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DIRECTORS’ REPORT

1. ECONOMIC SCENE IN FY16 & OUTLOOK FOR FY17

1.1 OVERVIEW OF INDIAN ECONOMY & OULTOOK

Economic growth is projected to dip marginally in FY16 due to slowdown in public investment, stressed corporate balance sheets and declining exports. GDP grew at an annual rate of 7.3% in Dec'15 quarter as compared to 7.4% in Sep'15 quarter and for FY16, it is projected at 7.6%.

Consumer price inflation (CPI) has evolved along the projected trajectory by the RBI for Jan'16 and the target was met with a marginal undershoot. It fell to a six–month low of 4.83% in Mar'16 from 5.18% in the previous month. Stability in inflation is expected to continue during this year aided by stable oil prices in the near term and the overall positive sentiment in the domestic market in lieu of expectations of a normal monsoon. The RBI expects CPI inflation to decelerate modestly and remain around 5% during 2016–17 with small variations. Exports continued to decline for the sixteenth month in Mar'16 by 5.5% due to falling world prices for commodities, including metal and petroleum products. It is expected to remain weak due to continued moderation in growth in China and the general slowdown in emerging markets economies.

Current account deficit (CAD) fell further to 1.3% of the GDP or its value stood at US$ 7.1 billion in the third quarter ending Dec'15, which is lower than US$ 8.7 billion or 1.7% of GDP in the preceding quarter.

After three straight months of fall, the Index of Industrial Production (IIP) posted a modest expansion of 1.99% in output in Feb'16 as compared to –1.48% in the previous month.

Improvement in consumption demand in both urban and rural areas is expected to drive the growth in manufacturing output while capacity additions and govt. initiatives are likely to give a boost to the electricity and mining sectors. The Seventh Pay Commission awards are expected to further bolster urban demand in FY17. Further, prospects of normal monsoon after two consecutive droughts are expected to prop up rural demand.

The uneven recovery in economic growth in FY16 is likely to strengthen gradually in FY17, assuming a normal monsoon due to the receding El Nino effect and also, a boost in private consumption from the implementation of the 7th Pay Commission and the OROP and along with the continuing monetary policy accommodation. In the light of these, the RBI has projected the GVA growth for FY17 at 7.6% with risks evenly balanced out. Asian Development Bank and IMF have forecasted India's growth at 7.4% and 7.5% respectively in FY17.

Additional steps in relaxing long–standing supply bottlenecks, especially in the mining and power sectors, as well as further labour market reforms to increase labour market flexibility in the formal sector will be crucial in achieving faster and more inclusive growth. Higher levels of public infrastructure investment and government measures to reignite investment projects would help crowd–in private investment.

1.2 OVERVIEW OF GLOBAL ECONOMY & OUTLOOK

In 2015, global economic activity remained subdued. Growth in emerging market and developing economies, while still accounting for over 70% of global growth– declined for the fifth consecutive year, though a modest recovery continued in advanced economies. Three key transitions continue to influence the global outlook: (1) the gradual slowdown and rebalancing of economic activity in China away from investment and manufacturing toward consumption and services, (2) lower prices for energy and other commodities, and (3) a gradual tightening in monetary policy in the United States.

Overall, financial conditions within advanced economies remained very accommodative. Prospects of a gradual increase in policy interest rates in the United States as well as bouts of financial volatility amid concerns about emerging market growth prospects have contributed to tighter external financial conditions, declining capital flows, and further currency depreciations in many emerging market economies.

The baseline projection for global growth in 2016 is a modest

3.2 percent, broadly in line with last year and a 0.2 percentage point downward revision relative to the January 2016 World Economic Outlook Update. The recovery is projected to strengthen in 2017 and beyond, driven primarily by emerging market and developing economies, as conditions in stressed economies start gradually to normalize. But uncertainty has increased and risks of weaker growth scenarios are becoming more tangible. The fragile conjuncture increases the urgency of a broad–based policy response to raise growth and manage vulnerabilities.

Commodity markets pose two–sided risks. On the downside, further declines in commodity prices would worsen the outlook for already–fragile commodity producers and increasing yields on energy sector debt threaten a broader tightening of credit conditions. On the upside, the recent decline in oil prices may provide a stronger boost to demand by oil importers than currently envisaged, including consumers' possible perception that prices will remain lower for longer.

1.3 BANKING OVERVIEW & OUTLOOK

The RBI, in its first bi–monthly policy 2016–17 announcement, has introduced a slew of measures to address the liquidity condition in the banking system apart from reducing the repo rate by 25 bps from 6.75% to 6.50%. The change in stance on maintaining liquidity closer to a neutral position rather than a deficit and the halving of the policy rate corridor would also aid in softening interest rates, at least in the short term.

The reduction in small savings rates by the central government has brought them at par with the term deposit rates offered by the banks. This will help banks to reacquire accounts especially that of pensioners and new customers as well. Also, substantial refinements in the liquidity management framework and the introduction of marginal cost of funds based lending rate (MCLR) is expected to improve policy transmission. Your Bank has already implemented the MCLR framework.

Aggregate deposits Y–o–Y growth for SCBs as a whole declined to 9.91% as on 18th Mar'16 from 11.03% a month ago. On the other hand, credit off take marginally slowed by 11.34% in the same period from 11.62% a month ago. In the current financial year (FY17), marginal improvement in consumer sentiments is expected on account of normal monsoon which will boost rural demand and implementation of 7th Pay Commission and OROP. These measures will provide a fillip to the industry to continue in expansionary mode on the back of new orders, including exports.

The Indian economy is on the brink of a major transformation with several policy initiatives set to be implemented shortly.

Enhanced spending on infrastructure, speedy implementation of projects and continuation of reforms are expected to provide further impetus to growth. All these factors suggest that banking sector is also poised for robust growth as the rapidly growing business would turn to banks for their credit needs.

2. PERFORMANCE OF ALLAHABAD BANK

The performance of the Bank is to be analyzed concomitantly with the aforesaid macroeconomic and banking environment during FY16.

2.2 PERFORMANCE HIGHLIGHTS

• Total business of the Bank increased to Rs. 358,352 crore as on March 2016 as against Rs. 346,519 crore in previous year, registering a Y–o–Y growth of 3.41%.

• Operating profit stood at Rs. 4134 crore as on Mar'16.

• Total deposits of the Bank increased to Rs. 200,644 crore during Mar'16 from Rs.193,424 crore last year, thereby registering a Y–o–Y growth of 3.73%.

• Gross credit surged to Rs. 157,707 crore during Mar'16 from Rs. 153,095 crore last year. On a Y–o–Y basis, it increased by 3.01%.

• Credit– Deposit ratio stood at 79.43% as on March 2016.

• Retail credit surged to Rs.25,894 crore, recording a Y–o–Y growth of 19.20%.

• Non–Fund Non–Interest Income during FY16 stood at Rs. 1220 crore as against Rs.1137 crore last year.

• Capital Adequacy Ratio stood at 11.02% as on 31.03.2016 under Basel III norms.

2.3 CAPITAL & RESERVES

During FY16, the Bank has issued and allotted equity shares of face value of Rs.10 each as under:

Consequently, paid up capital of the Bank has increased to Rs. 613.80 crore and shareholding of the Govt. of India (GOI) stood at 61.38% as on 31.03.2016.

Further, the Bank has received an amount of Rs. 690 crore from GOI on 30.03.2016 towards their further capital infusion in the Bank for FY16 by way of preferential allotment of equity in favour of GOI. As preferential issue & allotment of shares to GOI against their said capital infusion has to be made in compliance with the SEBI (Issue of Capital & Disclosures Requirements) Regulations, 2009, the Bank is maintaining the capital infusion fund received from the GOI as "Share Application Money pending allotment" as on 31.03.2016.

However, with specific permission of RBI vide their letter DBR. No. BP. 12713/ 21.01.002/2015–16 dated 06.04.2016, the Bank has included the entire amount of capital infusion fund received from GOI on 30.03.2016, into its Common Equity Tier 1 (CET 1) capital as on 31.03.2016.

The reserves and surplus went up to Rs.13,450.23 crore as on 31.03.2016 from Rs.12,071.40 crore as on 31.03.2015.

2.4 DIVIDEND

The Board of Directors have not recommended any dividend for FY16.

3. BUSINESS OVERVIEW

The Bank's total business reached a level of Rs. 3,58,352 crore as on 31.03.2016, thereby registering a Y–o–Y growth of 3.41% and an absolute increase of Rs. 11,832 Crore.

3.1 DEPOSIT MOBILISATION

Total deposits of the Bank showed a growth of 3.73% to Rs. 200,644 crore as on 31.03.2016 as against a growth of 1.35% a year ago. Although the Bank has continued to shed part of high cost bulk deposits and CDs during FY16, still it could register a higher Y–o–Y growth as against the previous year. SB deposits grew by 11.72% to Rs. 62,514 crore as on 31.03.2016, constituting 31.49% of aggregate deposits. The Bank lay emphasis on CASA deposits mobilization, especially on Savings Bank A/c opened per branch per day as result of which CASA ratio improved to 36.28% as on 31.03.2016.

3.2 CREDIT DEPLOYMENT

Total advances of the Bank went up by 3.01% to Rs. 157,707 crore as on 31.03.2016. Credit–Deposit ratio stood at 79.43% as against 79.60% last financial year. Your Bank has adopted the Marginal Cost of Funds Based Lending Rate, which will be the internal benchmark to calculate interest on advances as per RBI guidelines w.e,f. 01.04.2016. Yield on advances for the Bank stood at 10.01% as on 31.03.2016 as against 10.91% during last fiscal.

The Bank has major thrust on faster delivery and adoption of best practices in credit administration. During the year, efforts were made to improve the speed of decision making without compromising on quality. As a part of its ongoing business strategy to improve the quality of assets, the Bank analyzes the prevailing position, problems foreseen in near future and identifies weaknesses/ potential defaults at any stage. This enables the Bank to take corrective steps to prevent impairment in credit quality, which includes restructuring in deserving cases.

3.2.1 RETAIL CREDIT

The portfolio under Retail Credit as on 31.03.2016 stood at Rs. 25,894 crore as against Rs. 21,723 crore a year ago, registering Y–o–Y growth of 19.20%. The Bank gave thrust on retail lending in FY16. As a result, the share of retail credit portfolio against Gross Credit increased to 16.42% in FY16 from 14.19% during last fiscal. Housing Loan, a key constituent under Retail Credit grew at a pace of 27.39%.

Going forward, the Bank is looking at a growth of 20% in the retail credit portfolio. Also, major thrust on loans having low capital requirement like housing loan, gold loan, etc will continue to be given. The Bank has also opened additional 9 Centralized Retail Banking Boutiques (CRBBs) at different centres during FY16. Your Bank has now a total of 55 CRBBs spread over different parts of the country specially catering to specified retail loans for quick & hassle free disposal.

3.2.2 PRORITY SECTOR CREDIT

• Priority Sector Credit increased to Rs.62,695 crore as on 31.03.2016 from Rs.53910 crore as on 31.03.2015, registering Y–o–Y growth of 16.30%. The Bank has comfortably achieved the norm of 40% of ANBC by reaching 42.69% of ANBC as on Mar'16.

• Agriculture Credit increased from Rs.24,680 crore as on Mar' 15 to Rs.26,827 crore as on Mar'16, registering an absolute Y–o–Y growth of 8.70%. Bank has achieved 18.27% of ANBC as on Mar'16.

• The Bank's performance under Priority Sector and Weaker Sections as on 31.03.2016 is presented below:

3.2.3 RUPAY KISAN CARDS ( RKC )

• A sum of Rs.5641 crore was disbursed by the Bank during FY16 in 5.69 lacs number of KCC accounts out of which disbursal of Rs.2359 crore was made in 1.74 lacs fresh KCC accounts.

• Bank is now processing all KCC loan applications under Akshay Krishi–Kisan Credit Card Scheme digitally.

• RuPay Kisan Card providing ATM facility in KCC accounts has been launched on 09.02.2013. As per instructions of Government of India, the Bank has started issuing RuPay Kisan Cards to all eligible KCC account holders.

• Bank has issued 575271 Cards during this Financial Year.

3.2.4 MSME SECTOR FINANCING

Credit to Micro,Small and Medium Enterprises (MSME) grew from Rs. 22359 crore as on March 2015 to Rs. 27798 Crore as on March 2016, registering an absolute Y–o–Y growth of Rs. 5439 crore (24.33%).

3.2.5 COLLATERAL FREE LOANS VIS–A–VIS COVERAGE UNDER CGTMSE

The Bank has given much thrust on (credit delivery) to collateral free loans covered under CGTMSE. As on 31.03.2016 collateral free loans to Micro and Small Enterprises under CGTMSE was Rs.1653 Crore.

3.2.6 BANK'S EXPOSURE TO MICRO FINANCE INSTITUTIONS (MFIs)

As on 31.03,2016, total outstanding credit to MFI is Rs.98.83 crores in 13 MFI accounts.

3.2.7 LEAD BANK SCHEME:

• Bank is having Lead Bank responsibility in 17 districts, 13 in Uttar Pradesh, 2 in Jharkhand and one each in Madhya Pradesh and West Bengal.

• The Bank disbursed Rs.4053 crore under Priority Sector Credit against a target of Rs.4161 crore under District Credit Plan 2015–16 achieving 97.40% of the target.

• As Lead Bank, your Bank took initiatives in implementing all State and Central Government programmes including PMJDY, APY & other social insurance schemes.

3.2.8 Pradhan Mantri MUDRA Yojana

Under the scheme, Bank has disbursed total Rs.1768 crore in 160041 accounts as on 31.03.2016.

3.2.9 School Bank Champ Project

Under the project, total 2557 schools have been mapped by our Bank across pan India. The Bank has organized 2489 literacy camps under the project and opened 85400 children accounts as on 31.03.2016.

3.3 FEE BASED INCOME

The Bank has earned fee based income of Rs.1220 crore in March 2016 as compared to Rs.1137 crore last year, registering a growth of 7.32%. The Bank has achieved 86% of its total budget of earnings from TPP in March 2016. The total income across services like TPP, DP & online trading and CMS has amounted to Rs. 28.04 crore in Mar'16 as compared to Rs. 24.58 crore in Mar'15.

3.4 OFFICES & BRANCHES

The Bank is having 3209 domestic branches and one overseas branch at Hong Kong. Out of 3209 domestic branches, 1307 are at Rural, 720 at Semi–urban, 656 at Urban and 526 at Metropolitan Centres. A total of 108 new branches have been opened during FY16, out of which 50 are at Rural, 31 at Semi Urban, 20 at Urban and 7 at Metro centers. The rural branches includes opening of 36 branches in unbanked rural centres. Further, 6 Metro branches have been merged to consolidate business of close by located centres.

3.5 INTERNATIONAL BANKING

The Bank carries out its international business in India through its 53 authorised/ designated branches, which includes five international branches & through its overseas branch at Hong Kong. The Bank also has a centralised fully equipped forex dealing room at FCTM Branch Mumbai which handles forex transactions in 9 currencies and maintains 14 Nostro accounts and 1 Vostro account. Export Credit of the Bank as on 31.03.2016 stood at Rs. 2539.80 crores. The Bank is taking all steps to increase the credit flow to exporters. Exporters' meets are arranged at various centres to explain various facilities available to them. The Bank maintains correspondent relationship with prime banks abroad. The Bank is also catering to the needs of Non–Resident Indians through its branches.

3.6 OVERSEAS PRESENCE

Bank is having one overseas branch with a dealing room at Hong Kong. The business of Hong Kong has increased from Rs.10,420 crore as on 31.03.2015 to Rs.12,519 crore as on 31.03.2016. The Hong Kong branch has earned operating profit of Rs. 119.31 crore and net profit of Rs. 44.63 crore in FY16.

4. FINANCIAL INCLUSION

Pradhan Mantri Jan Dhan Yojona (PMJDY) was launched on 28.08.2014 with basic objective of achieving inclusive growth in Mission Mode through the following Six Pillars:

Pillar–1: Universal access to Banking facilities

• The Bank was allocated 17732 villages across the country for coverage by deploying Bank Mitra in these villages. These villages have been regrouped into 4580 Sub Service Areas (SSAs). Each SSA comprises of 2 to 6 villages based on population of these villages i.e. maximum 5000–6500 population within a radius of 5 Km area.

• These 4580 SSAs has been fully covered by our Bank by deploying 4355 Bank Mitras and covering remaining 225 SSAs through Branches.

Pillar–2: Financial Literacy Programme

• The Bank provides financial literacy through Financial Literacy Centers (FLC) located in all our Lead Districts and camps are organized at regular intervals through FLC counsellors.

• Financial Literacy is also provided by Bank Mitra located in villages through their Kiosks, various meetings and camps are also organized to educate rural population.

Pillar–3: Providing Basic Banking Accounts

• A total of 21.84 lac account holders who were not having bank accounts (out of 56.24 lac household falling under the villages and wards allocated to our Bank.) were covered by Bank as on 31.12.2014.

Pillar–5: Micro Insurance (PMJJBY & PMSBY)

• Social Security Schemes (SSS) viz. Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) and Pradhan Mantri Suraksha Bima Yojana (PMSBY) were launched on 09.05.2015 by Hon'ble Prime Minister of India in Kolkata.

• Insurance Premium has been remitted to the Insurer for 18.14 lac customers involving amount of Rs.2.18 crore under PMSBY and for 5.77 lac customers involving amount of Rs.16.69 crore under PMJJBY up to 31.03.2016.

Pillar–6: Unorganised Sector Pension schemes like Atal Pension Yojana (APY)

• APY was also launched with other two Social Security Schemes (SSS) viz. PMJJBY and PMSBY.

• Since inception, we have mobilized 0.54 lac proposals under APY as on 31.03.2016 out of which monthly installment of APY has been remitted to the PFRDA for 0.37 lac customers involving amount of Rs. 170.89 lac up to 31.03.2016.

5. NON–PERFORMING ASSETS (NPA) MANAGEMENT

The Gross NPA and Net NPA stood at Rs.15,385 crore and Rs.10,293 crore as on 31.03.2016 respectively. The Gross NPA ratio stood at 9.76% and Net NPA ratio stood at 6.76% as on 31.03.2016. The provision coverage ratio was 48.22% as on 31.03.2016.

6. CREDIT MONITORING & RESTRUCTURED DEBTS

A separate vertical headed by General Manager (Credit Monitoring) has been functioning at Head Office level for close monitoring and supervising the Bank's loan assets. The Department alerts, guides and follows up with the field functionaries for retaining the asset quality, preventing down gradation and slippages and advises suitable measures / corrective actions in case of delinquent assets. In order to maintain stringent monitoring over large borrowal accounts in the Banking system (Rs. 5.00 crore & above) Reserve Bank of India introduced reporting of SMA–2 Accounts to Central Repository of Information on Large Credits (CRILC) w.e.f. April 2014 which is being meticulously complied by the Bank including formation of Joint Lenders' Forum (JLF) in eligible cases and resolving the delinquency issues through adoption of suitable Corrective Action Plan (CAP).

6.1 RESTRCUTURED DEBT

Towards revitalizing the distressed assets per guidelines from the Reserve Bank of India, the gross restructuring of debts has been considered by Bank as under:

7. GOVERNMENT BUSINESS

In response to the Prime Minister's mission of "Jan Dhan se Jan Suraksha", the Bank extended the coverage area for APY by getting authorization of 3163 branches during the FY16 in order to address the old age income security needs of the citizen in an affordable manner.

During FY16, Bank participated in three tranches of Sovereign Gold Bond Scheme, launched by Govt. of India aiming to reduce the holding of the yellow metal and also to reduce import of Gold.

Central Government's initiative of rationalisation of Defence Pension through OROP has been implemented by the Bank in Feb'16 to all the eligible pensioners.

During the FY16, we have started many processes on e–platform doing away with physical process and made changes in the existing e–applications viz. IFMIS of MP Government, Integration of internet banking with Bharat Kosh Portal, TNIGRS online and offline for TN Government, Property Tax collection for Municipal Corporation of Gurgaon, Collection on behalf of EPFO etc.

8. PUBLICITY ENDEAVOURS

The Bank has gone for nation–wide campaign in newspapers/ magazines, hoardings wherein retail products and Bank's rich legacy were popularized. Small campaigns were also undertaken in radio and television.

9. CORPORATE SOCIAL RESPONSIBILITY

During FY16, the Bank has spent a sum of Rs. 1099 lacs under CSR activity.

10. INFORMATION TECHNOLOGY: CBS & ALTERNATE DELIVERY CHANNELS

• Under Financial Inclusion Project, the Bank has provided Banking Facilities through Online Inter–operable Kiosk Banking Solution at 5041 BC locations using Micro ATMs.

• For opening of account, e–KYC facility has been

implemented for customer verification without any paper documents. Aadhaar Enabled Payment System (AEPS) for on–us & off–us transaction and RuPay ATM card acceptance at all BC locations have been made operational.

• Bank's Internet Banking Application has been enhanced with new facilities and look & feel. Facility for on–line generation of Transaction Password & ATM PIN, Card Hot listing, scheduling of Funds Transfer, IMPS, e–filing of Income tax returns, SBI e–pay integration, mobile banking registration etc. have been introduced.

• Bank has deployed 42 new ATMs in FY16 and total ATM count is 1212 as on 31.03.2016.

• The Bank has launched new variants of RuPay cards viz RuPay Platinum, MUDRA and PUNGRAIN during FY16.

All RuPay cards are enabled for POS & e–Commerce transactions. Bank has introduced Insta PIN facility to provide ATM PIN instantly to customers in case of urgency. EMV Chip based card has been introduced for RuPay and VISA cards.

• Mobile Banking system has been enhanced with new features like IMPS for instant funds transfer and instant recharge of DTH & Mobile.

• New facilities for enhanced customers' experience have been provided at branches viz. on–line PAN verification, instant fund transfer through IMPS, introduction of Sovereign Gold Bond Scheme, SMS alert before debiting the account for cheques presented in CTS.

10.1 e–DELIVERY

• Growth in Mobile Banking Registration increased from 1.48 lac as on 31.03.2015 to 10.87 lac as on 31.03.2016 during FY16.

• Increase in IMPS transactions approx. by 179% from Mar'15 to Mar'16, thereby increasing NFNI income of Bank from Rs. 7.49 lac in Mar'15 to Rs. 54.03 lac in Mar'16 (increase of 620%).

• Internet Banking increased to 5.57 lac from 3.55 lac (increase 46.88%) in FY16.

• Customer base for Debit Cards grew to 98.50 lac from 67.06 lac (increase of 46.88%) during FY16

• Increase in percentage of electronic mode transaction over manual transactions. i.e; from 15.90% to 30.28%.

• The Bank has made live 185 onsite e–Lobbies, 2 offsite e–Lobbies, 97 mini e–Lobbies, 54 Cash Deposit Kiosks and 43 Pass Book Printing Kiosks covering 381 branches.

• To create awareness amongst bank staff regarding various alternate delivery channels with specific emphasis on Mobile Banking classes in Staff Training College (STC)/workshops were conducted pan India.

11. BUSINESS PROCESS RE–ENGINEERING (BPR)

Business Process Re–engineering (BPR) Cell is functioning with the purpose of bringing desired changes in the existing systems and processes, products and business of the bank on a continuous basis for maximizing performance, mainly productivity and efficiency.

In order to provide better customer service, the Bank has taken up actions/ introduced/ amended its business processes during the reporting year 2015–16.

12. AUTOMATED DATA FLOW (ADF)

In line with RBI requirements, ADF cell has developed in–house project and established an automated system of creation and updation of Centralized Data Repository (CDR) by seamless data flow from various sources. Accordingly, reports are now generated without any manual interventions.

13. RISK MANAGEMENT

The Bank has put in place comprehensive and well–defined policies & procedures, in accordance with the guidelines prescribed by the regulator, for identification, monitoring and mitigating the risks associated with business of the Bank.

The risks are managed through a well defined risk management architecture functioning at Head Office, which also takes measures to enhance risk management capabilities across the Bank. The overall risk undertaken by the Bank is monitored at the top most level of the Board of Directors. Various subcommittees viz., Risk Management Committee (RMC) of the Board, Asset–Liability Management Committee (ALCO), Credit Risk Management Committee (CRMC), Operational Risk Management Committee (ORMC) and Market Risk Management Committee (MRMC) have been formed to review various aspects of risk arising from the businesses undertaken by the Bank. The Bank has also put in place the Internal Capital Adequacy Assessment Process (ICAAP) for assessing significant risks associated with various businesses. The Bank continues to focus on refining and improving its risk measurement systems not only to ensure compliance with regulatory requirements, but also to ensure better risk–adjusted return and optimal capital utilization.

14. HUMAN RESOURCE DEVELOPMENT

With a stable human resource policy in place, your Bank is constantly endeavouring to ensure availability of personnel, well equipped with requisite skill sets and exposure, to cope up with present day challenges arising from the continued higher trend of retirements on superannuation in the Bank. Your Bank has adopted balanced strategy to create a composite and responsible human resource that can adequately meet the present day challenges in the –Bank.

The Bank has continued with its focus on overall development of its human assets through manpower planning, knowledge enrichment, capacity building, promotion & career progression, staff welfare, etc., to maintain a high level of productivity.

14.1 RECRUITMENT & MANPOWER MIX

Your Bank's Human Resource Department has continued with its need based approach in infusing new recruits to the system to maintain the optimal strength of the existing manpower.

During FY16, total 1349 officers/employees have been recruited by the Bank, which includes 166 officers (including specialist officers) and 620 SWO–A in clerical cadre. This has helped to maintain the average age of workforce, which stood at 40.20 years as on 31.03.2016 and is one of the lowest in the public sector banks. Further, the Bank is in the process of recruiting 685 officers (including specialist officers) and 839 SWO–A during FY17. This is in addition to two compassionate appointments made in the clerical cadre on account of death of employees while in service and considered under the Scheme for Compassionate Appointment introduced during the last year in the light of directive received from the Government of India.

SC/ST and OBC Cells are set up in the Bank at Head Office and Zonal Offices under the Chief Liaison Officer and the Liaison Officers respectively. Besides dealing with the grievances of SC/ST and OBC employees of the Bank, the Cells look after the implementation of Government guidelines issued from time to time in this regard.

14.3 LEARNING & DEVELOPMENT

Keeping in tune with the corporate priorities, Recovery and Retail Banking have been the prime focus areas in capacity building during FY16. With a view to reaching out to various cross sections of employees, the training programmes were conducted for carefully selected target groups viz. new recruits, first time Branch Managers, new promotees, officers who have not undergone any training programme in the last three years, POs (Refresher course), Promotee officers (Refresher course) and Clerical staff who have not undergone training in the last one year. Exclusive credit programmes were two pronged: one targeted for Branch Heads and the other for officers in second line or iSMART officers.

During the aforesaid financial year, 4984 number of officers and 1465 number of Clerical staff were trained through our inhouse training establishments.

Short duration programmes of one/two days were conducted by faculties of our Training Establishments at various locations in coordination with the ZOs. These programmes were of focused nature and topics were selected according to the needs of the target groups.

During FY16, 1023 number of officers were trained through the locational programmes

15. NEW INITIATIVES

• Golbibo: Tie–up with the Travel aggregator Golbibo for providing the cash discounts at the time of booking train and flight tickets and Hotel bookings by the customers of the 'Bank in their portal through the Alternate delivery Channels of the Bank viz. Debit Cards' and Internet Banking.

• EzeeWill: Tie–up with the M/s. NSDL e–Governance Infrastructure Ltd. for providing the Will preparation services, wherein the customers of the Bank can prepare their' WILL' online.

• The Bank has signed a Memorandum of Agreement (MoA) with NSFDC for claiming refinance, for on lending to Schedule Caste borrowers at concessional rate of interest having family income less than double poverty line (presently Rs. 98000 p.a. for rural and Rs. 120000 p.a. for urban areas.)

• Launch of RuPay Platinum Debit Card (International), with higher limits of withdrawals at ATMs (Rs. 1.00 lac per day), PoS and e–Commerce site (Rs. 2.00 lac per day).

Accidental Insurance coverage by NPCI for this card is Rs. 2.00 lac.

16. INTERNAL CONTROL SYSTEM

16.1 KNOW YOUR CUSTOMER (KYC) & ANTI–MONEY LAUNDERING (AML)

The Bank has implemented revised comprehensive policy guidelines on 'Know Your Customer (KYC) norms/Anti Money Laundering (AML) standards /Combating Financing of Terrorism (CFT) / Obligations of Bank under PMLA 2002' for the period 2015–16 in pursuance with the directives of Reserve Bank of India.

Under AML measures, the Bank is reporting to Financial Intelligence Unit India (FIU–IND) in terms of the provisions of Prevention of Money–Laundering Act (PMLA) 2002 and Prevention of Money–Laundering (Maintenance of Records) Rules, 2005 through Cash Transaction Report (CTR), Non– Profit Organization Transaction Report (NTR), Cross–border Wire Transfer Report (CWTR), Suspicious Transaction Report (STR) and Counterfeit Currency Report (CCR). The reporting is made online by the designated Principal Officer of the Bank as per the guidelines of FIU–IND and all the reports are uploaded on their portal within prescribed time schedule.

16.2 INSPECTION & AUDIT

With the implementation of Risk Based Internal Audit & Risk Based Concurrent Audit, the Annual Audit Plan is prepared as per the Risk profile of the branches. The audit resources are prioritized towards high risk areas. This provides a reasonable assurance to the Board and Top Management about the adequacy and effectiveness of the Risk Management and control framework in the Bank's operations. 2581 branches across the country were subjected to internal inspection during FY16. We have implemented the Risk Based Concurrent Audit (RBCA), wherein 1421 of our Branches are under concurrent audit covering 92% of our total business, as against 70% coverage stipulated by RBI. By convergence of concurrent audit & internal inspection, it is ensured that all the inherent risks are managed within the acceptable levels.

All our 49 Zones, 7 FGM offices & other offices are subjected to internal audit once in a year.

Offsite monitoring cell at Head Office & different Zones have been in operation to keep a track of business operations with a bird's eye view. The scope and coverage of the Cell have since been structured and broad based. The Cell is now reviewing the MIS on critical items like high value/abnormal transactions and sensitizing the Controlling Offices / Branches / Departments for corrective action, if any deviations are observed.

The Bank has also identified certain areas as 'Zero Tolerance Areas' & 'Fraud Sensitive Area'. These will foster and ensure further robustness of the system and control in the branches as well as to keep the lapses and irregularities at minimum level. Inspection Policy, Inspection Module, RBIA Module, Management Audit format & ZIC formats have been modified /reviewed by the Operational Risk Management Committee.

Certain new initiatives have been introduced in the system prominent among which is the "DeVA" (Document electronic Verification and Approval).

All our Inspecting officials are subjected to a refresher course once in a year, Similarly, all our Concurrent Auditors are also given interactive locational training by top executives from Zones/Head office.

All efforts are being made to strengthen our Inspection & Audit function by deploying adequate & quality man power in the system.

16.3 VIGILANCE

• Knowledge Hub: Information, rules & regulations on different areas of Banking are uploaded at Bank's Intranet Portal on regular basis. We urge upon maintenance of alertness, vigil and ethics so that the Organization remains safe.

• Workshop at Zones: The importance of direct interaction with the staff in branches has been a set priority and thus workshops at various zones have been conducted to explain the common irregularities to be taken care of by the field functionaries.

• Workshop at H.O: A workshop on 'Emerging Crime Trends in Advance & in CTS Clearing System' was conducted at Head Office wherein a senior official from Fraud Section, Detective Deptt, Kolkata Police, took the session.

17. THE RIGHT TO INFORMATION ACT 2005

In pursuance of the enactment of Right to Information Act, 2005, the Bank has designated 50 Central Public Information Officers at all its Zonal Offices including Head Office and an Appellate Authority at Head Office. Further, as per the directions of Central Information Commission (CIC), a Transparency Officer for the Bank, has also been designated. The Bank is providing information to the citizens of India through suo–moto disclosures on website as well as through disposal of requests for information received under the Act. During FY16, the Bank received 3262 requests for information and 706 First Appeals, under the Act, out of which 3171 RTI applications and 627 First appeals were disposed of & remaining applications and appeals were under process as on 31.3.2016. However, these were well within the stipulated period of disposal as allowed under the provisions of the Act.

18. OFFICIAL LANGUAGE

Compliance of various provisions under the Official Language Policy of Govt. of India was ensured in order to achieve the targets stipulated in the Annual Programme 2015–16. Accordingly, statutory requirements with regard to issuance of documents in bilingual form under Section 3(3) of Official Language Act, reply of Hindi letters in Hindi, bilingual publication of Manuals & Codes, bilingualisation of stationery items was ensured. During the year, a large number of officers and employees, not having working knowledge of Hindi, were nominated for various Hindi Teaching Courses conducted by the Govt. of India. During the year, 109 Hindi Workshops and 205 Desk Training Programmes were organized throughout the country to impart practical training for use of Hindi in day to day internal work.

Various Town Official Language Implementation Committee ( TOLICS )across the country awarded our various offices for remarkable implementation of Official Language Hindi.

Our Zonal Office(ZO), Ranchi was awarded "First Prize" by TOLIC (Bank), Ranchi for outstanding implementation of Official Language. Nasik Branch under ZO, Pune was also awarded "First Prize" by TOLIC(Bank), Pune. ZO Jabalpur was awarded "Second Prize" by the TOLIC, Jabalpur. ZO Agra was awarded with "Third Prize" by TOLIC(Bank), Agra for outstanding implementation of official language Hindi.

Your Bank is convener of TOLIC(Bank), Ranchi. During this year our ZO Gonda has been assigned the responsibility of TOLIC (Bank), Gonda by Deptt. of Official Language, MHA, Govt. of India.

The 3rd Sub–committee of the Committee of Parliament on Official Language inspected ZO Allahabad on 22.09.2015 and ZO Agra on 13.02.2016. The Hon'ble Committee lauded the work done by respective zonal offices.

19. SUBSIDIARY & JOINT VENTURE

AllBank Finance Ltd., a wholly owned subsidiary of Allahabad Bank, engaged in Corporate Advisory Services, Project Appraisal, Issue Management, Loan Syndication, Debenture Trusteeship and Underwriting, posted a net profit of Rs. 5.75 crore in FY16.

The Bank holds 27.04% equity stake in Asset Management Company "ASREC (India) Ltd.", along with other Banks/ Institutions.

The Bank holds 30% equity stake in joint venture company "Universal Sompo General Insurance Company Limited" for general insurance along with Indian Overseas Bank, Karnataka Bank Ltd., Dabur Investment Ltd. and Japanese insurance major "Sompo".

20. SECURITY

• The Bank adopted the best security arrangement with the implementation of the state of the art technology as per RBI and IBA guidelines. All the newly opened branches have been equipped with fire alarm systems/ integrated Fire cum Burglary alarm system.

• The Bank is dedicated to ensure secured environment for the customers at the ATMs, branches and e–lobbies.

All the high–risk branches have been provided with CCTV systems of latest specifications.

• Dedicated counters have been established for exchange of soiled notes and distribution of coins in identified branches. Coin melas at public places also have been organized.

• Coin vending machines have also been installed at important locations, both on–site and off–site. To arrest the influx of counterfeit notes in the country's system and to implement clean note policy of RBI, the Bank has provided more than 600 Note Sorting Machines to the Branches and currency chests.

21. CUSTOMER SERVICE

21.1 BANKING CODES & STANDARDS BOARD OF INDIA (BCSBI)

Your Bank is a member of BCSBI. For ensuring good customer service, we have already implemented the codes evolved by BCSBI viz., "Code of Bank's Commitment to Customers " and "Code of Bank's Commitment to Micro & Small Enterprises".

The Bank has been ranked at 28th position among 47 member banks. Within 26 PSBs, your Bank has been ranked 7th.

21.2 CITIZEN'S CHARTER

The Bank has a Citizen's Charter wherein major activities include:

a) To bring about awareness amongst customers regarding services offered as per standards laid down in the BCSBI, promote fair banking practices by maintaining transparency in various products and services offered by the Bank by making banking an enriching experience.

We also give a copy of BCSBI codes to customers at the time of opening accounts.

b) Give service to special customers like pensioners, senior citizens, customers in rural and semi–urban areas.

c) Operational activities like payment of balance in accounts of the deceased customers to survivors/ claimants, exchange of soiled/slightly mutilated currency notes, safe deposit vaults (lockers).

d) Grievance redressal mechanism for improvement in services.

Training is imparted to the staff members emphasizing the importance and the means of putting the Charter into practice.

21.3 CUSTOMER RIGHTS POLICY

The Bank's Customer Rights Policy spells out the rights of the customer and the responsibilities of the Bank. The Policy applies to all products and services offered by the Bank or its agents, whether provided across the counter, over phone, by post, through interactive electronic devices, on internet or by any other method. The Policy covers the following aspects:

i Right to Fair Treatment

ii Right to Transparency, Fair and Honest Dealing

iii Right to Suitability

iv Right to Privacy

v Right to Grievance Redress and Compensation

21.4 CUSTOMER GRIEVANCES CELL

Customers can lodge their complaint through a separate link provided on Bank's website. For expeditious redressal of customer complaints, the Bank has Customer Grievance Redressal Cell at Head Office. Complaints received from customers are redressed within the time lines and suitable replies are sent to the customers. Customer complaints which are forwarded by Ministry of Finance, DPG, RBI, VIPs are resolved on priority basis.

Several initiatives were also taken to remain customer focussed by providing fast service, bringing in diversified products/ services, responding to customers' queries and redressal of customer complaints.

Customer Service Committees have been formed at each and every branch and at Zonal offices. The Customer Service Committee meets once a month to study complaints/ suggestions,cases of delay, difficulties faced/reported by customers/members of the Committee and evolve ways and means of improving customer service. The members include a senior citizen too.

21.5 INTERNAL OMBUDSMAN

As per direction of Damodaran Committee Recommendations, the Bank has appointed an Internal Ombudsman (Chief Customer Service Officer) for speedy, transparent and quality redressal of complaints internally. Several initiatives were also taken to remain customer focussed by providing fast service, bringing in diversified products/services, responding to customer3s' queries and redressal of customer complaints.

22. FUTURE PLANS

The Bank is focusing on retail business and leveraging banking technology in addition to other core banking activities. Focus areas of business for FY17 will be growth in Retail Business, Improving Asset Quality and credit monitoring, customer acquisition and maximizing usage of e–delivery channels to reduce costs.

23. BOARD OF DIRECTORS

Prof. Radha R. Sharma, joined the Bank as Part–Time Non–Official Director on 28.01.2016. Prof. Sharma is Raman Munjal (Hero Motor Corp) Chair Professor and Professor of Organizational Behavior & HRD at Management Development Institute, Gurgaon, Haryana. She has been ICCR Chair Professor at HHL Leipzig Graduate School of Management, Germany & visiting Professor to ESCP Europe (Torino), European Business School, Germany and Guest Professor to Leipzig University etc.

24. AWARDS & ACCOLADES

• Your Bank has been conferred with "Second Prize" by Ministry of Rural Development, Government of India, for overall performance of RSETIs. RSETI Sitapur has also been given "Second Prize" in Individual category.

• Your Bank has also been conferred runner up award for Best MSME Bank & Best Eco–Tech Savvy Bank in Midsized Bank category for the year 2015 by CIMSME.

25. ACKNOWLEDGEMENTS

The Board of Directors places on record its gratitude to the Reserve Bank of India, Securities Exchange Board of India, and Government of India and other regulatory authorities and financial institutions for their co–operation, strong support and guidance. The Board acknowledges the support of shareholders and also places on record its sincere thanks to its valued clients and customers for their continued patronage.

The Board also expresses its deep sense of appreciation for the commitment shown by the employees in supporting the Bank in its performance on all fronts.

For and on behalf of the Board of Directors

(Rakesh Sethi)

Chairman and Managing Director


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