CHAPTER 11

PROFILE OF ANDHRA BANK

 PROFILE OF ANDHRA BANK

CONTENTS

INTRODUCTlON

EVOLUTION OF ANDHRA BANK

ABOUT THE FOIJNDER

OBJECTIVES OF ANDHRA BANk

CORPORATE IDENTI'I'Y

CAPITAL, OF ANDHRA BANK

ORGANISAI'IONAL STRUCTURE OF ANDHRA BANK

CORPORATE GOVERNANCE IN ANDHRA BANK

ANDHRA BANK SUBSIDIARIES

ANDIIRA BANK AS A LEAD BANK

ANDHKA BANK - SHG LINKAGE PROGRAMME

BRANCH NETWORK OF ANDHRA BANK

ANDI-IRA BANK NEW PRODUCTS AND SERVICES

ANDHRA RANK HUMAN RESOURCE DEVELOPMENT

ANDHRA BANK - CORE BANKING SOLU'I'IONS

2.1 INTRODUCTION

Commercial Banks play an important role in the economy by financing the

requirements of trade, industry and agriculture in the country. They draw the

community savings into the organized sector which are then allocated among the

different economic activities according to the priorities laid down by the authorities

i.e. RBI and Government of lndia.

The recognition of the potential of the banking system to promote larger

economic objectives such as growth and distributive jusiici: led LO the nationalization

of banks. The emergence of public hector in the Indian Banking Scene began with the

nationalization of the Imperial bank of India and it was renamed as State Bank of

lndia in 1955. July 19. 1969, marks an important milestone in the history of the Indian

banking as on that day, 14 major Indian Commercial Banks, each having total

deposits of not less than Rs.50 crores at the end of June 1969 were nationalized.

Another major development in the sphere of commercial banking was the

nationali~ationon April IS, 1980 o f six more banks in the private sector having total

deposits of not less than Rs. 200 crores in India on March 14, 1980. Among public

sector banks, the evolution of Andhra Bank, its achievement, operations, functioning

and progress are discussed in this chapter.

2.2 EVOLUTION OF ANDHHA BANK

Andhra Bank has a historical and patriotic background. It was an offshoot of

National Movement and was founded by Dr. Bhogaraju Pattabhi Sitaramaiah, an

ardent freedom fighter of the country. It was registered on 20" November, 1923 at

Machilipatnam, a port town in coastal Andhra Pradesh, with a paid up capital of Rs. I

lakh and authorized capital of Rs. 10 lakh, which were raised to Rs. 25 lakh and Rs. I

30
crore respectively by 1946. It was the first commercial bank established in Andhra

Pradesh. Dr. Pattabi was the Managing Director of the Bank since its inception in

1923 to 193 1 and continued to be a director till 1941. He also started Bharata Lakshmi

Bank, a second one in Andhra Pradesh, which was merged with the Andhra Bank in

1964.

In spite of some difficulties faced during the Second World War, the bank

moved forward and steadily sailed towards progress and stabilization. The Bank

attained the status of scheduled bank in 1943. The Bank stepped out of Andhra

Pradesh for the first time in February 1945 by opening a branch at Madras. The

central ofice was shifted from Machilipatnam to Hyderabad in 1963.

With the nationalization of 14 major banks in July 1969, Andhra Bank

remained as the largest hank among the non-nationalised banks. It maintained this

position of No. 1 in the Private Sector Banks throughout till it was nationalized on

1 51h April 1980 along with five more banks'. The Bank was assigned the Lead role in

five districts, namely, Srikakulam, East and West Godavari. Guntur in Andhra

Pradesh and Gunjam in Orissa even before its nationalization. The Bank took up the

financing of Small Scale Industries, agriculture, foreign trade, and weaker sections on

a massive scale. For the benefit of farmers, the bank introduced Kisan Card. To render

more help to the people in rural areas, a number of Rural Credit Branches were

opened besides sponsoring a number of Farmers' Service Co-operative Societies.

2.3 ABOUT THE FOUNDER

Dr. Bhogaraju Pattabhi Sitaramaiah the founder of Andhra Bank, was a true

Gandhian and a veteran freedom fighter who rcndered a selfless and fruitful service to

the Nation in various capacities for over half a century. Born on 24'h November, 18x0

in Gundugolanu, West Godavari District in Andhra Pradesh(it was then a part of

Krishna District). Dr. Bhogaraju Pattabhi Sitaramaiah graduated in Arts kom Madras

Christian College.

PICTURE 2.1
Dr. B. P. Sitaramaiah

Dr. Bhogaraju Pattahhi Silaramaiah joined in the medical college at

Madras(now called Chennai) in MBCM (presently known as MBBS). As an

upcoming medical practitioner he chosc to rcsidc in Machilipatnam and set up his

practice there. Dr Pattabi, along with Kopella Hanumantha Rao, established the

Andhra Jateeya Kalasala at Machilipatnam in I9 10, to offer educational opportunities

in tunc with the Gandhian ethos as alternative to those who braved boycott of

colleges responding to thc call of Mahath~naji.Dr Pattabi took charge of the Pdmous
journal, "Krishna Patrika", which was considered the mouthpiece of the National

Movement from 1908 to 191 1.

Dr Pattabi founded several institutions to provide employment avenues to the

young and also to bring about rural uplift. Notable among them were Andhra Bank

(1923), Bharata Lakshmi Bank,1929 (later merged in Andhra Bank), Krishna Co-

operative Central Bank, Machillipatnam(l915), Vadlamanu Idand Mortgage

Bank(1927). Andhra Insurance Company(l925), Hindusthan Ideal lnsurance

Company(1935) and the like. The insurance company was nationalized and merged

later in the Life Insurance Corporation of India.

Dr. Bhogaraju Patlabhi Sitaramaiah saw to it that these institutions not only

proved viable but served a definite social purpose. Andhra Bank which started at

Machilipatnarn with a paid up capital of only Rs. I lakh has grown into a gigantic

institution of national level with about 2502 Delivery Channels consisting of 1557

Branches, 48 Extension Counters, 38 Satellite Oflice, and 859 ATMs spread over 23

states and 3 Union territories. The Bank has 50 specialized branches, catering to the

needs of the specific segment of clientele. The Bank also has two representative

(overseas) offices at Dubai (I!.A.E.) and New Jersey (USA).

2.4 OBJECTIVES OF ANDHRA BANK

The main aim of the bank is to become a trustworthy, efficient and strong

bank. Andhra Bank is increasing its share of the market by introducing best services

that are customer-focused. It also takes every step to improve the creative talents of its

staff members in using leveraging technology in such a way that clientele is expanded

thereby offering value-added and quality service to customers. The main objective of
Andhra Bank includes positioning itself in the financial horizon as a rising star, to

create all types of possibilities to achieve its objectives, to empower and to

dynamically locate people, fast-cycle knowledge into innovative products and to

improve the capabilities of its staff members in such a way that customers are served

properly.'

1923 - Establishment of the Bank

1943 - Bank attained the status of a Scheduled Bank
1945 - Opened first branch outside Andhra Pradesh in Chennai, Tamil

Nadu

1964 - Amalgamation of Bharat Lakshmi Bank with the Bank

1969 - Lead Bank role in 4 districts of Andhra Pradesh and 1 district in

Orissa State

1980 - Nationalisation of the Bank

1981 - Introduction of Credit Cards by the Bank
1993 - First totally computerised branch opened at RP Road branch,
Secunderabad

1998 - Bank was granted functional autonomy by the GO1

1999 - Deposits oi'thc Bank surpassed Rs.1000.00 million

2001 - Initial Public Offering of the Bank

2002 - Launching of network ATMs
2003 - Achieved 100% branch computerization and ABHFL merged with
the Bank

2006 - Bank for the first time, organized Bancon - Annual Bankers'
conference at Hyderabad in association with IBA
 2008 - Andhra Bank along w ~ t hBank of Baroda and Legal and General

Group PLC of U.K., have floated a Joint Venture Life Insurance

Co.

2009 - Total business of the Bank rcachcd to Us I iI.3.X I X C I . C ~;I\C on

l l 03 2009

2010 - Andhra Bank has emerged as BhST BANK MID-SIZE , with

Rank 1

2.5 CORPORATE IDENTITY

PICTURE 2.2
"Togetherness" is the theme of this logo where 7 1
the world ol' banking services lncets ~ h realm
c of even

changing customer nccds and cstablishcs a link that is

like a chain inseparable. This logo also denotes a bank

that is prepared to do anything, to go to any lengths for

the customers. The blue pointer on the lop rcprcsents the philosophy of a bank. That is

always looking at growth and in newer, challenging and morc promising directions.

Thc kcyhole indicates safety and sccurity. The colors red and blue present fusion of

dynamism and solidity.'

2.6 CAPITAL STRUCTURE

The Andhra Bank had an authoriled capital of Rs. 10 lakh in 1923. It was

raised to Rs. 3000 crore by the end of 31" March, 201 1. The issued, subscribed and

paid-up capital of the Bank was Rs. 1 lakh in 1923, it was raised to Rs. 559.58 crore at

35
the end of March 3IS', 201 1. The table 2.1 gives the details of Authorised and paid-up

capitals of Andhra Bank since its inception. It is due to the impact of changing

dimensions of the traditional banking and opening of doors to liberalization and

globalization.

The table 2.1 clearly indicates that, from 1991 there has been a tremendous

growth in the capital of Andhra Bank. By the end of March, 201 I paid-up capital of

the bank rose from 22 lakhs in 1991 to Rs. 560 crore i.e.. 25 limes improvement

during the period.

TABLE 2.1
AUTHORISED AND ISSUED, SURSCRIBED AND PAID-UP CAPITAL
OFANDHRA BANK 1923 -2011

Source : 1. Compiled from the Annual Reports of Andhra Bank

2. Silver Jubilee Souvenir of Andhra Bank, P.33
 It is observed from the Table 2.2 that, the Government of lndia share by the

end of March 2011 has come down to 58 per cent from 66.66 per cent in 2002.

Further, there had been a great pressure on the Government to amend the Andhra

bank share capital to reduce the share of Government of India's contribution to

around 50 per cent, which makes the Bank more competitive in the changing scenario

and to stand on its own by entering into new capital markets and to achieve

international standard. Banks & Insurance companies' contributions are around 14

per cent of the Bank capital by the end of March, 201 1 . It is obscrved that, From the

year 2005 onwards Government of lndia had withdrawn 10.45 per zent of the capital

and that the gap was filled by foreign institut~onalinvestors.

TABLE 2.2
SHARE HOLDING PATTERN OF ANDHRA BANK

(In
. . per cent)

I I I I I 1 I I

201 1 58.00 10.56 0.37 1.70 0.89 13.82 14.47 0.19

Source : Compiled from the Annual Reports of Andhra Bank
2.7 ORGANISATIONAL STRUCTURE

The organization of Andhra Bank consists of a central or corporate office,

Zonal offices, Regional offices, and Branches. The Bank Registered office is at Sultan

Bazar, Hyderabad, whereas corporate office is at Saifabad, Hyderbad. The Chairman

and Managing Director is assisted by an Executive Director. It is his responsibility to

see that the policies of the Board are implemented efficiently. The bank had 3 - tier

organizational structure under which the Bank has one central officc at Hyderabad, 27

controlling offices, i.e. 15 are Zonal ofices and the remaining 12 are name as

Regional Offices each representing directly to the central office. The Bank had 2676

Delivery channels consisting of 1632 Branches, 25 Extcnsion counters, 38 satellite

ofices and 981 ATMs cpread over 23 states and 3 Union territories by the end of

March, 201 1. National Electronic Fund Transfer (NEFT) and Real Time Gross

Settlements(RTGS) are also integrated wrth Core Banking Solutions. The Bank is

having joint venture in insurance with Bank ot Baroda and Legal & General plc. of

IJK Christened, India's First Lifc Insurance Co. Ltd. The bank, along with Bank of

Baroda and Indian Overseas Bank, has entered into a tie up for setting up a banking

subsidiary in Malaysia.

2.8 CORPORATE GOVERNANCE IN ANDHRA BANK

There are three levels in the organizational structure of the Bank, namely (a)

the Top level management (b) the Middle level management and (c) the Lower level

management. The Board is constituted in accordance with the Banking Companies

(Acquisition & Transfer of Undertakings) Act, 1980. The Board is headed by the

Chairman & Managing Director, who is appointed by the Central Government in

consultation with the Reserve Bank of India. In addition to the Chairman, two whole-
time Directors (Executive Directors) of the Bank are appointed by the Central

Government, who are also members of the Board. As on 31" March, 201 1 there are 7

other Directors (Non-Executive), out of which 6 are Independent Directors as the

members of the Board represented by persons with diversified professional

experience. The Board has constituted various committees as under, which provide

specific and focused governance in the important functional areas and control the

affairs of the Bank:-

k Management Committee

i Audit Committee

k Shareholders and Invest01s Grievances committee

r Special Committee for Monitoring large value of frauds

Z Departmental promotion Committee

k Risk Management Co~nmittcc

i Customer service committee

b Share Transfer Committee

L Remuneration Committee

2. Nomination Committee of Board.

The Board and its committees meet at frequent intervals and guide the Bank to

achieve its objectives in a prudent and efficient manner to ensure high standards of

customer service, ethical practices and professional management of the Bank.

2.9 ANDHKA BANK SUBSIDIARIES

Andhra bank had a subsidiary by the name of Andhra Bank Housing Finance

Limited that was merged with the Bank on 1" April, 2002. Prior to its merger,
ABHFL carried on the business of Housing Finance. Andhra Bank has another

subsidiary called Andhra Bank Financial Services Limited, which is wholly-owned by

the Bank. It was incorporated on 25' February, 1991 to carry on the business of

merchant banking, equipment leasing and hire purchase. ABFSL was accordingly

registered with SEBl as a category4 merchant banker and with RBI as a Non-Banking

Financial Institution. The activities of ABFSL were discontinued in 1992 pursuant to

the Standard Chartered litigation. ABFSL had wbmitted an application to the RBI for

renewal of its registration as a Non-Banking Financial Institution on July3, 1997

which was rejected by the RBI on January& 2005. Further, the company has

approached RBI vide Ltr dt. 09-01-2008 with a request to treat it as Non-Banking

Non Financial Institution RBI replied on 05-12-2008 that it has taken the contents

mentioned there in on record. The company IS headquartered in Hyderabad. ABFSL

doesn't have significant operations.

2.10 ANDHRA BANK AS A LEAD BANK

The Lead Bank Scheme was introduced in the year I969 with the participation

of private and public sector banks. Among the banks three are private sector banks

and all public sector banks were involved. Andhra Bank was one among the private

Sector banks. Under this scheme, each district is entrusted to a bank which is called a

lead bank.

The Lead Bank has to survey the district concerned in detail and find the

potential area for mobilizing the deposits, pick up the viable unitslprojects for

extending bank finance, impart proper training and technical know-how to the

entrepreneurs, search for the centres where new branches may be opened and so on.
 3Gb>F,m.
From 1975, the Lead Banks were entrusted with another responsibility of sponsoring

the Regional Rural Banks in their concerned district.'

Andhra Bank. being private bank in 1969, was assigned with lead bank

responsibility in 4 districts of AP state viz. Srikakulam. East Godavari. West

Godavari and Guntur. Subsequently, two more districts viz. Ganjam and Gajapathi in

Odisha state were added taking the total number to six districts.

2.11 ANDHRA BANK - SHG LINKAGE PROGRAMME

Andhra bank is in the forefront in the impletiicntation of Self I-lelp Group

(SHG) Linkage programme and always ahead of other banks since inception of the

scheme i.e.. 1992. Bank has covered 725643 groups across the country with

outstanding credit of Rs. 2430 crore as on 3 1" March, 201 2.

Andhra Bank Rural Development Trust (ABRDT) was setup by the Bank.

with an aim to participate in the process of rural development through multi-

dimensional approach to attain sustainable rural development in its operational area.

At present, 1 1 Rural Self Employment Training Institutes (RSETls) are providing

entrepreneurial development training to educated unemployed youth on free of cost

basis besides extending the required guidance to the trained candidates to avail

financial assistance from Banks. So far, more than 96000 candidates are trained in

various activities of economic importance and majority of the trainers are settled in

gainful employment3.

2.12 BRANCH NETWORK OF ANDHRA BANK

The Branch Expansion Programme (BEP) is a must for economic development

and. if vigorously pursued by Indian Banks it can help them in increasing their
Pq
 deposits. By opening more and more branches, the banks come closer to the public to

cater to the banking needs and mobalise deposits in a manner.4 The newly opened

branches will provide banking facilities to a large number of people. Branch

expansion is necessary for the economic progress and development of a country.

Branch expansion promotes the banking habits among people from unbanked areas; it

leads to the development of banking industry. Andhra Bank took a lot of initiatives

for branch expansion. As a result branches increased from 627 in March, 1980 to

1727 by the end of March, 2012 recording a growth o f 3 times. The Bank has opened

most of its branches in rural areas5.

TABLE 2.3
BRANCH EXPANSION OF ANDHRA BANK
Year No. of ~ r a n c h c i O h of Growth
-
1980 627

1991 945 50.17

--
2002 1069 13.12
-
2003 1100

2004 1128

2005 1168

2006 1213

2007 1289

2008 1366

I I I I
Source : 1. Compiled from the Annual Reports of Andhra Bank
2. Trends and progress of Banking lndia 2002-12
 Table 2.3 showed Branch expansions after nationalization of the Bank i.e., in

1980 was very quick and high growth rate had been recorded. Between 1980 and

1991 the growth recorded was 50.17 per cent and during 1991 to 2002 it was 13.12

per cent, whereas during 2002-1 1 the branch expansion was limited to growth of

52.67 per cent. It is mainly because of the introduction of financial sector reforms.

The Bank also established more number of Automated Teller Machines (ATMs). The

reforms liberalized the branch licensing policy; RBI has given directions to

commercial banks with regard to appointment of Business Correspondents in

unbanked areas. The Bank's management was concentrating on quality rather than

quantity of expansion and on introducing new products to satisfy the need of

customers in the changing scenario.

TABLE 2.4
GROUP-WISE DISTRIBUTION OF ANDHRA BANK BRANCHES

Year

Category 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Rural 380 381 381 385 389 396 402 411 422 432

Semi-urban 295 307 317 329 345 375 399 412 430 456

Urban 260 268 277- 294 314 339 366 393 449 478

Metro 134 144 153 160 165 179 199 216 256 266

Total 1069 1100 1128 1168 1213 1289 1366 1432 1557 1632
-
Source : I. Compiled from the Annual Reports of Andhra Bank
2. RBI, Trends and progress of Banking India 2002-12

The Table 2.4 presented Andhra Bank group-wise distribution of branches in

the country. Realizing the interest of the country, even though it is not profitable to

43
open branches at rural and semi-urban areas the Bank is opening branches in those

areas. On the basis of population the areas covered by branches were classified into

four categories i.e., (i) Rural (ii) Semi-urban (iii) Urban and (iv) Metropolitan. With

the main aim of nationalization being extension of banking facilities to rural and

unbanked areas, a critical examination of the branch expansion pattern of the Andhra

Bank can throw light on the achievement of the Bank. Rural and semi-urban branches

are meant to serve the rural area, whereas urban and metro branches serve the needs

of urban population. The Table 2.4 depicted that 60 prr cent of the total branch

network is located in rural and semi-urban areas. At the time of aationali~ationof

banks (1980) the Andhra Bank had 232 branches in rural and 200 branches in semi-

urban areas. This had riqen to 432 branches in rural and 456 branches in semi-urban

by the end of March, 201 1. In terms of percentage it was 37 in rural and 3 1.9 in semi-

urban by the end of March, 1980 and it is now at 26.47 in rural and 27.94 in semi-

urban areas by the end of March 201 1. From the Table 2.4 it is observed that rural

and semi-urban branches during the study period had been increasing. It is due to the

reallocation of the population norms in rural and semi-urban areas as per the 2001

census.

The Andhra Bank expanded its branch network mostly in rural and semi-urban

areas with a view to serve the agriculture sector alone. The Bank has 53 specialized

branches to catering the needs of the specific segments of clientele. In the year 2010-

11, Bank opened 75 Branches (including up gradation of 23 extension counters) and

122 ATMs. With this at the end of March 201 1, the Bank had 2676 Delivery

channels consisting of 1632 branches, 25 extension counters, 38 satellite offices and

981 ATMs spread over 23 states and 3 union territories. During the year 2010-1 1, the

44
bank has added one new zone with Lucknow as its headquarters, thus taking the total

number of zones to 23. The Bank has also started three zonal lnspectoratc Offices

during the year with Head quarters at Chcnnal. New Delhi and ~ i s a k h a ~ a t n a m . ~

2.13 ANDHRA BANK NEW PRODUCTS AND SERVICES

The Bank offers a variety of products and services to its customers. This may

be represented in the following picture.

PICTURE 2.3
2.14 ANDHRA BANK HUMAN RESOURCE DEVELOPMENT

Human resource development would be the biggest challenge before the

banking industry in the next decade; nearly 50 per cent of people in the industry

would retire in the next one decade. This will lead to employment of neariy seven

lakh people in the banking sector in the next decade. The banking sector has to focus

on various factors related to human resource development such as employment,

mentoring and training to build a strong human resource base. This will he the higgest

challenge for the banking sector.

Meeting the requirements of customers would be another challenge for

bankers, as they have to face different sc: of customers in the coming years. In

addition to the existing customer base of 350 million, another 350 million new tech-

savvy customers would be added to the system. In add~tionto this, the banks will have

to meet the challenges of people in the unbanked segment. Bankers will have to be

geared up to meet this challenge.

The banking industry would undergo a sea change in terms of composition of

staff, their training and infusion of corporate culture and value in them. There is a

need to position the banking system against these challenges. The public sector banks

should be positioned to get the next generation of customers into its fold, and PSBs

should work in this direction.

 TABLE 2.5
HUMAN RESOURCE MANAGEMENT

Staff Year

Category 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Officer 6483 7180 7753 7990 8072 8021--=7 8678 8411 8058-

Clerks 4108 3519 3124 2885 2827 2675 2515 2972 3175 3248
--
Other- 2221 2292 2218 2233 2270 '2281; 2435 260.5 2 7 0 6 2792
employees

employees
Source: Compiled from Annual Reports o j ~ n d h r abank 2002-201 1

The Human Resource of the Bank is ~lassifiedinto threc categories: (I)

Oficels; (2) Clerical Staff and (3) Other employees. Table 2.5 presents the

employment in Andhra Bank fbr the Period 2002-2011. The tolal number of

employees ofthe Bank was 12812 in the year 2002, their number increased to 14098

by the end of March, 201 1. The increase during the study period is 1286 it., 10 per

cent, which is very low, because of introduction of Information Technology.

2.15 ANDHRA BANK - CORE BANKING SOLUTIONS

The Core Banking Project by Andhra Rank is very complex deployment and

upgrade of IT enabled banking. The reason for launching this project was the

immediate need for an integrated banking platform to support customer centric

banking, which means a migration from branch-based legacy banking platform to IT

driven centralized banking experience. Other desired objectives of the project were

strengthening multi-delivery channels which encompass ATM network, net banking,

mobile payments, tele-banking, integration to online tax administration and online

trading platform. All of the branches of the Bank are under core banking solutions.

Under CBS, the bank can transact from any of the hranches of the bank across the

country.B
 REFERENCES

I. httpll www.andhrabank.in

2. Sri vastava. P.K "banking Teory & Practice" Himalaya Publishing House,

New Delhi, 2000, P.2.

3 . 'Financial Inclusion : role ofAndhraBank ', @ www. Worldagribusincss.com

4. Sharma B.P. "The Role qf C'oniniercrul hanks In Indiu's Economic

Development ".
5. Andhra Bank Annual Report, various issues.

6. Andhra Bank Annual report 20 10-1 1

7. Nagarjuna. M 'pc,rformanc~El~aluofionrfAr~dhraRank' thesis submitted to

Andhra University, 1997.

8. .4ndhru Bank: Core Banking Solution, PC-QUEST, dated. lS' June, 2009.