Indian Bank

Dear Shareholders,

I am pleased to present to you the performance highlights of your Bank for the financial year 2022-23. Business growth and the details of accomplishments and initiatives of the Bank are provided in the Annual Report for the year. The performance of your Bank came in an economic environment where the major economies around the world faced unprecedented inflation & monetary tightening, which led to global slowdown.

Now, let me begin with a short preview of the prevailing financial eco-system and the outlook for global and Indian economy.

Global Economy:

Global economic activity remains resilient amidst the persistence of inflation at elevated levels, debacle of banks in some advanced economies, tight financial conditions and continued geopolitical tensions. Now, the Supply-chain disruptions are normalising, the disorders to energy and food markets caused by the geo-political conflict are also receding. The synchronous tightening of monetary policy by most central banks have started bearing fruits, with inflation moving back toward its targeted levels.

However, weakened external demand, spill-overs from the banking crisis, volatile capital flows and debt distress in certain vulnerable economies weigh on growth prospects. Hence, the outlook for the global economy remained sluggish. Consequently, IMF through its Global Economic Outlook for the month of Apr'23 has revised the global economic growth downward to 2.8% for 2023.

Indian Economy:

Due to multiple shocks, e.g. COVID-19, Russia invasion of Ukraine etc., record inflation observed across the globe and India also faced the cascading effect of imported inflations. the inflation, the RBI hiked the policy repo rate by 250 bps in different phases during the FY23. Throughout the year domestic inflation elevated, its cumulative print was recorded at 6.65% during FY23. However, India's retail inflation eased to an 18-months low at 4.7% YoY in Apr'23. In its Apr'23 MPC meet, the RBI kept the policy rate unchanged.

India's Industrial Production (IIP) growth fell to 5.14% YoY in FY23 due to subdued performance of manufacturing sector & consumer goods segment. For FY22, it was measured at 11.40%.

The Government's continued thrust on capex, improvement in capacity utilisation in manufacturing and pick-up in non-food credit may sustain the expansion in industrial activity. On the other hand, headwinds from geopolitical tensions, tightening global financial conditions and the slowing external demand pose downside risks to India's economic growth. The RBI projected real GDP to grow at 6.5% and CPI led inflation at 5.2% for FY24.

Banking Sector

The Indian Banking sector remained resilient & well capitalised and demand for credit from almost all the major sectors of the economy was seen. The banking sector successfully catered to the needs of the economy.

Bank's Performance - FY23

Against this background, I would like to present a synopsis of the Bank's performance during FY23.

Business Figure:

• Bank achieved the gross business of Rs10.95 Lakh Cr, witnessing YoY growth of 8%. This was driven by 14% YoY growth in Gross advances and 5% YoY growth in deposits. The YoY growth in SB deposits was at 7%.

• Bank's CASA deposits increased by 5% YoY to Rs2.61 lakh Cr (Rs2,60,809 Cr) in FY23. The CASA share to total deposits continued to remain around 42%, as in the previous year.

• Bank has a well-diversified credit book constituting 61% share of RAM (Retail, Agri & MSME) advances. The growth in the RAM advances has been observed in all the sectors i.e., Retail, Agriculture and MSME advances grew by 13%, 16% and 7% YoY respectively.

• The Corporate loan book grew by 12% YoY to Rs1,71,242 Cr in FY23.

• Priority Sector Advances stood at 44.26% of Adjusted Net Bank Credit (ANBC) in FY23 as against the RBI's mandatory target of 40%. Agriculture Credit stood at 19.27% of ANBC as against the mandatory target of 18%.

• The outstanding loan amount to SHGs grew by 44% YoY to reach Rs13,719 Cr involving 4.57 lakh SHGs as on 31^st Mar'23 as against Rs9,524 Cr in the previous year.

Earnings and Profitability:

• Net Interest Income of the Bank registered a growth of 21% YoY.

• Fee based income of the Bank grew by 16% YoY to Rs2,969 Cr. Recovery in written-off accounts improved by 33% YoY to Rs2,155 Cr in FY23.

• Operating Profit recorded a YoY growth of 20% to reach Rs15,271 Cr as compared to Rs12,717 Cr in the previous year.

• Net Profit of the Bank grew by 34% YoY toRs5,282 Cr in FY23 as against Rs3,945 Cr in FY22.

• Return on Assets (RoA) improved to 0.77% in FY23 from 0.63% a year ago.

• Return on Average Net worth (RoE) increased to 14.73% in FY23 from 12.13% in FY22.

• Earnings-per-Share (EPS) for FY23 improved to Rs42.41 from Rs32.38 a year ago.

• Domestic NIM of the Bank improved by 50 bps to 3.41% in FY23 as against 2.91% in FY22.

• Cost to income ratio reduced by 201 bps to 44.20% in FY23 as against 46.21% in the last year.

Asset Quality:

• Gross Non-Performing Assets (GNPA) reduced by 252 bps to 5.95% at Rs28,180 Cr in FY23 as against 8.47% in the previous financial year.

• Net NPA also declined by 137 bps to 0.90% at Rs4,044 Cr as on March 31^st 2023 as against 2.27% in FY22.

• Provision Coverage Ratio (PCR, including TWO) improved to 93.82% in FY23 from 87.38% in FY22.

Total recovery during FY23 increased to Rs8,504 Cr from Rs7,115 Cr a year ago.

Sound Capital Structure:

Capital Adequacy Ratio (CRAR) of the Bank computed as per Basel III guidelines stood at 16.49% in Mar'23, with Tier-I Capital at 13.48%. The share of Government of India in the Bank was 79.86% as on 31^st Mar'23.

The Board of Directors has recommended a dividend of Rs8.60 per equity share (86%) for FY23.

Bank's Footprint:

Currently, the Bank has an extensive customer touch-points across India, comprising 5,787 domestic branches, 3 overseas branches, 1 IFSC Banking Unit (IBU), 4,929 ATMs & BNAs and 10,750 Business Correspondents (BCs).

Awards & Recognition:

• Bank received the Financial Express, "Award for Best Public Sector Bank 2020-21" in Aug'22.

• Bank emerged as the winner in BFSI Award 2023 in Best Brand category for spurring growth amidst global slowdown by the Economic Times.

• Bank received the "Golden Peacock National Training Award-2023'' for excellence in training practices from Hon'ble Minister of UAE at Dubai.

• Bank bagged "CGTMSE Achievement Award FY23" for best efforts in information dissemination.

• Bank ranked at 2^nd Position in ATAL Pension Yojana Enrolments for FY22

• Bank bagged the Best Performing Bank Award in Tamil Nadu for SHG-Bank Linkage Programme for FY21-22 from NABARD.

• Bank has been awarded as the 2^nd Best Bank at National Level Award at 14^th SFBCK Banking Excellence Awards, 2021-22 by the former President of India Shri Ramnath Kovind in Jan'23.

• Bank was adjudged the Company of the Year at Mint W3 awards 2023.

Financial Inclusion Initiatives:

• The Bank is having 205 lakh PMJDY accounts as in Mar'23 in which the outstanding balance stood at Rs9342 Cr. The balance in PMJDY accounts has grown by 23% over the previous year.

• Balance per PMJDY account of the bank stood at Rs4,557 in comparison to industry average of Rs4,087. Bank has also issued Ru-Pay cards to around 56% of the accounts.

• Bank garnered 6.86 lakh fresh enrolments with highest ever average account per branch of 117 in APY.

Leveraging Technology

• Digital Banking has revolutionised traditional banking by leveraging technology to offer more convenient, accessible and secure financial services. During Q4FY23, 85% of the Bank's transactions were carried out through various digital channels as against 77% during Q4FY22.

• Mobile banking users of the bank increased to 115 lakh in FY23 as against 68 lakh in FY22, while the transactions increased by 72% YoY during the period.

• Number of UPI users increased by 27% YoY to 128 lakh, while the UPI transactions surged by 109% YoY in FY 23.

HR Initiatives:

• As part of our commitment to foster a positive work environment, we have implemented several HR initiatives to support our staff, viz., implementation of job family concept, capacity building initiatives etc.

• Bank has conducted trainings for the 36,652 employees posted in different verticals during the year for empowering and skilling them. 908 Digital banking champions have been assigned the responsibility of on-boarding more and more customers on the digital channels.

• The Bank has launched Performance Management System (PMS) to gauge the performance of our officers and motivate them for focused overall growth by assigning Key Performance Indicator (KPIs).

• We also prioritize employee well-being by offering wellness programs and initiatives, including health and fitness activities, stress management workshops, and mental health support. In our endeavour to serve our employees, the Bank has continued its tie-up with M/s. Practo for free online Doctor consultation for the serving and retired staff members.

New Initiatives:

Under the umbrella of "Project-WAVE" (World of Advanced Virtual Experience) the Bank has launched various digital journeys.

• Now one can digitally apply for Agri jewel loan, Shishu Mudra loan & Personal loan. Customers can also renew MSME & KCC loans, open fixed deposits and savings account digitally.

• To garner low cost deposits, Bank has set-up liability verticals in major cities of India to ensure customized service to esteemed corporates and Government departments.

• Bank has introduced PROJECT IND LEAP, which is an improved operating model based on centralisation, standardisation, automation, efficient processing & economies of scale. Under the project, micro-market strategy has been implemented at pin code level for business growth. It is a transformation journey to address evolving customer expectations and emerging opportunities.

Way Forward:

At, Indian Bank, we are adopting best in class industry practices to address evolving customer expectations. We are committed to deliver excellence in financial services by bringing innovation & technology in our offerings and will continue to be responsive to the needs of our customers through the channel of their choices.

Acknowledgement

I would like to thank our shareholders for their unwavering support and confidence in the Bank. The success we have achieved is a result of the hard work & dedication of the employees, the loyalty of our customers and the trust & confidence of our valued shareholders. We remain committed to delivering superior financial performance and creating value for our stakeholders.

I also wish to sincerely thank the Government of India, Reserve Bank of India, all our valuable shareholders and other stakeholders for their continued confidence and support to the Bank in all its endeavours. We would continue to look forward for your support, goodwill and patronage.