During the year the Bank issued share and allotted -

a) 164,69,83,312 (One Hundred and Sixty Four Crore Sixty Nine Lakhs Eighty Three Thousand Three Hundred Twelve) equity shares of face value of Rs.10/- each for cash at an issue price of Rs.31.16 (Rupees Thirty One and Paise Sixteen) per equity share including premium of Rs.21.16 (Rupees Twenty One and Paise Sixteen) per equity share determined in accordance with Regulation 76(1) of SEBI ICDR Regulations, 2009, on preferential basis to Government of India on 21.05.2018 resulting in capital infusion of Rs.5132 crores.

b) 146,82,57,756 (One Hundred and Forty Six Crore Eighty Two Lakh Fifty Seven Thousand Seven Hundred Fifty Six) equity shares of face value of Rs.10/- each for cash at an issue price of Rs.20.95 (Rupees Twenty and Paise Ninety Five) per equity share including premium of Rs.10.95 (Rupees Ten and Paise Ninety Five) per equity share determined in accordance with Regulation 164(1) of SEBI ICDR Regulations, 2018, on preferential basis to Government of India on 25.02.2019 resulting in capital infusion of Rs.3076 crores.

c) Government of India infused Rs.3330 crore on 21.02.2019 by way of preferential allotment of equity shares and the amount was maintained under share application money pending approval from Government of India for increase of authorized capital of the Bank. Bank has considered such amount received from Government of India as a part of Common Equity Tier 1 (CET 1) with the permission from Reserve Bank of India vide letter no. 8310/21.01.002/201819 dated April 2, 2019. We have received in-principle approval for listing of Equity share from National Stock Exchange on 13.05.2019.

d) The Bank has received application money from the employees of the Bank aggregating to Rs.266.68 crore on 30.03.2019 in response to the offer of equity shares made in compliance with SEBI (Share Based Employee Benefits) Regulations, 2014 to the employees under UCO Bank Employee Share Purchase Scheme (ESPS) 2019 and the amount was maintained under share application money pending receipt of regulatory approvals for allotment of shares. Bank has not considered above amount received under UCO Bank Employee Share Purchase Scheme (ESPS) 2019 from employees as a part of Common Equity Tier 1 (CET 1). We have received in-principle approval for listing of Equity share from National Stock Exchange on 13.05.2019.

1.0 Investments

1.1 The Details of investments and the movement of provisions held towards depreciation on the investments/Non Performing Investments of the Bank is given below:

1.2 Sale and transfers to/from HTM Category :

The value of sales and transfers of securities to/from HTM Category, excluding the one time transfer of securities undertaken by the Bank with the approval of Board of Directors, has not exceeded 5% of the book value of Investments held in HTM Category at the beginning of the year.

2.1 Disclosures on risk exposure in derivatives a) Qualitative Disclosures

i) The Structure and organization for management of risk in derivatives trading:

The organization structure consists of Investment Wing at the Corporate level which report to the Executive Directors, Managing Director & CEO and ultimately to the Board. Risk Management Department is informed of the transactions as and when they take place.

ii) The scope and nature of risk measurement, risk reporting and risk monitoring systems:

a) The Interest Rate Swap (IRS) transactions undertaken by the Bank are for hedging and trading purposes. Derivative as a product is also offered to the customer as per RBI norms. Such transactions are undertaken as per policies of the Bank formulated based on RBI guidelines.

b) The risk is measured in the interest rate derivative transactions depending on the movement of benchmark interest rates for the remaining life of the interest rate swap contracts. All interest rate derivative transactions are included for the purpose of risk measurement. The risk is evaluated and reports are placed to the MD & CEO/ED daily and Board periodically. Risk is monitored based on the mark to market position of the interest rate derivative transactions.

(iii) Policies for hedging and /or mitigating risk and strategies and processes for monitoring the continuing effectiveness of hedges/ mitigates:

IRS is undertaken on the actual interest bearing underlying assets or liabilities. The notional principal amount and maturity of the hedge does not exceed the value and maturity of underlying asset/ liability. The risk is monitored on the mark to market basis of the outstanding interest rate swap contracts and accordingly the effectiveness of the hedge is determined.

Collateral required upon entering into IRS is Nil. Notional principal amount of IRS multiplied by the relevant conversion factor and the respective risk weight of the counter party has been taken into account for determining the capital requirements.

c) Other Disclosures for Interest Rate Swaps

The Bank has undertaken fixed to floating and floating to fixed interest rate swaps on underlying assets and liabilities. The loss of income on the above IRS will be Rs.20.66 Crores (Rs.3.05 crores), in case counter-parties fail to fulfill their obligations. There is no concentration of credit risk arising from IRS transactions undertaken as the counter-parties are banks and the exposure is within the exposure limit permitted.

In terms of RBI circular no. RBI/2018-19/157 DBR.BP.BC.No.32/ 21.04.018/2018-19 dated April 1, 2019, the Banks are required to disclose divergence in asset classification and provisioning consequent to RBI’s annual supervisory process in their notes to the financial statements, the details of divergence in provisioning are as under:

3.1 Disclosure of penalties imposed by RBI.

a) During the financial year 2018-19 RBI has imposed penalties on the Bank of Rs.2.00 crore under the provision of Section 47A (1) (C) read with section 46(4) (i) of the Banking Regulation Act, 1949 for wrongfully collecting and crediting instruments in excess of Rs.50,000/- in third party account and not exercising due diligence in detection and reporting the fraud in time.

b) During the financial year 2018-19 RBI has imposed penalties on the Bank of Rs.3.00 crore under the provision of Section 47A (1) (C) read with section 46(4) (i) of the Banking Regulation Act, 1949 for violations of regulatory directions of implementation of swift related operational control.

4.0. Disclosures Requirement as per Accounting Standards:

4.1. Net Profit or Loss for the period, prior period items and changes in accounting policies (AS-5):

There is no material “prior period item” included in Profit and Loss account required to be disclosed as per AS - 5 issued by ICAI read with RBI guidelines.

4.2 Revenue Recognition (AS-9):

Revenue is recognized as per Accounting Standard (AS-9) and Accounting policy No. 10 of Schedule -17.

4.3 AS - 15 -Employee Benefits (Revised)

Provision for Employee Benefits viz. Pension, Gratuity, Leave Encashment, Sick Leave, LFC/LTC, medical benefits to retired and in service Directors and their family members etc. has been made as per Revised Accounting Standard (AS) -15.

A sum of Rs.832.84 Crore (Rs.423.40 Crore for FY 2017-18) (including Annual Medical Aid of Rs.0.40 crores, previous year 0.40 crores) has been charged to the Profit and Loss Account towards current year’s liabilities.

Note-1: Amount recognized in the Profit and Loss Account during the FY 2018-19 as per Actuarial Report. Provisions for employee benefits including pension has been made on actuarial valuation basis as per LIC table no.9496.

Note2: Amount debited in the Profit and Loss Account during the FY 2018-19 as Bank’s ordinary contribution to Pension on Salary Date i.e. same amount as Employees/ Members Contribution.

Note-3: The Net Funded Status (Difference between Present Value Obligation and Fair Value of Plan Asset) taking into account Rs.20 lacs as ceiling for Gratuity. As per RBI letter no. DBR.BP9730/21.04.2018/2017-18 dated 27th April 2018, Rs.221.53 crores has been spread into four quarters starting from quarter ended 31.3.2018, and an amount of Rs.55.39 Crores only have been amortized / recognized in the Profit & Loss Account in FY 2017-18. The unamortized portion of Rs.166.14 crores has been taken into account in June 2018, September 2018 and December 2018 quarters in equal proportion of the current financial year 2018-19.

c) Associates

Regional Rural Banks (RRB) sponsored by the Bank are as under:

i) Paschim Banga Gramin Bank

ii) Bihar Gramin Bank (BGB) sponsored by UCO Bank and Madhya Bihar Gramin Bank (MBGB) sponsored by Punjab National Bank are amalgamated to form a new entity, Dakshin Bihar Gramin Bank w.e.f. January 1,2019 consequent upon Gazette Notification issued by Government of India dated 21.12.2018 and the new entity is now sponsored by Punjab National Bank. As part of the amalgamation process Bank has received the share Capital of Rs.76.35 crore invested in the erstwhile Bihar Gramin Bank (BGB) from Punjab National Bank (PNB) on 30.03.2019. The investment under Zero Coupon Bonds (Tier II Bond) for Rs.6.57 crore in erstwhile Bihar Gramin Bank (BGB) is yet to be received from Punjab National Bank (PNB).

d) The transactions with RRB have not been disclosed in view of Para -9 of the AS-18, “Related Party Disclosure” which exempts State Controlled Enterprises from making any disclosures pertaining to their transactions with other related parties, which are also State Controlled Enterprises

4.5 . EARNINGS PER SHARE (EPS)- (AS-20):

4.6 Applicability of AS-21, 23, 24, 25, 27

As the Bank does not have Subsidiaries or controlling interest in Associates/Joint Ventures, AS 21- Consolidated Financial Statements, AS 23 - Accounting for Investments in Associates in Consolidated Financial Statements, AS-24 - Discontinuing Operations, AS-25 - Interim Financial Reporting and AS 27 -Financial Reporting of Interest in Joint Ventures issued by the ICAI are not applicable to the Bank.

4.7 Accounting for Taxes on Income (AS-22) :

a) During the year net amount of Rs.2759.12 Crore (Rs.2463.64 Crore for FY 2017-18) has been recognized as Deferred Tax Assets as per accounting standard AS-22.

4.8 Intangible assets (AS-26):

Fixed Assets include computer software, which has been considered as intangible assets as per AS-26 issued by the ICAI. The movement in software asset is given below:

4.9 Impairment of Assets (AS-28):

In view of the absence of the indication of material impairment within the meaning of clause 5 to clause 13 of Accounting Standard-28 “Impairment of Assets”, no impairment of fixed assets is required in respect of current financial year.

5.1 Contingent Liabilities

a) Such liabilities as mentioned at Serial No. (I) of Schedule 12 of Balance Sheet are dependent upon the judgment of court, arbitration award, out of court settlement, disposal of appeals, the amount being called up, terms of contractual obligations, devolvement and raising of demand by concerned parties, respectively and necessary provision is made where claim against the Bank is tenable.

b) Disputed demand as per orders passed by Income Tax Department and demand displayed at TRACES (Income Tax Website) on account of Income Tax, TDS, Penalty, Interest amounting to Rs.16.40 Crore C36.90 Crore) has been shown in Schedule 12 under Contingent Liability. No provision has been considered necessary by the Management as the matters are pending for disposal before various competent Authorities. It is pertinent to mention that Interest Tax issue pending before Hon’ble High Court of Kolkata amounting to Rs.3.38 Crore has been decided in favour of the Bank. On receipt of order effect form Income Tax department, Bank shall be entitled to receive the entire amount along with interest. Bank has not received any intimation/notice regarding filing of appeal by Income Tax Department in any higher Forum/Supreme Court on this issue.

5.2 Disclosure of Letter of Comforts

The Bank issues Letter of Comforts on behalf of its various constituents against the credit limits sanctioned to them. In the opinion of Management, no significant financial impact and cumulative financial obligations have been assessed under LOCs issued by the Bank in the past, during the current year and still outstanding. Brief details of LOCs issued by the Bank are as follows:

5.3 Income from Bancassurance

Bank is a Corporate Agent of Life Insurance Corporation of India for Bancassurance Life and Reliance General Insurance Company Ltd for Bancassurance Non-Life business. Details of income from Bancassurance is given below:

5.4 Off-balance Sheet SPVs sponsored

Bank has not sponsored any SPVs.

5.5 Reconciliation:

Most of the inter branch transactions are reconciled automatically with implementation of Centralized Banking Solution (CBS). Very few entries under inter branch account & inter bank account requires reconciliation which is done on ongoing basis.

Reconciliation of entries outstanding has been drawn up to 31.03.2019 in case of Inter-Branch Accounts and in Inter-Bank Accounts. Elimination of entries outstanding in Inter-Bank Accounts including Reserve Bank of India, State Bank of India, NOSTRO Accounts etc. and in InterBranch Accounts viz., branch adjustment, balances pertaining to advances paid for acquisition of assets, sundry creditors etc. is in progress. In the opinion of the management, consequential effect of the above on the revenue/assets/liabilities will not be material.

5.6 Transfer to Depositor Education and Awareness Fund (DEAF)

5.7 Unhedged Foreign Currency Exposure:

In terms of RBI Guidelines, our Bank has framed a policy on ‘Unhedged Foreign Exchange Exposure by borrowers including SMEs and Corporates duly approved by the Board. The policy inter-alia provides for:

- Monitoring and review of Unhedged Foreign Currency Exposure (UFCE) of all customers including SMEs.

- Incremental capital and provisioning requirements for exposures to entities with Unhedged Foreign Currency Exposure.

- Stipulation of UFCE Charge in order to provide protection and discourage entities having UFCE.

Based on the available data and financial statements and the declaration from borrowers, the bank has estimated the liability of Rs.24.02 lacs as on 31.03.2019 on Unhedged Foreign Currency Exposure (UFCE) to their constituents in terms of RBI Circulars and our Board approved policy and however, provision for the same of Rs.39.10 lakhs has been provided in the books.

5.8 Liquidity Coverage Ratio (LCR):

Qualitative Assessment of LCR data and Result:

The Liquidity Coverage Ratio (LCR) promotes short term resilience of banks to potential liquidity disruptions by ensuring that they have sufficient High Quality Liquid Assets (HQLA) that can be converted into cash to meet their liquidity needs under a significantly severe stress scenario lasting for 30 days. The LCR is calculated as the ratio of High Quality Liquid Assets (HQLA) to Net Cash Outflows under stressed conditions over the next 30 calendar days.

Drivers of a Comfortable LCR:

The Bank has been maintaining the LCR well above the regulatory requirement on an ongoing basis on solo as well as consolidated basis the main drivers of which are as under:

High Quality liquid Assets (HQLA): Our HQLA comprises of following

- Level 1 Assets

1. Cash in hand including Cash Reserve in excess of CRR

2. Govt. Securities in Excess of Mandatory SLR

3. Marginal standing Facility up to 2% of Net Demand and Time Liabilities in the form of SLR securities.

4. Facility to Avail Liquidity for liquidity Coverage Ratio up to 13% of Net Demand and Time Liabilities in the form of SLR securities.

- Level 2 Assets (Not issued by Banks/Financial Institution)

- Under Level 2A assets

1. Marketable securities representing claims on or claims guaranteed by Sovereigns Public Sector Entities (PSEs) having risk weight 20% under the Basel II

2. Corporate Bonds and Commercial Papers having minimum rating of AA-

- Under Level 2B assets

1. Securities issued or guaranteed by sovereigns having risk weight higher than 20% but not higher than 50% (i.e. Bonds with Rating AA & A)

2. Corporate Debt Securities (including Commercial Paper) having external rating between A and BBB-

3. Common Equity Shares Included in NSE CNX Nifty index and/or S&P BSE Sensex index

Concentration of Funding Sources: Our Funding sources is well spread with diversified liabilities portfolio comprising mainly of

- Current Deposit and Saving Deposit and

- Term Deposit ( normal and Bulk)

The bank is monitoring the funding sources on regular interval with the objective to monitor / reduce the concentration of funds having lower stability. The bank has reduced the bulk deposits and focused on accretion of current and Savings deposits. The bank also monitors the concentration of top 20 depositors on regular intervals.

We do not have any group entities and liquidity at solo level is being managed centrally.

5.9 Fixed Assets

(i) Bank has adopted Revaluation Model for Land and Building and Cost Model for other Fixed Assets.

(ii) Bank has revalued its premises last on 31.03.2019 by independent qualified valuers. The excess of fair market value over the book value is credited to revaluation reserve. As on date aggregate amount of revaluation reserve (net of revaluation relating to assets disposed of) is Rs.2555.36 crore (Rs.2537.71 crore) and depreciation on the revalued portion charged is Rs.205.60 crore (Rs.185.94 crore). As per revised AS 10, Revaluation Reserve equal to the additional depreciation on account of Revaluation of the Building amounting to Rs.21.20 Crore (22.74 Crore) has been transferred to Revenue Reserve.

(iii) The valuer has valued the properties on the following methods :

Land: On market rates by enquiry from the locality based on the latest transactions and wherever this information is not available, Govt. approved rate is taken as reference rate.

Building: On PWD plinth rate as per latest schedule on the basis of type of construction and applying depreciation factor depending on age of the Building.

Other Disclosures regarding Fixed Assets for FY ending 31.03.2019:

a) Premises include Leasehold property of Rs.451.38 Crores and amortised during the year Rs.4.27 Crores.

b) In respect of Eight (8) lease hold properties, renewal/ registration of lease is due for more than two years, out of which registration of lease of one property is pending since year 1995. The Bank has taken necessary measures in these cases and shall be completed in due course.

c) In Five (5) properties purchased by the bank, execution of deed of conveyance is pending. The Bank has taken necessary measures for the same.

d) Out of twenty six (26) unauthorised tenants at its own building at 2, India Exchange Place, Kolkata-700001, suit has been filed by the Bank on 20.05.2015, against twenty four (24) tenants and case is pending before City Civil Court.

e) Existence and amount of restriction on title, property, Plant & Equipment pledged as security for liabilities - NIL.

f) Contractual commitments for the acquisition of the property, plant & equipment as on 31.03.2019 - Rs.37.27 Crore (PY 41.61 Crore).

g) Expenditure recognized in the carrying amount of an item of plant equipment and property in the course of construction is Rs.3.09 crore (8.23 crore).

h) Amount of assets retired from active use and held for disposal - NIL

5.10 Break up of provision held against non-performing advances into facility-wise, security-wise and sector-wise is not ascertained. The same is deducted on estimated basis from Gross advances in the various categories to arrive at the balance of net advances as stated in Scheduled 9 of the Balance Sheet.

5.11 Assets and liabilities have been suitably adjusted for events occurring after the balance sheet date that provide additional evidence to assist the estimation of amounts relating to conditions existing at the balance sheet date.

6) MSME Restructured Accounts

In accordance with RBI vide circular No. RBI/2018-19/100/DBR No. BP. BC. 18/21.04.048/2018-19 dated 01.01.2019 on “Relief for MSME borrowers registered under Goods and Services Tax (GST)” the details of MSME restructured accounts as on 31.03.2019 as under:

7) Disclosure on IND AS Background:

Scheduled Commercial Banks (SCBs), excluding Regional Rural Banks (RRBs), were required to implement Indian Accounting Standards (Ind AS) from April 1, 2018 vide RBI Circular dated February 11, 2016. However RBI has deferred implementation of Ind AS till further notice due to the legislative amendments as recommended by RBI are under consideration of the Government of India vide its notification dated 22.03.2019.

Strategy of IND AS Implementation:

Bank has constituted IND AS steering committee headed by Executive Director to plan the IND AS technical requirements, System & Process Changes, Business Impact, evaluation of Resources and project management.

Bank has also constituted IND AS working group within the bank who will be working on IND AS implantation project which comprises of officers from cross functional department.

Bank has also appointed M/s Deloitte Haskins & Sells LLP as IND AS consultant to assist the bank in implementation of Indian Accounting Standard (IND AS) as per RBI/MCA guidelines.

Progress on IND AS implementation:

Bank has submitted the Proforma IND-AS Financial statements to Reserve Bank of India with reconciliation of change in Equity & profit on quarterly basis and last submitted on February 28, 2019 for the nine months ended December 31, 2018 compared with the previous GAAP figures.

8) Disclosure on Implementation of resolution plan on stressed accounts under Revised Framework:

Revised policy for resolution of stressed assets as per RBI direction no. RBI/2017-18/131 DBR.No.BP.BC.101/21.04. 048/ 2017-18 February 12, 2018 has been approved by Bank’s Board and put in to operation effective from 12.02.2018. Subsequently Supreme Court has struck down the RBI circular dated 12.02.2018 as “Ultra-Vires” and opined that it has no effect in law.

To augment the process of resolution of stressed assets under SMA1 and SMA2 category for exposure above Rs.20.00 crores a separate vertical for stressed asset management has also been created as approved by Bank’s Board to focus recovery effort through a dedicated, specialized and motivated team for enhanced and timely recovery.

9) Prompt Corrective Action (PCA)

In terms of the RBI Circular No. RBI/2016-17/276 DBS.CO.PPD.BC.No. 8/11.01.005/2016-17 dated April 13, 2017, RBI through its letter dated May 05, 2017 put UCO Bank under Prompt Corrective Action (PCA) framework on account of high Net NPA and negative RoA.

Bank is complying the PCA framework norms meticulously. Bank has prepared an action plan and also taken various steps to reduce NPA and improve its profitability. Bank is also reporting its progress made on PCA framework to RBI periodically.

10) The bracketed figures indicate previous year’s figures. Previous year’s figures have been re-grouped /re-arranged/re-casted wherever considered necessary.