Branch Accounts Reconciliation:

12.1 Timely reconciliation and speedy elimination of Inter Branch
transactions continue to be the forte of the Bank. The Bank has a Central
Inter Branch Reconciliation system for Processing of Inter-Branch
Transactions, in order to maintain efficiency in this vital area of
housekeeping.

12.2 During the year 2009-10, the Bank continued to maintain its core
competence in the area of timely reconciliation of Inter-Branch
transactions. The Inter-Branch transactions were generally processed and
reconciled on the next day of the transaction. All Inter-Branch
transactions emanated up to 31.03.2010 stand reconciled and all entries

(other than credits in respect of Demand Drafts issued) up to 28.02.2010
stand eliminated as at 31.03.2010.

13. Information Technology Initiatives:

13.1 The Bank's IT initiatives which are focused not only at customer
friendly delivery channels providing value added services but also to
enhance the internal efficiency and improving the decision making process
by bringing in an effective Management Information System. The efforts of
the Bank in brief are summarized below:

13.2 Core Banking:

All 1217 units under CBS - 100%, Enterprise Level Storage Subsystem (ELSS)
installed for improving efficiency and speed of processing transactions.
Various new, facilities at CBS installed like Sweep', ASBA and Online
Collection of LIC premium at branches.

13.3 ATMs:

The Bank has operationalised and networked 1079 ATMs, across the country
inclusive of 7 Biometric ATMs.

Direct Tax Payment through ATMs is enabled during the year, which is first
of its kind service through ATM channel.

13.4 POS Terminals:

Yet another delivery channel of Point of Service (POS) Terminals was taken
up and at the end of March 2010, Bank has installed 5016 terminals across
the Country at various merchant establishments.

13.5 Net Banking:

The enhanced infrastructure facilities provided in internet banking
resulted in getting wide acceptance from cross sections of the customers
like CAPS, Corporates and Retail customers.

The new facilities introduced under Corp Net during the year.

The on-line Banking has been made more user friendly and feature rich
during the year which include:-

For Retail customer:
On-line PIN Generation facility
Online Beneficiary creation facility
Corp Bank and LIC Credit card payment facility
SMS Banking registration
Online view facility for 26AS tax credit
E-Payment facility for Maharashtra &, Gujarat State Tax
ASBA Phase II for IPO application.

For Corporate customers:

Online Beneficiary creation facility
Online view facility for 26AS tax credit
NEFT Payment facility
Bulk payment facility through file uploads
Bulk tax payment facility through file upload
Digital signature authentication option to corporate customers
E-Payment facility for Maharashtra & Gujarat State Tax

To capture the e-Commerce market space, the Bank has launched electronic
payment gateway.

13.6 SMS Banking:

SMS Banking customers of the Bank enjoy the following facilities:-

NEFT through SMS Fund Transfer to third party Corpbank Account Fund
Transfer to loan and deposit account Current Gold rate enquiry ATM locator
enquiry. Credit confirmation for NEFT transaction P2P Fund transfer (Person
to Person Fund Transfer) Bill Payment Service through eSSecom,

13.7 Mobile Payment Facility:

PayMate is a mobile payment platform, which enables the customers to
transact using their mobile phones. It allows customers to pay for their
purchases through SMS. PayMate facility can be used to make payments at
over 2500 merchants, . primarily online merchants.

13.8 Government Business Modules:

Collection of direct tax [OLTAS] : E-payment of Direct Tax through internet
is enabled for all branches of the Bank. The tax so collected is
consolidated at Nagpur branch and is being remitted to RBI. The programs
have been fine tuned to efficiently complete tax payment transactions over
internet.

Software for handling Government of India Bonds; 55 branches are authorized
for collection of Government of India Tax savers Bonds.

Telephone bills collection: Telephone bill collection module is available
in select Zones for BSNL.

TDS Remittance by Branches: The branches are making TDS remittances through
e-payment.

Tax Upload: Uploading of tax has been simplified and made user friendly
during the Financial Year.

E-Payment of State Sales Tax/VAT: In addition to physical collection of VAT
in Delhi and Goa, e-payment of State Tax/VAT collection implemented for the
States of Maharashtra and Gujarat,

Tax Payment by Non Agency Banks:

There is a huge demand for the net banking of the Bank by private sector
and foreign banks for payment of taxes on behalf of their customers and on
their behalf also. The tax upload facility given in net banking is being
used by such banks to its maximum extent.

13.9 Real Time Gross Settlement (RTGS):

Inter Bank and Customer Transactions under RTGS system are enabled through
1090 units (including Branches and Extension Counters). RTGS transactions
are enabled through Straight through Processing (STP). During the year
11,29,451 transactions amounting to Rs.11,90,136 crore were made through
RTGS.

13.10 National Electronic Funds Transfer (NEFT):

NEFT Scheme for funds transfer across banks has been implemented in 1066
units of the Bank. NEFT facility is also provided through CorpNet, and ATM.
During the year 12,96,453 transactions amounting to Rs.5,969 crore were
made using NEFT

13.11 Forex Module:

Integrated Treasury Management System (ITMS) Software is fully
operationalised and interfaced to RTGS. All the Forex Designated Branches
are enabled for Straight Through Process (STP) and Chat Module with IIBD.

1) During the financial year, STP between Forex Service Branch and other
link branches, in line with ABB was enabled.

2) Straight Through Processing was enabled between IIBD and Designated
Branches for FCNR opening/closure.

3) During the financial year, as required by RBI, the Bank has complied
with submission of Centralised RRETURN for Bank as a whole.

4) Programs at Designated Branches were modified for booking Multi Tenor
Bill with exact tenor.

5) A program for posting of Service Tax (financial transaction tax for
foreign currency transactions) was enabled for Designated Branches.

SWIFT operations have been migrated to SWIFT ALLIANCE Software provided
directly by SWIFT Direct uploading of SWIFT messages from DB package to
SWIFT without re-entering the data of the Branches has been enabled during
the year.

Software for Trading in Derivatives to International Banking Division and
to act as Settlement Bank for Multi Commodity Exchange (MCX) has been
provided.

Corp Quick Remit facility is made available facilitating the NRI customers
to remit money to India.

Corp X' Press Money facility is launched for facilitating NRIs of Gulf
Countries to withdraw cash upto Rs.50,000/- during their stay in India.

13.12 Other Initiatives:

Payout module for payment of Dividend Warrants, Direct Debit to various
accounts across branches for pooling the credits, WAN (Wide Area Network)
provided to 1127 units of the Bank, E-mail facilities provided to all
feasible branches through MS Exchange, Digital Video Recording (DVR)
installed at 519 offsite ATMs and 809 branches of the Bank, Cheque
Truncation System, MICR Clearing implementation in Mangalore,
Implementation of RAM and CRISIL for Credit appraisal and borrower credit
rating, Human Resources Management System (HRMS) package for employees,
Centralised Inter-Branch Reconciliation, E-learning set up, Infrastructure
towards enhancing IT Security, Disaster Recovery Set up for different
applications etc., are some of the other innovative technological products
and services the Bank has introduced for enhancing the customer
convenience.

14. Credit Cards:

14.1 Credit Card portfolio of the Bank forms an important and a very
potential element of Bank Credit. In view of the large potential associated
with it the Bank has taken steps to expand this portfolio.

14.2 As on 31st March 2010, the Bank had issued a total of 27,575 credit
cards aggregating a limit of Rs.150.32 crore. The Bank is predominantly
issuing Cards to its existing customers.

14.3 To quicken the process of issuing the cards, Bank has started issuing
of pre-approved cards to its customers.

14.4 For customer convenience, Bank has introduced tech-savvy services such
as Auto Debit facility, SMS alerts, statements, on-line viewing of credit
card details, ATM interface and Verified by Visa authentication for on line
transactions. All these facilities are expected to help the customers to
use the Cards efficiently.

14.4.1 Delivery Channels:

14.4.2 ATMs: As of 31.03.2010, the Bank installed 1,079 ATMs. During 2009-
10, more than 6.5 crore transactions were executed at the ATMs. The Bank
installed second ATMs at 14 sites with high foot falls.

It was yet another first' for CorpBank in launching Direct Tax payment
through the ATMs of the Bank.

14.4.3 Debit Cards: As of 31.03.2010, the total number of cards issued by
the bank is nearing 40 lakhs of which 6.22 lakh cards were issued during
2009-10. In our endeavour to pursue our cardholders to spend more at POS,
the Bank launched cash back campaign from 10.10.2009 to 17.01.2010 during
which more than 82,000 cardholders had used their cards for the first time
at POS outlets. The Bank also redesigned the card with shopping theme to
communicate the utility of the card at POS outlets.

14.4.4POS Machines: During 2009-10, the Bankrolled out the POS project
across India. The feedback on the terminals is encouraging and as on
31.03.2010, the Bank installed 5,016 machines.

14.4.5 Prepaid Gift Cards: The Bank launched Prepaid gift cards on
13.10.2009 to meet the gifting requirements of corporates and individuals.
The product has been well received and as of 31.03.2010, The Bank issued
about 10,000 cards amounting to nearly Rs.2 crore.

14.4.6 Campus Cards: This product targeted at the student community has
further gained popularity and as of 31.03.2010, -the Bank enrolled 86
institutions for issue of campus cards. The cumulative campus card
population as on 31.03.2010 was 34,641 cards.

14.4.7 Depository Services:

The Bank is a member of the Depository managed by NSDL and offers its
customers Demat Services. The Bank has also tied up with M/s. HSBC
InvestDirect Securities (India) Ltd., and M/s. Religare Securities Ltd.,
for offering Online and Offline Trading facility for our customers. The DP
services are presently being offered in more than 60 branches of the bank.

14.4.8 Future Outlook:

Going forward, the Bank planned to offer different debit card variants to
cater to the different niche segments. Also, the Bank proposed to diversify
its prepaid card portfolio to meet the varied needs of its customers. In
the endeavour to offer unparalled convenience to its customers, the Bank
shall continue to launch innovative products and services.

15. Marketing Initiatives:

15.1 A cohesive, competent, system driven marketing infrastructure has been
developed to consolidate the marketing initiatives already taken by the
Bank. The following are the initiatives and activities during the financial
year 2009 - 10.

15.2 Sales Campaigns for Augmenting CASA:

Mobilizing CASA is the topmost priority for the Bank's Marketing Force. To
provide focused attention for bringing in new clientele under Current &
Savings accounts, a 181 days long CASA campaign was conducted from June 3,
2009 to run till November 30, 2009. During the campaign close to 16,000
Current Accounts with balance of Rs.417 crore and 4.5 Lakh Savings Account
with balance of Rs.600 crore were mobilized. Another Current Account and
Corp Classic Campaign was conducted from January 20, 2010 to March, 31,
2010 which has resulted in mobilization of more than 9,200 Current Accounts
with balance of more than Rs.170 crore and 1,100 Corp Classic Accounts.
These initiatives have aided the' Bank in adding more than 9.05 Lakh
Savings Bank Accounts and 38,400 Current Accounts during the Financial
year. This has helped the Bank cross the milestone of 100 lakh clientele
base.

15.3 Lakhpathi Recurring Deposit' Scheme & Sales Promotion Drive:

Recurring Deposits are an ideal Monthly Saver Scheme tailormade to suit the
saving capabilities of various segments of the society regardless of their
income levels. The RD scheme of the Bank was marketed as Lakhpathi'
Recurring Deposit during an aggressive nation-wide year long sales
promotion drive for popularizing the recurring deposit schemes and the same
has produced unprecedented results. This Integrated Marketing Drive helped
the Bank in garnering substantial long term deposits. The RD portfolio has
doubled from Rs.399 crore in March, 2009 to Rs.799 crore in March, 2010.

15.4 Marketing Events/Activities:

The Marketing Teams of the Bank have been engaged for systematic and well
planned marketing events like loan melas, customer meets, NRI meets,
Professional Meets, etc. for aggressively mobilizing Retail products.
During the year, the Retail Sales Units have been conducting marketing
events such as participating in counseling processes for admission in
Professional Colleges, NRI Meets, Auto & Home Loan Utsavs, Customer meets,
etc.

15.5 Gold Sale Campaign:

Coinciding with the Diwali festival, a month long Gold Coin Sale Campaign
was conducted during October 2009. During the campaign, the Bank could sell
8,861 coins amounting to more than 70 kgs. During the financial year, over
257 kgs of gold was sold through the retail channel earning an income of
more than Rs.1.85 crore for the Bank.

16. Customer Service

16.1 Products & Services:

16.1.2 Bank has taken initiatives to introduce a number of Customer
friendly products and services to meet the growing expectations of the
customers. NEFT through Bank's ATM, Prepaid Gift Cards, Payment of Tax
through ATMs. More user friendly features are introduced in Corpnet
Banking.

16.2 Banking Codes and Standards Board of India:

The Bank has been complying with the various commitments under Code of
Bank's Commitment to Customers in which bank is voluntary member. Apart
from displaying the various policies adopted by the bank in the Bank's
website, the printed BCSBI Codes are procured from IBA and made available
to customers at branches.

16.3 Customer Satisfaction Survey:

A Customer satisfaction survey was conducted during 200910 by M/s Hans
Research Group. The survey has revealed that customer awareness on services
offered by the Bank are good. Customers have opined that perfect bank for
people like me' indicating there is element of customer loyalty for the
Bank.

17. The Right to Information Act 2005:

Bank in pursuance of the enactment of Right to Information Act, 2005, has
designated Public Information Officers and Appellate Authorities at Head
Office and Zonal Offices. The disclosures under the Act are displayed in
the Bank's website. Bank is complying with the provisions of the said Act
at all levels and disposing of all the applications and appeals received
from the public within the stipulated time frame.

18. Integrated Risk Management System:

18.1 Basel II Compliance:-

18.1.1 Consequent upon globalization, Banks and other financial institution
all over the world are exposed to different types of risks. The emergence -
of Basel-II accord and its increasing applicability throughout the world
calls for sound practices in risk management. Risk Management is an
integral part of a Bank's organizational structure and business strategy.
Identification, measurement, monitoring and controlling the risk enables
the Bank to minimize losses and maximize profits. The major types of risk
faced by the Bank are Credit Risk, Market Risk and Operational Risk.

18.1.2 Risk Management Committee of Executives and Risk Management
Committee of the Board are looking after the implementation of integrated
risk management systems in the Bank. The Bank has well laid down risk
management policies for management of credit risk, market risk and
operational risk.

18.1.3 The Bank has put in place Internal Capital Adequacy Assessment
Process (ICAAP) to assess both the risks to which it is exposed and the
risk management processes in place to manage and mitigate those risks and
evaluate its capital adequacy relative to its risks. Stress Testing Process
is in place for enhancing risk assessment by providing the bank a better
understanding of the likely impact even in extreme circumstances. Going
forward, this exercise is expected to render an objective basis for
decision making both to the risk control function and to the entire
institution.

18.2 Credit Risk:

18.2.1 In the area of credit risk, the Bank had in the year 2006 upgraded
the rating models applicable for borrowers under commercial loan segment.
The rating models are working on web based enterprise wide s.lution called
Risk Assessment Model (RAM). The software, apart from rating the borrowers
helps in preparation of appraisal notes. This software will enable the Bank
to build database for moving over to IRB approach of Basel - II. The
software also has a module called Capital Assessment Model (CAM), which is
used to compute capital for credit risk under Standardized Approach of
Basel-II as prescribed by RBI.

18.2.2 Bank has formulated a Group Credit Policy, which lays down policy
guidelines for credit management covering all areas of operation where
credit risk is involved. The policy would enable the bank to enhance the
risk management capabilities thus making it possible for the Bank to show a
steady and healthy growth in its credit portfolio, resulting in overall
improved performance.

18.2.3 In terms of above policy, the Bank has set prudential limits to
individual borrowers, non-corporate borrowers, entry level exposure norms,
substantial exposure limits, bench mark financial ratios, borrower
standards, exposure limits/ceilings to industries, sensitive sectors,
rating category, etc. The Board reviews the prudential limits regularly.

18.2.4 The Bank has implemented a multi-tier credit approving system
wherein the loan proposal are cleared by an 'Approval Grid' before being
placed to the respective sanctioning authorities. For speedy and efficient
disposal of credit proposals, the Bank has established Retail Hubs at major
centres for retail credit approval and Centralised Credit Processing Cells
at each of the Zones for appraising larger credit proposals.

18.2.5 The Bank has put in place a Loan Review Mechanism to improve the
quality of loan assets and to ensure adherence to the policies, procedures
and other statutory requirements. For theyear-ended 31.03.2010, the Bank
has reviewed 61% of credit portfolio of the Bank under Loan Review
Mechanism.

18.2.6 Offsite surveillance through the Core Banking Platform is now made
use of to track exceptions in the conduct of borrowal accounts and initiate
timely corrective action to protect/improve the health of credit portfolio.
Credit Monitoring Cells have also been formed at all the Zonal offices for

independent and effective monitoring of borrowal accounts.

18.2.7 The Bank has also undertaken portfolio reviews/industry studies in
order to assess the credit risk at the portfolio level and adopt strategies
to improve the quality of the portfolio and reduce the potential adverse
impact of concentration of exposures to certain borrowers, sectors or
industries.

18.2.8 Study on rating migration of borrowal accounts is undertaken and
appropriate corrective actions are initiated to protect the portfolio
quality.

18.3 Market Risk:

18.3.1 Market risk is the risk to the Bank resulting from the 'movements in
market prices particularly due to changes in the interest rates, foreign
exchange rates, and equity and commodity prices. The changes will have
direct impact on the Bank's earning and its capital. These changes can have
ramifications on the Bank's liquidity and profitability.

18.3.2 For management of Market risk, the emphasis has been placed on
stabilization and steady growth of Bank's net interest income (NII). Market
position, funding patterns, duration, counter party limits and various
sensitive parameters are monitored. The advanced risk management tools such
as Value at risk (VaR), Earning at risk (EaR), Net Overnight Open Position
limits (HOOP) and Modified Duration limits are used in managing market
risk. VaR on the investments portfolio was monitored on a daily basis

18.4 Operational Risk:

18.4.1 Operational risk is embedded in all business operations and the
Management of Operational risk is an important part of the sound Integrated
Risk Management Structure. In the background of the size and complexity of
business and risk philosophy of the bank, emphasis is being given to impart
knowledge at the field level through continuous training process. In order
to move to the advanced approaches under Basel II frame work and adopt
industry best practices in risk management, the bank has appointed
consultants and software vendor for operational risk management frame work
conforming to international standards.

18.4.2 Under Risk Based Supervision, Risk Profile Templates covering five
business risks and two control risks are prepared on quarterly basis and
submitted to Reserve Bank of India.

19. Asset Liability Management (ALM):

19.1 The ALM function involves planning, directing and controlling the
flow, level, mix, cost and yield of consolidated funds of the Bank. The
primary objective of ALM is not to eliminate risk; but to manage it in such
a way that the volatility of net interest income is minimised.

19.2 As a part of Risk Management and Control, the Bank is using the ALM
system for studying and analyzing the Interest Rate Sensitivity (Gap
Analysis), Maturity and Liquidity Analysis of Assets and Liabilities.
Models like Earning at Risk and Duration are used for interest rate risk
management arid improving the Net Interest Margin. Stress testing of
liquidity risk and interest rate risk is conducted every month. The Bank
applies Value-at-Risk (VaR) to measure the trading risk.

19.3 The Bank has constituted the Asset Liability Management Committee
(ALCO) which meets at regular intervals to review the-interest rates
scenario, product pricing for both deposits and advances, desired maturity
profile of the incremental assets and liabilities, demand for bank funds,
cash flows of the Bank, Profit Planning and overall balance sheet
management.

19.4 The Bank has implemented the upgraded ALM and Market Risk software for
effective Balance Sheet Management.

20. Human Resources Management:

20.1 Business growth and branch network expansion necessitated fresh
recruitment to the extent of 1205 employees during the year. The total
staff strength stood at 13,143 on 31st March, 2010 compared to 12,465 in
the previous year.

20.2 The staff productivity in the Bank increased from Rs. 10.48 crore as
on 31.03.2009 to Rs.12.68 crore as on 31.03.2010 recording a growth of 23%.
Net profit per employee increased from Rs.7.64 lakhs to Rs.9.52 lakhs
during the year.

20.3 The Bank has been following the guidelines for reservation in
employment to specified categories. During the year, 1205 candidates were
recruited out of which 357 candidates belong to Scheduled Caste and
Scheduled Tribe categories. The representation of Scheduled Caste/Scheduled
Tribe employees in the total'staff strength was 3411 (25.95%) as on
31.03.2010.

20.4 The Bank also has a fair representation of other reserved categories.
As on 31st March, 2010, 1631 Other Backward Communities, 236 Physically
Handicapped and 666 Exservicemen were on the rolls of the Bank.

21. Human Resources Development & Training:

21.1 In keeping with the organizational growth, there have been adequate
promotional opportunities in the Bank. During the fiscal year, 809 members
of staff were promoted to the next higher cadre/scale.

21.2 The Bank has effected improvements in the Staff Welfare Schemes. The
Bank also continued to promote sports, games and cultural activities.

21.3 Competencies of the workforce improve the competitiveness of the
organization. Bank has trained 8,153 employees to improve skills and
behavioral aspects. This includes workshops on ,Anti-Money Laundering, E-
learning programme on KYC norms & Currency Management.

21.4 As per the people engagement plan, the Bank is administering various
incentive schemes with monetary and non-monetary incentives for business
leaders and team to activate the innate potential and prompt them to
contribute extra towards Organisational growth. While continuing to
administer corporate awards for rewarding performance of business units,
the Bank has introduced scorecard based comprehensive performance
management during current year for individual performance. The bank is
permitted to earmark 1 % of profit after tax [PAT] of the year for
releasing incentives and has utilized this limit optimally for business
development.

21.5 Succession Planning:

To enhance the psychological motivation among the officers, the Banks is
providing opportunity of 'Fast Track Promotion' in promotion process from
clerical to officer cadre, for promotion from one scale to next scale from
Scale I upto Scale IV During the year 2009-10, promotions were effected
under 'Fast Track' as under:

Junior Management Scale I to MM Scale II - 81
MM Scale II to MM Scale III - 39
MM Scale III to Executive cadre scale IV - 5

Even though direct recruitment is usually restricted to scale I, looking at
the age profile of existing officers, Bank has proactively taken initiative
during the year 2009-10 to directly recruit officers at higher levels as
under:

MM Scale II : 40
MM Scale III : 9
Chief Manager=Scale IV : 1

These initiatives will strengthen the middle management and entry level
executive positions and build young managers who can take up responsibility
during the ensuing years.

22. Inspection & Audit:

22.1 Effective Audit system will ensure efficiency and quality in the
overall functioning of the bank. Risk assessment is the key in the
functioning of the Division. The aim of the Division is to ensure
containment of risk to its minimum at all levels. The objectives being:

* To provide adequate management control systems to accomplish corporate
governance objectives.

* To review the methodology used for assessment and evaluation of the
business risks in the changing dynamics of today's banking.

* To focus more on Information system audit to ensure that the technology
risk is kept at its lowest.

* To benchmark Audit system with the best in the industry.

22.2 The best of standards available in the banking industry in the conduct
of audit work in a structured and efficient manner is envisaged with the
objective of:

* Adoption of new techniques to handle internal audit.

* Introduction of new audit modules like Management Audit, HR Audit, Credit
Audit, Expenditure Audit etc., based on select parameters and on risk
perception.

* Strengthen Information Security Audit to ensure minimum risk in the
technology front.

* Providing feedback to functional divisions on control and compliances and
help in identifying operational improvement opportunities.

22.3 Risk Based Internal Audit lays focus on Risk Identification, Risk
Management, adequacy of Control System and Procedures as well as optimum
use of resources. It aims a giving an assurance to the Management on the
level of regulator; and systemic compliance besides assisting in
accomplishment o corporate governance objectives.

22.4 Branches and other Offices of the Bank are subjected to different
types of Inspection & Audits. The Branches and Controlling offices,
Currency Chests of the Bank, Corp Bank Securities Ltd. (wholly owned
subsidiary of the Bank) COBSETTI, Chiko Bank and Lead Bank offices are
subjected to Audits for evaluating their working with the laid down
procedures and systems.

22.5 Housekeeping:

22.5.1 Housekeeping position at branches is closely monitored Books of
Accounts at all the branches and Offices of the Bank have been balanced and
tallied as on 31.03.2010.

23. Legal Services

23.1 The Legal Services Division of the Bank plays a significant role in
the various commercial activities undertaken by the Bank, including
recovery of the monies lent. It performs multifarious activities such as
scrutiny of title to immovable properties offered as security, preparation
of case specific documents, conduct of legal audit, advising branches as to
the initiation of necessary steps to recover the dues of the Bank and
examination of applications and appeals received from citizens under the
Right to Information Act. Legal Services Division also takes effective
steps in defending the Bank in legal proceedings initiated before various
forums like Civil/Criminal Courts, Consumer Forums, Banking Ombudsmen and
various other statutory authorities. Matters. pertaining to orders of
attachments from income tax, sales tax or other authorities are effectively
handled. The Division has devised a simplified procedure for settlement of
claims relating to deceased depositors with least amount of inconvenience
and delay. The Law Officers are regularly and continuously handling varied
legal matters and offering legal suggestions to branches and Administrative
Offices in a time bound manner and take steps to safeguard the interest of
the Bank in all its spheres of activities.

24. Security Department:

24.1 In the backdrop of challenging law and order situation across the
country with specific reference to attack against banks and financial
institutions, the Bank has been alert, conscious and concerned about the
safety of public assets, customers, employees and bank's property. Efforts
were channelised to strengthen the risk management system of the Bank. Bank
has adopted forward posture in implementing measures to avoid/ minimise
security risk by heavily leaning on technology as force multiplier in
addition to ruthless implementation of physical security measures like fire
alarm, security alarm, access control system and video surveillance.
Frequent interactive sessions with the employees manning the show windows
by Security Managers adds additional dimension as contributing factor in
sensitising them with prevalent threats and measures. Bank is abreast with
latest development in the security management field aiming to constantly
rediscover the key matrixes for breaking new grounds and to tread
untraveled tracks with the sole aim of providing utmost comfort to the
customers.

25. Compliance Division:

25.1 The Bank has a Compliance Division in place as mandated by Reserve
Bank of India. The compliance division in the Bank maintains a system of
internal checks and balances designed to ensure, strict observance of
applicable statutory provisions contained in various legislations,
compliance with rules and regulations applicable to banks and adherence to
internal policies and fair practices codes.

The Bank has instituted a compliance program in conformity with the
Compliance Policy of the bank.

26. Vigilance Machinery:

26.1 As Bankers, we are expected to maintain highest standards of honesty,
integrity and efficiency since we are custodians of public funds. Every
Organisation works on the philosophy of mutual trust and confidence more so
a banking Organisation. In an organizational set up the roles and
responsibilities of each functional division are well defined and
documented for better clarity and effectiveness. The vigilance functions
primarily relate to preventive and detective rather than punitive and
Vigilance machinery plays the role of a watchdog so as to ensure that the
laid down systems and procedures are not tampered with for any personal
gain or benefit. It believes in the principles of natural justice and
punishing the guilty irrespective of rank and position.

26.2 Wherever instances of serious violation in the systems and procedures
are reported or complaints received against the Bank Officials, an
investigation is ordered and punitive action is taken. To avoid such
action, as a pro-active measure, the Vigilance Division conducts preventive
checks and reports on the deviations observed. It also suggests how such
violations can be avoided with the collective effort of all.

26.3 During the year the Bank has introduced a new Preventive Vigilance
Mechanism. All branches are now directed to convene meetings every month.
In the said meeting the staff members have to discuss and share information
and their work experiences so that alertness and awareness is generated
through out the Bank.

26.4 Banks are often the front-line defense against financing of terrorism
and can contribute significantly by increasing vigilance against the abuse
of the financial system. Keeping in mind the said objective, detailed
guidelines on Anti Money Laundering (AML) covering the areas of customer
acceptance, customer identification, monitoring of transactions and risk
management etc. have been issued to branches/offices of the Bank from time
to time. With a view to increasing awareness amongst staff members about
their obligations under PMLA and monitoring their compliance, Awareness
Programme on Provisions & Implementation of Anti Money Laundering Act 2002
was conducted at various centers with the active involvement of the
officials of FIU-IND.

26.5 The Bank has framed its own 'Whistle Blower Policy', the objective of
which is to identify any untoward events with the help of the employees and
to take timely corrective measures so as to prevent/protect the Bank at the
initial stage itself. This mechanism also provides adequate safeguards
against victimization of employee who avail of this mechanism.

27. Opportunities:

27.1 A high calibre workforce, high network of branches better
infrastructure facilities and a competitive customer service and all
advanced tech savvy environment helped the nationalised banks in India to
get a prime slot in the minds of the people.

27.2 The winds of change sweeping the country have revived up nationalised,
banks to meet the onslaught of globalisation. Infused with new zeal, the
banking industry has expanded its services to include faster cash
dispensing methods, 24-hour automated teller machines and computerised cash
transactions.

27.3 Corporation Bank has altogether progress in its business parameters,
registering 29.47% growth over the previous year; profit growth registered
an increase of 21.47%.

27.4 Bank is having fully computerised environment in all its branches with
interconnectivity through core banking.

27.5 A good number 1,155 branches and 1,079 ATMs across the country and two
Representative Offices at Hong Kong and Dubai give strong presence.

28. Threats:

The banking industry in India is undergoing a major transformation due to
changes in economic conditions

28.1 Economic recession engulfed the world economy has its impact on Indian
Banking System too. Low rate of takers of loan portfolio pose problems on
the profitability of banks.

28.2 The introduction of advanced technology measures also imposed greater
responsibility to protect against various information security threats.

28.3 Banks, like any other industry are exposed to credit, Market and
operational risks in the day to day operation, thinning of Interest spread
affects the profitability structure of the Bank.

28.4 Regulatory guidelines, Policies, Provisions etc. may affect the
operational viability of the Bank.

28.5 A set back in the GDP growth rate against the forecast could adversely
affect the bank's borrowers and contractual counter parties. Any slow down
in retail loan segments because of slowdown in growth of sectors like
housing and automobiles may have adverse impact on performance.

28.6 Effectiveness of Recovery Management, Asset Liability Management and
Risk Management may have its own impact on performance.

28.7 Competition from peer group and foreign banks may affect the
productivity.

For and on behalf of the Board of Directors

Place: Mangalore (J.M. Garg)

Date : 01-06-2010 Chairman & Managing Director