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State Bank Of India
Change Company : 
Chairman : Arundhati Bhattacharya Industry : Bank - Public
Last Price Today's Change Open Prev Close Day's Range 52 Week Range
2460.45 -42.55 2514.00 2503.00 (2524.55)   (2453.00) (2833.85)   (1455.00)
BSE Code 500112
ISIN Demat INE062A01012
Book Value (Rs.) 1631.44
Dividend Yield (%) 1.22
Market Cap (Rs Mn) 1836905.76
P/E 16.70
EPS (Rs.) 147.33
Face Value (Rs.) 10
Volume 189549.00
March 2013

DIRECTOR’S REPORT:

ECONOMIC BACKDROP AND BANKING ENVIRONMENT

Global Economy

The global economy has entered 2013 with reduced downside risks, as the US fiscal cliff and a flare up of the euro area crisis being averted. With downside risks receding, it is now worth considering the prospects for an improvement in global growth. As per the IMF forecast, global economy is forecast to grow by 3.3% in 2013 (vis-a-vis 3.2% in 2012). The housing sector in the US economy - the epicentre of the downturn - has made considerable progress in repairing its balance sheet. Policy makers in the euro zone area have reconfirmed their commitment to resolution of the euro crisis by working on a common euro area integration framework. Going forward, US economy is supposed to gain continued traction, even though a sustained pick-up in euro area may take a while to materialize. Growth in emerging market and developing economies is projected at 5.3% in 2013 (vis-a-vis 5.1% in 2012). On the whole, an environment of progressively lower global tail risks and continued structural reforms in various economies will favourably impact global growth outlook in 2013.

Indian Economy

India's economic growth touched 5% in FY13-a decadal low. This was mainly due to the protracted weakness in industrial activity aggravated by domestic supply bottlenecks (manufacturing sector expanded at 1% in FY13 vis-a-vis 2.7% in FY12), and slowdown in the services sector reflecting weak external demand. 

Agricultural production was impacted during the year reflecting deficiency and uneven distribution of rainfall (agricultural sector expanded at 1.9% in FY13 vis-a-vis 3.6% in FY12). It dented Kharif sowing, however, recovery of rainfall from September 2012 onwards helped maintain soil moisture during the rabi season. The third advance estimates of crop production for FY13 indicate a marginal decline of 1.5% in overall food grain production to 255.4 million tonnes from 259.3 mt in the previous year. The current stock of foodgrains 59.7 million tonnes at end-March 2013 is sufficient to meet the requirement of the country.

Headline inflation after progressively rising from 7.5% in Apr'12 to over 8% till Sept'12, has now declined to 4.9% in April 13, a 41 month low and within the RBI comfort zone. Core inflation has also declined to 2.8% in Apr'13, a 39 month low. The CPI -Rural Urban (CPI-RU) has eased to 9.4% in Apr'13. This was the lowest CPI inflation in 13 months. Various other CPI indicators support the contention that consumer inflation may have peaked out. Interestingly, rural inflation is coming down at a faster rate than urban areas indicating some deceleration in rural demand as well. Moreover, the calibrated increase in diesel prices are not likely to continue over the entire fiscal, with the current under-recovery on diesel at lower levels. This will further reduce the prospects of an upturn in inflation over FY14.

The growth of industrial production decelerated to 1% during FY13 (vis-a-vis 2.9% in FY12). Even though, there has been a pick-up in industrial activity in March 2013, contraction in capital goods and mining sector continues to pose a downside risk.

India's current account deficit (CAD) touched a sharp 6.7% of GDP in the third quarter of FY13. The widening in CAD was in part attributed to a deceleration in India's exports (decline of 1.8% in FY13). With regards to the concerns regarding the widening current account deficit, we believe soft global commodity prices, reduced volatility in Indian rupee and Government's export promotion measures will facilitate a reduction in trade deficit and subsequently CAD over the medium term.

However, the good news is that a look at the direction of Indian exports, reveal a shifting trend with exports to Asia, Africa and Latin America during FY13 touching 65% of our total export basket. This is indeed a development with significant import as Asia's accelerating economic growth has been shifting the global economic and industrial centres of gravity away from the US and EU, raising the importance of Asia in world trade and boosting the prospects of South-South trade.

On the hindsight, India still remains one of the fastest growing economies in the world, and continues to be a favoured destination for investment. The foreign investment flows into the debt markets have increased in the recent months, with a cumulative flow of $3.1 bn during the calendar year 2013 (till May'17). Moreover, the recent decision to reduce the withholding tax on Government and INR-denominated corporate debt has boosted the FN debt flows. On the whole, portfolio capital inflows increased to $27.5 billion during FY13 (vis-a-vis $16.8 bn in FY12). Net FDI inflows increased to $22.9 bn in FY13 (vis-a-vis $21.8 bn in FY12).

Banking Environment

The slowdown in the economy and monetary tightening has affected banks' business in 2012-13. Aggregate deposit growth of All Scheduled Commercial Banks (ASCB) grew higher by 14.3% in FY13 against 13.5% growth in FY12, while growth in credit decelerated sharply to 14.1% in FY13 from 17.0% in FY12.

RBI kept the key interest rates unchanged till the end of third quarter of FY13. However, to ease pressure on liquidity, RBI has cut CRR by 75 bps from 4.75% to 4.0% and slashed SLR by 100 bps to 23%. As a part of monetary transmission, deposit rate of major banks for more than one year maturity softened from 8.50­9.25% in FY'12 to 7.5-9.0% in FY'13, and base rate of major banks fell from 10.0-10.75% to 9.70-10.25% in the same period. Growth deceleration impinging on corporate profitability and move to system-driven identification of NPAs, non-performing assets of banks increased during the year.

In a new development, RBI is likely to issue new bank licenses during FY14, which apart from providing an impetus to financial inclusion, is expected to intensify competition in banking sector in medium term. Meanwhile, with the implementation of Basel III norms by March 2018, Indian banks will be required to raise significant capital from the market.

The other policy initiatives taken by RBI during the last fiscal, include among others (a) Banks to provide "CTS-2010" standard cheques to customers, (b) Enhanced provisioning requirement on certain categories of non-performing advances and restructured advances, (c) Revised guidelines for electronic payment transactions and (d) International use of debit and credit cards.

In the Monetary Policy announced in May 2013, RBI reduced the repo rate by 25 bps. Depending upon growth inflation dynamics, RBI is expected to cut rates further during FY14 to boost growth. It will provide business opportunity for banks and threat as well to do business with lower margins.

A strong and resilient banking system is the foundation for sustainable economic growth, as banks are at the centre of the credit intermediation process between savers and investors. Moreover, banks provide critical services to consumers, small and medium-sized enterprises, large corporate firms and governments who rely on them to conduct their daily business. In this context, it is needless to mention that the Indian banking sector has demonstrated strong resilience during the global financial crisis. Such resilience has also been ably abetted by RBI through initiation of Basel III norms embedded with provisions and guidelines for higher capital adequacy norms to be adopted by the banks in India.

Outlook

During FY14, economic activity is expected to show a modest improvement over last year, with a pick-up likely in the second half of the year. Conditional upon a normal monsoon, agricultural growth could return to trend levels.

The outlook for industrial activity remains subdued, with a recovery more likely in the later part of FY14. In this context, the National Manufacturing Policy (NMP) sets the framework for revitalization of manufacturing sector of the country. Rapid implementation of the NMP and the creation of National Manufacturing & Investment Zones can be seedbeds not only for manufacturing, but also concomitant development of the service sector. Additionally, continued monetary accommodation by RBI will also support industrial growth. A declining inflation trend, as being witnessed currently will also help to prop up consumption demand to a certain extent as well.

Infrastructure however, remains an area for improvement. It is imperative that we continue to support a meaningful public-private partnership with inclusiveness and sustainability as essential prerequisites for sustained growth rates over the next decade. 

On the inflation front, we believe average level of inflation will trend downwards and may be closer to RBI comfort level in FY14, based on the emerging trend of continued soft international commodity prices, and provided the rupee remain stable. Such a development will also reduce the worries on CAD during the course of FY14. Additionally, capital inflows to emerging economies, including India are likely to remain buoyant in FY14 reflecting benign monetary conditions in developed economies.

We also believe that fiscal consolidation will remain a priority, with Government clearly making its intent clear several times. It may be noted that the Government plans to trim the fiscal deficit to 3% by 2016-17.

Exports are unlikely to post significant gains in FY14, as the global economy will witness only a gradual recovery. The import elasticity of our growth remains significant and going forward we would need to develop a new paradigm of a low-carbon economy. It is now becoming clear that the centre of gravity of the world economy is shifting to South and for trade, investment and finance India may have to look more and more to the South.

On the aggregate, we believe GDP to grow by about 5.5%-6% during FY14. Faster resolution of projects currently awaiting regulatory clearances may provide the much needed impetus to domestic investment and reinvigorate growth prospects.

Finally, amidst growth slowdown in emerging Asian economies, fears of a "middle-income trap" are now growing rapidly. Empirical evidences (IMF, 2013) suggest that sound economic institutions, favourable demographics and trade structures can all reduce the likelihood of such a growth trap. Though India is currently poised favourably on demographics and trade structures, the current slowdown may just provide the right occasion for India to move from physical resource intensive growth to human resource intensive growth. Over the medium term, India's opportunity for accelerated development lies in human capital formation. There are huge opportunities for expansion of service sector provided we can accelerate our programs for skill formation. This is all the more important given that services sector currently contributes to more than 60% of India’s GDP.

The fact that India has a young population also implies that Indian banks are moving towards a right mix of assisted and self-serviced channels to provide a rich, unified and consistent banking experience. 

For example, Green Channel Counters are the latest innovation in the series for banks to serve its customers in an eco friendly atmosphere. With continued regulatory changes, Indian banks will have more of opportunities in the area of financial inclusion, rural banking and mobile banking in their quest for a new banking paradigm.

Financial Performance

Profit

The Operating Profit of the Bank for 2012-13 stood at Rs. 31,081.72 crores as compared to Rs. 31,573.54 crores in 2011-12 registering a marginal decline of 1.56%. The Bank has posted a Net Profit ofRs. 14,104.98 crores for 2012-13 as compared to Rs. 11,707.29 crores in 2011-12 registering a growth of 20.48%.

While Net Interest Income recorded a growth of 2.40%, the Other Income increased by 11.73%, Operating Expenses increased by 12.33% attributable to higher staff cost and other expenses.

Net Interest Income

The Net Interest Income of the Bank registered a growth of 2.40% from Rs. 43,291.08 crores in 2011-12 to Rs. 44,331.30 crores in 2012-13. This was due to higher growth in the advances and investment portfolios.

The gross interest income from global operations correspondingly rose from Rs. 1,06,521.45 crores to Rs. 1,19,657.10 crores during the year registering a growth of 12.33%.

Interest income on advances in India registered an increase from Rs. 77,309.15 crores in 2011-12 to Rs. 85,782.26 crores in 2012-13 due to higher volumes. The average yield on advances in India has declined from 11.05% in 2011-12 to 10.54% in 2012-13. Interest income on advances at foreign offices has grown by 26.17%.

Income from resources deployed in treasury operations in India increased by 13.82% mainly due to higher average resources deployed. The average yield, which was 7.51% in 2011-12, has increased to 7.54% in 2012-13.

Total interest expenses of global operations increased from Rs. 63,230.37 crores in 2011-12 to Rs. 75,325.80 crores in 2012-13. Interest expenses on deposits in India during 2012-13 recorded an increase of 20.88% compared to the previous year, whereas the average level of deposits in India grew by 14.3%. The average cost of deposits has consequently increased from 5.95% in 2011-12 to 6.29% in 2012-13. 

Non-Interest Income

Non-interest income stood at Rs. 16,034.84 crores in 2012-13 as against Rs. 14,351.45 crores in 2011-12 registering an increase of 11.73%.

During the year, the Bank received an income of Rs. 715.51 crores (Rs. 767.35 crores in the previous year) by way of dividends from Associate Banks/ subsidiaries and joint ventures in India and abroad.

Operating Expenses

There was an increase of 8.29% in the Staff Cost from Rs. 16,974.04 crores in 2011-12 to Rs. 18,380.90 crores in 2012-13. Other Operating Expenses registered an increase of 19.89% mainly due to increase in expenses on rent, taxes and lighting, advertisement & publicity, law charges, postage, telegrams & telephones, insurance and miscellaneous expenditure.

Operating Expenses, comprising both staff cost and other operating expenses, have registered an increase of 12.33% over the previous year.

Provisions and Contingencies

Major amounts of provisions made in 2012-13 were as under:

i. Rs. 961.29 crores write back from provisions for depreciation on investments, excluding amortization of premium on 'Held to Maturity' category (as against Rs. 663.70 crores provided towards depreciation on investments in 2011-12).

ii. Rs. 5,953.88 crores towards Provision for Tax, excluding deferred tax creation of Rs. 107.97 crores (as against Rs. 6,320.09 crores in 2011-12 excluding deferred tax reversal of Rs. 455.93 crores).

iii. Rs. 11,367.79 crores (net of write-back) for non-performing assets (as against Rs. 11,545.85 crores in 2011-12).

iv. Rs. 749.61 crores towards Standard Assets (as against Rs. 978.81 crores in 2011-12). Including the current year's provision, the total provision held on Standard Assets amounts to Rs. 5,289.58 crores.

Reserves and Surplus

i. An amount of Rs. 4,417.86 crores (as against Rs. 3,516.98 crores in 2011-12) was transferred to Statutory Reserves.

ii. An amount of Rs. 19.17 crores (as against Rs. 14.38 crores in 2011-12) was transferred to Capital Reserve Fund.

iii. An amount of Rs. 6,453.26 crores (as against Rs. 5,536.50 crores in 2011-12) was transferred to Other Reserve Funds.

Assets

The total assets of the Bank increased by 17.28% from Rs. 13,35,519.23 crores at the end of March 2012 to Rs. 15,66,261.04 crores as at the end of March 2013. During the period, the loan portfolio increased by 20.52% from Rs. 8,67,578.89 crores to Rs. 10,45,616.55 crores. Investments increased by 12.41% from Rs. 3,12,197.61 crores to Rs. 3,50,927.27 crores as at the end of March 2013. A major portion of the investment was in the domestic market in government securities.

Liabilities

The Bank's aggregate liabilities (excluding capital and reserves) rose by 17.24% from Rs. 12,51,568.03 crores on 31st March 2012 to Rs. 14,67,377.36 crores on 31st March 2013. The increase in liabilities was mainly contributed by increase in deposits and borrowings. The Global deposits stood at Rs. 12,02,739.57 crores as on 31st March 2013 against Rs. 10,43,647.36 crores as on 31st March 2012, representing an increase of 15.24% over the level on 31st March 2012. The borrowings increased by 33.21% from Rs. 1,27,005.57 crores at the end of March 2012 to Rs. 1,69,182.71 crores as at the end of March 2013 mainly attributable to borrowings from RBI in India and borrowings & refinance outside India.

I CORE OPERATIONS

I. 1. Customer Service

Our vision statement unambiguously spells out the centricity of the customer in the Bank's business strategies and operations. A multi-tiered structure of committees constantly review existing services and suggest improvements. Important issues raised by these Committees and action taken thereon, as well as analysis of the consolidated data for customer grievances for all Circles are placed before the Customer Service Committee of the Board every quarter, to identify common systemic and policy issues that require rectification.

The Bank has a well defined and documented Grievance Redressal Policy which provides for:

• A dedicated Customer Care Cell

• Bank's Web based Complaint Management System (CMS) has been redesigned and launched as a single online Grievance Lodging and Redressing System for the Bank. Customers can lodge their complaints through various channels including written complaint at branch, by calling at the toll free number of Bank's Contact Centre 1800 425 3800 / 1800 11 22 11, online through Bank's website www.sbi.co.in, sending SMS message 'UNHAPPY' to number 8008 202020 etc. All complaints are lodged through CMS and are acknowledged with a unique ticket number immediately on lodging. Bank has mandated and has been able to redress a majority of the customer grievances within a maximum period of three weeks of receipt, as against the time limit of 30 days prescribed in the BCSBI Code. All ATM related complaints of Bank customers are redressed within the RBI-prescribed 7 days. 

• While the Bank strives to achieve the highest standards in customer service, it has also put in place a Board approved Compensation Policy to compensate the customer financially in the unlikely event of any slippage in services extended. The Policy ensures that the aggrieved customer is compensated without having to ask for it.

• Over 70% of the recommendations of the Damodaran Committee have already been implemented.

• Suitable structure has been put in place at the Branches, Regional Business Offices, Local Head Offices, Administrative offices and at the Corporate Centre of the Bank for handling requests and appeals under the RTI Act 2005, Consumer Forums, etc.

Customer Friendly Initiatives

During 2012-2013, in the backdrop of slowing investment/consumption/net exports, constrained food production, high inflation, distress in several industry and infrastructure sectors-textile, chemicals, iron and steel, food processing, construction, telecom-major initiatives were taken by your Bank towards catalyzing investment & growth, to facilitate the flow of credit to critical sectors of the economy including agriculture, infrastructure, micro, small & medium enterprises, housing, exports, and with a view to reducing customer distress/pain points & raising levels of customer satisfaction. These initiatives include:

> Pricing concessions

• Interest rates Base rate was twice reduced during the year from 10% to 9.75% as on 20/9/2012, and then again to 9.70% as on 4/2/2013, the lowest amongst all banks and so pegged, to bring relief to all borrowers, particularly SME units, home loan borrowers, who continued to enjoy the lowest home loan interest rates, and commercial real estate accounts, which were aligned with the prevailing retail housing loans in terms of interest rates.

• Guarantee fees were absorbed by the Bank, both for exporters (ECGC fees) and fees payable by MSE units to CGTMSE for guarantee cover collateral free loans upto Rs. 1 crore. 

> Process innovations

i. Relationship management platform was strengthened across business verticals-Accounts Management teams for corporates, premier banking services for high networth customers, relationship managers for SMEs (ME&SE)

ii. The number of processing cells (RACPCs/ SMECCs), supported by loan origination software, were increased and revamped, for quicker processing of loans

iii. Touch-points with customers were expanded, through opening of branches and increasing Customer Service Points, BC outlets in remote areas

iv. Cluster models were introduced at all currency chest branches for efficient cash management at semi-urban/rural areas

v. A dedicated wing was created in all processing cells to monitor NPA accounts

> Product changes

i. We have a great CASA franchise and savings bank accounts form the bulwark. The savings bank account is normally the first on-board facility availed by a customer and the referral point for all future services from the Bank. To preserve and enhance the value of our savings bank offering, your Bank introduced the following initiatives during the year:

a. Minimum balance in savings account was done away with.

b. The penalty on non-maintenance of Average Quarterly Balance stands withdrawn.

c. The inter-core transfer transactions have been made free, and cash deposit minimum charges were reduced from Rs. 25 to Rs. 10.

d. Introduction of Personal Accident Insurance Policy for all savings bank account holders at a national rate received tremendous response.

e. Proactively, providing CTS-2010 compliant multi-city cheque-books benefited all our customers

ii. Unfixed Deposits scheme applicable to term deposits of 6 months was extended to term deposits upto one year.

iii. A new tractor loan scheme with relaxations in eligibility, margin, security, interest & upfront fee was launched. Also a revised KCC scheme was rolled out for the benefit of farmers. Relaxed collateral security norms for all agri loans upto Rs.1 lac was introduced.

iv. SBI loan scheme for Vocational Education & Training was launched while loan amount for studies abroad was raised to Rs. 30 lacs

> Technology upgrades

i. SBI through CMP Centre was the first Bank to use NPCI Aadhar Payment Bridge System (APBS) for transferring LPG subsidy based on Aadhar Number.

ii. The Bank launched an Online Savings Bank Application facility and e-RD, TDR / STDR accounts which evoked enthusiastic response from the customers. Issuance of TDR / STDR through ATMs have been operationalised.

iii. Centralised printing and mailing of current account/OD/Cash credit statements, housing loan interest certificates, deposit accounts' certificates to enhance customer convenience, were initiated during the year.

iv. The Bank issued a series of new plastic cards for the convenience of their target groups, e.g State Bank Business debit card for corporate customers in two variants-Pride & Premium, Insta Deposit cards enabling traders & service providers to quickly deposit cash, State Bank Virtual Card for retail customers.

v. State Bank MobiCash Easy, a mobile wallet, was introduced during the year.

vi. E-challan cum return for collection of Employees Provident fund, through branches and corporate internet, commenced during the year.

I.2. BUSINESS GROUPS

A. GLOBAL MARKETS OPERATIONS

Global Markets Unit manages the Bank's rupee liquidity, compliance with reserve requirements and investment portfolio of the Bank besides offering a wide range of foreign exchange and hedging products to the customers. It also offers portfolio management services to large retirement funds. It constantly endeavors to keep liquidity at the optimum level while maximizing the returns. 

During the year the Reserve Bank of India reduced Cash Reserve Ratio by 0.75% and Statutory Liquidity Ratio by 1%. The Bank therefore had ample liquidity during the year. This offered the Bank opportunities to invest in short term money market instruments like Commercial Papers (CPs) and Certificate of Deposits (CDs). Bank invested over Rs. 75,000 Crores in CDs and CPs at an average spread of 65 to 75 basis points (BPs) over applicable yield on Treasury Bills, thereby earning additional interest income.

The yield on Government securities declined during the year responding to the Repo rate cuts of 100 BPs by the RBI and moderation in inflation. Yield on the benchmark 10 year Central Government securities declined from 8.63% in April 2012 to 7.99% by 31st March 2013. This reduction in yield offered opportunities for churning the SLR portfolio of the Bank. 

We booked more than Rs. 200 Crores from active management of the portfolio. Despite a fall of 64 BPs in yield on Government Securities, the return on SLR portfolio was only marginally lower by 5 basis points, because of dynamic rebalancing of the portfolio. 

As the yields were in a declining trend, the Bank decided to increase duration of the portfolio. The Bank purchased long dated Securities of over Rs. 35,000 Crores of Central and State Governments. The Bank also invested in high yielding corporate bonds aggregating to more than Rs. 10,000 Crores during the year. The gross corpus of funds under the management of Global Markets was close to Rs. 4 lac Crores as on 31st March 2013.

Equities witnessed a turnaround this year led by improved economic situation in the USA, reduced stress in Eurozone, pro-reform measures of the Indian Government as well as rate cuts by the RBI. While the Bank remains invested in multiple strategic positions, Global Markets increased proprietary trading in Nifty stocks. The Bank also used Mutual fund schemes for liquidity management and higher returns. The Bank made a profit of about Rs. 600 Crores from Equity and Mutual Funds. 

The Bank continued to explore opportunities in the area of private equity and venture capital fund investments. During the year, investments of Rs. 100 Crores were made in different venture capital funds. Bank also partially exited from one of the private equity investments during FY13 resulting in a profit in excess of Rs. 50 Crores at an IRR of more than 45.25%. Due to favorable valuations and market conditions, Bank also exited from another strategic investment resulting in a profit of Rs. 65 Crores. The Bank also participated in the primary market and disinvestment programme of the Government of India through Offer For Sale (OFS) route by investing about Rs. 1,300 Crores.

Global Markets provides foreign exchange solutions to the customers in all currencies for managing their currency flows and hedging risks through options, swaps, forwards and bullion services. Given the large presence across the country, the Bank provides a world class technology platform to seamlessly process currency flows between its customers through branches and the dealing room. This is part of our continuous endeavour to provide enhanced services to our customers. The Treasury Marketing outfits complement this by engaging with customers to provide them with inputs about markets and suggest products to suit their requirements. The Bank earned income of over Rs. 1600 Crores from covering the customer flows in foreign exchange, hedging, gold, and proprietary trading, registering an increase of 18%. Global Markets also manages FCNR(B) corpus of the Bank and provides funds for Export Finance in Foreign Currency and FCNR(B) loans.

The Bank was also ranked number one in the "Best for FX options" and "Best for FX Products and Services" categories and number two in the "Best for FX Research & Market Coverage" category in the same poll. These help us to consistently improve our service to our esteemed customers.

The Bank provides portfolio management services to an array of retirement funds in the country consistently giving better returns. The Portfolio Management Services section, with an AUM of over Rs. 2,38,000 Crores, has consistently outperformed private sector peers in generating returns for the EPFO funds. Last year, the bank was adjudged the best fund manager for EPFO.

B. CORPORATE BANKING GROUP

The Bank's Corporate Banking Group consists of three Strategic Business Units viz. Corporate Accounts Group, Transaction Banking Unit and Project Finance & Leasing SBU.

B.1. Corporate Accounts Group (CAG)

CAG is the dedicated SBU for handling the large credit portfolio of the Bank. The SBU has Offices in 6 regional centers viz. Mumbai, Delhi, Chennai, Kolkata, Hyderabad and Ahmedabad headed by General Managers. The business model of CAG is centered around the Relationship Management concept and each client is mapped to a Relationship Manager who spear-heads a cross-functional Client Service Team. The Relationship strategy is anchored on delivering integrated and comprehensive solutions to the clients, including structured products, within a strict Turn-Around-Time. The principal objective of the strategy is to make SBI the first choice of the top corporates thereby deepening the wallet-share and improving the Return on Capital Employed. A sustained Account Planning exercise with rigorous review by senior management sets the pace for the Relationship Management in CAG. 

While the Fund Based outstandings of CAG constitute 16% of total credit portfolio of the Bank, CAG also handles about 59% of the domestic forex business of the Bank. During the year, CAG handled several high value deals for clients such as Essar Oil, HDFC, Hindalco Industries, Essar Steel, Power Grid Corporation, DVC, JSW Energy etc.

In an environment of depreciating Rupee, several CAG clients prefer to borrow in foreign currency. Significant International business is thus originated from CAG clients like PSU Oil Majors and groups such as Tata, Reliance, Essar, Adani, JSW, etc. In the highly competitive area of Acquisition Funding also, CAG has registered a strong presence through deals such as Hinduja's acquisition of Houton International Inc, USA and B C Jindal group's acquisition of Exxon Mobil's global BOPP business.

The Asset quality of CAG remained well under control with the Gross NPAs at 0.57% of total advances. About 87% of CAG's portfolio is investment grade with 40% carrying the highest rating from the External Credit Rating Agencies.

In the backdrop of the robust growth of CAG, it is proposed to open additional Offices in major centres beginning with Mumbai and Delhi. All CAG Offices are now headed by General Managers in line with the rising business profile of the Group and to facilitate interaction at senior level with due regard to the high profile of the CAG clients. Keeping in view the critical importance of the delivery platform, the incumbency of the Chief Operating Officer has also been upgraded to the level of Dy. General Manager in all CAG units.

B.2. Transaction Banking Unit (TBU)

TBU oversees Cash Management Products, Trade Finance and Supply Chain (Dealer / Vendor) Finance and has expanded its activity during the last three years.

i. Cash Management Product (CMP) collection services in the Bank are now offered through 1219 authorized branches located at 722 Centres. Besides usual cheque and cash collections, Doorstep Banking for cash / cheque pickup and collections for Public Issues (IPO/Bonds), are being handled by CMP. Payment services comprising Dividend Warrants, Multi City Cheques, lOIs and e-payment are extended through all branches. CMP Centre has integrated the State Government Payments Systems with the Core Banking Solution of the Bank providing Centralized Payment Solutions to the State Governments in their ambitious National e-Governance Project (NeGP). SBI was the first Bank to use NPCI Aadhar Payment Bridge System (APBS) for transferring LPG subsidy based on Aadhar Numbers.

ii. e-Trade SBI, a web-based portal, to enhance customer comfort and provide easy access to trade finance services, by enabling customers to lodge Letters of Credit, Bank Guarantees and Bills Collection/ negotiation requirements online from any corner of the world has been well received, with 1326 Corporates registered under e-Trade SBI as on 31.03.2013 and more than 11000 transactions per month through e-Trade platform.

iii. e-VFS (Electronic Vendor Financing Scheme) & e-DFS (Electronic Dealer Financing Scheme) are fully automated and secured products, designed to ensure efficient management of working capital cycle of the corporates and sustained growth and profitability of business partners.

iv. Financial Institutions Business Unit (FIBU), a dedicated vertical created for capturing potential business opportunities from financial institutions, has been able to bring on board 15 Insurance Companies, 26 Mutual Fund Companies, 45 NBFCs and 15 Banks.

B.3. Project Finance & Leasing SBU (PFSBU)

PFSBU deals with the approval and arrangement of funds for large projects in infrastructure sectors like power, telecom, roads, ports, airports, other urban infrastructure as also other non-infrastructure projects in sectors like metals, cement etc., with certain threshold on minmum project cost. 

As on 31.03.2013, t he portfolio of infrastructure projects under implementation with PFSBU involves Power projects with aggregate capacity of 52,862 MW; Telecom Projects serving 303 million subscribers; Road projects covering 5,386 kms; new Ports to handle 40 MTPA multi-purpose cargo and 1.2 million TEU of container capacity; Metro project in Hyderabad besides a host of projects in steel, cement, Urban Infra, CRE etc. During the year, a total (FB + NFB) of Rs.12,884 crores (Rs.15,410 crores in FY 12) were disbursed to these projects.

The Bank has constituted a panel of 21 eminent Consultants who are former CEOs/ Directors of leading PSUs with domain expertise in various important sectors. The expert panel has significantly enhanced the capability of PFSBU in evaluating the techno-economic feasibility of projects in critical sectors like Power, Oil Refining, Metals, Fertilizers, Telecom etc.

C. MID CORPORATE GROUP

Mid Corporate Group (MCG), through its 13 regional offices at Ahmedabad, Bangalore, Chandigarh, Chennai (2), Hyderabad, Indore, Kolkata, Mumbai (2), New Delhi (2) and Pune, has 60 branches as on 31.03.2013. During the year, the advances grew from Rs.1,70,442 crores to Rs.2,04,853 crores. 

Looking to the expansion and growth in business, both in number and volumes, an additional Chief General Manager (CGM) was posted in October 2012 at the Mid Corporate Group, Corporate Centre. The distribution of work between the 2 CGMs is based on geographical lines, with one looking after Northern and Southern regions and the other Eastern and Western regions

- assisting the DMD & Group Executive in handling the increased number of MCROs/MCG branches and the growing complexities of business. Similarly, an additional General Manager has been posted at Delhi, Mumbai and Chennai Regional Offices during 2012-13, with clear allocation of MCG branches and attendant responsibilities. The doubling of General Managers at these centres has provided customers with greater access to senior officials, and has also resulted in improved credit delivery

- with greater thrust on attracting good quality new business. During the year, the incumbency of 16 Mid Corporate branches was upgraded from Assistant General Manager (AGM) to Deputy General Manger (DGM). 

With these branches now being headed by DGMs, instead of AGMs earlier, the customers would have more effective resolution of their credit and other related problems.

Account Management Team (AMT) Model, with manageable number of accounts in each team, has been implemented at all branches (214 AMTs), for better credit delivery and focused attention to individual accounts. In the AMT set-up, both pre and post-sanction formalities are handled by the same team - consisting of Relationship Manager, Credit Analyst and Service Officer, which helps in having a holistic view of the requirements of customers as also the underlying risks.

The MCG held several conclaves, essentially as brain­storming sessions with the key functionaries to understand and analyse the trends of business. The frank and detailed exchange of views between the top executives and the operating officials on the ground, in these conclaves, were extremely useful in planning business growth and asset management.

As a result of a concerted drive for selecting good quality assets by making pricing and other terms more attractive for top rated customers, the total percentage of assets above investment grade grew from 64.26% as on March 2012 to 68.31% as on March 2013.

The Group also assisted companies in India to acquire assets / companies overseas and provides support for such expansion plans, including by way of external loans to overseas subsidiaries/JVs (backed by LoCs) through the International Banking Group. Over the years, the Group has helped many such acquisitions by Indian companies in USA, Europe, Australia, Africa, etc.

Simultaneously, a conscious attempt was made to improve the asset quality through intense engagement with promoters of weak/stressed accounts. Consequently, the Non Performing Assets (NPAs) of MCG declined from Rs.19,777 crores as on December 2012 to Rs.18,443 crores as on March 2013, and NPAs as a percentage of total advances were not only contained but also significantly brought down in the last quarter of 2012-13.

The Mid Corporates have been more severely affected by the down-turn in economy - leading to deterioration in asset quality. The processes of appraisal/sanction, follow-up and supervision were, therefore, significantly beefed up. An additional position of General Manager (Restructuring) has also been created in the Group at Corporate Centre, in view of the recent increase in restructuring cases - both CDR and non-CDR. With these additions, the DMD has greater support from senior officials to look after customer relationships.

D. NATIONAL BANKING GROUP

In terms of Business volumes, Branch Network, and Human Resources, the National Banking Group (NBG) is the largest Business Vertical of the Bank. The Group has five strategic Business Units, comprising of Rural Banking (RBU), Personal Banking (PBBU), Real Estate Habitat & Housing Development (RE, H & HD), Small & Medium Enterprises (SMEBU), and Government Business (GBU). National Banking Group's share in the total business of the Bank as on 31st March 2013 is 95.05% in total domestic Deposits, and 56.70% in total domestic Advances.

National Banking group, as on 31st March 2013, comprised of 14,733 branches out of 14,816 total domestic branches, which are controlled by 14 Local Head Offices.

With a view to enhance customer experiences at our branches, we have air-conditioned all our branches, and improved ambience of our branches. With the recruitment of a large number of Assistants, Branch expansion programme also got an impetus, and during the year we increased our Branch count by 719.

Branch Expansion 

New branches were opened with very good ambience, air-conditioning, digital display facilities and with adequate staffing.

To improve operational efficiencies, we have added 2 more Networks, 7 more Administrative Offices and 81 Regional Business Offices during the FY 2012-13.

ATM Network: State Bank of India has the largest ATM network in the country, which we have expanded further during the year, to provide better ATM facilities to the customers. We have also improved upon uptime of ATMs.

To further improve upon customer satisfaction and to minimize their hardship during bunched holidays, we have been suo-moto offering increased working hours/ additional working days. 

D.1 RURAL BUSINESS UNIT

FINANCIAL INCLUSION:

i. Bank has set up 38,480 BC Customer Service Points, through alliances both at national and regional level.

ii. SBI is offering various technological-enabled products, through Business Correspondents (BC) channel, such as, Savings Bank, RD, STDR, remittances & OD facilities.

iii. Opened 2.03 crores small accounts with simplified KYC.

iv. Bank has covered 12,931 Fl villages (population >2000) and 7,600 FIP villages (population <2000).

v. Transactions volume through BC Channel has grown 2.4 times during FY12-13 at Rs.13,033 crores over FY 11-12.

vi. Direct Benefit Transfer (DBT) Scheme successfully rolled out. SBI has Lead responsibility in 28 out of 121 DBT pilot districts. SBI has successfully completed 1.31 lac transactions amounting to Rs. 8.77 crores as Sponsoring Bank, in addition to handling 0.41 lac transactions amounting to Rs. 7.08 crores as Receiving Bank.

vii. Around 99% households covered & 9.85 lac accounts linked with Aadhaar in 43 pilot districts.

viii. Under Urban Financial Inclusion, 5,629 BC outlets have been set up in Urban/Metro centres to cater to the requirements of migrant labourers, vendors, etc. 157 lac remittance transactions for Rs. 6,962 crores were registered during FY 13.

ix. 5.45 lac SHGs were credit linked with credit deployment of Rs. 5,600 crores. Our market share in SHGs is 23%.     

Multiple IT enabled channels for Financial Inclusion include:

i. Kiosk Banking - The Bank's own technology initiative, operated at internet enabled PC (Kiosk) with bio-metric validation at 20,178 CSPs, covering 83 lac customer enrolments, has been rolled out in 31 states and 479 districts.

ii. SBI Tiny Card - About 14 lac customers have been enrolled during FY13 (cumulative more than 76 lac customers).

iii. Mobile Rural Banking - Bank's own technology on mobile platform introduced. This technology works on even very inexpensive mobile handsets.

iv. Cell Phone Messaging Channel-This cost effective model, working on low-cost simple mobile phones and well secured through PIN / signature based security has been rolled out in 12 states across 50 districts and covered 2,025 CSP outlets. 

Business Performance of Agri-Advances

Direct Agri Adva nces crossed Rs. 1,00,000 crores, the only Bank to have crossed this landmark, covering more than 1,11,00,000 farmers and surpassed the Benchmark of 13.5% of ANBC. The Bank has also achieved an all time high growth of Rs. 21,408 cr under Agri segmental advances during FY'13. YOY growth works out to 25%. 

• Bank has opened the largest number- 111 RSETIs for empowering rural youth to take up self-employment. 

Credit Flow to Agriculture

The Bank has disbursed loans aggregating Rs.63,936 crores in FY'13 surpassing the annual GOI target of Rs.60,000 crores and 11.89 lakh new famers were brought into the bank's fold during the year. 

New Products launched:

• The revised Kisan Credit Card scheme provides for comprehensive short term credit limit, assessed for 5 years with 10% step up every year, with inbuilt post harvest/household/consumption requirement, maintenance expenses of farm assets, Crop Insurance, Personal Accidental Insurance Scheme (PAIS), asset insurance and investment credit. In addition, loan account is operated through multi-delivery channels (PoS and ATMs) using the State Bank Kisan Cards. 

• The new Tractor Loan Scheme was rolled out to cater to emerging needs with relaxations in eligibility norms, margin, security, coupled with competitive interest rates and EMI mode of repayment.

Special campaigns were launched to accelerate agri-business growth:

'Swarna Dhara Campaigns' for agri-gold loans was continued, with quarterly competitions and garnered Rs. 14,345 crores business.

'Tractor Carnival' launched from 1st Sep' 12 to regain the market share, resulted in a business growth of Rs. 328 crores (8083 tractor loans). 

• Growth enablers:

• Corporate and Partnership Tie-ups: Bank has entered into 14 new corporate tie-ups for driving growth , major being PepsiCo (KCC), Rallis India (KCC), ITC Ltd (KCC) and National Bulk Handling Corporation (Warehousing receipt financing).

• Special interest concessions: Special interest concessions ranging from 1.5% to 3.5% were extended to promote loan growth in high value agriculture activities like horticulture, minor irrigation, seed processing, warehousing, rural godowns, fishery, dairy, poultry, dealers in agri inputs, farm machinery etc.

• Relaxed collateral security norms upto Rs.1.00 lac for all agri loans and Rs.3.00 lac for loans with recovery tie up arrangements have been leveraged to improve quality Agri-Business.

• Bonding with Farmers:

During the year 209 new villages were adopted under "SBI Ka Apna Gaon Scheme" for overall development taking the total to 1,272. 373 new Farmer Clubs were formed for fostering continued relationship with the farming community taking the total to 10,648.

Regional Rural Banks: 

As on 31.03.2013, SBI has 15 sponsored RRBs, which operate in 138 districts of 15 states and have a network of 3380 branches. During FY2012-13, four RRBs viz.,Sharda Gramin Bank, Rewa Sidhi Gramin Bank, Nainital Almora Kshetriya Gramin Bank &Rushikulya Gramin Bank, sponsored by other Commercial Banks, have amalgamated with SBI sponsored RRBs and three RRBs sponsored by the Bank viz; Parvatiya Gramin 

Bank, Samastipur Kshetriya Gramin Bank &Vidisha Bhopal Kshetriya Gramin Bank have amalgamated with RRBs, sponsored by other Banks. All the RRBs are operating on Core Banking platform and are leveraging technology in electronic banking services such as NEFT, RTGS, ATM linked KCC and ATM, to provide better customer service. The RRBs are endeavouring to increase the size and business volumes by implementingfinancial inclusion.

Rural Self Employment Training Institutes (RSETIs)

RSETIs offer free, unique and intensive short term residential self employment training programmes with free food and accommodation, designed specially to empower rural youth. Bank has set up 111 RSETIs as on 31.03.2013 across the country. The SBI- RSETIs in aggregate conducted 5371 training programmes, trained 1,43,190 candidates and 56,630 trainees are settled under self employment/wage employment.  

Other Highlights

i. Under Prime Minister's Programme for the welfare of Minorities and implementation of Sachar Committee recommendations, against GOI stipulated target of 15% of the total priority sector lending (PSL) to Minority Communities, the Bank has achieved a level of 16.77% of the total PSL as on 31.03.2013.

ii. 169 Financial Literacy Centres (FLCs) were set up with the main objective of creating financial awareness, importance of savings, and advantage of savings with banks, other facilities provided by banks and benefits of borrowing from Banks

iii. The Bank has extended advances to the tune of Rs. 77,019 crores as on 31.03.2013 to the weaker sections, which is 10.14% of ANBC against the Benchmark of 10% set by Reserve Bank of India.

iv. The Bank has opened 172 new branches in under-banked/unbanked areas in Minority Community Districts (MCDs) taking the total number of such branches to 3,438 as on 31.03.2013. 

D.2 Personal Banking Business

Domestic Business performance of PBBU 

Domestic Deposits have grown by Rs. 94,720 crores with a growth of 15.8% and Advances by Rs. 10,539 crores with a growth rate of 13.23% as on 31 March 2013. CASA Deposit has grown by 16.89% and CASA Ratio as on 31.03.2013 is 47.5%.

Other highlights include:

i. Western Union transactions are being offered at all the branches and have contributed Rs. 8.11 crores to other income up to 31st March, 2013. During the year the Bank also commenced Money Gram transactions.

ii. Our Bank has been designated as the point of Presence (POP) for conducting business under the New Pension System (NPS), an initiative of the Government of India, and 3879 branches across all Circles have been registered for conducting business under the New Pension System. Our Bank has also developed a Corporate Model and has registered 08 Corporates including State Bank of India. Bank is also registered as an Aggregator for promotion of registrations under NPS Lite which is a variant of NPS.

iii. Our Bank is Self-Certified Syndicate Member for ASBA (Application Supported by Blocked Amount), as per SEBI guidelines, which is being offered through all our branches in India.

iv. SBI has enabled 3000 ATMs across the country for Visually Challenged Persons to carry out ATM transaction through voice guidance. These ATMs can be accessed by visually challenged custmomers of all banks. 

NRI Services:

i. During the year 2012-13, NRI Deposits have grown by Rs. 13,922 crores (22%) and reached a level of Rs. 77,185 crores as on 31.03.2013. Advances to NRIs recorded a growth of Rs. 442 crores (25%) during the financial year 2012-13, the level reached being Rs. 2,240 crores as on 31.03.2013. NRIs have invested in the schemes of SBIMF and SBI Life to the tune of Rs. 696 crores during the year.

ii. SBI was the principal sponsor of Pravasi Bharatiya Divas, a flagship event for NRI Diaspora from all over the world, organized by the Ministry of Overseas Indian Affairs, which was held in Kochi (Kerala) from 7th- 9th January 2013.

iii. To achieve the status of the preferred NRI Bank, we have opened 16 new NRI Branches in India during the current financial year, taking the number of NRI branches to 69. These branches have an excellent ambience along with dedicated team of officials to serve NRI customers.

iv. SBI has started offering FCNR (B) deposits in 4 additional currencies viz. Swiss Franc (CHF), New Zealand Dollar (NZD), Swedish Krona (SEK) and Danish Krone (DKK) since September 2012. 

Corporate & Institutional Tie-Ups: 

The various Salary packages together have resulted in taking the total salary account Customer base to 70.79 lacs, i.e. a growth of 9.03 lac new accounts during the period 01.04.2012 to 31.03.2013. CASA in these accounts has gone up from Rs. 16,221 crores to Rs. 21,262 crores during this period. The incremental CASA of Rs. 5,041 crores represents 11.58 % of the incremental Personal Banking CASA of the Bank. 

Auto Loans

SBI Auto Loans maintains its retail market leadership in car loan financing. The Auto Loan portfolio has grown by 35.48% during FY 2012­13 in spite of near flat growth of passenger car market. The Bank has emerged as a clear market leader in Auto Loans with a market share of 22.25% amongst ASCB as on Mar'2013.

The Bank is currently offering car finance on "On Road Price" of the car, with the longest repayment period of 7 years, no pre-payment penalty, no advance EMI and at competitive interest rates. A new product "SBI Combo Loan Scheme" has been launched during the year for financing a car and a two-wheeler together (combined limit).

SBI has taken up various joint promotional activities with major car manufacturers like Maruti, Hyundai, Tata Motors, Ford, Mahindra & Mahindra, Toyota, and Mercedes during the financial year 2012-13.

Education Loans

SBI Education Loans has grown by 9.43% during FY 2012-13. SBI has a total exposure of Rs. 13,751 crores as on Mar 2013. 

SBI Loan Scheme for Vocational Education and Training was launched in July 2012 and loans upto Rs. 1 lac are given under this scheme.

Maximum Loan Amount for Studies Abroad has also been increased to Rs. 30 lac from the previous limit of Rs. 20 lac. 

In order to provide financial assistance to more students opting for higher education, the SBI Scholar Loan scheme has been extended to 114 institutes . The maximum loan amount under this scheme has also been enhanced to Rs. 30 lac.

Personal Loans

The Personal Loans Portfolio, which is the second largest in the Personal Banking Segment, has grown by Rs. 2,860 crores during FY 2012-13. It includes Loan against Securities, Loans against Properties, Gold Loan, etc. Ofthese, Xpress Credit and Loan against Time Deposits are two major products and have grown by Rs. 1,002 crores and Rs. 1,217 crores during FY 2012-13 respectively. The most notable growth has been in Gold Loan portfolio of Rs. 480 crores (96.94%) during FY 2012-13.In order to further increase our market share in the 'Loan against Deposit' Scheme, we have reduced our rate of interest from 0.75% above the TD rate to 0.50% above the TD Rate, which is one of the lowest in the industry.

The Delivery Systems for loan products have been under constant focus. Retail Assets Centralized Processing Centres (RACPCs) have been opened up across the country, based on the volume, geographical spread and product focus to ensure uniformity in processing of all Retail loan proposals. This ensures smooth delivery to the customer and with the support of Loan Originating Software (LOS) that currently takes care of Credit- related risks, will enable customers, in future, the facility to track their application online. As on 31.03.2013, there were 60 RACPCs and 70 Retail Assets and Small & Medium Enterprises City Credit Centres (RASMECCs). 

Some of the steps taken to reduce NPAs are:

i. Risk Scoring Models have been developed for all P-Segment Loans on the basis of statistical models for objective assessment. Recently, the Auto Loan scoring model has been made tighter and more emphasis is now being given to Net Income of an individual. (For eg: The minimum income criterion for Auto Loans has been raised from Rs. 1 lac to Rs. 2.5 lac p.a.).

ii. Loan Origination Software (LOS) usage (100% usage at RACPCs), and its integration with the Risk Scoring Model (RSM) and CIBIL check to take care of many process related risks.

iii. In view of the rising NPAs in Education Loans, PAN card of the student and co-borrower/ guarantor has been made mandatory for all Education Loans. For existing Education Loans, a one-time exercise is planned to obtain the PAN card numbers. Instructions have been issued to all operating units to send Notices to borrower, co-borrowers and guarantors in case of default in Education Loans.

iv. Immediate action under SARFAESI, including seizure of cars for eligible cases.

v. Instructions are in place for granting no further Retail Loans (except Education Loans) to the employees of those companies whose accounts are classified as NPAs.

D.3 Real Estate, Habitat & Housing Development (RE, H&HD)

During FY 2012-13, several initiatives were taken by the Bank to give an additional thrust to its Home Loan portfolio. Some of the important initiatives in this regard are as under:-

i. The 'Maximum Repayment Period' permissible under NRI Home Loans Scheme has been increased from 25 years to 30 Years to align the same with the 'Maximum Repayment Period' under domestic Home Loans Scheme, imparting it with greater flexibility.

ii. The ceiling on financing Home Interiors/ Furnishings, as part of the project cost, has been revised upwards from Rs.3 lac to Rs.6 lac subject to the amount expended towards Home Interiors/ Furnishings being restricted to 10% of the Project Cost and the Maximum Loan Amount adhering to the stipulated Loan to Value (LTV) Ratio. 

iii. Home Loan Interest Rates were reduced substantially w.e.f. 7thAugust, 2012 by reducing the spread over the Base Rate. With subsequent downward revisions in the Base Rate itself, the effective Interest Rate on Home Loans ultimately stood reduced to 9.95% p.a. for loans upto Rs.30 lac and 10.10% p.a. for Home Loans above Rs.30 lac as on 4thFebruary, 2013 rendering them very competitive and the lowest in the market. 

iv. The premium of 0.25% p.a. applicable on Interest Rates under Commercial Real Estate (CRE) Home Loans has been waived to align the same with the prevailing Interest Rates on normal Home Loans.

v. With a view to extend the benefit of lower rates of interest (both Fixed and Floating Interest) to our existing Home Loan customers paying relatively higher interest rates, an option to switch-over their loans to the current lower interest rates was made available on payment of a fee of 0.56% of the outstanding w.e.f. 21stSeptember, 2012.

vi. A Special Takeover Campaign was launched from ^September, 2012, assuring prospective customers, of a fixed Processing Fee of Rs. 1000/-on Home Loan Takeovers, irrespective of the loan amount. The Campaign was extended till 31stMarch, 2013 and provided our Bank with a competitive edge in the overall pricing of our Home Loan products.

vii. Term Assurance (Loan Protection) Cover (optional) is available to our Home Loan customers from SBI Life Insurance Company Ltd through RiNnRaksha /Smart Shield/Saral Shield. The Bank provides additional loan for payment of the premium of the above policies on the same terms as those applicable to the underlying Home Loans.

D.4 SME BUSINESS UNIT (SMEBU) 

During the financial year 2012-13, the advances under SME Business Unit has registered year on year growth of 12.45%. The advances figures of SME Business Unit as on 31.03.2013 are as under. 

Business Performance in SME

i. Relationship Banking: 

Under single window approach, the Bank is offering Relationship Banking to SME Entrepreneurs. The strength of Relationship Managers (Medium Enterprises) was augmented to 566 as on 31.03.2013 and mapped to ME units with credit limits Rs.1.00 crores and above across the country. The advances portfolio under Relationship banking as on 31.03.2013 is Rs. 1,03,619 crores. For units having credit limits between Rs. 10.00 lacs to Rs. 1.00 crores, Relationship Managers (SE) have been posted to improve credit flow to Micro and Small Enterprises.

ii. SME Credit City Centres (SMECCC):

SMECCCs, rolled out during 2004-05 as a part of BPR initiative, are centralized loan processing centres for sanction of SME loans upto credit limit of Rs. 1 crore. At present 78 SMECCCs and 58 RASMECCs across the country are functional. To further revamp the structure and process of SMECCCs to enable consolidation of the Bank's position in the SME universe in the country a major exercise has been initiated in association with renowned consulting group. The revamped process will be in place by September 2013.

iii. Specialized SME Branches:

To provide specialized services to SME Entrepreneurs, 400 branches having predominant share of SME advances in their portfolio are being branded as "SME BRANCH" to define the identity of these branches with a common nomenclature and to develop these branches as centres of excellence for SME loan delivery.

iv. Project Uptech: 

 Bank is providing consultancy support to SMEs for catalyzing Technology Upgradation in SME clusters with the objective of making the clusters more competitive through increase in productivity and quality and reduction in costs. Since inception of the initiative 1600 units have benefitted in 28 clusters. Presently, three projects, Steel Structural Fabrication & Boiler Component (Trichy), Fabrication Engineering (Jamshedpur and Nagpur) are going on.

v. Entrepreneurship Development programme:

Bank has formulated a scheme for conduct of EDPs on an ongoing basis, in association with reputed national level EDP training institutes. To begin with, 4 centres were identified for conduct of EDPs on pilot basis during the year, viz. Ahmedabad (in association with EDI), Hyderabad (in association with NI-MSME), New Delhi (in association with NIESBUD) and Bhubaneswar (in association with SBI-RSETI, Jharsuguda). The target groups for the EDPs were mainly final year students of engineering / management colleges and educated youth. 

The total number of participants was 120. It is proposed to have EDP programmes on regular basis in all the Circles across the country during FY 2013-14.

vi. Supply Chain Finance:

Leveraging its state-of-art technology, SBI is focusing on further strengthening its relationship with the Corporate World by financing their Supply Chain partners. Towards this SBI introduced Channel Financing Products with the following features:

a. Web based platform, fully integrated worth Corporate Enterprise Resource Planning Software

b. Real time online transfer of funds

c. Automated settlement of funds

d. Customized MIS

e. Centralized hassle free processing

All the product offerings under Channel finance are designed to ensure efficient management of working capital cycle and sustained growth and profitability of business partners and the entire Supply chain is taken care under the scheme, which is fully automated, secured and robust. The products offered under channel financing are Electronic Dealer Financing Scheme (e-DFS) and Electronic Vendor Finance scheme (e-VFS). Under Supply Chain Finance bank has tied up with 65 Industry majors with across all Industry Verticals like Auto, Oil, steel, Power, fertilizer, FMCG and Textile.

vii. Cash Management

The Bank has introduced cash deposit machines to facilitate deposit of cash into their account by customers themselves by swiping their SBI ATM cum Debit card. To enable SME customers also to deposit cash into their CA/CC account through CDMs, State Bank SME Insta Deposit Card was launched during the year. With Insta Deposit Card, SME customers like traders & service providers are able to quickly deposit their cash into their accounts without waiting in the queue. As on March 31, 2013, the Bank had issued 1,66,477 insta deposit cards to SME customers, showing the growing popularity of the facility. The number of CDMs installed was 665. Similarly, the cash pickup facility of collecting cash at customers doorsteps was introduced for SME customers in August 2011 Marketing campaigns were launched during the year to popularize the scheme among SME customers.

D.5 GOVERNMENT BANKING UNIT 

i. While the Bank retained its leadership in Government Business ,there was a minor dip in Agency Commission due to downward revision in rates by RBI with effect from 1st July, 2012. The adverse impact on Agency Commission was contained by marketing of various products, customized to suit the requirements of the Government.

ii. The Bank brought more State Governments and taxes under the ambit of Cyber Treasury and paid special attention to opening Public Provident Fund Accounts and Pension Accounts. 

iii. The growth in usage of this facility has been as under: E- Governance Projects of Central and State Governments which are bringing a paradigm shift in the way Government business is conducted are being leveraged for customers convenience bringing about more efficiencies of processes.

iv. 2.83 Lakhs new Pension Accounts were opened, bringing the tally to 34.74 Lakhs Pension Accounts being serviced efficiently through 14 Centralized Pension Processing Cells set up in various parts of the country. Pension details are being sent to the pensioners on their mobile numbers. Besides this, pensioners can lodge their complaints online, on our website, or seek clarifications at our contact Centre.

v. The Bank is ushering in the era of hassle free fee collection on behalf of various Departments, Union Ministries and state Governments. An income of Rs. 41 crores was generated from this product during the current financial year.

vi. The Bank is actively participating in the "SAAKSHAR BHARAT" Mission of the Union Government and has opened 1, 23,343 accounts for dispensation of funds upto Gram Panchayat level in 22 states across the country. The Bank has also sponsored the SAAKSHAR BHARAT celebrations at Red Fort, Delhi and Lucknow, the Capital city of Uttar Pradesh.

vii. State Bank of India is the exclusive Banker to the Ministry of External Affairs (MEA) and is collecting the Passport Fees from Passport Sewa Kendra (PSK) in the country.

viii. Bank is proud to be associated with Central Government Projects like Government e-Payment Gateway (GePG). By integrating with GePG portal, the Bank is now enabled to make electronic payments to employees/ vendors of Central Government across the country.

ix. Products like "Rail Shakti", "E-Auction" and "Imprest Cards" have been very well received by Railway Authorities and are expected to gain momentum during FY 13-14.

x. The Bank has since been authorized to collect RTI fee online which will be helpful in generating substantial revenue as Agency Commission.

E INTERNATIONAL BANKING GROUP

Operation of Foreign Offices

The asset level of foreign branches rose by 18%, from USD 35.826 bn in March 2012 to USD 42.146 bn in March 2013. During FY'13, net customer credit grew by 17% from USD 26.681 bn to USD 31.148 bn, customer deposits grew by 11%, from USD 12.075 bn to USD 13.374 bn. Net profit rose by 10% to USD 435.64 mn.

Business Performance of Foreign Offices

Overseas Expansion 

The number of foreign offices increased from 173 as on 31st March 2012 to 186 as on 31st March 2013 spread across 34 countries. The offices comprised of 51 branches, 7 Representative Offices, 107 offices of the six foreign banking subsidiaries and 21 other offices. 

Resource Management

Bank's Foreign Offices maintained comfortable liquidity position during the fiscal, despite volatile market conditions. In July 2012, Bank successfully priced a USD 1.25 Bn Bond issue, 144A/ Reg S transaction maturing in August 2017. Bank received overwhelming response across investor classes for the Bond, despite very difficult market conditions. Bilateral loans of different maturities worth USD 540 Mn were also raised during the fiscal. At Singapore, where the Bank has 7 branches and 24 ATMS, including ATMs at Changi Airport terminals 1, 2 & 3, retail deposits saw a 21% growth year-on-year. Our UK operations also scaled up its retail presence to achieve a retail deposit growth of 41% in the fiscal.

Remittance

Inward remittances grew from Rs. 61,457 crores in FY'12 to Rs. 69,812 crores in FY'13, clocking a growth of 14%. The Bank had a tie-up with 27 exchange companies and five banks in Middle-East countries for routing remittances through SBI. During the year, new remittance product 'SBI Express Remit-Canada' was launched exclusively for Canadian Dollar remittances. An Outward remittance product 'RemXout' was launched for SBI Internet Banking customers.

E-2. Domestic Operations

Merchant Banking

The Bank retained its premier position as Mandated Lead Arranger and Book Runner for syndicated loans in Asia Pacific (excluding Japan but including Australia) for the sixth consecutive calendar year, in FY'13.

During FY-13, Bank acted as the Mandated Lead Arranger in 17 deals aggregating USD 6.442 Bn for several leading Indian corporates like IOCL, REC, NPCL, MRPL, Reliance Industries and Vedanta Resources Plc.

Syndicated Loan Deals

Apart from this, foreign currency term loans aggregating USD 3.68 bn were extended to Indian corporates on a bilateral basis. Further, 10 loans amounting to USD 229.04 mn were acquired through secondary market.

Fee income of USD 89.88 mn was earned from foreign currency term loans concluded during the year through syndication / bilateral deals.

Global Link Services (GLS)

Global Link Services (GLS), a specialized outfit, caters to centralized processing of Export Bills collection, Cheque collection and online inward remittance transactions.

During the financial year 2012-13, GLS (on behalf of domestic branches) handled 104,262 export bills and 74,566 foreign currency cheque collections aggregating USD 15.27 bn. In addition, it handled 7,047,064 online inward remittance transactions amounting to USD 6.45 bn received from all over the world in 39 currencies

Correspondent Relations

The Bank maintains correspondent banking arrangement with 429 reputed International Banks to extend seamless services to varied clients. These correspondent Banks are located in 118 countries. The Bank also has 1,765 Relationship Management 

Application (RMA) arrangements with SWIFT, facilitating speedier flow of financial messages.

Country Risk and Bank Exposures

The Bank has in place a Country Risk Management Policy in tune with RBI guidelines. The policy outlines robust risk management model with prescriptions for Country, Bank, Product and Counter party exposure limits. Both Country-wise and Bank-wise exposure limits are monitored and reviewed on a regular basis. The exposure ceilings and classifications are moderated in line with the dynamics of their risk profiles. Periodical corrective steps are initiated to safeguard the Bank's interests.

I.3. CORPORATE STRATEGY AND NEW BUSINESSES

Emerging business areas, including tech-based products, are developed and launched by a dedicated department headed by a Dy. Managing Director. Progress on some of their key initiatives is detailed hereunder: 

Debit Cards: 

Debit Card spends of State Bank Group crossed Rs. 15,000 crores for FY 2012-13 which constitutes over 20% of total Debit Card spends in the industry. The Bank has been actively promoting Debit Card usage at Point of Sale/for e-Commerce. For the festive season from 16-Oct-2012 to 15-Nov-2012, the Bank ran a promotional Campaign called "Cracker of an Offer" where the Bank along with its subsidiary, SBI Card, tied up with a number of merchant partners to offer attractive discounts for State Bank Debit and Credit Card usage at their outlets/websites. With a view to increasing Debit Card activation, the Bank also ran special promotional offers for its Debit Cardholders with leading merchants of different merchant categories in the industry in co-ordination with SBI Card. 

The Bank launched "State Bank Business Debit Card" for its corporate customers in two variants "Pride" and "Premium" on the occasion of Bank's Day 2012. Till 31-March-2013, more than 86,000 Business Debit Cards have been issued. This product is being launched in Associate Banks shortly.

Prepaid Cards:

Bank's range of products include popular Rupee Prepaid Cards like Gift Card, General Purpose Prepaid Card like eZ-Pay Card and Foreign Travel Card catering to various payment needs of the customers.

Foreign Travel Card:

Foreign Travel Card, now a CHIP based EMV Compliant Card, is available in eight currencies, US Dollar (USD), Great Britain Pound (GBP), Euro, Canadian Dollar (CAD), Australian Dollar (AUD), Japanese Yan (JPY), Saudi Riyal (SAR) and Singapore Dollar (SGD), providing safety, security and convenience to overseas travellers. Corporate variants of SBFTC have been introduced to cater to the needs of Corporates. Sales for FY 2012-13 were to the tune of to USD 66.92 million.

eZ-Pay Cards

eZ-Pay Cards are aligned with most of the social schemes of State and Central Governments in addition to salary payments by Corporate entities, thus reaching millions of households. Sales for FY 2012-13 were to the tune of to INR 931.92 crores. Co-branded Prepaid Cards for various Zones of Indian Railways and Federation of Freight Forwarders' Association in Indian (FFFAI) were rolled out during FY 2012-13.

Gift Cards

Gift Cards remain the preferred option to customers to gift the 'freedom of choice' to their loved ones. Customers can create Gift Cards online. Sales registered during FY 2012-13 was INR 77.44 crores. State Bank Achiever Card, a re-loadable corporate incentive Card with a validity of 10 years for disbursement of incentives/awards was rolled out during March-2013.

Green Channel Counter (GCC)

The 'Green Channel Counter' facility is made available in 7052 branches. On an average, the daily transactions routed through GCC are more than 1,00,000.

Self Service Kiosk (SSK)

As on 31.03.2013, SSKs have been installed in 965 branches. On an average, SSKs are recording more than 30,000 transactions on a daily basis.

Green Remit Card (GRC) 

GRC, a remittance card, was introduced on 02.01.2012 mainly to take care of the large number of non-home cash deposit transactions at our branches. A cardholder can swipe the card at Green Channel Counter or in Cash Deposit Machines and remit money to the beneficiary whose account number is mapped to the card. Once the transaction is complete, both the remitter and beneficiary get confirmation through SMS on their mobile phone. The Bank has issued 6,23,623 cards resulting into 8,08,830 cash deposit transactions as on 31.03.2013.

Mobile Banking & Wallet

Presently, the Bank has a market share of around 65% in the transaction volume and over 36% in the transaction value. During the FY, financial transactions to the tune of Rs. 1933 Crores were done through the service resulting in a total income of Rs. 4.67 crores. As on February 2013 SBI is the market leader in terms of registered user base and number of transactions. Efforts are in place to maintain the leadership position in this space.

The Bank has launched a full KYC mobile wallet under the brand name "State Bank MobiCash". A variant of the same "State Bank MobiCash Easy", a wallet which does not require completion of KYC formalities was launched in Mumbai, Delhi and Chandigarh on the 31st December, 2012. So far, around 14,500 wallets have been issued. 

Merchant Acquiring Business (MAB) 

In order to create a comprehensive electronic infrastructure in the country, activate our more than 136 million debit cards on POS terminals, increase visibility and to tap the huge potential available in the market, Merchant Acquiring business is being conducted by the bank. With around 70000 terminals in the market, Bank is already the largest player amongst the Public Sector Banks and 4th largest Acquirer in India. Bank has already entered into Corporate tie-ups with many prominent players including top educational institutions and hospitals.

Private Equity 

The Bank's foray into the in 2009 with a Joint Venture with the Macquarie Group of Australia. The Fund raised US $ 1.2 billion, making it one of the largest India focussed Private Equity Funds. The Fund has made 8 investments in sectors such as Airports, Telecom, Roads, Renewable and Thermal Energy. The Fund made investments to the extent of 90% of the Capital Committed.

The Joint Venture with State General Reserve Fund of the Sultanate of Oman, named the Oman India Joint Investment Fund, a US $ 100 million Fund has made three investments of Rs. 202 crores, in sectors such as defense electronics and industrial explosives. With this, the Fund has made investments to the extent of 40% of the Capital Committed.

The Bank signed a preliminary non-binding MoU with Russian Sovereign Wealth Fund- Russian Direct Investment Fund (RDIF) for setting up US$2 billion Private Equity Fund to invest / facilitate investments into bilateral co-operation projects, bilateral trade related projects or companies, privatization or globalization opportunities, projects particularly with India-Russia context.

I.4. NPA MANAGEMENT

Credit Policy and Procedures

This year was characterized by sharp increase in non-performing assets in the first three quarters of the year, which abated only in the fourth quarter. While a major reason for such high NPA generation could be the overall slowdown in economic growth and other macro economic factors, it has also brought to attention the need for arranging our credit policy and practices to achieve the following objectives:

a. To analyse and address the reasons for relatively higher NPAs in comparison to the other banks,

b. Reasons for our relatively low share in better performing business segments.

The Credit Policy and Procedure Committee of the Bank, headed by Chairman, comprises of all heads of business groups/verticals like CFO, IBG, NBG, MCG, CAG and also Treasury. The forum of CPPC was activated and 17 meetings were held during the year and 72 policy changes were approved.

Details of the Credit Committees' Structure are as below:

At Corporate Centre:

a) Executive Committee of Central Board (ECCB)

b) Corporate Centre Credit Committee (CCCC)

c) Whole Banking Credit Committee (WBCC-I) International Division Credit Committee (IDCC)

d) Whole Banking Credit Committee (WBCC-II) International Division Credit Committee (IDCC-II)

At Local Head Office/Mid Corporate Group

a) Circle Credit Committee (CCC-I)/

Mid Corporate Credit Committee(MCCC)

b) Circle Credit Committee (CCC-II)

c) Zonal Credit Committee (ZCC)/

SME Credit Committee (Branch level Credit Committee in MCG)

d) Regional Credit Committee (RCC)

In order to downstream the credit sanction process, a Regional Credit Committee (RCC) at each Regional Office was created with discretionary powers of Rs.5 crores fund based and Rs. 2.5 crores non-fund based for Corporates.

SAMG has also put in place a new Credit Committee.

The above structure has the benefit of being able to respond to the business opportunities in a quick manner and at the same time having adequate control and oversight. All the above Committees have periodic and regular meetings whenever there were enough proposals to be considered. The collective decision making process has been found to be effective in better risk assessment and quality decision making.

The analysis revealed the spreads in non-fund business in the Bank are much lower compared to the fund based even after adjusting for cost of capital. Accordingly, the Bank has decided to link the pricing for all non-fund based business to External Credit Ratings and also improve the security cover for these exposures. Simultaneously, the pricing for top rated companies' viz. AAA, AA, A was made more aggressive in order to get higher share. The first half of the financial year was slack. The results of these strategies were noticeable in the second half and there was a robust growth of Rs. 46,491 crores in advances from the last quarter and more than 80% of this came from companies rated investment grade.

The Bank has also fine tuned its policy for Corporates, which allows the Bank to refinance their high cost loans with other Banks. Corporate loan has twin advantage as it is extended for long term working capital requirements of the corporate and requires only a minimum Fixed Assets Coverage Ratio (FACR) of 1.25. It has proved to be quite popular with our constituents. Similarly, from time to time, the pricing and terms of various other loans like Home Loans, etc. have been adjusted to generate high growth with good quality.

The product of electronic platform for financing to dealers of reputed companies e-DFS was made strong and pricing was also made very attractive, which has led to phenomenal growth in the portfolio of e-DFS.

The Bank also continued with its policy of 100% ECGC cover for all export oriented units and premium thereof was borne by the Bank. During the year ECGC based 

on their understanding of global slowdown and default by several overseas buyers, made the rules stricter for packing and post shipment credit. Accordingly, Bank's credit policy also envisages that packing credit can be sanctioned only when there are satisfactory credit reports available on the overseas buyers on a recent date and verification of Buyers Specific Approval list maintained by ECGC.

Similarly, credit scoring model for car loans was modified to make it more effective without significantly diluting credit standards. Further, the minimum threshold credit rating for takeover of advance has also been enhanced to SB6 and with External Rating of minimum BBB.

External rating: The Bank has to allocate capital on assets depending on the basis of credit rating. As per current regulations, credit rating is necessary / mandatory for all accounts of advances of Rs.5 crores and above. Out of 55,130 eligible accounts, 31,702 have already been rated. We are continuing our endeavours to encourage the remaining eligible accounts to obtain the required external credit rating.

In order to impart transparency and impartiality to the pricing process for all working capital advances, the pricing has been linked to external rating and the current matrix is:

Pricing of loans

With the pricing for loans being non-discriminatory, executive time is not required to be given for deciding on pricing for individual companies. Similarly, in other business areas like Home Loans, Education Loans, Car Loans, etc. the pricing was made non-discriminatory and uniform for similar categories.

STRESSED ASSETS MANAGEMENT GROUP 

In the wake of the Global crisis of 2008 and the headwinds before the Indian economy today, asset quality of Indian Banks, including SBI, has been under pressure. Slippages have continued unabated and resolution of NPAs today poses a major challenge to Banks.

With a view to address this issue, we have, during 2004, set up the Stressed Assets Management Group (SAMG). SAMG is headed by a Deputy Managing Director supported by a team of 2 Chief General Managers and other senior officials. SAMG has been set up as a dedicated and specialised vertical to efficiently resolve high value NPAs which are transferred to the Group by other Strategic Business Units.

Today, SAMG has 15 branches across the country of which 2, one at Ernakulam and another at Mumbai (second branch) were opened during the year. The Bank also holds licenses for opening branches in three other Centres. Arrangements are on hand to open one of these in Coimbatore. The branches are staffed with officials with expertise in resolution of stressed assets, duly supported by Law officers.

As on date, 24.35% and 58.14% of the Bank's NPAs and AUCA reside within SAMG. While SAMG is primarily responsible for resolution of NPAs in the Corporate segment, Stressed Assets Recovery Branches (SARBs) and Stressed Assets Recovery Cells (SARCs) have been set up within the National Banking Group to tackle retail NPAs. The recovery efforts of SARBs/SARCs are supplemented by efforts put in by ground level operating staff at our 14,816 branches across the country. Besides, Account Tracking & Monitoring (AT@M) Centres have been operationalised in all Circles to contact SMAs and NPAs in the retail segment. Business Correspondents, Business Facilitators and Self Help Group are also involved in recovery of Agricultural NPAs.

SAMG employs multi-pronged strategies to resolve stressed assets including, inter alia,

• Restructuring of both Standard assets and NPAs, either though the CDR mechanism or through a bilateral arrangement

• Recovery through auction of assets using the SARFAESI route

• Filing suits in Debt Recovery Tribunals and other Courts for recovery of our dues

• Identifying strategic investors and engaging with them for takeover of stressed assets

• Sale of NPAs to Asset Reconstruction Companies

• Entering into One Time Settlements with borrowers

• Using Resolution Agents to take possession of properties mortgaged to the Bank and arranging for their auction

• Using the e-auction platform to reach out to as many prospective bidders as possible

• Debt Asset swaps have been considered in some cases

• Engaging investigation agencies to trace out unencumbered assets of promoters and guarantors and obtaining Attachment Before Judgements over these properties

• Identifying Companies and promoters as Wilful Defaulters and arranging for display of their names on the websites of Credit Information Companies such as CIBIL. These names are also reported to the Reserve Bank of India.

• Publishing photographs of defaulters in newspapers where warranted.

The focussed and specialised attention that SAMG has been able to bring to the task has resulted in substantial recoveries in high value NPAs during the year. Besides, the concerted efforts of SAMG have resulted in recoveries of dues to the Bank this year, some of which are decades old.

The skills of officials posted in SAMG and other recovery units are constantly upgraded and honed by:

• Regular training programmes tailor made to the requirements of SAMG organized by the Bank's ApexTraining Institutes

• Arranging for Guest Lectures by acknowledged experts in the field (For e.g. Shri R. C. Kohli, an experienced banker and author of "Practical Approach to Recovery Management in Banks and Financial Institutions and Securitisation Act" has addressed our officials on several occasions)

• Regular conclaves are held where matters of topical relevance are discussed. Individual accounts are also reviewed and strategies decided to expedite recoveries in these accounts. Feedback from operating functionaries is regularly elicited on how the Group can further optimize operations.

• Top Management of the Bank, including the Chairman, regularly review all high value accounts and suggest ways and means to resolve these NPAs.

The Bank took an important initiative during the year to facilitate expeditious credit decisions, such as approving OTSs, fixing reserve prices for auction of seized properties, etc., within SAMG. Till recently, all matters requiring sanctions/approvals were routed through Credit Committees of other Business Groups. A Stressed Assets Management Credit Committee (SAMCC) has now been set up with the sole objective of considering proposals of SAMG for sanction or approval. This dedicated Credit Committee is a valuable resource for SAMG as credit decisions are taken immediately and communicated at once to operating functionaries resulting in swifter recoveries. During the year, the Bank had also announced a scheme where nominal incentives were paid to officials instrumental in recovering amounts written off over 5 years ago, which yielded significant results and the Bank was able to recover more than Rs. 1000 crores during this year from written off accounts.

Notwithstanding the harsh and challenging environment we have seen in the year gone by, the determined and focussed efforts of the SAMG and SAMBs/SARBs/SARCs has contributed to a deceleration in NPA accretion. This was particularly evident during Q4 of 2012-13 when Gross and Net NPA percentages were brought down to 4.75% and 2.10% respectively from the peak levels of 5.30% and 2.59% witnessed during the year. In fact, Q4 also saw a reduction in gross NPAs by Rs.2, 269 crores in absolute terms.

While asset quality is expected to be under pressure during FY 13-14 also, the SAMG and other recovery outfits of the Bank are fully geared up to meet the challenges of the future.

II SUPPORT & CONTROL OPERATIONS

INFORMATION TECHNOLOGY

> CORE BANKING PROJECT

The CBS environment is benchmarked to establish the capability to support one billion accounts, over 250 million transactions in a day, and delivering a throughput of over 17,000 transactions per second.

Several new features were rolled out in CBS during the year for making the system more user-friendly. Two new ATM cards on 'RUPAY' platform. Password protected statements in PDF format of Savings Bank, Current Account, Cash Credit accounts are now being sent to the e-mail addresses of customers. Functionalities for issuance of TDR/ STDR through ATM, online capture of 16-digit Census Code have been developed in CBS. Biometric authentication as a second-factor authentication method is being implemented in branches for all CBS users.

The process for the systematic and proactive risk identification, assessment, measurement, monitoring and mitigation of various risks in the IT vertical has been initiated. Disaster Recovery Drills are conducted regularly as part of the implementation of the Business Continuity ^ Management System (BCMS). The first comprehensive Integrated Business Continuity Exercise (IBCE) during the current financial year was tested on 8th & 9th December 2012 and the second on 17th & 18th February 2013.

> ATM

SBI has issued more than 11.00 crores Cards out of which around 8.54 crores Cards are transacting regularly on the ATMs. The State Bank Group's ATM operations run from two Switches. The BASE24 Switch has recently been upgraded and it can now handle close to 50,000 ATMs. The ATM footprint is being enlarged substantially through Brown Label ATMs which are being rolled out as totally outsourced initiative under the guidance of Ministry of Finance. A wide variety of ATMs and various types of cards have been deployed. 581 new Cash Deposit Machines have been installed to facilitate customers to deposit the cash.

> INTERNET BANKING

Internet Banking service is available through the Bank's website "https://www.onlinesbi.com".

The Bank's internet banking solution is a comprehensive product for both retail and corporate users. The following major new features have been added during current financial year 2012-13:

Personal Internet Banking:

IPO (Debt) ASBA facility, Multi-lingual image based keyboard for profile password, Voice OTP for J&K customers for doing Internet Banking transactions etc.

Corporate Internet Banking:

Rakhsha IRCTC - Ticket Booking by Paramilitary Forces, Central Plan Scheme Monitoring System (CPSMS) facility , EPF payments by Corporate customers, Second Factor authentication through Hardware token for login by corporate customers, Merchant pre-approved transactions for corporate, Foreign Currency Loan Application

> IT - FOREIGN OFFICES

145 Foreign Offices ofthe Bank in 25 countries use the Finacle suite of applications that include Finacle Core, Finacle Treasury and Finacle Internet Banking Applications. 134 ATMs and 2 Kiosks have been installed at Foreign Centres and 7.63 lakh Debit Cards have been issued. Around 1.43 lakh users have been registered for Internet Banking.

> ENTERPRISE DATA WAREHOUSE DEPARTMENT

Data Marts relating to the various areas like Risk Management, Customer Analytics, Assets and Liability Management etc. have been designed. Dashboards have been developed and deployed for use by the executives for decision making. Campaign Management Tool has been implemented and campaigns through emails/ SMS have been launched by the various Business Units targeting customers under various segments. "Customer One view" (COV) has been developed for Corporate Account Group, Mid Corporate Group and Small and Medium Enterprise Accounts for better monitoring. Data Mining and Analytics are being performed in the areas of business development, Control, Performance and Profitability.

> NETWORKING

The Bank has implemented a secured, robust WAN architecture network connecting branches/ offices and ATMs of State Bank Group through leased lines, VSATs and CDMA technology. While leased lines and VSATs have been procured for primary links for connectivity, ISDN lines or VSATs have been provided as backup. The bandwidth of primary VSATs has been upgraded from 32 Kbps to 64 Kbps at all locations. The Bank is in the process of upgrading leased lines at all locations with bandwidth of 64 Kbps to 128 Kbps. 

II.2. RISK MANAGEMENT & INTERNAL CONTROLS

> Risk Management Structure in SBI:

The Risk Governance structure in place in the Bank is as under:

An independent Risk Governance Structure, in line with international best practices, has been put in place, in the context of separation of duties and ensuring independence of Risk Measurement, Monitoring and Control functions. This framework visualizes empowerment of Business Units at the operating level, with technology being the key driver, enabling identification and management of risk at the place of origination.

As envisaged in the Risk Governance Structure, Credit Risk , Market Risk, Operational Risk, Group Risk and Enterprise Risk Management Departments alongwith Basel Implementation and Information Security Departments are placed under Chief General Manager (Risk Management) under the control of Deputy Managing Director and Chief Credit & Risk Officer to ensure Integrated Risk Management for various Risks

Credit Risk Management:

• The Bank has strong credit appraisal and risk assessment practices in place. The Bank uses various internal Credit Risk Assessment Models for assessing credit risk under different exposure segments. Internal ratings of the bank are subject to comprehensive rating validation framework.

• The department tracked 36 industries during FY 2012-13 including sectors such as Telecom, Power, Coal, Aviation, NBFC, Textile Sector, Iron and Steel and disseminated the same to operating staff for informed decision making. Specific studies on Companies/Groups as directed by the Bank's Board were also conducted.

• The Bank has filed Letter of Intent with RBI for migration to Internal Ratings Based (IRB) Approach for Credit Risk. For this purpose, new policies and governance structure related to credit risk management have been approved by the Risk Management Committee of the Board (RMCB). The governance structure has also been made more robust for effective implementation of the IRB.

• Models for estimation of Probability of Default (PD), Loss Given Default (LGD) and Exposure at Default (EAD) have been developed.

• Bank regularly conducts stress test on its Credit portfolio and Stress Scenarios are regularly updated in line with Industry best practices and changes in Macro economic variables.

• Five meetings of Credit Risk management Committee (CRMC) and six meetings ofRisk Management committee of Board (RMCB) were conducted during the year to review various risk policies, industry guidance and exposure norms.

Market Risk Management:

• Market Risk is the possibility of loss a Bank may suffer on account of changes in values of its trading portfolio due to change in market variables such as exchange rates, interest rates, equity price, etc. The Market Risk management process at the Bank consists of identification, and measurement of risks, control measures, monitoring and reporting systems.

• The Bank has Board approved policies pertaining to the said risks for Trading in Foreign Exchange, Derivatives, Interest Rate Securities, Equities and Mutual Fund. Market risks are controlled through various risk limits such as Net Overnight Open Position, Modified Duration, Stop Loss, Management Action Trigger, Cut Loss Trigger, Concentration & Exposure Limits etc mentioned in the respective policies.

• Presently, market risk capital is computed under Standardized Measurement Method (SMM). The Bank has decided to migrate to advanced approaches under Basel-II for market risk i.e. Internal Models Approach (IMA) and submitted its Letter of Intent to the Reserve Bank of India. The IMA is a Value at Risk (VaR) based tool for monitoring of Bank's trading portfolio. The VaR methodology is supplemented by conducting stress testing of the trading portfolio at quarterly intervals. The Bank is currently conducting parallel run of SMM and IMA methodologies.

• The Market Risk at the Bank is monitored and reviewed by the Market Risk Management Committee (MRMC) and the Risk Management Committee of the Board (RMCB) which meet at least once at quarterly intervals. 

Operational Risk Management:

• Operational Risk is the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events.

• The main objectives of the Bank's Operational Risk Management are to continuously review systems and control mechanisms, create awareness of operational risk throughout the Bank, assign risk ownership, align risk management activities with business strategy and ensure compliance with regulatory requirements, which are the key elements of the Operational Risk Management Policy of the Bank.

• Important policies, manuals and framework documents in line with RBI guidelines on Operational Risk Management Framework (ORMF) and Operational Risk Measurement System (ORMS) for migration to Advanced Measurement Approach (AMA) are in place.

• The Bank has already submitted its Letter of Intent (LOI) to RBI for migration to Advanced Measurement Approach (AMA).

• The Bank-level Operational Risk Management Committee (ORMC), an executive committee, reviews the operational risk profile of the Bank at quarterly intervals and recommends suitable controls/mitigations for managing operational risk in the Bank. The Risk Management Committees at all the 14 Circles, Business and Support Groups (NBG, IBG, CBG, MCG, GMU & IT) are also in place.

• Committee of Executives on High Value Frauds (CEHVF), headed by the Chairman, has been set up during the current year to periodically monitor and control high value frauds (Rs.1 crores & above) and alsofor mitigation ofthe same.

• Other executive level Committees viz. Overall Product Committee (OPC) and Outsourcing Vetting Committee (OVC) are also in place.

Group Risk Management:

• Group Risk Management aims to put in place standardised risk management processes in Group entities

• The Group Internal Capital Adequacy Assessment Process (Group ICAAP) assesses relevant risks and mitigation measures for capital assessment, including under stressed conditions. A Group ICAAP Policy to ensure uniformity in ICAAP exercises of Group entities is in place.

• A quarterly analysis of risk-based parameters for Credit Risk, Market Risk, Operational Risk, Concentration Risk, Liquidity Risk and Contagion Risk is presented to Group Risk Management Committee/Risk Management Committee of the Board.

• Exposure limits for Large Borrower Exposure and Capital Market Exposure as per RBI have been adopted for the Group. Also, limits for Unsecured Exposures, Real Estate and Intra-Group Exposures have been set by the Bank.

• In order to overhaul the Group Risk Management and adopt global best practices, the Bank has embarked upon a Group Risk Management Project recently.

Basel Implementation:

• RBI Guidelines on Basel III Capital Regulations have been implemented from April 1, 2013. Bank has put in place appropriate mechanism to comply with these guidelines.

• India is one of the first few countries to implement the Basel-III guidelines while USA and EU Block, are not yet on board.

Enterprise Risk Management:

• For assessment of Pillar I risks and Pillar 2 risks such as Liquidity Risk, Interest Rate Risk, Credit Concentration Risk, as well as adequacy of Capital and overall Risk Management practices under normal and stressed conditions, the Bank has comprehensive Internal Capital Adequacy Assessment Process (ICAAP) in place.

• As part of the Risk Management Project being undertaken by the Bank to transform its role into a Strategic function aligned with Business Objectives, Bank has initiated Enterprise Risk Management (ERM) framework.

• Global best practices like Risk Appetite, Risk Aggregation and Risk based Performance Management System including Economic Capital and Risk Adjusted Return on Capital (RAROC) will also be covered within the ERM project recently taken up.

Information Security:

• Bank has implemented a robust IT policy and Information System Securitypolicy which are in line with the international best practices. These policies are reviewed periodically and suitably strengthened in order to address emerging threats.

• Regular security drills and employee awareness programs are conducted to ensure security and increase awareness among staff. Business Continuity Management Systems (BCMS) has been implemented at Global IT centre, Belapur. Bank is also among the forerunners in the process  

of implementing the new RBI guidelines for the Banking Sector in this area.

Internal Controls

The Bank has in-built internal control systems with well-defined responsibilities at each level. It conducts internal audit through its Inspection & Management Audit Department. Audit Committee of the Board (ACB) exercises supervision and control over the functioning of the I&MA department. The inspection system plays an important and critical role in identification, control and management of risks through the internal audit function which is regarded as one of the most important components of Corporate Governance. The Bank carries out mainly two streams of audits - Risk Focused Internal Audit (RFIA) and Management Audit covering different facets of Internal Audit requirement. All accounting units of the Bank* are subjected to RFIA. Management Audit covers administrative offices and examines policies and procedures besides quality of execution thereof.

Besides the above, the department conducts Credit Audit, Information Systems Audit (Centralised IT Establishments & Branches), Home Office Audit (audit of foreign offices) and Expenditure Audit (at administrative offices) and oversee policy and implementation of Concurrent Audit (domestic & foreign offices) and Circle Audit. To verify the level of rectification of irregularities by branches, audit of compliance at select branches is also undertaken. During the period 01.04.2012 to 31.03.2013 - 8895 domestic branches / BPR entities were audited under Risk Focussed Internal Audit.

Risk Focussed Internal Audit:

l&MA Dept undertakes a critical review of the entire working of auditee units through RFIA an adjunct to risk based supervision as per RBI directives. All domestic branches have been segregated into three groups (Group I, II & III) on the basis of business profile and risk exposures. While audit of Group I branches is administrated by Central Audit Unit (CAU), audit of branches in Group II & III category and Business Process Re-engineering (BPR) entities are conducted by thirteen Zonal Inspection Offices, each of which is headed by a General Manager. During the period 01.04.2012 to 31.03.2013 - 8895 domestic branches / BPR entities were audited under Risk Focused Internal Audit.

Management Audit:

With the introduction of RFIA, Management Audit has been reoriented to focus on the effectiveness of risk management in the processes and the procedures followed in the Bank. Management Audit universe comprises of Corporate Centre establishments / Circle Local Head Offices / Apex Training Institutions, Associate Banks and Regional Rural Banks sponsored by the Bank (RRB).

Credit Audit:

Credit Audit aims at achieving continuous improvement in the quality of Commercial Credit portfolio of the Bank through critically examining individual large commercial loans with exposures of Rs. 10 Crs and above annually. Credit Audit System also provides feedback to the business unit by way of warning signals about the quality of advance portfolio in the unit and suggests remedial measures. Credit Audit also carries out a review (Loan Review Mechanism) of all the pre-sanction and sanction process of all individual advances above Rs. 5 Crs within 6 months of sanction / enhancement / renewal. During the period 01.04.2012 to 31.03.2013 - 7329 accounts have been subjected to Credit Audit on-site.

Information System Audit:

All the Branches are being subjected to Information System (IS) Audit to assess the IT related risks as part of RFIA of the branch. Is Audit of centralized IT establishments is carried out by a team qualified officials. During the period from 01.04.2012 to 31.03.2013, IS audits of 13 centralised IT establishments were completed.

Foreign Offices Audit:

During the period from 01.04.2012 to 31.03.2013, Home Office Audit was carried at 49 branches, Management Audit at 11 Representative offices / Country Head Offices & 4 Subsidiaries / Joint Ventures.

Concurrent Audit System:

Concurrent Audit System is essentially a control process integral to the establishment of sound internal accounting functions effective controls and overseeing of operations on continuous basis. Concurrent Audit System is reviewed on an on-going basis as per the RBI directives so as to cover Bank's Advances and other risk exposures as prescribed by RBI. I&MA department prescribes the processes, guidelines and formats for the conduct of concurrent audit at branches and BPR entities.

Circle Audit:

Circle Audit which is a delegated audit covers low risk areas and is conducted between two RFIAs. This enables auditee unit to be better prepared betterforthe RFIA. 

II.3. VIGILANCE

The essential function of Vigilance Administration in the Bank is not only to check against non-compliance of rules & regulations by initiating suitable disciplinary action for serious transgressions, but also to devise and implement various measures of preventive vigilance by reviewing the systems & processes to ensure a higher effectiveness and the least vulnerability. The concept of Vigilance as an investigative process and an exercise for punitive action has over time evolved to that of "Vigilance for Corporate Growth", the emphasis getting shifted from punitive vigilance to "Preventive and Proactive Vigilance" through an active participation of all concerned.

(i) Preventive Vigilance Committee (PVC) Meetings being held at the branches and the BPR outfits and (ii) Under Whistle Blower Scheme*, our staff members are expected to advise appropriate authorities about irregular and unethical practices, if any, being indulged in by colleagues and even seniors.

The number of vigilance cases brought to conclusion during the year 2012-13 is 1508, as compared to 1117 during 2011-12.

Fraud Prevention & Monitoring

i. Monitoring of transactions is done with a view to submit critical reports to Financial Intelligence Unit - India, as mandated vide Prevention of Money laundering Act, 2002.

ii. Bank is observing 1st August every year as "KYC Compliance and Fraud Prevention Day" to maintain appropriate awareness across the Bank as also to create proper understanding of KYC issues among the members of Public.

iii. Bank has taken several measures with a view to strengthening internal control mechanism to prevent frauds.

II.4.HUMAN RESOURCES

Human Resources are a very important part because of the people intensive nature of the banking industry.

In order to take full advantage of the expansion of the branch network and also to mitigate staff shortage, particularly at our rural and semi-urban branches, the Bank added 20,682 new Assistants. More than 30 lakhs candidates appeared for the test and the Bank chose the best and the brightest candidates. Many of the new assistants are holding good academic qualification including professional qualifications of computer engineering, MBA, etc. Apart from lowering the average age, the young recruits have brought a fresh attitude to the work. We welcome the new entrants and believe that they will ensure a strong future for the Bank. 

The Bank also advertised for recruitment of 1500 Probationary Officers and an unprecedented 17 lakhs candidates applied for the same. This only shows that the Bank is now the employer of choice of the young and educated population ofthe country.

Improvement in employee productivity:

The large-scale recruitment of Gen-next employees in the officers as well as in the assistant grade have not only brought a far reaching attitudinal change among staff in their customer interface and services across the branches, it has also become a catalyst in enhancing / improving the productivity and efficiency of the employees, thereby resulting in increasing growth in business and profitability for the Bank. Consequently, both business per employee and also profit per employee went up significantly during the year. 

Staff Productivity

The addition of new manpower in the Assistant category during the year happened only in January-March 2013 quarter and these employees are now inducted for full scale work in the bank after initial training and are ready to contribute towards further growth in business.

Improvement in work culture: The Management initiated administrative action against frivolous agitations by certain categories of officers. State Bank officers are on the best terms and conditions among all the banks in the public sector. It is ironic that still some categories of officers chose to conduct agitation only in SBI to the exclusion of other banks. The Bank is a caring and considerate employer. Therefore, in our view, there is no case for disruptive agitation exclusively in SBI, when issues are to be decided at the industry level. Consequent upon the above administrative action, the demonstrations within the Bank premises have stopped.

Periodic consultative meetings were held with the Officers Associations / Staff Unions and the SC-ST Staff Welfare Association as part of the constructive dialogue for understanding and addressing grievances of various categories of employees. These consultations are done both at Corporate Centre as also at Circles. 

Reservation in employment 

Bank provides reservation to SC, ST, & Persons with disabilities (PWDs) as per GOI directives. In order to deal with issues relating to reservation policy and effectively redress the grievances of the SC/ST employees, Liaison Officers have been designated at all Local Head Offices of the Bank as also at the Corporate Centre at Mumbai. 

Other Initiatives

Several perquisites like leased accommodation, provision of mobile phones, Group Insurance etc. were significantly improved for all categories of staff during the year, which besides, being a great motivational factor in improving the employee productivity, were indicative of a healthy employer-employee relationship.

During the year, Inter-Circle Tournaments were also successfully arranged in the field of Hockey, Volleyball and Basketball at Bhopal, Chennai and Hyderabad respectively with the active participation by the employees representing all the 14 Circles.

II.5. Strategic Training Unit (STU)

The Bank's training apparatus comprises of the following:

Apex Training Institutions (ATI): State Bank Staff College - Hyderabad, State Bank Academy - Gurgaon, State Bank Foundation Institute (Chetana) - Indore, State Bank Institute of Rural Development -Hyderabad, State Bank Institute of Information and Communication Management - Hyderabad State Bank Learning Centres: 47 Learning Centres spread across 19 states of the country.

Further, the Bank has acquired 10 acres of land in the prime institutional area at Rajarhat New Town, Kolkata from WBHIDCO (West Bengal Housing Infrastructure Development Corporation Limited) at a cost of Rs. 58 crores. The land is located close to the Kolkata Airport. Efforts are under way to construct a state of the art full scale residential apex training institute. This would help correct regional imbalances as participants from eastern and north eastern region would not have to travel long distance for undergoing training.

In order to raise the standards of training and also to familiarize the Bank officials in the new and sophisticated techniques of financial management like mergers, acquisitions overseas and also in-depth analysis of financial statements, the Bank has taken the help of outside experts, who along with our senior retired officials, are conducting advanced training courses for officials handling credit and faculty members, for imparting sophisticated learning. The aspiration is that our faculty at the training institute should progressively be able to customize these programs and conduct the in-house training.

Training Overseas:

Recognising the need for more advanced training and particularly in areas of strategic management, which may not be completely provided by the Bank's in-house training apparatus, the Bank deputed its senior executives for training in short duration Executive Development Programmes to reputed institutes both in India and overseas.

In fact, the senior officials were given an opportunity of selecting both the training as also the university / institute they wanted to attend. The Institutions/ universities where officials were deputed include reputed names like Harvard, Stanford, Wharpon School of Management Studies, Indian Institute of Management etc. The Policy of the Bank is that every single employee in every grade must attend at least one training programme every year. 1.76 lakhs employees have been given institutional training during the year, covering 90% of the Officers and 60% of the Assistants.

Several articles have been published by our Research officers/faculty members in internal and reputed external journals such as Bancon compendium, Indian Banker, Financial Planning Journal etc.

Our efforts to inculcate a self learning culture in the Bank through an e-Learning portal which has over 280 lessons currently, has yielded good results and more than 70000 employees are using the portal while 94% have registered. State Bank Training Management System (SBTMS), a comprehensive database system in place, enables viewing of training calendars of any ATI/SBLC, programme timetable, individual training history, trainee feedback and self nomination on line. Knowledge Helpline, has been established to answer, knowledge related queries.

II.6. OFFICIAL LANGUAGE

Various efforts were made during the year for improving and increasing Official Language implementation at various levels in the Bank. After providing for the facility to work in Hindi on the Core Banking Solution (CBS), Standard Encoding Unicode facility was uploaded on all the computers of branches and offices of the Bank. Training on the usage of Hindi in Unicode has been given to majority of staff members during the year and thus the usage of Hindi on computers has now become much easier for staff members in the Bank. For encouraging the staff members to use Hindi in their day to day work, various Functional Hindi Training Programmes were also conducted for officers and employees during the period under review.

The work of bilingualisation of the Bank's corporate and internet banking websites is in progress. Different information and procedural manuals in HRMS related to staff members have been provided in bilingual, i.e. in Hindi and English and thus the use of HRMS has become much easier for all the employees especially for the subordinate staff members. The service desk queries asked in Hindi are being replied in Hindi only. Similarly, now information at the Call Centers of the Bank is being provided in Hindi. This year the total number of ATM hits in Hindi was 66674049 as compared to 52063356 hits last year, thus recording an impressive increase of 28.04% which shows the rising interest of our customers in the usage of Hindi in alternative channels 

II.7. CORPORATE SOCIAL RESPONSIBILITY (CSR)

Corporate Social Responsibility:

1. The Bank keeps aside 1% of its net profit for corporate social responsibility and the endeavour is to have full achievement of the same.

2. The Bank CSR policy involves donation under the following major categories:

i) National donations to Prime Minister's and Chief Minister's Relief Funds for natural and other calamities,

ii) Contribution to organizations having exemption under 80G of the Income Tax Act largely for equipment and vehicles,

iii) Distribution of fans and water purifiers to neighbourhood schools.

During the year we are happy that the target of donating 1% of the net profits to CSR, which has eluded the Bank earlier, was not only fully achieved but was surpassed. 

3. Other Flagship programmes:

Looking to the deep inconvenience and discomfort students faced in hot summer in classrooms without the fans, the Bank donated 1,40,000 fans to 14,000 schools. The methodology was that every branch of the Bank adopted a school in its neighbourhood attended by students from modest background and installed 10 fans and one water purifier. This strategy gave wide reach to the activity and every single region of the country having SBI branch had schools in the vicinity benefitting from donation of fans and a water purifier. 

The Bank prefers to support largely with community assets as the benefits of those are shared by all. These steps have created tremendous goodwill in the community and many of our branch managers have been invited to preside over the annual functions of neighbourhood schools. We consider this to be a constructive bond between the Bank and the community. We are happy to make the lives of our young citizens comfortable and healthier.

To help in delivering quality healthcare and transportation of patients and doctors which is a challenge especially in non metro areas, Bank has donated 313 ambulances and medical vans. To help children especially the physically handicapped children, Bank has distributed 51 school buses/vans.

Some of the notable beneficiaries of Bank's support have been the following institutions like Aravind Eye Hospital, Chennai, Tata Medical Centre, Kolkata, N. Swain Memorial Trust, Hyderabad, Sankara Nethralaya, Chennai, St. Xavier's College, Mumbai etc.

Environment friendly initiatives:

The Bank has also supported several initiatives in installing solar lamps in many places largely in the rural areas not having dependable electricity supply.

III ASSOCIATES AND SUBSIDIARIES

State Bank Group, with a network of 20325 branches, including 5509 branches of its five Associate Banks, dominates the banking industry in India. In addition to banking, the Group, through its various subsidiaries, provides a whole range of financial services, which include Life Insurance, Merchant Banking, Mutual Funds, Credit Card, Factoring, Security trading, Pension Fund Management, Custodial Services, General Insurance (Non Life Insurance) and Primary Dealership in the Money Market.

1 Associate Banks

The five Associate Banks of SBI had a market share of 6.16% in deposits and 6.32% in advances as on last Friday of March 2013.

Important Developments during the year in Associates, Subsidiaries and Joint Ventures:

¦ SBI Capital Markets Ltd has decided to invest in equity of its subsidiary, viz, SBICAP Securities Ltd, to the tune of Rs. 50 crores in in two tranches of Rs. 25 crores each. The amount of 1st tranche has been invested on 4th May 2012.

¦ Our JV Company, GE Capital Business Process Management Services (P) Ltd. has bought back a total of 33,98,996 shares of Rs.10/- each @ Rs.141/-per share, aggregating Rs.47.92 crores in January 2013. The share of SBI in the buy back is 13,59,598 shares worth Rs. 19.17 crores.

¦ An additional capital of x5 crores each has been infused by SBI Funds Management (P) Ltd and SBI Capital Markets Ltd. (Total Rs. 10 crores) in SBI Pension Fund Pvt Ltd (SBIPF) during Oct'12. Consequently, the stake of SBI in SBI PF has come down from 90% to 60%.

2 SBI Capital Markets Limited (SBICAP)

SBICAP is India's leading investment bank, offering financial advisory services to varied client base across three product groups - Infrastructure, Non-Infrastructure and Capital Markets (Equity and Debt). These services include Project Advisory, Loan Syndication, M&A, Private Equity and Restructuring Advisory.

SBICAP, on a standalone basis, posted a PBT of Rs. 418.39 crores during the FY 13 as against Rs.364.84 crores earned in FY 12 and a PAT of Rs.296.00 crores in FY 13 as against a PAT of Rs.250.96 crores during FY 12.

SBICAP and its 4 subsidiaries together, posted a PBT of Rs. 444.37 crores during the FY 13 as against Rs. 385.87 crores earned in FY 12 and PAT of Rs. 313.96 crores in FY 13 as against Rs. 265.31 crores in FY 12.

As a leader in its space, SBICAP has attained recognition in the form of some of the most prestigious awards in the industry namely, IFR Asia's India Loan House of the Year 2012 and Business World Award for the Deal of the Year 2012 for Videocon. SBICAP continues to attain the premier spot in industry rankings, the highlights being:

• Ranked No. 1 Global Mandated Lead Arranger in Project Finance Loans by Dealogic.

• Ranked No. 1 Global Project Finance Bookrunner by Thomson- Reuters.

• Ranked No. 1 in the number of issues handled for the public issue of debt in FY 2013 by PRIME

2.1 SBICAP Securities Limited (SSL)

SSL, a wholly owned subsidiary of SBI Capital Markets Ltd., besides offering equity broking services to retail and institutional clients both in cash as well as in Futures and Options segments, is also engaged in Sales & Distribution of other financial products like Mutual Funds, etc. SSL has 100 branches and SBI Capital offers Demat, e-broking, e-IPO and e-MF services Market was to both retail and institutional clients. SSL currently has more than 3.18 lacs customers in their books. The Company has posted a PAT of Rs. 2.42 crores during the FY 13 as against a PAT of Rs. 4.03 crores during the FY 12. The profits are lower on account of subdued capital markets. 

2.2 SBICAPS Ventures Limited (SVL)

SVL is a wholly owned subsidiary of SBI Capital Markets Ltd. SVL earned a Net Profit of Rs. 0.35 crores during FY 13 as against Rs. 0.23 crores earned during FY 12.

2.3 SBICAP (UK) Ltd. (SUL)

SUL is a wholly owned subsidiary of SBI Capital Markets Ltd. SUL has booked Total Revenue of Rs. 17.26 crores and has posted a Net Profit of Rs. 10.76 crores during FY 13 as against Total Revenue of Rs. 9.18 crores and Net Profit of Rs. 4.82 crores during FY 12 despite the global recessionary scenario.

SUL is positioning itself as a relationship outfit for SBI Capital Markets in UK and Europe. Relationships are being built with Flls, Financial Institutions, Law Firms, Accounting Firms, etc to market the business products of SBICAP.

2.4 SBICAP TRUSTEE Co. Ltd. (STCL)

SBICAP Trustee Co Ltd (STCL), a wholly owned subsidiary of SBI Capital Markets Ltd., which commenced security trustee business with effect from 1st August 2008 has earned a gross income of Rs. 14.93 crores and a Net Profit of Rs.7.51 crores during FY 13 as against Gross Income of Rs.11.63 crores and Net Profit of Rs. 5.86 crores during FY 12.

3 SBI DFHI Ltd. (SBI DFHI)

SBI DFHI Ltd is one of the largest standalone Primary Dealers (PD) with a pan India presence. Besides Government securities, it also deals in money market instruments, non G-Sec debt instruments etc. As a PD, its business activities are stipulated/ regulated by RBI.

SBI group holds 72.17 % share in the Company, which is a primary dealer to support the book building process in Primary Auctions and provide depth and liquidity to secondary markets in Gsecs. For the period ended 31st March 2013, the Company's PAT was Rs.80.28 crores as against Rs.43.50 crores earned during FY 12.

The market share of SBIDFHI amongst all market participants was 3.64% as on March 2013.

SBI DFHI's market share amongst Standalone PDs has increased from 16.45 % in March 2012 to 22.48 % in March 2013.

4 SBI Cards & Payments Services Pvt. Ltd. (SBICPSL)

i. SBICPSL, the only stand-alone credit card issuing company in India, is a joint venture between State Bank of India and GE Capital Corporation, wherein SBI holds 60% stake. 

ii. SBICPSL is 3rd largest in the industry in terms of Cards in Force.

iii. The "Cards in Force" (CIF) of the Company stood at 25.70 lacs as at 31st March 2013 The Average receivables stood at Rs. 3,294 crores as at the end of March 2013 as against Rs. 2,178 crores at the end of March 2012.

iv. The Company has posted a net profit of Rs. 136.30 crores as on March 2013 as against Rs. 37.90 crores earned during the year ended March 2012. This performance was primarily driven by asset based revenue growth, substantial reduction in credit losses and better collection performance.

v. SBICPSL won "Gold Award" in the Reader's Digest most trusted brand 2012 survey under the finance category.

vi. SBICPSL has crossed Rs. 1000 crores mark on monthly retail spends in current financial year, which is the highest since inception.

5 SBI Life Insurance Company Limited (SBILIFE)

i. SBI Life is Joint Venture Company between SBI and BNP Paribas Cardiff in which SBI holds 74% stake.

ii. SBI Life has a unique multi-distribution model comprising Bancassurance, Retail Agency & Institutional Alliances and Group Corporate Channels for distribution of insurance products.

iii. SBI Life emerged as the private market leader in New Business Premium for FY 13.

iv. SBI Life has a market share of 16.85 % in respect of New Business Premium (NBP) amongst Private Life Insurers. Overall market share (including Life Insurance Corporation of India) of SBI Life in terms of NBP stood at 4.84 % as on 31st March, 2013.

v. SBI Life launched Dynamic Insurance products catering to different customer segments, initiated online term plans with - "E-Shield" the first significant foray into online distribution and "Grameen Bima" catering to the micro insurance sector aimed at financial inclusion.

vi. SBI Life recorded a PAT of Rs. 622.20 crores during FY 13 as against Rs. 555.80 crores during FY 12, recording a YOY growth of 12%.

vii. The 'Assets under Management' of SBI Life recorded a growth of 11.50% YoY to reach Rs. 51912 crores as on 31st March 2013.

viii. SBI Life expanded its branch network by adding 44 branches during the year bringing the total number of branches to 758.

ix. SBI Life has undertaken various CSR projects during the year. Tree plantation drive witnessed a plantation of 6,309 trees till date. "Gift a Smile" and "Project Scholar" are initiatives to contribute towards economically disadvantaged students. SBI Life took an initiative of enabling mentally challenged children of "Swayam Siddh". Donations have been made to Leprosy eradication centres.

The following are some of the awards / recognitions received by the Company during 2012-13:

i. Best Employer Brand Award at IPE BFSI Awards

ii. 'Best Presented Annual Report Award' by South Asian Federation ofAccountants (SAFA). 

iii. Dun & Bradstreet - PSU Award 2012-Insurance Sector

iv. The Indian Insurance Awards 2012 for the categories -Under-served Market Penetration Award and Claims Service of the Year Award 2012.

v. SBI Life has won Indian Merchant Chambers' Ramakrishna Bajaj National Quality Award 2012 in Services category indicating its commitment towards quality and organizational excellence.

6. SBI Funds Management (P) Ltd. (SBIFMPL)

i. SBIFMPL, the Asset Management Company of SBI Mutual Fund, is the 6th largest Fund House in terms of Average "Assets Under Management" and a leading player in the market with over 5 million investors.

ii. SBI Mutual Funds celebrated 25 Years of Investment Management in FY 13.

iii. SBIFMPL recorded a complete turnaround in investment performance with over 92% of equity scheme AUM in top 2 quartiles, and 41% were in top quartile.

iv. SBIFMPL posted a PAT of Rs. 85.68 crores during FY 13 as against Rs. 60.52 crores earned during FY 12.

v. The average "Assets Under Management" (AUM) of the company during the quarter ended March 2013 quarter stood at Rs. 54,905 crores as against Rs. 42,042 crores during Mar 2012 quarter registering an YoY growth of 30.60%. 

vi. SBIFMPL launched first Exchange Traded Fund- SBI Sensex Fund, this Fund also qualifies for availing benefits under Rajiv Gandhi Equity Savings Scheme during the FY 13.

vii. SBIFMPL launched SBI Edge Fund, a fund that gives benefit of 3 asset classes viz. Equity, Gold and Debt in one fund.

7 SBI Global Factors Ltd. (SBIGFL)

i. SBIGFL is one of the leading factoring companies in India in both domestic as well as export & import factoring.

ii. The company registered a Profit of Rs. 3.63 crores during the FY 13 as against a loss of Rs. 65.73 crores incurred during FY 12.

8 SBI Pension Funds Pvt. Ltd. (SBIPF)

i. SBIPF is one of the three Pension Fund Managers (PFM) appointed by Pension Fund Regulatory & Development Authority (PFRDA) for management of Pension Funds under the National Pension System (NPS) for Central Government (except Armed Forces) and State Government Employees.

ii. SBIPF, a wholly owned subsidiary of the State Bank Group, commenced its operations from April 2008. The total "Assets Under Management" of the company as on 31st March 2013 were Rs. 11,788 crores (YoY growth of 96 %).

iii. The Company maintained lead position amongst Pension Fund Managers (6) in terms of AUM in both Government and Private sectors.

iv. The overall AUM market share in Private sector was 73%, while in the Government sector it was 37%.

v. SBIPF has maintained lead in 7 asset categories in terms of returns since inception.

vi. SBIPF received the following awards during the FY 13:

vii. 'Pension Fund of the Year' for excellence in performance and customer service to subscribers at the Indian Pension Fund Awards- 2012.

viii. Award for Financial Inclusion (Pension Category) in Skoch Financial Inclusion Awards, 2013.

9. SBI GENERAL INSURANCE COMPANY LTD (SBIGIC)

i. SBIGIC is a joint venture between State Bank of India and IAG Australia in which SBI holds 74% stake.

ii. SBIGIC has completed its Third year of full operations during FY 13.

iii. Gross Direct Written Premium stood at Rs. 770.85 crores as at 31st March 2013.

iv. The Company recorded a net loss of Rs. 145.16 crores as against the estimated loss of Rs. 164.90 crores during FY 13 and a loss of Rs. 95.34 crores incurred during the FY 12. The Company is expected to turn around during 2014-15.

v. SBIGIC has a multi-distribution model comprising Bancassurance, Agents, Broker and Direct Channels for distribution of insurance products.

10. SBI SG GLOBAL SECURITIES SERVICES PVT LTD (SBISG)

i. SBISG, a joint venture between State Bank of India and Societe Generale, was set up to offer high quality custody and fund administration services to complete the bouquet of financial services on offer by a financial conglomerate.

ii. SBISG commenced commercial operations in Custody in May 2010 and Fund Accounting Services in Sept 2010.

iii. The Company recorded a net profit of Rs. 38.43 lacs during the FY 13 as against Rs. 24.71 lacs during the FY 12.

iv. The Assets Under Custody as on 31st March 2013 stood at Rs. 51,629 crores, while the Assets Under Administration were at Rs. 52,639 crores. 

Responsibility Statement

The Board of Directors hereby states:

i. that in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;

ii. that they have selected such accounting policies and applied them consistently and made judgements and estimates as are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Bank as on the 31st March 2013, and of the profit and loss of the bank for the year ended on that date;

iii. that they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Banking Regulation Act, 1949 and State Bank of India Act, 1955 for safeguarding the assets of the Bank and preventing and detecting frauds and other irregularities; and

iv. that they have prepared the annual accounts on a going concern basis.

ACKNOWLEDGEMENT

During the year, Shri G. D. Nadaf, Officer Employee Director, retired on attaining superannuation on 31st May 2012. Shri Rashpal Malhotra, Director nominated under section 19(d) by Govt, of India retired on 9th August 2012. Dr. Subir V. Gokarn, Dy. Governor, RBI Nominee, retired on completing his term on 31st December 2012. Shri Dileep C. Choksi, Director, elected by Shareholders under Section 19(c) resigned from the Board effective from the close of business on 31st December 2012. Shri D. K. Mittal, GOI Nominee Director retired on 31st January 2013 attaining superannuation.

Dr. Rajiv Kumar was re-nominated as Director under section 19(d) by GOI w.e.f. 6th August 2012. Shri Harichandra Bahadur Singh was nominated as Director under section 19(d) by GOI w.e.f. 24th September 2012. Shri S. K. Mukherjee, was nominated under section 19(cb) as Officer Employee Director w.e.f. 4th October 2012. Shri S. Vishvananthan was appointed as Managing Director under section 19(b) w.e.f. 9th October 2012. Shri Thomas Mathew, elected for the first time from 13th January 2013 to 24th June 2014 in place of Shri Dileep C. Choksi. Shri Rajiv Takru was nominated as Govt. Nominee Director vice Shri D. K. Mittal, under section 19(e) vide Notification dated 4th February 2013. Dr. Urjit R. Patel was nominated as RBI Nominee Director vice Dr. Subir V. Gokarn, under section 19(f), vide Notification dated 6th February 2013.

The Directors place on record their appreciation of the contributions made by the respective outgoing Directors, namely, Shri G. D. Nadaf, Shri Rashpal Malhotra, Dr. Subir V. Gokarn, Shri Dileep C. Choksi and Shri D. K. Mittal to the deliberations of the Board. The Directors welcome the new Directors Dr. Rajiv Kumar, Shri Harichandra Bahadur Singh, Shri S. K. Mukherjee, Shri S. Vishvananthan, Shri Thomas Mathew, Shri Rajiv Takru and Dr. Urjit R. Patel on the Board.

The Directors also express their gratitude for the guidance and co-operation received from the Government of India, RBI, SEBI, IRDA and other government and regulatory agencies.

The Directors also thank all the valued clients, shareholders, banks and financial institutions, stock exchanges, rating agencies and other stakeholders for their patronage and support, and take this opportunity to express their appreciation of the dedicated and committed team of employees of the Bank.

For and on behalf of the Central Board of Directors 

Chairman 

Date: 23rd May 2013

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