During the last quarter of 2001-02 a pick-up in the non-food credit has been observed which is expected to continue. Further, benign inflation, good agricultural prospects, and signs of recovery should help the process of recovery in our economy.

Performance of the Bank
Under the above circumstances, I am happy to inform you that Bank's performance during 2001-2002 has been good with an operating profit of Rs.53.34 crores as compared to Rs.36.32 crores in 2000-01, a growth rate of 47% was achieved. The net profit for the year had also grown from Rs. 17.50 crores to Rs.22.75 crores registering an increase of 30%.

The global deposits registered a growth of 12.97% from Rs.1613.86 crores in 2000-2001 to Rs.1823.26 crores in 2001-02. The gross advances had increased from Rs.807.71 crores in FY 2000-01 to Rs.939.56 crores in FY 2001-02, registering a growth of 16%. The CD ratio was at 51.53% as against 50.05% in the previous year.

The business volume grew by Rs. 341 crores during 2001-02 registering a growth of 14.09% as against 13.19% during the previous year. The Bank's advances to priority sector stood at 49.62% as against the stipulated requirement of 40%. The Bank had continued to surpass the target of 12% fixed by RBI for export finance. Our exposure to export finance in FY 2001-02 was at 12.78%.

The Net NPA had risen marginally from 4.14% during 2000-01 to 4.38% during the current year. The Bank placed continued emphasis on recovery and settlement of bad debts assets. Multi-pronged strategies are being adopted to improve debt recovery.

The poor performance of the steel and textile sectors was the reasons for the increase in NPAs during the year 2001-02.

The Networth of the Bank had increased from Rs.100.17 crores as on 31.03.01 to Rs. 123.03 Crores as on 31.03.02, registering an increase of 23%.

The capital adequacy ratio stood at 15.09% as on 31.03.02 as against 14.43% as on 31.03.01.

The core capital adequacy ratio is 12.55% as on 31.03.02 as against 12.48% as on 31.3.01.

Risk Management
Risk is inherent in the banking business and sound risk management is critical to any bank's success. Risk Management is not a defence mechanism in the lexicon of banking, but is a very competitive advantage. Our Bank continued to implement and improve policies and procedures to identify, monitor, and manage risks across the Bank. A separate Integrated Risk Management Cell has been set-up to frame risk management control measures and to implement the same.

Overseas Branch
Our Bangkok Branch at Thailand has continued to perform well. The deposits in Bangkok Branch have registered a growth of 6.21% while advances registered a growth of 9.37% in local currency terms.

The gross profit earned has increased from Thai Baht 70 Mio for the year ended 31.03.01 to Thai Baht 112 Mio for the current year ended 31.03.02 registering an increase of 36.58%. The net profits at Bangkok amounted to Thai Baht 70 Mio as on 31.03.02.

During the current year, we have increased the assigned capital from the present Thai Baht 280 Mio to Thai Baht 360 Mio. The increase in the assigned capital will enable us to romp in big-ticket clientele and strengthening the high quality advance business.

An Advances Product "Traders Collection TR" has been introduced at Bangkok, which targets the trading community.

Performance Excellence:
We have constantly strived to upgrade the marketing skills of our employees by providing training on a continuous basis, both on the job and through training programs conducted by external and internal faculty. In the competitive environment it has become necessary to upgrade skill of the personnel with focus on Customer Relationship Management, Marketing and sales maximisation. Towards this, our Bank has retained M/s NIS Sparta Limited, a leading marketing training organization. We have so far trained 57 of our Managers and 30 officers through them.

Further to strengthen the Bank's position in a competitive market place, executives with a flair for marketing, designated as Territory Heads, have been appointed at strategic centers to improve customer acquisitions, increased penetration and higher cross sell and to take care of the developmental work in the territory. A flat organisational set-up with access to the Chief Executive has also been put in place.

Retail banking
As you all know that there is pressure on margins in the falling interest rate regime; In such a scenario a right mix of business segments, product innovation, and increase in volumes will all assume significance for profit maximisation. The retail segment will continue to be our niche area.

From concept to creation, the evolution of every successful product begins with an idea that is nurtured with care and analyzed for form, fit and function. In today's competitive environment, it has become imperative to design and develop suitable financial products that address the specific needs of each sector of society.

Our Bank continues to innovate new products targeting specific groups with right mix of business volumes and segments.

We provide a range of financial products to individuals in every strata of Society. The following deposit and loan products, which were launched during the previous year, had gained wide acceptance.

a) Shubha Labh- Specially tailored loan Scheme for Traders.
b) Shanthi- Special Deposit Scheme with an incentive for senior citizens.
c) Shakti- Easy Car loan and Consumer Durable loan
d) Shubam- Unit Deposit Scheme

The following two new retail loan products were launched during the year.

"Saraswathi"- an Educational Loan Scheme for students
"Sree Griha"- a Housing Loan Scheme.

Technology Update
Systematic efforts were initiated by the Bank during the year to upgrade technology. A system study was undertaken, TCS Ltd were appointed as consultants, vendors were selected and the Bank has undertaken the creation of a Central Data Warehouse and networking of all branches in a phased manner in the years to come. Leveraging our technology platform to deliver more products to more customers, to control operating costs & achieve better risk management are the goals to be achieved through technology upgradation.

ATMs have been installed in Goregaon branch and in Chennai Main branch. The Bank has introduced computerisation at 64 branches, which constitutes 84% of the total number of branches. The remaining branches will also achieve computerisation during the current year.

Brand Equity
The strengths on the Bank's Balance Sheet are attractive but the strengths that lie outside are quite impressive. Brand equity is the value- addition created by our employees with their prompt and quality service. Customers no longer want just a service but a relationship based on trust and familiarity. We shall relentlessly pursue quality in service, in order to achieve the goal of an earnings stream secured by loyalty of customers. We shall continue to preserve our - off balance sheet strengths, a nurtured clientele.

Appreciation
I thank the shareholding Banks for their continued and valuable support. To the members of the Board, I offer my gratitude for the enlightened counsel and guidance. I take this opportunity to thank Reserve Bank of India and Bank of Thailand for their valuable guidance offered. I place on record my appreciation for the employees of the Bank, who undoubtedly are the pillars of the Bank.

Most importantly, I express my gratitude to our customers in India and Bangkok whose loyalty, patronage, affection and faith have always remained a source of inspiration for the Bank's continued good performance.

We wish to build, with your patronage, a sound customer base across distinct business so as to be a preferred provider of banking services to the target retail and institutional customer segments, and to achieve healthy growth in profitability consistent with the Bank's risk appetite.



Yours truly,

G. Krishna Murthy      Place : Chennai
Chairman Date : 20.6.2002