andhra bank annual report 2014 15

1ANNUAL REPORT 2014-15


Shri C VR RajendranChairman and Managing Director

]

Shri Anandrao Vishnu Patil Govt. of India Nominee Director

Shri S K KalraExecutive Director

Shri A KrishnakumarDirector

Shri Amit GoelDirector

Shri Ajit Kumar RathExecutive Director

]

Shri E E KarthakRBI Nominee Director

Shri G SivakumarDirector

Shri K ThamaraiselvanDirector

Dr. Naina SharmaDirector

Board of Directors

(A Govt. of India Undertaking)


/ CONTENTS OF ANNUAL REPORT

/ From the Chairman & Managing Director ..........................................................................................2 \ / Notice of Annual General Meeting .................................................................................................6 / \

Directors Report / Management Discussion and Analysis .....................................................................................................20

III II ( ] )Disclosures Under Pillar-III of Basel-II (New Capital Adequacy Framework) ............................................................................64

/ Corporate Governance Report .............................................................................................................126 / Balance Sheet .................................................................................................................................................200 / Profit and Loss Account ...........................................................................................................................201 / Significant Accounting Policies ...........................................................................................................212 / Notes on Accounts ................................................................................................................................224 / Cash Flow Statement ...........................................................................................................................262 / Auditors Report ..............................................................................................................................264 { / Our Progress at a glance ...............................................................................................................266 - / Key Performance Ratios ............................................................................................................268

Abridged Financial Statements in Foreign Currency ..........................................................................................................270

- ] - Classification of Branches - Population Groupwise ..............................................................................................................272

- { Financial Statements of Subsidiary - Andhra Bank Financial Services Limited .........................................................................273

Consolidated Financial Statements of Andhra Bank and its Subsidiary ...................................................................................329

/ Proxy Form ...................................................................................................................................................365 \/ / Attendance Slip / Entry Pass ...........................................................................................................367

M/s. MCS SHARE TRANSFER AGENT LIMITED002, GROUND FLOOR, KASHIRAM JAMNADAS

BUILDING, 5, P.DMELLO ROAD, MASJID EAST, MUMBAI - 400 009.

Ph. No. 022-40206020/22/23/24Fax No. 022 -40206021

] ] Registrar & Share Transfer Agents

AUDITORS

NAG & ASSOCIATES

PREM GUPTA & CO

V. KRISHNAN & CO

BASHA & NARASIMHAN

002,5,

400 009


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Chairman & Managing Directors Letter to Shareholders

Dear Shareholders,It gives me immense pleasure to share with you that your Bank crossed yet another milestone during financial year 2014-15 with its total Business surpassing the Rs.2.85 Lakh Crore mark. The past year posed unique challenges and to the industry with slow recovery in the core sectors, which

metamorphosed into a modest growth in the economic activity and consequently the expectations of stakeholders, market and confidence levels of economy are moderated from their high levels witnessed during the course of the year.

The global economic activity recovered during FY 2014-15, albeit, marginally with divergent rates across economies. While most of the Emerging market Economies (EMEs), are experiencing slowdown, the Advanced Economies (AEs) are battling the risks of deflation barring the US. This has resulted in continuation of unconventional monetary policies by the AEs and by EMEs to fight disinflationary/ inflationary conditions respectively. As a consequence, there have been large movements in exchange rates and other asset prices. In sum, the AEs are yet to recover from the after affects of global financial crisis, while the EMEs are confronted with rising negative output gap, falling potential growths, which restricted the revival of global growth in FY 2014-15.

However, it is expected that the global economy will trace on a higher growth trajectory in the coming fiscal in comparison to that of the previous years, hoping to be comforted with softer commodity prices and rising level of output in the US and Euro area.

The growth in Gross Domestic Product (GDP) during 2014-15 is estimated at 7.4% (y-o-y) as compared to the growth rate of 6.9% in 2013-14, suggesting a revival in the domestic economic activity in 2014-15. However, the divergence between other lead indicators of economic activity and the GDP growth numbers, suggest that the recovery is not broad based.

The role of Agriculture as a sector for fuelling growth momentum during FY 2015-16 seems to be the most crucial, given the dry clouds of a below normal monsoon hovering over the horizon this year.

In the backdrop of optimism for further recovery in growth this year coupled with downside risks to industry and agriculture, a stable investment climate with renewed confidence in the fundamentals of the economy is quintessential for achieving the much desired results.

The financial year 2015-16 has unfolded itself as an opportunity to revive the growth momentum, and we will strive hard with renewed vigour to work towards placing your Bank amongst the forerunners in the growth process.

The performance highlights of your Bank for the Financial Year 2014-15 are as follows:

Total Business increased to `2,84,588 Crore as on 31.03.2015, from `2,52,494 Crore as on 31.03.2014 registering a growth rate of 12.7%.

Total Deposits increased to `1,55,012 Crore from `1,41,845 Crore in the previous year, registering a growth rate of 9.3%.

CASA Deposits increased to `42,402 Crore from `35,186 Crore, registering a growth rate of 20.5%.

Cost of Deposits stood at 7.73%. Gross Bank Credit increased to `1,29,576 Crore from

`1,10,649 Crore, registering a growth rate of 17.1%.

Credit Deposit Ratio stood at 83.61% compared to 78.02% during the previous year.

Net Interest Margin stood at 3.00%. Non-Interest Income stood at ` 1499 Crore. Net Profit for 2014-15 stood at `638 Crore. Gross NPAs to Gross Advances Ratio stood at

5.31%.

Net NPAs to Net Advances Ratio reduced from 3.11% to 2.93%.

Capital Adequacy Ratio stood at 10.63% under BASEL-III.

Return on Average Assets stood at 0.38%. Net Profit per Employee stood at `3.45 Lakh. Average Business per Employee stood at `13.73

Crore.

Network Expansion: During 2014-15, your Bank opened 395 Branches and added 382 ATMs. As on 31.03.2015, Bank had 4782 Delivery Channels consisting of 2507 Branches, 8 Extension Counters, 35 Satellite Offices and 2232 ATMs.

During FY 2014-15, your Bank has taken the following I.T. initiatives to improve Customer Service:

382 number of new ATMs were installed during this period, which include 342 Onsite ATMs.


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Implementation of Two Factor Authentication solution for Internet banking to overcome delay in delivery of OTP (one time password)

AB E-Collection Module for collection of Fees and Other Charges customized for each user.

Customized Commercial Tax collection module for the Telangana State government.

Introduced the facility of Scheduling of NEFT payments by the internet banking customers

Enabled card less cash deposits at BNA to facilitate 3rd party deposits

Enabled E-KYC for sourcing of information directly from UIDAI (Aadhar) server for opening of accounts.

Enabled Donation modules for HUDHUD Cyclone relief fund, Arasavalli temple Srikakulam Dist,

Enabled foreign inward remittances through IMPS. Provided the facility of e-filling of Income Tax returns

through our internet banking facility

Launched Cash Recyclers 1st of its kind in AP & TG. The Bank processed 1.42 Cr DBT record and credit

beneficiaries accounts as on 31.03.2015 which is highest amongst all Banks.

Leveraging the strong IT background, the Bank has developed the following IT products/ Services In house :

o Bulk Account Opening Utility

o Export Data Processing and Management System (EDPMS)

o PMJDY accounts opening through E-KYC The

bank has opened 18.25 lacs of accounts under PMJDY scheme. The Bank has opened 6,94,257 number of accounts, which is the highest among all the banks, using online E-KYC service.

o Mandate Management System

o Customized Portal for Rajiv Vidya Mission funds transfer

o AB e-passbook to maintain passbook on Android Devices.

o Missed call Balance Inquiry facility

The Banks IT Department received ISO 27001: 2013 on Information Security Management System (ISMS) certification for DC/ DR/ DIT on 07.01.2015

Your Bank is committed towards delivering best services to customers by leveraging on technology and dedicated human resources, and would tirelessly work towards maximizing shareholders value.

With warm wishes,

Yours sincerely,

(C.VR RAJENDRAN)

Chairman & Managing Director

Place : Hyderabad

Date : 27.04.2015


( )(A Govt. of India Undertaking)

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NOTICE

Notice is hereby given that the Fifteenth Annual General Meeting of shareholders of Andhra Bank will be held on Wednes-day, 8th July, 2015 at 11.00 A.M at Sri Satya Sai Nigamagamamam, 8-3-987/2, Sri Nagar Colony, Hyderabad - 500 073 to transact the following business:

To receive, consider and adopt the Audited Balance Sheet as at 31st March 2015 and the Profit and Loss Account for the year ended on that date, the Report of the Board of Directors on the working and activities of the Bank for the period covered by the Accounts and the Auditors Report on the Balance Sheet and Accounts;

To declare dividend on Equity Shares for the FY 2014-15;

To consider and if thought fit, to pass with or without modifications the following special resolution:

RESOLVED THAT pursuant to the provisions of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 (Act), The Nationalised Banks (Management and Miscellaneous Provisions) Scheme, 1980 (Scheme) and Andhra Bank (Shares and Meetings) Regulations, 2003 as amended from time to time and subject to the approvals, consents, permissions and sanctions, if any, of the Reserve Bank of India (RBI), the Government of India (GOI), the Securities and Exchange Board of India (SEBI), and/ or any other authority as may be required in this regard and subject to such terms, conditions and modifications thereto as may be prescribed by them in granting such approvals and which may be agreed to by the Board of Directors of the Bank and subject to the regulations viz., SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 (ICDR Regulations) as amended up - to - date, guidelines, if any, prescribed by the RBI, SEBI, notifications/circulars and clarifications under the Banking Regulation Act, 1949, Securities and Exchange Board of India Act, 1992 and all other applicable laws and all other relevant authorities from time to time and subject to the Listing Agreements entered into with the Stock Exchanges where the equity shares of the Bank are listed, consent of the shareholders of the Bank be and is hereby accorded to the Board of Directors of the Bank (hereinafter called the Board which shall be deemed to include any Committee which the Board may have constituted or hereafter constitute to exercise its powers including the powers conferred by this Resolution) to create, offer, issue and allot (including with provision for reservation on firm allotment and/ or competitive basis of such part of issue and for such categories of persons as may be permitted by the law then applicable) by way of an offer document/ prospectus or such other document, in India or abroad, such number of equity shares and/or preference shares (whether cumulative or not; convertible into equity shares or not) in accordance with the guidelines framed by RBI from time to time, specifying the class of preference shares, the extent of issue of each class of such preference shares, whether perpetual or redeemable, the terms & conditions subject to which each class of preference shares

may be issued and/or other permitted securities which are capable of being converted into equity or not, upto such amount/s (as decided by the Board or Committee of the Board of the Bank) which together with the existing paid-up equity share capital of ` 602.85 Crores will be within Rs.3000 Crore, being the ceiling in the Authorised Capital of the Bank, as per Section 3(2A) of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 or to the extent of enhanced Authorised Capital as per the Amendment (if any), that may be made to the Act in future, in such a manner that the Central Governments stake in the equity paid-up capital of the bank will not go below such percentage as may be decided by Government of India, whether at a discount or premium to the market price, in one or more tranches, including to one or more of the Members, employees of the Bank, Indian Nationals, Non-resident Indians (NRIs), Companies, Private or Public, Investment Institutions, Societies, Trusts, Research organizations, Qualified Institutional Buyers (QIBs) like Foreign Institutional Investors (FIIs), Banks, Financial Institutions, Indian Mutual Funds, Venture Capital Funds, Foreign Venture Capital Investors, State Industrial Development Corporations, Insurance Companies, Provident Funds, Pension Funds, Development Financial Institutions or other entities, authorities or any other category of investors which are authorized to invest in equity / preference shares / securities of the Bank as per extant regulations/ guidelines or any combination of the above as may be deemed appropriate by the Bank.RESOLVED FURTHER THAT such issue, offer or allotment shall be by way of public issues or such other issues which may be provided by applicable laws, with or without over-allotment option and that such offer, issue, placement and allotment be made as per the provisions of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980, the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 (ICDR Regulations) and all other guidelines issued by the RBI, SEBI and any other authority as applicable, and at such time or times in such manner and on such terms and conditions as the Board may, in its absolute discretion, think fit.

10

ANNUAL REPORT 2014-15

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RESOLVED FURTHER THAT the Board shall have the authority to decide, at such price or prices in such manner and where necessary, in consultation with the lead managers and /or underwriters and/ or other advisors or otherwise on such terms and conditions as the Board may, in its absolute discretion, decide in terms of ICDR Regulations, other regulations and any and all other applicable laws, rules, regulations and guidelines to issue such securities to investors, whether or not such investor(s) are existing members of the Bank, at a price not less than the price as determined in accordance with relevant provisions of ICDR Regulations. RESOLVED FURTHER THAT in accordance with the provisions of the Listing Agreements entered into with relevant stock exchanges, the provisions of Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980, the provisions of the Andhra Bank (Shares and Meetings) Regulations, 2003, the provisions of SEBI ICDR Regulations, the provisions of the Foreign Exchange Management Act, 1999 and the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000, and subject to requisite approvals, consents, permissions and/or sanctions of Securities and Exchange Board of India(SEBI), Stock Exchanges, Reserve Bank of India (RBI), Foreign Investment Promotion Board (FIPB), Department of Industrial Policy and Promotion, Ministry of Commerce (DIPP) and all other authorities as may be required (hereinafter collectively referred to as the Appropriate Authorities) and subject to such conditions as may be prescribed by any of them while granting any such approval, consent, permission and/or sanction (hereinafter referred to as the requisite approvals) the Board may, at its absolute discretion, issue, offer and allot, from time to time in one or more tranches, equity shares or any securities other than warrants, which are convertible into or exchangeable with equity shares at a later date, in such a way that the Central Governments stake in the equity paid-up capital of the bank will not go below such percentage as may be decided by Government of India, to QIBs (as defined in Chapter VIII of the ICDR Regulations) pursuant to a qualified institutional placement, as provided under Chapter VIII of the ICDR Regulations, through a placement document and / or such other documents / writings / circulars / memoranda and in such manner and on such price, terms and conditions as may be determined by the Board in accordance with the ICDR Regulations or other provisions of the law as may be prevailing at that time; provided the price inclusive of the premium of the equity shares so issued shall not be less than the price arrived in accordance with the relevant provisions of ICDR Regulations.RESOLVED FURTHER THAT in case of a Qualified Institutional Placement (QIP), pursuant to Chapter VIII of the ICDR Regulations,a) the allotment of Securities shall only be to QIBs within

the meaning of Chapter VIII of ICDR Regulations, such Securities shall be fully paid-up and the allotment of such Securities shall be completed within 12 months from the date of this resolution;

b) The Bank is pursuant to Proviso to Regulation 85(1) of ICDR Regulations authorized to offer shares at a discount of not more than five percent on the price so calculated for the QIP;

c) The relevant date for the determination of the floor price of the securities shall be in accordance with the ICDR Regulations.

RESOLVED FURTHER THAT the Board shall have the authority and power to accept any modification in the proposal as may be required or imposed by the GOI / RBI / SEBI / Stock Exchanges where the shares of the Bank are listed or such other appropriate authorities at the time of according / granting their approvals, permissions and sanctions to issue, allotment and listing thereof and as agreed to by the Board. RESOLVED FURTHER THAT the issue and allotment of new equity shares / preference shares / securities, if any, to NRIs, FIIs and/or other eligible foreign investments be subject to the approval of the RBI under the Foreign Exchange Management Act, 1999 as may be applicable but within the overall limits set forth under the Act.RESOLVED FURTHER THAT the said new equity shares to be issued shall rank pari passu in all respects with the existing equity shares of the Bank including dividend, if any, in accordance with the statutory guidelines that are in force at the time of such declaration.RESOLVED FURTHER THAT for the purpose of giving effect to any issue or allotment of equity shares / preference shares / securities, the Board, be and is hereby authorized to determine the terms of the public offer, including the class of investors to whom the securities are to be allotted, the number of shares/ securities to be allotted in each tranche, issue price, premium amount on issue as the Board in its absolute discretion deems fit and do all such acts, deeds, matters and things and execute such deeds, documents and agreements, as they may, in its absolute discretion, deem necessary, proper or desirable, and to settle or give instructions or directions for settling any questions, difficulties or doubts that may arise in regard to the public offer, issue, allotment and utilization of the issue proceeds, and to accept and to give effect to such modifications, changes, variations, alterations, deletions, additions as regards the terms and conditions, as it may, in its absolute discretion, deem fit and proper in the best interest of the Bank, without requiring any further approval of the members and that all or any of the powers conferred on the Bank and the Board vide this resolution may be exercised by the Board .RESOLVED FURTHER THAT the Board be and is hereby authorized to enter into and execute all such arrangements with any Book Runners, Lead Manager(s), Banker(s), Underwriter(s), Depository(ies), Registrars, Auditors and all such agencies as may be involved or concerned in such offering of equity/ preference shares/ securities and to remunerate all such institutions and agencies by way of commission, brokerage, fees or the like and also to enter into and execute all such arrangements, agreements, memoranda, documents, etc., with such agencies.

12


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RESOLVED FURTHER THAT for the purpose of giving effect to the above, the Board, in consultation with the Lead Managers, Underwriters, Advisors and/ or other persons as appointed by the Bank, be and is hereby authorized to determine the form and terms of the issue(s), including the class of investors to whom the shares / securities are to be allotted, number of shares/securities to be allotted in each tranche, issue price (including premium, if any), face value, premium amount on issue, fixing of record date or book closure and related or incidental matters, listings on one or more stock exchanges in India and / or abroad, as the Board in its absolute discretion deems fit.RESOLVED FURTHER THAT such of these shares/ securities as are not subscribed may be disposed off by the Board in its absolute discretion in such manner, as the Board may deem fit and as permissible by law.RESOLVED FURTHER THAT for the purpose of giving effect to this Resolution, the Board, be and is hereby authorised to do all such acts, deeds, matters and things as it may in its absolute discretion deem necessary, proper and desirable and to settle any question, difficulty or doubt that may arise in regard to the issue, of the shares/ securities and further to do all such acts, deeds, matters and things, finalize and execute all documents and writings as may be necessary, desirable or expedient as it may in its absolute discretion deem fit, proper or desirable without being required to seek any further consent or approval of the shareholders or authorise to the end and intent, that the shareholders shall be deemed to have given their approval thereto expressly by the authority of the Resolution.RESOLVED FURTHER THAT the Board be and is hereby authorized to delegate all or any of the powers herein conferred to the Managing Director & Chief Executive Officer and/or to the Executive Director/(s) in the absence of the Managing Director & Chief Executive Officer or to the Committee of Directors to give effect to the aforesaid Resolutions. For and on behalf of the Board of Directors

Place: Hyderabad (Y. Amarnath) Date: 29.05.2015 Company Secretary

Notes:

The Explanatory Statement setting out the material facts in respect of the business of the meeting is annexed hereto.

1. Voting RightsIn terms of the provisions of sub-section (2E) of Section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980, no shareholder of the corresponding new Bank, other than the Central Government, shall be entitled to exercise voting rights in respect of any shares held by him/her in excess of ten per cent of the total voting rights of all the shareholders of the Bank.

Subject to the above, as per Regulation 68 of Andhra Bank (Shares and Meetings) Regulations, 2003, each shareholder who has been registered as a shareholder on the Cut-off date, i.e. Wednesday, 01.07.2015, shall have one vote for each share held by him/her in remote e-voting / voting through poll.Exercise of rights of joint holders:As per Regulation 10 of the above Regulations, if any share stands in the names of two or more persons, the person first named in the register shall, as regards voting, be deemed to be the sole holder thereof. Thus, if shares are in the name of joint holders, then first named person is only entitled to attend the meeting and is only eligible to vote on the Resolutions.2. Cut-off date for the purpose of ascertainment of shareholders entitled to receive the annual report including the notice of Annual General MeetingThe Bank has fixed Friday, 29.05.2015 as the cut-off date for the purpose of ascertaining the names of shareholders entitled to receive the Annual Report including the Notice of Annual General Meeting. 3. Appointment of ProxyA shareholder entitled to attend and vote at the meeting is entitled to appoint a proxy to attend and to participate in the POLL at the venue of the General Meeting instead of himself/herself and such a proxy need not be a shareholder of the bank. In order to be effective, the proxy form must be deposited at the Head Office of the Bank atleast four days before the date of the meeting. No employee of the Bank shall be appointed as a duly authorized representative or as a proxy.4. Appointment of a Representative :No person shall be entitled to attend or vote at the meeting as a duly authorized representative of a Company, unless a copy of the resolution appointing him as a duly authorized representative certified to be a true copy by the Chairman of the meeting at which it was passed shall have been deposited at the Head Office of the Bank at Hyderabad not less than four days before the date of the meeting.5. Attendance slip-cum-entry pass:For the convenience of the Members, attendance slip is enclosed to this report. Members are requested to fill in and affix their signatures in the space provided therein and handover the attendance slip-cum-Entry pass at the entrance of the venue of the meeting. Proxy / Representative of the shareholder should mark on the attendance slip as proxy or representative as the case may be.6. Book Closure:The Register of Shareholders and Share Transfer Books would remain closed from 02.07.2015 to 07.07.2015 (both days inclusive).

14


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15


7. Dividend :The Board of Directors has recommended a dividend of ` 2.00 ps. per equity share (@20%) for the Financial Year 2014-2015. The dividend, if approved by the Shareholders at the Annual General Meeting, shall be paid to the shareholders holding shares in physical form and whose names appear in the Register of Shareholders and to the shareholders holding shares in electronic form on the basis of the beneficiary position statement provided by the Depositories as at the end of 01.07.2015. The dividend payout date is 17.07.2015.8. Dividend payment by way of Electronic Clearing Service (ECS) :In order to protect the investors from fraudulent encashment of their dividend warrants, the Bank has offered Electronic Clearing Service facility to the shareholders having Bank accounts at the following centers: Ahmedabad, Allahabad, Amritsar, Aurangabad, Bangalore, Baroda, Bhopal, Bhubaneswar, Chandigarh, Chennai, Coimbatore, Dhanbad, Durgapur, Ernakulam, Erode, Goa, Guwahati, Gwalior, Haldia, Hubli, Hyderabad, Indore, Jabalpur, Jaipur, Jammu, Jodhpur, Kakinada, Kanpur, Kolkata, Lucknow, Ludhiana, Madurai, Mangalore, Mysore, Nagpur, Nellore, Nasik, NewDelhi, Patna, Pondicherry, Pune, Raipur, Rajkot, Ranchi, Salem, Siliguri, Solapur, Surat, Tiruchirapalli, Tirupathi, Tiruvananthapuram, Trissur, Varanasi, Vijayawada and Visakhapatnam.Dividend payment by way of National Electronic Clearing Service (NECS) :The objective of the system is to facilitate centralized processing of payment of dividend. The NECS (credit) facilitate the Issuer multiple credits to beneficiary accounts which have been covered under Core-Banking Solution. For the purpose, the shareholders have to update their bank account details by furnishing their CBS account number, MICR No., etc. to their respective Depository Participants in case of dematerialized holdings and to the Registrars & Transfer Agents in case of physical holdings. The NECS facilitates the shareholder to receive dividend in his/her account on the pay-out date itself.9. Updating of any change in address, bank details, etc. of the shareholders : The shareholders holding the shares in physical form are requested to inform the Bank or its Registrars for noting any change in their address, bank account details, if any, for prompt receipt of any correspondence. The shareholders holding the shares in electronic form are requested to update the change in their address, bank account details, if any, with their respective Depository Participants.The shareholders holding shares in physical form are requested to inform their PAN details, e-mail id, mobile no., etc. to the Bank or its Registrars for updation of

shareholder details. Shareholders holding shares in electronic form are requested to update the said details with their Depository Participant.10.Consolidation of Folios :The shareholders who are holding shares in identical order of names in more than one account are requested to intimate to the Registrars and Transfer Agent, the ledger folio of such accounts and send the share certificates to enable the Bank to consolidate all the holdings into one account. The share certificates will be returned to the members after making necessary endorsement in due course.11.Lodgment for Transfers :Share Certificates along with the duly filled in transfer deed should be forwarded to the Registrars and Transfer Agents of the Bank at the following address: M/s. MCS Share Transfer Agent Limited (Unit: Andhra Bank) 002, Ground Floor, Kashiram Jamnadas Building 5, P.DMello Road, Masjid East, Mumbai 400 009.12. Requests to Shareholders :a. Please note that copies of the Annual Report will

not be distributed at the Annual General Meeting as an economy measure. Hence, shareholders are requested to bring their copies of the Annual Report to the venue of the meeting.

b. Shareholders may kindly note that no gifts / coupons will be distributed at the venue of the meeting.

c. Shareholders are advised to avoid bringing bags / brief cases/ tape records / cameras etc. as these items are subject to a security check and may not be allowed at the venue.

13. Green Initiative:In support of the green initiative, the Bank has sent the soft copy of the annual report through email to those shareholders who have registered their email id with their depository participant/ Banks registrar & share transfer agent. The Bank has decided to circulate the hard copy of abridged annual report containing the salient features of all the documents, as prescribed to all those shareholder(s) who have not registered their email address(es).Full version of the annual report will be available on the Banks website: www.andhrabank.in. In case a shareholder wishes to receive a printed copy, he/she may please send a request to the Bank by e-mail to the id: [email protected]; upon which hard copy of full annual report will be sent to the shareholder.14. Poll processThe voting on approval of agenda items will not be on the basis of show of hands but shall be done through POLL by means of a secret ballot, at the venue of the Annual General Meeting.

16


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15. Voting through electronic meansIn compliance with provisions of Clause 35B of the Listing Agreement with Stock Exchanges, read with Rule 20 of the Companies (Management and Administration) Amendment Rules, 2015 and in compliance with the SEBI Circular dated 17.04.2014, the Bank is pleased to offer Remote e-voting facility as an alternative mode of voting, besides physical ballot, for its Members at the Annual General Meeting which will enable them to cast their votes electronically and to pass the RESOLUTIONS.

The facility to exercise the right to vote on resolutions proposed to be considered at General Meeting by the shareholders, by electronic means has been termed as Remote e-voting by Ministry of Corporate Affairs vide their Notification dated 19.03.2015. These Rules are called as the Companies (Management and Administration) Amendment Rules, 2015. For this purpose, the Bank has appointed M/s. Central Depository Services (India) Limted (CDSL) as e-voting agency to provide the Remote e-voting platform for facilitating its Members to vote electronically. The Bank has also appointed M/s.T.R.Ramabhadran, Practising Company Secretary, Hyderabad, as the Scrutiniser for conducting the Remote e-voting and POLL process in a fair and transparent manner. The instructions for members for voting electronically are as under:-

(i) The remote e-voting period begins at 10.00 A.M. on 05.07.2015 and ends at 5.00 P.M. on 07.07.2015 During this period, shareholders of the Bank holding shares either in physical form or in dematerialized form, as on the cut-off date, 01.07.2015, may cast their vote electronically. The remote e-voting module shall be disabled by CDSL for voting thereafter.

(ii) The shareholders should log on to the e-voting website : www.evotingindia.com.

(iii) Click on Shareholders.(iv) Now Enter your User ID

a. For CDSL: 16 digits beneficiary ID

b. For NSDL: 8 Character DP ID followed by 8 Digits Client ID

c. Members holding shares in Physical Form should enter Folio Number registered with the Bank.

(v) Next enter the Image Verification as displayed and Click on Login.

(vi) If you are holding shares in demat form and had logged on to www.evotingindia.com and voted on an earlier voting of any company, then your existing password is to be used.

(vii) If you are a first time user, follow the steps given below:

For Members holding shares in Demat Form and Physical Form as on cut-off date 01.07.2015 PAN Enter your 10 digit alpha-numeric *PAN

issued by Income Tax Department (Applicable for both demat shareholders as well as physical shareholders)

Members who have not updated their PAN with the Bank/RTA /Depository Participant are requested to use the first two letters of their name and the 8 digits of the sequence number in the PAN field.

In case the sequence number is less than 8 digits enter the applicable number of 0s before the number after the first two characters of the name in CAPITAL letters. Eg. If your name is Ramesh Kumar with sequence number 1 then enter RA00000001 in the PAN field.

DOB Enter the Date of Birth as recorded in your demat account or in the Banks / RTAs records for the said demat account or folio in dd/mm/yyyy format.Dividend Enter the Dividend Bank Details as recorded in Bank your demat account or in the Banks / RTAs Details records for the said demat account or folio.

Please enter the DOB or Dividend Bank Details in order to login. If the details are not recorded with the depository or Bank / RTA, please enter the member id / folio number in the Dividend Bank details field as mentioned in instruction (iv).

(viii) After entering these details appropriately, click on SUBMIT tab.

(ix) Members holding shares in physical form will then directly reach the Company selection screen. However, members holding shares in demat form will now reach Password Creation menu wherein they are required to mandatorily enter their login password in the new password field. Kindly note that this password is to be also used by the demat holders for voting for resolutions of any other company on which they are eligible to vote, provided that company opts for e-voting through CDSL platform. It is strongly recommended not to share your password with any other person and take utmost care to keep your password confidential.

(x) For Members holding shares in physical form, the details can be used only for remote e-voting on the

resolutions contained in this Notice.(xi) Click on the EVSN for the relevant on which you choose to vote.

18


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(xii) On the voting page, you will see RESOLUTION DESCRIPTION and against the same the option YES/NO for voting. Select the option YES or NO as desired. The option YES implies that you assent to the Resolution and option NO implies that you dissent to the Resolution.

(xiii) Click on the RESOLUTIONS FILE LINK if you wish to view the entire Resolution details.

(xiv) After selecting the resolution you have decided to vote on, click on SUBMIT. A confirmation box will be displayed. If you wish to confirm your vote, click on OK, else to change your vote, click on CANCEL and accordingly modify your vote.

(xv) Once you CONFIRM your vote on the resolution, you will not be allowed to modify your vote.

(xvi) You can also take out print of the voting done by you by clicking on Click here to print option on the Voting page.

(xvii) If Demat account holder has forgotten the same password then enter the User ID and the image verification code and click on Forgot Password & enter the details as prompted by the system.

(xviii) Note for Non Individual Shareholders (Institutional Investors) and Custodians Non-Individual shareholders (i.e. other than

Individuals, HUF, NRI etc.) and Custodian are required to log on to www.evotingindia.com; and register themselves as Corporates.

A scanned copy of the Registration Form bearing the stamp and sign of the entity should be emailed to [email protected];.

After receiving the login details a compliance user should be created using the admin login and password. The Compliance user would be able to link the account(s) for which they wish to vote on.

The list of accounts should be mailed to [email protected]; and on approval of the accounts they would be able to cast their vote.

A scanned copy of the Board Resolution and Power of Attorney (POA) which they have issued in favour of the Custodian, if any, in PDF format, should be sent to the Scrutinizer through e-mail: [email protected]; to verify the same.

General Information:(A) The Remote e-voting period begins from 10.00

A.M on Sunday, 05.07.2015 and ends at 5.00 P.M. onTuesday, 07.07.2015. During this period, shareholders of the Bank, holding shares either in physical form or in dematerialized form, as on the cut-off date (for voting), 01.07.2015, may cast their

vote electronically. The Remote e-voting module will be disabled by CDSL for voting thereafter. Once the vote on a resolution is cast by the shareholder, the shareholder shall not be allowed to change it subsequently.

(B) In case you have any queries or issues regarding e-voting, you may refer the Frequently Asked Questions (FAQs) and e-voting manual available at www.evotingindia.com; under help section or write an email to [email protected];

(C) You are advised to cast your vote through Remote e-voting or through Poll at the Annual General Meeting. A Shareholder may participate in the General Meeting even after exercising his/her right to vote through remote e-voting but shall not be allowed to vote again.

(D) As per the new Rules, the cut-off date to determine the eligibility of the shareholders to vote by electronic means or through POLL process, is a date not earlier than seven days before the date of General Meeting, viz.,01.07.2015. The shareholders who are the Beneficial owners as on 01.07.2015 will be eligible to participate in voting. In other words, the shareholders holding shares as on 01.07.2015 only will be able to access the remote e-voting module to vote electronically and/or participate in the physical POLL at the venue of the Annual General Meeting.

16. The issue of POLL Paper will commence immediately after an announcement in this regard is made by the Chairman and Managing Director at the venue of the General Meeting. The Chairman shall at the General Meeting at the end of discussion on the resolutions on which voting is to be held, allow voting with the assistance of the scrutinizer by use of polling paper for all those members who are present at the General Meeting but have not cast their votes by availing the remote e-voting facility.

Entry Pass has to be retained till the conclusion of the meeting. The number of votes will be equivalent to the number of shares held by them on the Cut-off date, i.e. 01.07.2015 (1st July, 2015).

Shareholders may exercise their right by indicating their approval against the agenda items in the POLL paper and deposit them in the POLL Box(es) kept at the venue of the General Meeting.

The counting of votes would be taken up thereafter. The consolidated results of remote e-voting and Poll

will be posted on the website of the Bank and on the website of the Depository, viz., CDSL, and will be informed to the Stock Exchanges, within 48 hours of holding of AGM.

Note:Bank shall highly appreciate if shareholders, desirous of making any suggestion, seeking clarification, etc. relating to the item of agenda only, at the Annual General

20


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Meeting, may send their suggestions, Queries, etc. so as to reach the Investors Services Cell at Head Office of the Bank atleast 15 days before the date of meeting.

Explanatory Statement in respect of the business mentioned against Item No.3 of the Notice Raising of capital through Qualified Institutional Placement, Follow-on Public Offer, etc.:

To raise capital by way of Qualified Institutional Placement to Qualified Institutional Buyers, Follow-on Public Offer, etc., in such a manner that the Central Governments stake in the equity paid-up capital of the bank will not go below such percentage as may be decided by Government of India.

a) The present Paid-up Capital of the Bank is Rs.602.85 Crore and the Capital Adequacy Ratio of the Bank as on 31.03.2015 is 10.63% which is well above the 9% stipulated by the Reserve Bank of India. However, in view of the growth plans of the Bank, the implementation of BASEL-III norms and consequent capital charge, there is a need to increase the capital to further strengthen the Capital Adequacy Ratio.

b) The Bank in terms of Section 3(2B)(c) of the Banking Companies (Acquisition and Transfer of Undertaking) Act, 1980, will obtain requisite approval of Government of India, Ministry of Finance and Reserve Bank of India for increasing the paid-up capital of the Bank.

c) Sub-Clause (a) of Clause 23 of Listing Agreement provides that whenever any further issue or offer is being made by the Bank, the existing shareholders should be offered the same on pro-rata basis unless the shareholders in the General Meeting decide otherwise. The said resolution, if passed, shall have the effect of allowing the Board on behalf of the Bank to create, offer, issue and allot the securities otherwise than on pro-rata basis to the existing shareholders.

d) The resolution seeks to enable the Bank to create, offer, issue and allot equity shares / preference shares / securities by way of QIP, Follow-on Public Offer, etc. The issue proceeds will enable the Bank to strengthen its Capital Adequacy Requirements as specified by RBI from time to time.

e) The Resolution seeks to empower the Board of Directors to issue shares through QIP, without further approval of the shareholders.

f) The approval of the shareholders of the Bank was obtained in the Extraordinary General Meeting held on 19.12.2013 for raising of capital through Qualified Institutional Placement / Follow-on Public Offer. As per the guidelines, the validity of the resolutions is restricted to twelve months for such QIPs. Keeping in view the future requirements (as denoted in Point (a) above), the approval of the shareholders is sought once again.

g) As the pricing of the offering cannot be decided except at a later stage, it is not possible to state the price of shares / securities to be issued. However, the same would be in accordance with the provisions of the ICDR Regulations, the Banking Companies (Acquisition and Transfer of Undertaking) Act, 1980 and the Andhra Bank (Shares and Meetings) Regulations, 2003, as amended from time to time or any other guidelines / regulations / consents, etc. as may be applicable / required.

h) The detailed terms and conditions for the issuance of the Equity Shares as and when made will be determined by the Board in consultation with the Merchant Bankers, Lead Managers, Advisors and such other authorities as may required to be considered by the Bank considering the prevailing market conditions and other relevant factors. The Resolution seeks to give the Board powers to issue Equity Shares / Securities in one or more tranches at such time or times, at such price or prices, and to such of the Investors as are mentioned therein as the Board in its absolute discretion deems fit.

i) For reasons aforesaid, an enabling resolution is proposed to give adequate flexibility and discretion to the Board to finalise the terms of the issue.

j) The equity shares issued, shall rank pari passu in all respects with the existing equity shares of the Bank including dividend.

k) For this purpose the Bank is required to obtain the consent of the shareholders by means of a special resolution. Hence your consent is requested for the above proposal.

Your Directors recommend the resolutions as set out in the Notice.None of the Directors of the Bank is interested or concerned in the aforementioned Resolution(s), except to the extent of their shareholding in the Bank and their participation in raising of capital, if any.

Place : Hyderabad Y. Amarnath Date : 29.05.2015 Company Secretary

22


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23


DIRECTORS REPORT:Directors of your Bank are happy to present the Annual Report of the Bank together with the audited Statement of Accounts and Auditors Report for the financial year ended March 31, 2015.MANAGEMENTS DISCUSSION & ANALYSISMACRO ECONOMIC DEVELOPMENTSThe global economic activity recovered during FY 2014-15, albeit, marginally with divergent rates across economies. While most of the Emerging markets Economies (EMEs) are experiencing slowdown, the Advanced Economies (AEs) are battling the risks of deflation barring the US. This has resulted in continuation of unconventional monetary policies by the AEs and by EMEs to fight disinflationary/ inflationary conditions respectively. As a consequence, there have been large movements in exchange rates and other asset prices. In sum, the AEs are yet to recover from the after affects of global financial crisis, while the EMEs are confronted with rising negative output gap, falling potential growths, which restricted the revival of global growth in FY 2014-15. According to Advance Estimates of National Income published by Central Statistics Office (CSO), Ministry of Statistics & Programme Implementation (Govt of India) based on the new GDP series, the growth in Gross Domestic Product (GDP) during 2014-15 is estimated at 7.4% (y-o-y) as compared to the growth rate of 6.9% in 2013-14, suggesting a revival in the domestic economic activity in 2014-15. However, the divergence between other lead indicators of economic activity and the GDP growth numbers, suggest that the recovery is not broad based. As per IMF, global growth in 2015 is likely to be about 3.5% as compared to 3.3% registered for 2014. With the concerns of secular stagnation rising over the recovery in AEs, and the slowing down of growth in China, Russia, Japan and euro area has affected the world trade substantially. The subdued global demand has impacted the pace of recovery in India. Though comforted with the falling crude price, the trade deficit widened during FY 2014-15, due to decline in exports owing to weak external demand. This has impacted the pickup in the real economy. On the domestic front macroeconomic stability was reassured with falling inflation which is further supported with a credible government at the centre. This has raised the investor confidence and revived their interest in the Indian Economy. Coupled with the easy monetary conditions elsewhere and rising confidence on performance of the economy, Indian financial markets have witnessed higher inflows both in debt and equity. This has resulted in comfortable liquidity situation for a major part of the year. However, the actual revival in the investment cycle to the fullest extent is yet to seen, consequently the output gain due to Capital expenditure by the corporates has been minimal in FY 2014-15. FY 2014-15 began on strong positive note corroborated by the formation of a strong government at the centre and abatement of inflationary pressures. The high expectations were moderated during the course of the year tracking global developments and pace of domestic policy actions. In sum, recovery in the economic activity and investment cycle has begun in FY 2014-15, but the full effects on output are yet to be seen.

1.1 Monetary and Liquidity ConditionsDuring the financial year 2014-15, the stance of monetary policy has changed to being accommodative. Carefully reading the developments in the inflation trajectory and the evolving domestic and external conditions, RBI has reduced policy rate (Repo Rate) to 7.50%. As committed, the policy stance of RBI since then has been accommodative. Leveraging the new liquidity management framework of using Term Repos, the RBI has ensured the spread of Money Market rates in around the policy rate on a sustainable basis. This has led to reduced volatility in the money market rates. Broad money (M3) growth remained low during Q3 and Q4 of FY 2014-15. With credit and deposit growth moving broadly in tandem, liquidity conditions in the system remained comfortable throughout, barring transient liquidity mismatches due to frictional factors. Currency demand started picking up since Q3 with the festival season and drained some liquidity, but timely liquidity provision by the Reserve Bank smoothened these short-lived spikes. The provision of primary liquidity was augmented by the large expansion in net foreign assets of the Reserve Bank. Active sterilisation operations, however, contained the growth of reserve money. The evolution of overall global liquidity conditions has been conditioned by expectations relating to high intensity events such as the lift-off of US interest rates, monetary accommodation elsewhere and geo-political flashpoints. The annual average CPI has fallen significantly below the trend due to favourable base effects and also due to falling consumption demand. The average CPI was 300 bps below the 8% Jan 2015 target set by RBI. This has given room for monetary accommodation by RBI and resulted in reduction of policy rates on two occasions. The lower inflation coupled with falling international commodity prices is yet to show its full impact on the pricing across sectors. The disinflationary momentum set by the lower prices and weak domestic demand remained vulnerable to both domestic and external shocks. However, the inflationary expectations have been contained and credibility of the disinflationary momentum has also improved as compared to previous year. In the credit market, subdued activity in the first half of the year picked up from Q3 as banks shifted their portfolios towards retail lending, especially housing. Credit flow to the industrial sector particularly to food processing and basic metals and services, also improved modestly reflecting the generally sluggish demand for credit as also regulatory requirements relating to the liquidity coverage ratio (LCR). On the other hand Banks investments in G-secs showed a sharp increase during 2014-15 resulting in excess SLR holdings of banks. Banks have been rebalancing their lending portfolio away from sectors in which their assets are under stress to relatively stress free sectors such as retail housing and automobiles. Following the 50 basis points reduction in the policy rate in Q4, 22 banks have reduced their median term deposit rates in the range of 7-53 bps while 14 banks reduced their base rates in the range of 10-50 bps.In spite of the ease in general level of liquidity and falling cost of funds, the credit growth remained low, due to the lack of domestic demand and slow pick up in the investment cycle. Consequently, the credit growth of the Banks at 9.5% is much lower than 14% registered in the last two years.

24


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25


1.2 BoP and External SectorExport performance has been progressively weakening and contraction set in on both non-oil and petroleum product exports. Fragile external demand conditions and the softness in international commodity prices have taken a heavy toll, as in several other EMEs in Asia. In particular, price realisations have been eroded, despite export volumes going up. With the Indian rupee gaining in real effective terms, export margins are coming under pressure for those exporters without substantial imported inputs. Net terms of trade gains and compression in imports of petroleum products have narrowed the trade deficit in the last three months to its lowest level since 2009-10. Gold imports remained contained; although non-oil non-gold imports grew at a modest pace in these months, they may be reflecting substitution effects in view of the sluggishness in domestic manufacturing.Exports of services, particularly, software and travel have provided a silver lining and have helped to hold down the current account deficit (CAD) which has narrowed in Q3 of FY 2014-15. This improvement might extend to Q4 of FY 2014-15 and thereafter. As a result, capital inflows mainly portfolio flows into domestic debt and equity markets and foreign direct investment have exceeded the external financing requirement and enabled accretion to the foreign exchange reserves which reached an peak of US$ 343 billion as on April 3, 2015. These reserves, including forward purchases that will be delivered over the next few months, provide some buffer against potential capital outflows when monetary policy normalisation in AEs commences. 1.3 Equity and Bond MarketsAmidst abundant global liquidity and risk-on/risk-off fluctuations in investor appetite, financial markets in India rallied strongly in the second half of 2014-15, supported by improvement in domestic macroeconomic conditions. Liquidity was comfortable in all segments and this was reflected in a pick-up in turnover, softening of interest rates, an appreciating bias in the exchange rate of the rupee and equity markets scaling historic highs.Domestic financial markets have been buoyed through 2014-15 by the global search for yields as fears of imminent normalisation of US monetary policy receded and ultra-accommodative monetary easing commenced in the euro area and Japan. Barring sporadic volatility sparked by incoming data, India became a preferred destination in portfolio reallocations, with discernible differentiation vis--vis other EMEs. Liquidity conditions were expansionary in all segments, spurring trading activity.Barring soft patches, equity markets rallied through the second half of 2014-15, scaling all-time highs. Indian indices were among the better performing in the world, with significantly attractive valuations relative to fundamentals and the cross-country EME experience. Some of these gains were pared during December 2014 by pessimism triggered by fears of earlier than expected reversal in the US interest rate cycle, uncertainty relating to Greece and geo-political tensions in the Ukraine and the Middle East. Equity markets, however, started gaining again from the beginning of January 2015 on

resumption of portfolio investment flows . Buoyant sentiment bounced back with the Reserve Banks announcement of a cut in the policy repo rate on January 15, and the BSE Sensex reached a historic high closing at 29,682 on January 29, 2015. Equity markets gave up some gains on concerns following the results of Delhi elections, weak results reported by some big corporates, poor Chinese trade data and decline in European stocks. Equity markets recovered and gained strength with the announcement of the Union Budget 2015-16 as also passing of key legislations relating to coal, mining and insurance subsequently. During March 2015, the stock market eased moderately on global cues.The market for commercial paper (CPs) picked up momentum during Q3 and Q4. This reflected some substitution of short-term bank credit due to the weighted average discount rate of CPs softened from 8.9 per cent during the second half of September 2014 to 8.5 per cent in the second half of January 2015, before hardening to 8.8 per cent in the first half of March 2015.Activity in the corporate bond market also gathered pace in the second half of FY 2014-15, driven by private placements which recorded a y-o-y growth of 112 per cent. On the other hand, amounts mobilised through public issues declined through this period (up to February). The significant increase in resource mobilisation through corporate bonds could be reflecting substitution effects since bank credit growth has remained subdued in 2014-15. FPIs investment in corporate bonds stood at Rs 1,890 billion as on March 31, 2015, accounting for 77 per cent of the limit, and as a consequence, secondary market trading volumes surged by 51 per cent (y-o-y) in the second half of 2014-15. Notwithstanding increased resource mobilisation through corporate bonds and CPs, the flow of financial resources to the commercial sector remained lower during 2014-15 than a year ago, mainly due to the deceleration in non-food credit.In the Government securities (G-sec) market, yields softened through Q3, barring some spikes during the second half of December 2014 due to the Ukrainian crisis followed by the Russian currency crisis. Buoyant investor sentiment conditioned by the ongoing disinflation in India and expectations of monetary policy easing helped the market to shrug off the impact of the Federal Reserve completely exiting quantitative easing (QE) in October. G-sec yields hardened transiently in response to the reduction in the SLR in February and the broadly unchanged size of the market borrowing programme announced in the Union Budget. Barring these episodes, the G-sec market was range bound during FY 2014-15 with a downward shift in the yield curve The 10- year yield declined by 72 basis points from 8.52 per cent at the end of September 2014 to 7.80 per cent on March 31, 2015.In the primary market, Qualified Institutional Placement (QIP) was moderate at ` 41 billion while equity and debt issues declined to ` 34 billion during Q3. On the other hand, private placements of corporate bonds and mutual funds spurted to ` 1,240 billion and ` 574 billion, respectively. There has already been some improvement in resource mobilisation in

26


[ ] 2015-16 - \ \ 1.4 \ \ , 2015 (\ , ) 2015 ), \ ] ( ) ] 85,85,644 , ] 11.4% - 14.6% 9.5% ] 2014-15 65,65,676 , ] 94,418 2014-15 2013-14 ] 13.9% - - - -] 76.5% , ] 77.8% 2. 2.1 31 \ 2015 , 31.03.2014 .2,52,494 [ .2,84,588 12.7% ] ( ) 2.2 ] ] 31.03.2015 .1,55,012 ] .13167 (9.3%) ] (\ \) ] 27.4% 31.03.2015 \ ] .9,706 ]

31.03.2014 7,493 , 29.5% ]

\ ] 31.03.2015 [ 32,696 ] 31.03.2014 27,693 18.1% ]

] 31.03.2015 [ 1,12,610 ] 31.03.2014 .1,06,656 5.6% ]

2.3 31.03.2014 .1,10,649 [ 31.03.2015 17.1% . 1,29,576 31.03.2014 20,267 31.03.2015

.19,892 , 21.7% 31.03.2014 .18,238 [ 31.03.2015 .22,200 2.4 2014-15 2013-14 .15,630 14.3% . 17,868 ] [ 1499 ] .1333

2014-15 \ .3298 ] 2760 19.5% - ] .436 638 46.6% - ]

2.4.1 ] 14.5% ] 2013-14 . 14,297 [ 2014-15 .16,369 ] 2013-14 .11,114 14.6% 2014-15 .12,742 ] 16.6% 2013-14 .3008 [ 2014-15 3509

2.4.2 ] 31.03.2015 .117

2.4.3 2014-15 .14,570 ] .12870 \ .2739 31.03.2015 11.65%

1 ],

(. )

2013-14 2014-15 ] 14297.32 16368.61 2071.29 14.50%

] 10559.98 11830.57 1270.59 12.03%

] 3737.34 4535.04 800.7 21.42%

1332.84 1499.84 167 12.53%

395.40 366.5 -28.9 -7.34%

937.44 1133.34 195.9 20.90%

\ 2309.94 2739.44 429.5 18.59%

\ 2760.24 3298.44 538.2 19.50%

2324.66 2660 335.34 14.43%

435.58 638.44 202.86 46.57%

] ] -2 2014-15 159.61 .2,616.95 ( ) .144.68

27


Q4 in response to investment-friendly measures announced in the Union Budget 2015-16 and steps taken by the SEBI to streamline existing regulations relating to public shareholding of state-owned companies.1.4 Trends in Banking Industry For the Financial Year ended March 2015 (as on last reporting Friday of March 2015) the Deposits of Scheduled Commercial Banks (SCBs) stood at ` 85,85,644 Crore registering a growth rate of 11.4% over the previous year, much lower than the growth rate of 14.6% recorded during the previous financial year. Gross Bank Credit for SCBs recorded a growth rate of 9.5% over the previous year, and stood at ` 65,65,676 Crore on the last reporting Friday of FY 2014-15, out of which Food Credit stood at ` 94,418 Crore. The growth in advances during 2014-15 was also much lower than the growth rate of 13.9% registered during 2013-14. The muted recovery and slow pick in the investment demand in the economy has adversely affected the credit off-take and asset quality. The Credit-Deposit Ratio remained at 76.5%, lower than 77.8% at the end of the previous financial year. 2.PERFORMANCE HIGHLIGHTS OF THE BANK2.1 BusinessFor the financial year ended 31st March 2015, Andhra Banks Business increased to ` 2,84,588 Crore from ` 2,52,494 Crore as on 31.03.2014, recording a growth rate of 12.7% (y-o-y). 2.2 DepositsAndhra Banks Total Deposits stood at ` 1,55,012 Crore as on 31.03.2015, recording an incremental growth of ` 13,167 Crore (9.3%) over the previous year. The share of CASA deposits (current and savings) in Total Deposits stood at 27.4%. Current Deposits stood at ` 9,706 Crore as on 31.03.2015

as compared to ` 7,493 Crore as on 31.03.2014, recording a y-o-y growth of 29.5%.

Savings Bank Deposits increased to ` 32,696 Crore as on 31.03.2015, up from ` 27,693 Crore as on 31.03.2014, growing at a rate of 18.1%.

Term Deposits increased from ` 1,06,656 Crore as on 31.03.2014 to ` 1,12,610 Crore as on 31.03.2015, registering a growth rate of 5.6%.

2.3 AdvancesGross Bank Credit increased by 17.1% from ` 1,10,649 Crore as on 31.03.2014 to ` 1,29,576 Crore as on 31.03.2015.Credit to Agriculture Sector stood at ` 19,892 Crore as on 31.03.2015. as against ` 20,267 Crore as on 31.03.2014.Credit to Micro, Small and Medium Enterprises (MSME) increased from ` 18,238 Crore as on 31.03.2014 to Rs. 22,200 Crore as on 31.03.2015 registering a growth rate of 21.7%.2.4 ProfitabilityTotal Income for the financial year 2014-15 increased by 14.3%, from ` 15,630 Crore during financial year 2013-14 to `17,868 Crore. Non-Interest Income increased to `

1,499 Crore compared to ` 1,333 Crore in the previous year. Operating Profit of the Bank for 2014-15 increased to ` 3,298 Crore compared to ` 2,760 Crore in the previous year registering a growth rate of 19.5%. Net Profit increased to ` 638 Crore as compared to ` 436 Crore in the previous year, registering the growth rate of 46.6%. 2.4.1 The Total Interest Income recorded a growth rate of 14.5 % and increased from `14,297 Crore during 2013-14 to Rs. 16,369 Crore during 2014-15. Of this, Interest Income from Advances grew by 14.6% from ` 11,114 Crore during 2013-14 to `12,742 Crore during 2014-15. Interest Income from investments increased by 16.6% from `3008 Crore during 2013-14, and stood at ` 3509 Crore during 2014-15. 2.4.2 Out of total Non Interest Income, Fee Based Income for the financial year ended 31.03.2015 stood at ` 117 Crore.2.4.3 Total Expenses during the financial year 2014-15 were `14,570 Crore against `12,870 Crore during the previous year. Of this, Operating Expenses stood at ` 2,739 Crore. Establishment Expenditure as a percentage of Total Expenditure stood at 11.65% for the financial year ended 31.03.2015. Table 1: Highlights of Revenue, Expenditure and Profitability (` in Crore)

2013-14 2014-15 Absolute Growth

Percentage Growth

Total Interest Income

14297.32 16368.61 2071.29 14.50%

Total Interest Expenditure

10559.98 11830.57 1270.59 12.03%

Net Interest Income

3737.34 4538.04 800.7 21.42%

Other Income 1332.84 1499.84 167 12.53%

Profit on sale of Investments

395.40 366.5 -28.9 -7.31%

Core Other Income

937.44 1133.34 195.9 20.90%

Operating Expenses

2309.94 2739.44 429.5 18.59%

Operating Profit 2760.24 3298.44 538.2 19.50%

Provisions and Contingencies

2324.66 2660 335.34 14.43%

Net Profit 435.58 638.44 202.86 46.57%

APPROPRIATIONSThe appropriations made out of Net Profit are shown in Table 2. An amount of ` 159.61 Crore was transferred to statutory reserves during 2014-15, and with this, the statutory reserves now stand at ` 2616.95 Crore. Transfer towards Dividend (including Dividend Tax) amounted to ` 144.68 Crore.

28


2 ]

(. ) 2014-15 ] 638.43 56.16 159.61] 76.55] 28.77 190.00 ( ) 144.68 ] 94.982.5 - \ ] ] 3.00% ] 2.76 % 45.56 % 45.37% ] () .10.82 () 153.83 .

31.03.2015 ] 2.93% ] 5.31%

3

31.03.2014 31.03.2015 ] (%) 11.22 11.38

] (%) 7.81 7.73

] ] (%) 2.76 3.00

](%) 9.40 9.64

(%) 6.95 6.97

(%) 45.56 45.37

- III (%) 10.78 10.63

(%) 0.29 0.38

](.) 7.67 10.82

(.) 145.57 153.83

(%) 3.11% 2.93

(%) 5.29% 5.31

2.6 ] (. )

31.03.2014 31.03.2015 ] 590 603

8148 9461

() 8583 9274

2.7 ]

.. - , - III

- 1 , 2013 , 1 , 2013

-III ]-

] 31.03.2015 .13,218 ]

10.63%, 9%

-III [ ] -

, ]-

] ()

], - ]- ] ] -III

- -II ]

4 31 \ 2015 ( III)

-I ] 9309

-I ] 626

-II ] 3283

132183. ( ] ) 12.7% ] , ] 31.03.2014 . 2,52,494 [ 31.03.2015 .2,84,588

3.1 ] ] ( ] ) 31.03.2014 .1,41,815 [ 31.03.2015 .1,54,974 9.28% ] ] .9,668 \ ], .32,696 \ ] .1,12,610 ]

5 ] - (. )

. ] ] . 31.03.2015 1 \ ] 9668.27 6.24%

2 \ ] 32695.8 21.10%

3 ] 112609.79 72.66%

4 (1+2+3) 154973.86 100.00%

5 (%) 9.28%

.31.03.2015 ] ( ]

] )

29


Table 2: Appropriations out of Net Profit 2014-15Appropriation out of Net Profit 638.43Balance brought forward 56.16Transfer to Statutory Reserves 159.61Transfer to Capital Reserve 76.55Transfer to Revenue Reserves 28.77Transfer to Special Reserve 190.00Transfer to proposed Dividend 144.68(including Dividend Tax) Profit carried over to Balance Sheet 94.98

2.5 KEY FINANCIAL RATIOSThe Bank has done considerably well in key financial ratios, given the performance of the Industry as a whole. Net Interest Margin (NIM) stood at 3.00% compared to 2.76% in the previous year. Cost to Income Ratio stood at 45.37%, as compared to 45.56% for the previous year. Earnings per Share (EPS) stood at `10.82 and Book Value per Share (BVPS) stood at `153.83

Gross Non-Performing Assets to Gross Advances stood at 5.31% and Net Non-Performing Assets to Net Advances stood at 2.93% for the financial year ended 31.03.2015.

Table 3: Key Financial RatiosParameter 31.03.2014 31.03.2015Yield on Advances (%) 11.22 11.38

Cost of Deposits (%) 7.81 7.73

Net Interest Margin (%) 2.76 3.00

Yield on Funds (%) 9.40 9.64

Cost of Funds (%) 6.95 6.97

Cost-to-income Ratio (%) 45.56 45.37

CRAR Basel III (%) 10.78 10.63

Return on Assets (%) 0.29 0.38

Earning Per Share (`) 7.67 10.82

Book Value Per Share (`) 145.57 153.83

Net NPA (%) 3.11% 2.93%

Gross NPAs (%) 5.29% 5.31%2.6 CAPITAL & NET WORTH (` in Crore)Parameter 31.03.2014 31.03.2015Equity Capital 590 603Reserves Surplus 8148 9461Networth of the Bank (Tangible) 8583 9274

2.7 CAPITAL ADEQUACY

As per the Reserve Bank of India guidelines, the start date for implementation of Basel III guidelines in India is w.e.f. April 1, 2013. Accordingly, w.e.f. April 1, 2013, the Bank has been assessing its Capital Adequacy as per Basel III prescriptions.

The total Capital Funds of the Bank are at ` 13218 Crore as on March 31, 2015 and the Capital Adequacy Ratio at 10.63% is above the required RBI prescribed norm of 9%.

The Bank has in place an Internal Capital Adequacy Assessment Process (ICAAP) for assessing the adequacy of Capital levels keeping in view the expected increase in business levels and enhanced Capital requirements in the Basel III regime. The assessment process also includes a framework for inclusion of Pillar-II risks under Basel-III guidelines, such as Credit concentration risk, interest rate risk in the banking book, liquidity risk, etc.

Table 4: CRAR Position (` in crores) 31 March 2015 (Basel III)Tier-1 Capital 9309Additional Tier-1 Capital 626Tier-II Capital 3283Total 13218

3. BUSINESS REVIEW

The Total Business (Total Deposits plus Gross Bank Credit) of the Bank registered a growth rate of 12.7%, up from ` 2,52,494 Crore as on 31.03.2014 to ` 2,84,588 Crore as on 31.03.2015.

3.1 Aggregate Deposits

Aggregate Deposits (excluding inter-bank deposits) went up from ` 1,41,815 Crore as on 31.03.2014 to ` 1,54,974 Crore as on 31.03.2015, registering a growth rate of 9.28%. Aggregate Deposits comprised of Current Deposits of ` 9,668 Crore, Savings Deposits of ` 32,696 Crore and Term Deposits of ` 1,12,610 Crore.

Table 5: Category-wise classification of Aggregate Deposits (` in Crores)Sl. Type of Deposits Amount Percentage of No. 31.03.2015 Aggregate Deposits1 Current Deposits 9668.27 6.24%2 Savings Bank 32695.8 21.10% Deposits 3 Term Deposits 112609.79 72.66%4 TOTAL (1+2+3) 154973.86 100.00%Growth rate over 9.28% previous year (%)

Area-wise distribution of Aggregate Deposits (Total Deposits less Inter-Bank Deposits) as on 31.03.2015 is set forth in the following Table.

30


6 ]

(. )

. . 30.03.2015 %

1 11010.83 (20.6%) 7.10%

2 - 24086.51 (13.6%) 15.54%

3 42083.31 (14.4%) 27.16%

4 77793.20 (4.2%) 50.20%

5 (1+2+3+4) 154973.86 (9.3%) 100.00%

() \

3.2

31.03.2015 17.1%

] .18,927 ] 31.03.2014

.1,10,649

.1,29,576

7

(. )

31.03.2014 31.03.2015

1. 1882.14 1746.73 -135.41

2. (2.1 2.4) 108766.90 127829.41 19062.51

2.1 20267.11 19892.22 -374.89 ( )

2.2 18238.31 22200.44 3885.46

2.3 ( ) 16515.45 19846.12 3330.67

2.4 53746.03 65890.63 12221.27

(1+2) 110649.04 129576.14 18927.1

] 41293.29 44966.96 3673.67

3.2.1

8.56% -- ] \, 2015

.45507.52 (

541 ) 3,588

40% , 31.03.2015

40.71% ]

8 (31.3.2015 )( )

2014 -151. (2 7) 45507.52

2 (2.1 +2.2) 20432.78

2.1

andhra bank annual report 2014 15

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