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Rajeev Rishi
Chairman & Managing Director

CMD:2017-18:16 14rhJune.2017.

Mydearcolleagues

We havejust been informedby the RBI of our Bank havingbeen placedunder PCA (promptcorrective
action)on accountof our highnet NPAand negativeROAfor two consecutiveyears.We are the fifthBank
to be putunderthisframeworkafterlOB,lDBl,UCOand DenaBank.We havebeenso placedon accountof
our highnet NPAs and havingrecordedlossesfor the secondyearin succession.
Thisfallfrombeingin the
categoryof strongandthe BestBanksto beingplacedunderPCAindeedcallsfor deepintrospection.

Whodo we blamefor the positionwe findourselvesin? An honestanalysiswouldindicatethata majorpart

of the blamewe needto apportionto ourselves.Duringthe last threedecadeswe haveslowlybut surely
cededmarketshare,purelyon accountof our inabilityto keep pace with the changingtimes.The last
decadewe tried to correctthis loss by aggressivelygrowingoul book by taking on exposuresin bulk
disregarding
the wisdomof risk dispersion.
We alsoduringthis time ignoredour basicconstituencies
from
whichthe Bankactuallyderivedits mainstrength.The resultsarefor all to see.

We are todaysaddledwith mountingNPAs and inadequate capital.What does beingplacedunderPCA

implyfor us? Well, we continueto do businessas usual.Howeverwe shall have to work with some
constraints
listedhereunder:

o The Banknotto distributedividend

. The Banknotto expandits Branchnetwork,domesticand/ or overseas.
. The Bankto makehigherprovisions withthe objectiveto improveprovisioncoverageratio.
r The Banknot to incurany capitalexpenditure otherthanfor technologicalup-gradationand for
suchemergentreplacements withinBoardapprovedlimits.
r The Bank to restrictexpansionof high risk weightedassets, reduce loan concentration /
exposurein identifiedsectors,industries
or borrowers,reduceexposureto highrisksectors,and
unsecuredexposures.
o The Bankto restrictlowqualityand unratedexposures.
. The Bankto improveits CASAandavoidhighcostdepogits.
. Bankto reduceoperatingexpensesandimprovecostto incomeratio.

My dearcolleagues, beingplacedunderPCAshouldbe takenup as a wakeupcall.Nowis the timefor all of

us to gearup all our effortstowardstacklingthe factorson accountof whichwe are in presentpredicament.

NPAmanagement has to be our top priority.We certainlycannotaffordfurtherslippages.Butjust merely

preventingslippageswill not help.We alsoneedto be makingcashrecoveries/upgrading assets,in orderto
freeprovisionsalreadymadeto strengthen our BalanceSheet.We needto augmentour lowcostresources
viz Savingsand Currentdepositswith greatersenseof urgency.We also needto be cuttingdownon our
expenses whereverpossible.

I haveimmensefaith both in your capabilityand commitmentlevels.What is requirednow is a do or die

effortfromeachone of us for cleansingup of our NPA book.Let io othermatterdiluteour effortstowards
thisendeavour .lf we are ableto achieveour Cashrecovery/up gradqtiontargetsand at the sametimeare
ableto containfurtherslippages, we shallbe in a muchqtrongerpositionby the endof thisfinancialyear'

I am hopefulof yourcollectivecontributions
towardsachieving
thisend.

(RAJEEV
RrSHr)

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Point,Mumbai- 400021
ChanderMukhi,Nariman
E zzoz 4393| 22023942E Pl-Zz) 22028122X chairman@centralbank.co.in