Annual Report - Bank of Maharashtra - 2009-2010

BANK OF MAHARASHTRA

ANNUAL REPORT 2009-2010

DIRECTOR'S REPORT

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



MANAGEMENT DISCUSSION AND ANALYSIS

1. MACRO ECONOMIC AND MONETARY ENVIRONMENT

1.1 Global Economy:

The , global economy is slowly recovering from economic slowdown
experienced in the wake of global financial crisis of 2008. Even though the
pace of recovery is faster than expected a couple of quarters back, it is
still fragile and narrow based. The growth has relied heavily on
performance of the emerging market economies (EMEs) led by China and India,
and the trend is expected to continue in 2010.

In the advanced world also, trend in economic recovery is divergent. While
the industries and services sector in the United States showed encouraging
growth in February 2010, about half of Europe is struggling to come out of
the recession. Even in the USA, analysts' are far from unanimous that the
economy is out of recession. Unemployment rates in the USA and European
countries are still high and raise question about the extent of recovery.
The International Monetary Fund (IMF) has projected unemployment rate to
remain high till 2011.

1.1.1 Outlook:

The International Monetary Fund (IMF) has revised upward its estimation of
growth in global output by one percentage point to 4,2 per cent in 2010.
World trade volume is expected to expand by 7 per cent in 2010 as against a
contraction of (-) 10.7 per cent in 2009. Improved world trade scenario
might, therefore, help the export led Asian economies to grow even faster.

Most of the recovery in advanced economies and the growth in EMEs are due
to enormous government expenditure. However, the generous debt funding of
public demand by Governments across the world pose a downside risk for
public debt management.

1.2 Indian Economy:

The Indian economy, along with the Chinese economy, is leading the global
economic recovery. Despite a likely reduction in agricultural output due to
below average monsoon and continuous fall in demand for exports for the
first half of the fiscal, output in the year ending March 2010 is expected
to grow between 7.2 and 7.5 per cent as compared to 6.7 per cent in 2008-
09. The stimulus measures, both fiscal and monetary, are seen to be
yielding positive result. As the economic growth has become broad based,
the concern about output growth has subsided. While in 2008-09, growth in
output was mainly on account of increase in government expenditure, this
year the growth is led by strong industrial performance and continued
resilience of the services sector. Taking cue from the early signals of
improved economic activities, the government of India has initiated
calibrated exit from its fiscal stimulus measures.

During the period April-February 2009-10, the Index of Industrial
Production & (IIP) increased by 10.1 per cent over the previous year. The
industrial sector has posted more than 15 per cent growth every month
during December-February 2009-10 over the corresponding months of previous
year. Capacity utilization in major infrastructure sectors is near or above
100 per cent. In addition to that, the increase in investment shows early
signals of improvement in demand. Investment demand as measured through
change in Gross Fixed Capital Formation has increased by 6.9 per cent
during nine months to December 2009 as compared to 4.4 per cent during the
previous year.

After showing contraction for twelve consecutive months, exports have shown
positive growth in October 2009 over the previous year. While it is
accepted that base effect is behind the turn around, there is improvement
in global demand also. Imports started growing once again since November
2009. Acceleration in non-oil imports since November 2009 indicates early
recovery in domestic demand.

Improvement in demand is also evident from the spiraling price level during
the second half of 2009-10. The consumer price indices remained high
throughout the year. Of late, the wholesale price index (WPI) is also
rising at a tad below the double digit rate. The high rate of WPI inflation
observed towards the end of 2009-10 is a matter of concern because it has
.become more generalized with contribution of non-food items increasing' to
53.3 per cent in March 2010 from negative at (-) 0.4 per cent in November
2009. Inflation expectations are further building up in view of pick up in
capital inflow and likely resurgence in non-food credit. Net capital inflow
in April-December 2009 was substantially higher at US$ 42 billion as
compared to US$ 7 billion in the corresponding period last year. The system
was flush with liquidity and as a liquidity tightening measure, the Reserve
Bank of India (RBI) raised CRR by 75 basis points (bps) during 2009-10 and
by further 25 bps in April 2010. SLR was restored to 25 per cent in
November 2009.

1.3 Domestic Banking Scenario:

Aggregate deposits of scheduled commercial banks (SCBs) increased by Rs.
6,54,798 crore during 2009-10'and stood at Rs. 44,21,639 crore as at
26.03.2010, showing a growth rate of 17.4 per cent as compared to'19.8 per
cent recorded during 2008-09. Due to poor monsoon rains, lack of private
consumption as well as global demand, besides excess industrial capacity,
growth in bank credit dipped to a low of 9.5 per cent as of 30.10.2009. The
trend of declining growth in non-food bank credit has been reversed since
then and the year has ended with a growth rate of 16.9 per cent, above the
16 per cent revised indicative rate set by the RBI. The data published by
the Reserve Bank of India reveals that during 2009-10 till 26.02.2010,
credit flow to agriculture was 24.4 per cent higher than that in the
previous year; While flow of credit to industry grew by about 20 per cent,
the growth in personal loan was very low at 4.7 per cent. Advances to the
priority sector grew by 22.2 per cent and that to small enterprises
increased by 22 per cent.

Investments of SCBs in Government and other approved securities have grown
by 18.5 per cent y-o-y as of 26.03.2010 to reach the level of Rs. 13,82,684
crore as against 20 per cent growth recorded during the corresponding
period in the previous year. The investments to deposit ratio of SCBs stood
at 31.27 per cent as of 26.03.2010 against 30.97 per cent a year ago.

1.4 Outlook for Domestic Economy:

India is fast returning to the high growth path. Economic growth
projections for 2009-10 have been constantly revised upwards with the
latest RBI expectation pegging it upto 7.5 per cent. With strong
indications of a normal monsoon in 2010, expectations of continued recovery
in domestic as well as global demands, good performance of the industrial
and services sectors, the RBI projects real GDP to grow at 8 per cent in
2010-11 with an upward bias. To support this kind of growth, non-food bank
credit is expected to grow at 20 per cent and aggregate deposits with banks
to increase at around 18 per cent.

The twin challenges in the coming days would be macroeconomic stability &
and financial sector development. The Reserve Bank of India expects WPI
based inflation to come down from 9.9 percent in March 2010 to about 5.5
percent in March 2011. Factors which loom large on the inflation front are
rise in net capital inflow and resultant growth in money supply, rising
international commodity prices, especially those of oil and metals and
expected resurgence in domestic demand. Given the budgeted net central
government borrowing in 2010-11 and inflation control as top most monetary
policy priority of the RBI, there could: be curtailment of domestic
liquidity in the next fiscal. The challenge before the banking industry is
to manage liquidity and ensure adequate credit flow to the core sectors of
the economy like agriculture, micro, small and medium enterprises (MSMEs),
infrastructure and export oriented units at affordable costs.

2. BANK OF MAHARASHTRA-2009-10:

The Bank has entered into Platinum Jubilee year from 16th September, 2009.
During the year, the Bank has been able to show good performance on most of
the business parameters and crossed the milestone business level of Rs.
1,00,000 crore.

2.1 Business:

Total business of the Bank stood at Rs. 1,04,230 crore as on 31.03.2010
registering a year on year growth of 19.71 per cent.

2.2 Deposits:

Driven by robust growth in current and savings account (CASA) deposits,
total deposits recorded growth of Rs.11,049 crore during the year to reach
Rs.63,304 crore, up by 21.14 per cent over the level of Rs.52,255 crore as
at the end of March 2009. Aggregate deposits recorded growth of 21.11 per
cent during the same period.

CASA deposits increased by 25.27 per cent and stood at Rs. 23,364 crore as
of 31.03.2010. CASA deposits constituted 36.91 per cent of total deposits
of the Bank.

2.3 Credit Deployment:

The Bank has put in place a lending policy with emphasis on qualitative
credit growth. The policy is in full conformity with the guidelines issued
by RBI and also the Priority Sector lending norms of the Government of
India. It enunciates the thrust areas, risk factors and also sets out
prudential exposure limits to facilitate qualitative expansion of credit.

The gross advances increased from Rs.34,817 crore as on 31.03.2009 to
Rs.40,926 crore as on 31.03.2010 with growth of 17.55 per cent.

The Credit Deposit Ratio (CDR) as on 31.03.2010 was 64.65 per cent.

2.3.1 Sectoral Deployment of Credit:

The Bank has endeavoured to maintain a diversified credit portfolio and
ensured credit disbursal across sectors and various segments -of the
economy. The Bank has continued its efforts to support core, manufacturing
and priority sectors as well as infrastructure projects, which serve to
drive economic growth. This focus of the Bank will continue in future, in
line with the national priorities in economic growth.

Sr. 31.03.2010 Percentage
No. Credit deployed Outstanding to total
Rs. in crore credit
outstanding


1. Industry 13655.60 33.37
Of which

i. Infrastructure 7308.48 17.86

ii. Chemicals, Dyes, Paints etc 566.86 1.39

iii. Petroleum 683.74 1.67

iv. Iron & Steel 170.62 0.42

v. Textiles 823.63 2.01

vi. Engineering 3353.64 8.19

vii. Other Industries 748.61 1.83

2. Agriculture 6249.98 15.27

3. Micro, Small and Medium 4069.41 9.94
Enterprises(MSME)

4. Other priority sectors 4282.64 10.46

5. Retail sector 4942.37 12.08

6. Housing 3627.27 8.86

7. Education 430.02 1.05

8. Exports 1088.32 2.66

9. Commercial real estate 1122.51 2.74

2.3.2 Credit Administration and Monitoring (CREAM):

The Bank has developed 'CREAM' system, a comprehensive database of all
borrowal accounts, which is now integrated with Core Banking Solution
(CBS). With implementation of CBS at all branches, 100 per cent borrowal
accounts are captured in CREAM.

CREAM serves the purpose of an effective Management Information System
(MIS) for proper Income Recognition and Asset Classification (IRAC) as per
RBI norms. The database helps to track the recovery/turnover in each
borrowal account and helps to pick up early warning signals for timely and
effective monitoring of the accounts, for retaining/improving asset
quality. The credit quality of borrowal accounts is further monitored
through periodical asset performance review and credit audit.

Credit monitoring aims at improving the credit quality, credit
administration, regulatory compliance and review of credit approval
process.

2.4 Asset Performance:

The Bank has achieved total cash recovery of Rs.254.27 crore in respect of
NPAs during the fiscal 2009-10, of which recovery in ledger balance is
Rs.174.04 crore, recovery in written off accounts is Rs.58.38 crore and
recovery in unapplied interest is Rs.21.85 crore. This is besides up-
gradation of NPAs to the tune of Rs. 54.49 crore into performing assets.

The Bank has registered 21 per cent improvement over the previous year's
recovery performance (Rs. 210.53 crore). This was possible due to intensive
follow up with defaulting borrowers for recovery of overdue amounts;
effective implementation of the provisions of SARFAESI Act; vigorous loan
recovery measures in respect of chronic NPAs; prompt execution of Recovery
Certificates obtained from DRTs for realization of the secured assets, etc.

The ratio of Gross NPAs to Gross Advances has increased from 2.29 per cent
as on 31.03.2009 to 2.96 per cent as on 31.03.2010 and the ratio of Net
NPAs stood at 1.64 per cent as on 31.03.2010 as against 0.79 per cent a
year ago.

2.5 Foreign Exchange Business and Export Finance:

During the year 2009-10, the Bank achieved Merchant turnover of Rs.16,002
crore and an Interbank turnover of Rs.1,78,289.42 crore. The outstanding
export credit as on 31.03.2010 was Rs.1,088.32 crore as against Rs.711
crore as on 31.03.2009. The International Banking branch at Mumbai and 28
other branches throughout the country cater to the foreign exchange
business needs of our customers. The Bank regularly conducts
Exporters'/Importers' meets at important centres. During the year, the Bank
has set up currency futures desk at its Dealing Room and started
proprietary trading in MCX-SX Exchange. A helpdesk has also been set up at
the International Division at Mumbai to cater to the requirements of the
clients with regard to Foreign Exchange. Straight-through-Processing (STP)
of Merchant Transactions was implemented in all 28 designated Fex Centres
during the year.

2.6 Investments:

The net investments of the Bank stood at Rs.21,324 crore as on 31.03.2010
as against Rs.18,382 crore as on 31.03.2009, registering growth of 16 per
cent. 77.94 per cent of the portfolio was held under Held to Maturity (HTM)
category, 22.05 per cent in Available for Sale (AFS) and balance 0.01 per
cent in Held for Trading (HFT) category. The net interest income from
investment increased by 31.12 per cent to Rs.1,297.90 crore from Rs.989.84
crore during the last year.

2.7 Borrowings:

The Borrowings of the Bank as on 31.03.2010 stood at Rs. 129.45 crore,
including refinance of Rs.61.47 crore availed from NABARD and SIDBI. The
total borrowings as at 31.03.2009 were Rs.190.01 crore.

2.8 Non Interest Income:

The Bank continued its focus on enhancing non-interest income which rose to
Rs. 591.24 crore during 2009-10 from Rs. 500.02 crore during 2008-09,
registering growth of 18.24 per cent over 2008-09. The treasury operations
have contributed about 34.55 per cent of the non-interest income. The Bank
has been looking at new avenues to shore up its income and has consolidated
its bancassurance, mutual fund distribution and government business. The
Bank has introduced new value added services like online share trading to
increase non-interest income.

2.9 Merchant Banking:

The Bank handled 69 issues of Commercial Paper amounting to Rs.12,120.10
crore for its clients as an issuing and paying agent during the year and
earned commission income of Rs.28.02 lakh.

2.10 Depository Services:

The Bank is a Depository Participant (DP) of Central Depository Services
India Ltd. (CDSL) since September 1999. With the establishment of MAHANET,
direct processing of debit transactions are accepted at all branches.
Account level queries relating to demat account balances, etc. are
available at all branches of the Bank. The Bank also provides free 'EASI'
facility (through CDSL) to view account position through Internet. Query
compliance facility is available at Mahabank Facilitation Centre from 7.00
a.m. to 11.00 p.m. on all working days. The Bank has introduced the MAHA e-
Trade (Online Share Trading) Service for its customers in association with
three brokers. The unique facility of Lien marking on funds / securities is
the salient feature of the MAHA e-Trade.

2.11 Bancassurance:

All branches of the Bank sell life insurance products of LIC of India and
Non-Life insurance products of United India Insurance Co. Ltd under
corporate agency arrangements. The Bank sold 15,497 life insurance and
64,907 general insurance policies during the year. The LIC of India
declared 68 branches of the Bank as 'Bima Bank' for their performance. The
Bank offers two group insurance schemes namely Maha Suraksha Deposit Scheme
for all deposit account holders and Maha Grih Suraksha for those availing
home loans to facilitate life cover, which also mitigates credit risk at a
very affordable cost.

2.12 Mutual Fund Activity:

The customers of the Bank have choice of investing in schemes of 16 select
Mutual' Funds at all branches of the Bank.

2.13 Credit Card:

The Bank has been in business of credit card in affiliation with Master
Card since 1991 through all its branches with card base of 73,210 as at
31.03.2010. This is in association with Bank of India.

2.14 Net Worth:

Net worth of the Bank has improved from Rs.1,749.39 crore as on 31.03.2009
to Rs. 2,114.46 crore as on 31.03.2010, mainly due to plough back of
profits.

2.15 Capital Adequacy Ratio:

As on 31.03.2010. in terms of Basel II norms, the capital adequacy ratio
stood at 12.78 per cent as against the minimum stipulated norm of 9 per
cent prescribed by RBI. The Tier I capital adequacy ratio stood at 6.41 per
cent as against RBI's prescription of 6 per cent.

2.16 Income, Expenditure and Profitability:

There has been a rise in total income from Rs. 4,791.58 crore at March 2009
to Rs. 5,326.81 crore at March 2010, i.e. a growth of 11.17 per cent during
the year. The details of income components are as under:

(Rs. in crore)
Particulars 2008-09 2009-10 Variation (%)

Interest/discount 3266.60 3369.63 3.15
on advances/
bills

Income on investments 989.84 1297.90 31.12

Interest on interbank 35.12 68.03 93.71
lending & other
interest

Total interest income 4291.56 4735.56 10.35

Non-interest income 500.02 591.24 18.24

Total income 4791.58 5826.81 11.17

Interest on deposits 2783.22 3183.06 14.37

Interest on borrowings 251.81 256.25 1.76

Interest expenditure 3035.03 3439.31 13.32

Staff expenses 579.62 655.50 13.09

Non staff expenses 383.40 417.45 8.88

Total non interest expenses 963.02 1072.95 11.41

Total operating expenses 3998.05 4512.25 12.86

Operating profit 793.52 814.55 2.65

Provisions and contingencies 418.36 374.97 -10.37

Net profit 375.17 439.58 17.17

2.17 Financial Ratios:

Particulars 2008-09 2009-10

EPS (Rs.) 8.71 10.21
Cost to income ratio (%) 54.82 56.85
Return on assets (%) 0.72 0.70
Return on equity (%) 21.93 21.43
Book value per share (Rs.) 39.74 49.11
Profit per branch (Rs. in lakh) 26.40 30.25
Profit per employee (Rs. in lakh) 2.75 3.21
Business per branch (Rs. in crore) 61.28 71.73
Business per employee (Rs. in crore) 6.39 7.62
Interest income as % to average working funds 8.29 7.50
Non int. income as % to average working funds 0.97 0.94
Interest spread as % to average working funds 2.43 2.05
Operating profit as % to average working funds 1.53 1.29
Staff expenses to average working funds 1.12 1.04
Dividend (%) 15.00 20.00

2.18 Dividend:

The Board of Directors have proposed a dividend of 20.00 per cent (i.e.
Rs.2.00 per share) for the year ended 31.03.2010.

3. ORGANISATION AND SUPPORT SYSTEM:

For the quick and efficient decision making, the Bank took steps in opening
specialized branches and introducing technology based services and support
systems. Three retail credit hubs were established during the year one each
at Pune, Mumbai and Delhi to facilitate robust and qualitative growth in
retail credit with special focus on housing loans.

Five Asset Recovery branches were also set up one each at Pune, Mumbai,
Nagpur, Kolkata and Aurangabad to provide greater thrust to the legal and
administrative measures for recovery of NPAs.

3.1 Branch Network and Expansion:

During the year, the Bank opened 33 new branches. As on 31.03.2010, the
total branch network comprised of 1453 branches spread over 22 states and 2
union territories. The branch network includes specialized branches for
foreign exchange, government business, treasury & international banking,
industrial finance, micro, small and medium enterprises including small-
scale industry, hi-tech agriculture, pension payment, pension processing,
retail credit and asset recovery. Area wise classification of branches as
on 31.03.2010 is given in the table below:

Sr. Classification As on
No. 31.03.09 31.03.10

1. Rural 520 526
2. Semi-Urban 262 266
3. Urban 271 281
4. Metropolitan 368 380

Total 1421 1453

The Bank has on hand 79 licenses for opening of new branches including 7
branches in the North East states of Assam, Arunachal Pradesh, Sikkim and
Meghalaya.

3.2 Human Resource:

As on 31.03.2010, the Bank had a human resource of 13,673 employees
comprising of 4,448 Officers, 6,356 Clerks and 2,869 Sub-staff.

3.2.1 Human Resource Development:

The Bank has put in place a comprehensive HRM Policy Document that provides
road map for acquiring need based and appropriate human resources, its
development and retention through training, job enrichment, reward,
recognition and accountability for performance, career progression and
welfare.

During the year, internal promotion process was carried out and 244 clerks
were promoted to Officer cadre.

682 employees ceased to be in service during the year on account of
retirement, resignation and other reasons.

The Bank recruited 176 Clerks and 312 Officers including 129 Specialist
Officers in various disciplines viz., Treasury, Risk Management, Marketing,
Human Resources, Agriculture, Security, Information Technology and Law. In
February 2010 the Bank has completed recruitment of 100 Post Graduates in
Business Management / Administration from the campuses of reputed Business
Management Schools. Out of total 489 persons recruited during the year, 166
persons belong to SC/ST and OBC categories.

The Schemes of reward and recognition to officers and staff for outstanding
contribution to business development, customer service includes membership
to the Chairman's Club, Better Managed Branch / Region Trophy, cash
incentives to all members of staff of Best Performing branches besides
deputation for training at prestigious institutions in India and abroad.

The Bank has been allocating upto 3 per cent of its net profits towards
schemes for the welfare of staff. The schemes are administered by a Trust.
The Bank has endeavoured to promote a healthy industrial relations climate
through fair, transparent and firm handling of issues keeping in view the
interest of ail stakeholders.

3.2.2 The Bank has been complying with the Reservation Policy of
Government of India. Special Cells at Central Office and all Regional
Offices are functioning to monitor the implementation of the Reservation
Policy and to redress grievances of SC/ ST/ OBC/ Physically Challenged
employees as well as Ex-servicemen. The Bank has designated two Chief
Liaison Officers at Central Office and has set up SC/ST Cells at each of
its 32 Regional Offices for the purpose. During the year, periodical
meetings were held with SC/ ST/ OBC Employees' Association to discuss
implementation of reservation policy and other constitutional safeguards
and also to facilitate involvement in business growth. Similar meetings
were also held at Regional level.

The numbers of employees belonging to different categories are as under:

S. EMPLOYEES NO. OF PERCENTAGE
No. EMPLOYEES TO TOTAL

1. Women 2954 21.61%

2. Physically Challenged 199 1.45%

3. SC Employees 2754 20.14%

4. ST Employees 951 6.96%

5. OBC Employees 617 4.51%

Rosters have been maintained as per Govt, guidelines and are regularly
inspected/ checked.

3.2.3 Training Activities:

The Bank has a Training system which facilitates attention to regular/
periodic assessment of skill gaps at various levels in relation to existing
and emerging business opportunities, Skill building in Credit, Forex,
Customer Relationship Management, Marketing of Products and Services;
Credit Monitoring and Recovery, Risk Management, Technology based1 Banking,
Branch Management. Complying with statutory, legal and policy requirements
and Preventive Vigilance received special attention during the year.

The training programmes were also held on thrust areas like financing SMEs,
retail lending, agriculture finance and rural development.

Presently, the Bank has an apex Training College with three training
establishments operating under it, one each at Mumbai, Nagpur and Pune.
Information Technology Training Institute and Computer Labs train the
officers and staff to utilize Information Technology for effective customer
service and efficient back office functions.

During the year, all the training establishments of the Bank together
conducted a total of 504 programmes, out of which 191 were for officers,
280 for clerks and 33 for sub-staff members.

A total of 10,047 employees participated in various training programmes
during the year, in-house and external, comprising of 5,044 officers, 4,366
clerks and 637 sub-staff members, of whom 2,036 were SC employees, 458 ST
employees and 1,358 women employees. 1,192 members of staff were trained to
handle the Core Banking Solution (CBS) software for efficient customer
service and back office function.

10 Executives/ Officers were deputed abroad for training programmes,
participation in seminars/ international meets etc. for facilitating global
experience and exposure to developments taking place in Banking and
Financial services.

A total of 397 staff members from 19 Regions were covered under Camp/
Locational Training.

The IT Labs across the country in addition to the existing training
infrastructure cater to the training needs of the end-users at the branches
and regional offices. During the year, 7,826 staff members were imparted
training under CBS.

Executive Development Programmes were also held during the year for
building skills and enhancing efficiency.

3.3 Information Technology:

The Bank has been leveraging the tools of Information and Communication
Technolgy for improving the operational capabilities and customer service.
The year 2009-2010 has been a landmark year in the chronicle of the Bank as
far as technology implementation and up-scaling are concerned. The Bank
completed the process of networking of all the 1,453 branches and bringing
them under Centralized Solution on February 2,2010, thereby achieving 100%
CBS. The Bank offers a bouquet of customer-centric IT products and services
as part of its endeavour to be a one stop mall for banking and financial
services.

3.3.1. Core Banking Solution (CBS):

In addition to covering all branches, the Bank has brought all the 32
Regional Offices under CBS fold.

The Bank has implemented FOREX module under CBS at all the 28 FEX centers
and e-Treasury at TIBD. The Anti Money Laundering (AML) Module has been
implemented at 1,258 branches generating various statutory reports. The
Bank is in the final stages of implementing other modules like e-Credit,
Performance Budgeting, Transfer Pricing, Asset Liability Management (ALM),
Customer Relationship Management (CRM) etc.

3.3.2 New Initiatives:

Welcome Kit - Issuance of Mahabank Insta Debit Card: Issuance of VISA ATM
Debit Card (Insta-Card) as Welcome Kit at the time of opening of accounts
for Savings and Current Accounts.

The Mobile Banking product Maha Mobile was launched offering services like
balance enquiry, view last three transactions, cheque status enquiry,
request for cheque book / statement of accounts, change MPIN and intra bank
fund transfer up to Rs.50,000 per day.

Maha E-Statement - Account statement on email: A customer centric product
Maha e-statement for sending weekly / monthly electronic statements for
saving, current, cash credit and loan accounts automatically to the
registered customers via e-mail.

SMS Alerts for transactions: Sending transaction alerts and reminders to
customers for the transactions done by them.

Online Share Trading - Maha e-Trade: For facilitating safe and easy online
share trading for its customers, the Bank has entered into an arrangement
with three vendors viz., M/s. Religare Securities Pvt. Ltd., M/s. Munoth
Securities and M/s. Enam Securities.

Online Shopping/e-Commerce through Net Banking: Facilitating e-commerce
transactions including online shopping, utility bill payments, airline
ticketing etc through the Internet.

Electronic Cheque Deposit System: Facilitating deposit of cheques for
collection and obtaining instant acknowledgement with cheque image has been
rolled out at 15 centers on a pilot basis.

Application Supported by Blocked Amount (ASBA): Facility to apply for
public offers, based on lien marking (without remitting the share
application money) as per SEBI guidelines has been extended to retail
investors.

Queue Management System for customers: An electronic queue management
system for streamlining the customer service at front-line counters has
been implemented for the customers at select branches in Pune, Nasik and
Delhi.

Implementation of CBS in Regional Rural Bank (RRB): As per directives of
the Government of India, the Bank has initiated steps to implement CBS in
the Maharashtra Gramin Bank, a RRB sponsored by the Bank.

3.3.3 Data Centre & Disaster Recovery Site:

The Bank has its own Data Center (CMM Level III) at Pune to take care of
the CBS infrastructure requirements with Disaster Recovery (DR) site at
Hyderabad. Disaster Recovery Drills were conducted twice during the year
and the systems have been tuned up to ensure business continuity under
various contingencies.

3.3.4 ATM Network:

The Bank's ATM Network of 345 ATMs is fully stabilized and VISA enabled.
Card base has crossed 12.66 lakh. Average cash dispensed per day is
Rs.13.00 crore.

The Bank has also joined National Financial Switch (NFS) Network for
broadening its ATM Network and enabling the customers to access more than
50,000 ATMs all over India.

Eleven ATMs are Bio-metric for the benefit of those customers, including
pensioners, who do not find the regular ATMs convenient. The Bank is in the
process of installing additional 75 ATMs during the Platinum Jubilee Year
celebrations.

3.3.5 Corporate Network:

The Bank has established its Corporate Network 'MAHANET' with classical
leased lines/ISDNs and VSATs. All branches, Regional Offices, Training
Colleges/Centers and Central Office are now connected. The Bank has used
VSATs (Pooled Bandwidth through VSAT connectivity) for networking 640 plus
rural and semi-urban branches during the year.

Applications like CBS, ATM Network, RTGS, Demat, INTRANET, Credit Risk
Rating, Online Tax Collection System (OLTAS), etc. are put to use through
MAHANET.

IP Telephones are extensively used through MAHANET at all the Regional
offices, CBS branches and Head office.

3.3.6 RTGS/NEFT:

Straight-Through-Processing (STP) has been introduced for RTGS/NEFT system
at all CBS branches facilitating inter bank funds transfer without manual
intervention.

3.3.7 Internet/Phone/SMS Banking:

The Bank has implemented the Net Banking suite-Internet Banking/Phone
Banking and SMS Banking with online and offline request processing and e-
payment of direct taxes. As on 31.03.2010, 52,060 users under Internet
Banking, 13,842 under Phone Banking and 20,777 users under SMS Banking are
utilizing the facility.

3.3.8 Information System Security Policy:

The Bank has put in place its Information System Security Policy (ISSP)
comprising of 32 different policy documents and the same are updated
periodically to keep pace with developments. The Policy document has been
circulated to all members of staff of the Bank for compliance. The policy
has been implemented at 1,113 branches.

3.3.9 Video conferencing:

MPLS Connectivity for Video Conferencing has been installed and
commissioned for better connectivity and quality conferencing. This
facility is being used for review meetings with Regional Heads, Managers of
strategically important branches and interface with officers and staff
attending training.

3.3.10 Business Process Reengineering (BPR):

As part of BPR, the Bank had implemented centralized clearing system
through 14 service branches already migrated into CBS and Centralized
Pension Payment System for Central Government Pensions. Other BPR
activities like Centralized Cheque Book Issuance, Personalized Cheque
Printing, and Centralized Customer Statement Printing and Dispatch would be
explored during the year 2010-11.

3.3.11 In-House Software Development:

The Bank is having a well-trained pool of software developers continuously
engaged in development of various systems as per the requirement of user
departments, Regional Offices and Central Office.

The major systems developed and implemented are Regional Office Software
(ROSW), HRM Software (Payroll and other modules), Branch Inspection
Software (BRAINS), Online Tax Collection System (OLTAS), Credit Risk Rating
System, PF System, INTRANET, ATM card tracking etc.

3.4 Vigilance:

Vigilance activity in the Bank is an integral part of the managerial
function. Its objective is to enhance the level of managerial efficiency,
effectiveness and to ensure a proper climate for an efficient
administration, where officials can perform their duties without fear or
favour.

Vigilance activity in the Bank recognizes the need for a judicious mix of
commercial decision making process, transparency and accountability.

Preventive Vigilance is an important aspect of vigilance. The Bank has
taken various measures for improving decision making, administration and
operations.

* In accordance with CVC directives, Vigilance Committees have been formed
at branches having staff of 20 and more, to review/monitor sensitive and
fraud prone areas and report abnormalities observed therein, if any.

* Communication is sent to all the branches/regions periodically educating
them about the 'modus operandi' adopted in various frauds and advising
precautions to be taken to guard against such incidents.

* 'Vigilance Awareness Week' is observed in the Bank during which period
meetings with staff and general public are held by branches/regions.
Lectures/talks by eminent personalities, emphasizing the need to be
vigilant in the present environment were arranged.

* Sessions on 'Preventive Vigilance' are included in the training
programmes conducted by the Staff College.

* 'Fraud Risk Management Policy' on prevention, detection, classification
and reporting of frauds including action to be taken, has been issued by
the Bank for the guidance and use of the branches and field functionaries.

3.5 Customer Service:

The Bank has over 13.2 million customers and full-fledged grievances
redressal machinery is in place to respond promptly to customer grievances.
Complaint Management Cells are operative in Central Office as well as in
Regional Offices to ensure guick redressal of grievances. The Committee of
the Board on Customer Service meets periodically to monitor the guality of
customer service, redressal of customer grievances and provide customer
satisfaction. The Bank level Standing Committee on Customer Service also
meets regularly to review customer service related matters and to make
improvements.

Regional Office Customer Service Committee and Branch Level Customer
Service Committee are also set up. A cross section of customers
representing depositors, corporates/ businessmen, senior citizens is
invited to the meetings to provide feedback and suggestions on schemes,
products and services.

The Bank has implemented all major recommendations of Goiporia Committee
and Dr. S. S. Tarapore Committee. The Bank has adopted policies/operational
procedures for Depositing and Collection of Chegues/ Instruments,
Compensation Policy in case of delay in collection of instruments or loss,
policy for collection of dues and repossession of security, Operational
Procedure for Settlement of Claims of Deceased Depositors. These policies/
procedures are displayed on the Banks website.

The Bank is also a member of the Banking Codes and Standards Board of India
and has adopted the Revised Code of Bank's Commitment to Customers-August
2009 and Bank's Code of Commitment to MSEs for implementation.

The Bank has in place internet based mechanism for inviting suggestions/
feedback on services from customers and for providing acknowledgement and
status of their feedback / complaint.

3.6 Information and Facilitation Centre:

Mahabank Facilitation Centre has been operating from Mumbai since June 2005
and can be accessed through two Toll Free Numbers which are 1800-222340 and
1800-220888. Toll Free Telephone Numbers have been made available at 12
major cities. During the year, 21,982 calls were received on our toll free
numbers relating to various products offered by the Bank, queries and
feedback on the Bank's services. During the year, 5,508 complaints were
received and redressed through this center.

An Information Facilitation Centre has been set up since July 2001 for
providing information on various schemes and products of the Bank and any
other information/assistance that may be required by customers and public.

3.7 Risk Management

3.7.1 General:

The Banking business is exposed to a wide array of risks as compared to
yesteryears and these risks create a charge over the capital of the Bank if
not managed properly.

The Bank has formulated a comprehensive Risk Management Policy to
effectively identify measure, monitor and control various risks in view of
their implications on the Bank's business growth and financial soundness.

Organizational set up of the Bank for risk management comprises of the Risk
Management Committee of the Board, Executive level committees for Credit

Risk Management, Market Risk Management, Operational Risk Management and
Asset Liability Management, to identify, measure and take steps to mitigate
the risks and monitor them.

3.7.2 Risk Management Systems:

3.7.2.1 Credit Risk:-

For better credit risk management, the Bank has put in place comprehensive
Lending Policy, Loan Review Pol icy and Risk Management Policy.

The Bank has also set up Credit Approval Grids at various levels and at
Treasury & International Banking Division (TIBD), Mumbai to provide
preliminary clearance through a committee approach on credit and investment
proposals, from the risk view point.

To evaluate the risk perception in a lending proposition, the Bank has put
in place an in-house developed Credit Risk Rating Framework (CRRF) as
desired under Basel II. The Bank has prescribed threshold ratings for entry
level exposures.

The Bank has undertaken migration analysis of credit risk rating and
estimated probability of default in line with Basel II requirements. Stress
testing results are evaluated periodically.

3.7.2.2 Market Risk:-

Interest Rate Risk is managed through prescriptions of Asset Liability
Management (ALM) Policy which is reviewed regularly. The Asset Liability
Management Committee (ALCO) of the Bank reviews the risk on a regular
basis.

For management of Liquidity Risk, review of structural liquidity and short
term dynamic liquidity is undertaken on an on-going basis. The Bank has put
in place a contingency plan for managing liquidity.

Investment Risk is managed through the prescriptions made in a
comprehensive Investment Management Policy & Investment Risk Management
Policy.

Foreign Exchange Risk is managed by the Bank by stipulating prudential
limits for open foreign exchange position, the aggregate gap position,
Daylight limit, Overnight limit, Net open overnight position, Stop loss
limit, Limit for undertaking swaps/ investment/ borrowing overseas, inter
bank exposure limits etc. These limits are monitored on daily basis.

The Bank is using Asset Liability Management system for studying and
analyzing the interest rate sensitivity, maturity and liquidity analysis of
assets and liabilities. Models like earnings at risk, duration and Value at
Risk are used for interest rate risk management.

The Asset-Liability Management Committee (ALCO) monitors liquidity risk,
interest rate risk and earnings risks at frequent intervals.

3.7.2.3 Operational Risk Management:-

The Bank has put in place Board approved policies for Business Continuity
Planning and Operational Risk Management. Policy on outsourcing facilitates
use of the expertise available in the market with adequate safeguards for
risks associated with outsourcing.

3.7.2.4 Basel II:-

In line with the RBI guidelines, the Bank has migrated to capital adequacy
under New Capital Adequacy Framework (Basel II) on 31.3.2009. The Bank has
provided capital as per Standardized Approach for Credit Risk, Standardized
Duration Approach for Market Risk and Basic Indicator Approach for
Operational Risk as per RBI guidelines. The Bank has entered into MoUs with
all the four designated external credit rating agencies, for rating of
corporate exposures, as required under Basel II and has also drawn a
roadmap for migrating to the advanced approaches under Basel II.

The Bank has put in place policy on Internal Capital Adequacy Assessment
Process (ICAAP) covering procedures for identification and measurement of
appropriate level of internal capital in relation to risks, to meet the
requirements of Pillar 2 of Basel II norms. The Bank has also put in place
the policies on Utilization of Credit Risk Mitigation Techniques,
Collateral Management and Disclosures, in line with Basel II Framework. The
Bank has adhered to Disclosure norms as stipulated in the guidelines of RBI
to meet Pillar 3 requirements.

Awareness of Basel II norms among staff is created and continuously
enhanced through training. Knowledge and skill levels of staff at Central
Office are periodically upgraded through participation in external
trainings, workshops and seminars.

3.8 Inspection and Concurrent Audit:

The Inspection and Audit system and various measures of internal control
adopted by the Bank ensure identification/assessment and mitigation of
operational risks.

3.8.1 Inspection of branches:

The Bank continued to adhere to the Jilani Committee recommendations and
inspected 1,055 branches during the year, covering 72.60 per cent of the
total branches of the Bank. Similarly, as per RBI guidelines under Risk
Based Supervision, the Bank has undertaken Risk Based Internal Audit [RBIA]
at all these 1,055 branches.

Conference of all inspecting officials and heads of inspection cells was
organized during September 2009 to update them on policies, procedures,
business environment, opportunities and challenges for banks, emerging
areas of risks and their role in alerting the top management of existing
and impending risks at branches and offices.

3.8.2 Surprise Inspection:

In pursuance of the Ghosh committee recommendations, surprise inspection
was carried out at 146 branches focusing mainly on high risk areas at the
branches.

3.8.3 Concurrent Audit:

300 Branches were subjected to Concurrent Audit during the year. These
branches covered 62.23 per cent of aggregate deposits and 77.30 per cent of
total advances of the Bank. Four Central Office departments were also
subjected to Concurrent Audit during the period.

3.8.4 Income & Expenses Audit:

Income & Expenditure Audit for the period October 2008 to September 2009
was carried out at 670 branches to identify and recover income leakages, if
any. Half yearly Expenditure Audit of all the Regional Offices was carried
out during the year.

3.8.5 Management Audit:

Management Audit of all 32 Regional Offices and 15 departments at Central
Office was carried out for assessing their effectiveness in terms of
supervision and controls.

3.8.6 RBI inspection under Section 35 of the Banking Regulation Act:

During the year 2009-10, RBI inspected 23 branches and 6 Regional Offices
under Section 35 of RBI Act.

3.9 Marketing and Publicity:

The Bank is utilizing the print and electronic media to create awareness
among customers, prospective customers and citizens at large about the
uniqueness of its services and to facilitate a distinct Brand of a
reliable, responsive banking institution.

During the year, the Bank launched new IT enabled services like Mobile
Banking and Maha-e-Trade etc. Besides the existing tie up with 15 mutual
funds, for sale of mutual fund products, the Bank established similar
arrangement with SBI Mutual Fund also.

A dedicated CASA campaign was conducted across India for mobilization of
Current and Savings accounts.

Mrs. Pratibha Devi Singh Patil, Her Excellency the President of India
launched the Bank's Platinum Jubilee Celebrations on 26th November 2009 at
Pune by unveiling the Platinum Jubilee Logo of the Bank and declaring
adoption of 75 backward villages across the country. The Bank would
endeavour to promote basic sanitation, health, education and conservation
of energy and water resources, self employment, besides agricultural best
practices and banking facility for all households in these adopted
villages. The event received wide coverage in the print and electronic
media, especially on the national television channel, Doordarshan.

The Bank has also organized cultural programmes by associating acclaimed
artistes in major cities and towns for customers and citizens as part of
the Platinum Jubilee Celebrations.

The fact of the Bank having networked all its branches through Core Banking
Solution has been highlighted in the electronic and print media in addition
to outdoor displays to market its anywhere, anytime banking capabilities.

3.10 Citizens' Charter:

The Bank has adopted the Citizens' Charter since 2000-01, which details the
duties and responsibilities of the Bank towards its customers and the
mechanism for redressal of customers' grievances. The Charter is displayed
at all the branches and on the website of the Bank. The Bank has also
adopted a Citizens' Charter on exchange of notes and coins in line with the
guidelines issued by the Reserve Bank of India.

4. SOCIAL BANKING:

4.1 Priority Sector Lending:-

It has been the constant endeavour of the Bank to facilitate equitable and
sustainable economic development by timely and hassle-free availability of
credit for productive purposes to Small and Marginal Farmers, Micro & Small
Enterprises, Retail Traders, Professional & Self Employed, Women
Entrepreneurs and entrepreneurs from economically weaker sections.

The outstanding advances under Priority Sector as of March 2010 aggregated
to Rs.14,232.26 crore, constituting 40.88 per cent of the Adjusted Net Bank
Credit of previous year against the stipulated minimum target of 40 per
cent.

The rise in Priority Sector Advances was Rs.1,996.26 crore over March 2009
in absolute terms.

4.2 Agriculture:

The Bank disbursed Rs.3,833.61 crore for agriculture and allied activities
during the year 2009-10. The outstanding advances to agriculture sector as
of 31.03.2010 were Rs.6,249.98 crore i.e. 17.95 per cent of Adjusted Net
Bank Credit.

The Bank undertook awareness/sensitization programmes for all the branches
for increasing advances to agriculture. To streamline the agricultural
lending and promote best practices among farmers, the Bank recruited 140
Agricultural Field Officers and 75 Agricultural Business Facilitators and
has placed them at strategic branches.

4.2.1 The Bank successfully implemented Agriculture Debt Waiver and Debt
Relief Scheme of the Government of India, by reaching out to 86,549
eligible small and marginal farmers for debt waiver involving Rs.219.19
crore. The number of farmers eligible for debt relief was 48,237.

4.2.2 Mahabank Kisan Credit Card (MKCC):

This scheme gained popularity especially in rural areas where it is being
propagated successfully and vigorously. The Bank has issued 3,32,965 Kisan
Credit Cards to farmers involving amount of Rs. 1,806.51 crore.

4.3 Micro, Small and Medium Enterprises (MSME):

SMEs are recognized as a major growth engine for the Indian economy. They
generate opportunities for direct and indirect employment by facilitating
use of natural resources and local skills to stem the tide of migration to
urban areas and promote low investment enterprises. Finance is made
available to viable enterprises at an attractive and low rate of interest.
On line enquiry portal is made available on the Bank's website during the
year.

A MSME care center has been set up at each of the 32 Regional Offices of
the Bank to handle MSE's problems. The Bank has adopted Simplified Loan
Application for MSEs as devised by IBA and the same is displayed on the
Bank's website. The Bank has also adopted Bank's Code of Commitment to
Micro and Small Enterprise and it is displayed on the Bank's website.

The Bank's lending to Micro, Small and Medium Enterprises which was at the
level of Rs.3,073.92 crore as at 31.03.2009, increased to Rs.4,069.41 crore
as at 31.03.2010, which translates into a y-o-y growth of 32.39 per cent.
This includes fresh credit facilities to the tune of Rs.2,022.50 crore
extended to MSMEs between April 2009 and March 2010 under the special
package announced by the Government of India in September 2008.

The Bank was presented with the Y. B. Chavan Memorial Award by the
Maharashtra Industrial and Economic Development Association, at the
Maharashtra Economic Summit held at Mumbai on March 12, 2010.

4.3.1 Maha-Entrepreneur:

Under the scheme, the Bank is providing for supporting SMEs in rural areas
finance up to Rs.100.00 lakh to Micro and Small Enterprises without
Collateral Security and/ or Third Party Guarantee.

Accounts under the scheme are covered under Credit Guarantee Fund Scheme
for Micro, Small and Medium Enterprises of Government of India. The Bank is
bearing the entire guarantee fee and 50 per cent of annual service fee,
which is to be paid to the Trust under CGFMSE. The Bank sanctioned loans of
Rs. 154.15 crore to 3,293 borrowers under this scheme upto March 2010.
Coverage under Credit Guarantee Fund Scheme has been more than doubled in
FY 2009-10.

5. IMPORTANT SCHEMES/PROJECTS OF THE BANK

5.1 Retail Financing:

The Bank is providing retail loans to individuals who are salaried persons,
professionals, businessmen and pensioners for purchase of consumer
durables, two/four wheeler vehicles and also for other personal needs.
During the year 2009-10 the Bank has opened three Retail Credit Hubs one
each at Pune, Mumbai and Delhi. Besides this, the Bank also started six
Retail Loan Cells at Nasik, Nagpur, Indore, Thane, Aurangabad and
Bangalore. The retail lending portfolio grew by 12.11 per cent during the
year.

5.2 Housing loan to public:

The Bank has in place Housing Loan Scheme to meet the needs of all economic
segments including NRIs. Financing housing in rural and urban parts of
India is a thrust area. The Scheme is simple and customer-friendly.

The Bank is also implementing Golden Jubilee Rural Housing Scheme of the
Government of India in rural areas having population not exceeding 50,000
(as per 1991 census). The Bank's lending to housing sector has grown by
22.58 per cent during the year to reach the level of Rs.3,627.27 crore
(outstanding) as at 31.03.2010.

5.3 Model Educational Loan scheme:

With the objective of ensuring that no deserving student is denied an
opportunity to pursue higher education for financial reasons, the Bank
implements a Model Educational Loan Scheme. As of March 2010, the Bank had
lent Rs. 430.02 crore to 22,463 students. The Bank has provided the

facility of submission of application for education loan through web-access
(on line).

5.4 Aadhar Scheme for Pensioners:

The Bank has introduced a special scheme called 'Aadhar' for catering to
the personal credit needs of the pensioners. This scheme has evoked an
encouraging response from the pensioners and has enabled them to meet their
financial needs such as medical expenses, travel plans etc. Outstanding
advances under the Scheme stood at Rs.96.69 crore as on 31.3.2010.

5.5 Finance for Non-conventional Sources of Energy:

The Bank has been implementing the scheme for financing non-conventional
sources of energy in tune with the Government's policy by providing
interest rate subsidy in respect of loans given for purchase of Solar Water
Heaters since September 1998. During the year, the Bank has sanctioned 1416
cases with loans amounting to Rs.5.74 crore under the scheme.

5.6 Micro Finance:

The Bank has always recognized the importance of credit to rural and urban
poor for taking economic activity. The SHGs have proved to be effective
instruments for empowerment of women. The Bank has actively financed non-
traditional activities of various Self Help Groups (SHGs).

As on 31.03.2010, there were 75,015 SHGs formed by the Bank, out of which
73,208 SHGs had availed aggregate financial assistance of Rs.149.10 crore
from the Bank. Repayment of these loans has been satisfactory and the Bank
continues to encourage lending to SHGs.

5.7 Swarna Jayanti Shahari Rozgar Yojana (SJSRY) (Golden Jubilee Urban
Employment Scheme):

The Bank has been implementing the scheme since 1997 and during the year,
the Bank sanctioned loans to 1,704 beneficiaries under the scheme.

5.8 Assistance to SC/ST Category:

The Bank has been actively extending finance to SC/ST beneficiaries through
various schemes. Total finance as of March 2010 to SC/ST beneficiaries
stood at Rs.687.77 crore, covering 80,957 beneficiaries.

5.9 Advances to Minority Community:

A special cell has been set up at Central Office to review and ensure
smooth flow of Credit to minority community. As of March 2010, the
outstanding advances to minority communities were at Rs.770.93 crore to
60,306 beneficiaries.

5.10 Women Empowerment:

Ever since the year 2001 (the 'Year of Women'), the Bank is implementing
the 13-point action plan in letter and spirit. The total credit extended to
women beneficiaries amounted to Rs. 1,796.88 crore covering 1,73,537 women
borrowers as on 31.03.2010.

6. CORPORATE SOCIAL RESPONSIBILITY:

* On the eve of the Bank's Platinum Jubilee celebrations during the year
2009-10 the Bank has selected 75 villages under 'Mahabank Platinum Gramin
Unnati Prakalp' (Mahabank Platinum Village Development Programme) for their
overall socio-economic development, with emphasis on cleanliness, health,
education, drinking water, housing, financial inclusion, rain water
harvesting and water shed development programmes. These villages are
located in the states of Maharashtra, Karnataka, Andhra Pradesh, Madhya
Pradesh, Goa, Chhattisgarh and Gujarat.

* The Rural Development Centres at Hadapsar and Bhigwan in Pune District of
Maharashtra have been undertaking various developmental activities for the
benefit of farmers viz. Lab to Land Project, Re-development of Saline
Soils, Soil Testing and offering advice on the use of fertilizers.

* A Trust viz. Mahabank Agricultural Research and Rural Development
Foundation (MARDEF) undertakes various projects and village improvement
programmes. MARDEF is imparting training to farmers on various subjects in
agriculture, e.g. dairy, emu farming, goat rearing, best practices in grape
farming, application of fertilizers, agriculture credit schemes, etc.

* Financial Inclusion: As a part of corporate social responsibility,
Financial Inclusion has been rolled out at Nandurbar, Malhar Peth (Satara)
and Parvati (Pune) in Maharashtra.

* 'Mahabank Agri Bulletin' is published every quarter with focus on new
trends in agriculture. An interactive access to farmers/villagers is
provided at doorstep in Pune and Satara districts through 'Krishi Mitra', a
mobile van carrying Touch Screen Facility and the officials accompanying
the vehicle provide information to farmers on various schemes of the Bank.

* The Bank has established Mahabank Self Employment Training Institute
(MSETI) for providing training to rural youth and women to enable them to
acquire skills for self-employment through small business enterprises. The
Institute has centres at Pune, Nagpur, Aurangabad, Amravati and Nasik. The
Institute has so far imparted training to 5,742 youths and has achieved
settlement rate of 71 per cent.

* Gramin Mahila Va Balak Vikas Mandal (GMVBVM), an NGO formed by Bank of
Maharashtra and National Institute of Bank Management is actively involved
in formation, nurturing, training and ensuring linkage of SHGs to Bank
Credit. The GMVBVM also helps SHGs in marketing products of SHGs through
outlets established in Pune City under the name 'SAVITRI'. The GMVBVM
guides and actively helps SHGs for selection and purchase of raw materials
and quality production.

* The Bank started a novel project for counseling farmers in six districts
of Vidarbha area in Maharashtra State on different subjects, like
agriculture, animal husbandry etc. under the 'Mahabank Vidarbha Shetkari
Jagruti Abhiyan'.

7. Lead Bank Scheme

7.1 The Bank has Lead Bank responsibility in six districts of Maharashtra
State viz. Aurangabad, Jalna, Nasik, Pune, Satara and Thane. Every year
credit plans for the districts are prepared and implemented with the
cooperation of other banks. Performance during the year in respect of our
lead districts was 116 per cent of the targets.

7.2 State Level Bankers' Committee:

The Bank is the Convenor of State Level Bankers' Committee (SLBC) for the
State of Maharashtra and the Bank monitored implementation of State Annual
Credit Plans and Government sponsored schemes in the state.

In order to speed up the work of identification of villages for providing
banking services in every village having population of over 2000, a meeting
of Lead District Managers was convened by SLBC on 24.02.2010 at Pune.
Accordingly, 4,348 un-banked villages having population over 2000 were
identified in 33 districts of Maharashtra and were allocated among banks to
extend banking facilities and achieve Financial Inclusion.

As per the recommendations of High level Committee for review of Lead Bank
Scheme, SLBC has formed 11 Sub-Committees on various subjects for effective
implementation of Lead Bank Scheme.

During the year, three SLBC and two Steering Committee meetings were held.

7.3 Road Map on Financial Inclusion:

The RBI in collaboration with Government of India has introduced the
concept of Financial Inclusion which envisages delivery of banking services
at an affordable cost to the vast sections of disadvantaged and low income
groups so as to ensure inclusive growth.

The Bank has drawn up a road map to provide banking services through a
banking outlet in every village having a population of over 2000, and such
banking services may be provided through the various forms of ICT-based
channels.

The Bank has identified 1,215 villages in 7 states and proposes to provide
Banking services using ICT through existing 484 branches, new branches
and/or Business Correspondents by 2012.

8. SUBSIDIARIES/JOINT VENTURES AND SPONSORED INSTITUTIONS

8.1 The Maharashtra Executor & Trustee Company Pvt. Ltd. (METCO):

The Company was established in 1946 as a wholly owned subsidiary of the
Bank to provide services auxiliary to banking, such as:

* Drafting & Execution of will

* Management of private trusts

* Management of public charitable trusts

* Management of investments & house properties as attorney

* Guardianship of minor's property

* Consultation for sale/purchase of property

* Filing of Income-Tax Returns for individuals

During the year 2009-10, 20 new Trusts were added to its client base,
bringing the total number of Public and Private Trusts to 1,051 under its
management. New wills added during the year were 59 bringing the total
number of Wills in custody and execution to 979.

The Company is presently managing 116 properties under Power of Attorney.
The Company also acts as Trustee in respect of 137 policies under Married
Women's Property Act and as Court appointed Guardian for minor's property
in 10 cases.

8.2 Regional Rural Banks:

Bank of Maharashtra had originally sponsored three RRBs viz., Marathwada
Gramin Bank, Aurangabad-Jalna Gramin Bank and Thane Gramin Bank. As per the
policy of the Government of India, process of amalgamation of RRBs was
initiated and accordingly, during the year 2007-08, amalgamation of two
erstwhile RRBs named Aurangabad - Jalna Gramin Bank and Thane Gramin Bank
took place and Maharashtra Godavari Gramin Bank (MGGB) came in to existence
w.e.f. March 25, 2008.

In the second phase during 2009-10, the erstwhile Marathwada Gramin Bank
(MGB) and Maharashtra Godavari Gramin Bank (MGGB) were merged and a new
entity named 'Maharashtra Gramin Bank' came into existence on July 20, 2009
with Head Quarters at Nanded (Maharashtra).

In view of the above, Bank of Maharashtra has now only one RRB, covering 16
of the 33 districts in Maharashtra with 323 branches. The Sponsor bank has
initiated necessary steps to bring all the brandies under CBS by September
2011.

9. PROGRESSIVE USE OF OFFICIAL LANGUAGE:

The Bank received 2nd Indira Gandhi Rajbhasha Shield at the hands of Her
Excellency the President of India on 14.09.2009 at New Delhi for better use
of Hindi.

The Bank is the Convenor Bank for Town Official Language Implementation
Committee (TOLIC) in Pune, Mumbai and Solapur. Meetings of these committees
were held regularly during the year.

The TOLIC at Mumbai and Pune have secured first and third prizes
respectively from the Rajbhasha Vibhag, Ministry of Home Affairs, Govt, of
India on 27th March, 2010.

The Bank's House Magazine secured Second Prize under the Reserve Bank of
India Bilingual House Magazine competition for the year 2008-09.

The Bank also received First Prize under Reserve Bank of India Rajbhasha
Shield Scheme for both 'A' and 'B' regions (predominantly Hindi speaking)
and Fourth Prize for C region for the year 2007-08 at a function held at
Mumbai on 03.06.2009 for excellent use of Hindi.

10. DIRECTORS' RESPONSIBILITY STATEMENT

The Directors confirm that in the preparation of the annual accounts for
the year ended 31.03.2010:

* The applicable accounting standards of the Institute of Chartered
Accountants of India, 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, are consistently applied and proper disclosures are
made for changes, if any;

* 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 the profit of the Bank for the year;

* Proper and sufficient care was taken for 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.

11. CHANGES IN THE BOARD OF DIRECTORS

During the year 2009-10, the following changes took place in the Board of
Directors:

Shri. R.K. Deshpande ceased to be the Director w.e.f 3rd July, 2009 on
completion of tenure.

Shri. D.R. Tuljapurkar ceased to be the Director w.e.f. 24th September,
2009 on completion of tenure.

The Board of Directors place on record their sincere appreciation for the
valuable contribution made by the outgoing Directors.

12. ACKNOWLEDGEMENTS

The Board of Directors wish to express sincere thanks to the Government of
India, the Reserve Bank of India, the Securities and Exchange Board of
India, Insurance Regulatory and Development Authority, Indian Banks'
Association and Stock Exchanges for their valuable guidance and support; to
the customers and shareholders for their patronage; to the correspondents
and associates for their co-operation and to all the members of staff of
'Mahabank' for their unstinted commitment and contribution to the growth
and development of the Bank.

For and on behalf of the Board of Directors,

Pune (Allen C.A. Pereira)

30th April, 2010 Chairman and Managing Director