PA

PROJECT REPORT
ON

STUDY OF PERFORMANCE INDICATORS OF

BANKS
WITH
STATE BANK OF INDIA

SUBMITTED TO
UNIVERSITY OF PUNE
IN PARTIAL FULFILMENT OF TWO YEARS FULL TIME COURSE
MASTERS IN BUSINESS ADMINISTRATION (MBA)
SUBMITTED BY
CHIKURDEKAR RAHUL RAMAKANT
MBA (2ND YEAR)
UNDER GUIDENCE OF
PROF .SAI KISHORE

G. H. RAISONI
INSTITUTE OF MANAGEMENT AND RESEARCH, PUN
 (BATCH 2008-09)

To Whomsoever It May Concern

This is to certify that Mr. Rahul Ramakant
Chikurdekar is a bonafide student of G.H.Raisoni
Institute of Management and Research, Pune. He has
successfully carried out his summer project titled
“STUDY OF PERFORMANCE INDICATORS OF BANKS” at State
Bank Of India, Nerul Branch ,Navi Mumbai, in the
partial fulfillment of Masters in Business
Administration course of University of Pune (2007-
2009).
He has worked under our guidance and directions.
His work is found to be good and complete in all
respects. During the period we found him hardworking,
Sincere and loyal. We wish him all the best for his
future.

BRANCH MANAGER

2
ACKNOWLEDGEMENT

It gives me great pleasure to express my gratitude towards all the individuals who
have directly or indirectly helped me in completing this project. First of all I amextremely
grateful to Mr Ramdas Kamat & Mr. Shruti Yadav (Branch Manager, Nerul
Branch) for providing me integrating project in finance for sixty days. ). I would like to
express my sincere gratitude to my company guides Mr R.D.Sonavane (Account
officer, Nerul Branch) for their invaluable guidance during the project period which
helped me in completing the project successfully. I also extent my special thanks to Mrs.
Trupti R Chowdhary And Mrs.Jyoti Watwe (Cash Officers), Mrs Jayashri S
Gondke(Trainee Officers) State Bank of India Nerul.

I wish to express my sincere thanks to our Director Dr. Sanjay Patankar and my
project guide Prof. Sai Kishore for providing me valuable guidance & inputs which
helped me to complete this project in true sense.
I also extend my thanks to all the staff award staff of State Bank Of India Nerul Branch
And all the Officers of our Zonal Office worli, Mumbai And Local Head Office, Andheri
for their support, which helped me a lot in completing the project.
Lastly my ingenious thanks to all my colleagues and friends for their kind cooperation
and help.

Rahul R Chikurdekar
(MBA-II)

3
DECLARATION
I, Chikurdekar Rahul Ramakant, here by declare that this report is a result of my
intensive study during a period of 7 weeks at State Bank of India, Nerul Branch, New
Mumbai. This work is an original one and has not been submitted earlier either to this
university or to any other institution for fulfillment of the requirement of a course of
study to the best of our knowledge.

Under the Guidance of

Chikurdekar Rahul Ramakant
Mrs. Shruti Yadav
Branch Managar
State Bank Of India, Nerul

Date:

4
 1. EXECUTIVE SUMMARY

Project Title:- STUDY OF PERFORMANCE INDICATORS OF BANKS

Company name:-STATE BANK OF INDIA.
A Project “STUDY OF PERFORMANCE INDICATORS OF BANK” was carried out at State
Bank Of India , Nerul Branch to analyze and understand current financial and competitive
feasibility of the bank.
I chose to do this project at State Bank Of India , Nerul Branch Ltd because it is
biggest flagship in Indian banking industry .and it is one of the biggest emerging ‘FINANCIAL
SUPER MARKET OF INDIA’
It involves various Calculated ratios, Graphs. More emphasis is given on the Various Operations
of the Bank. It include It’s core operations and miscellaneous operations as bank is having wide
network of its various core branches (10000+) across the country. As well as bank is having its
subsidiaries and various joint ventures with domestic and international ventures. Bank is has vital
part in financial inclusion the and agricultural growth of the Country.

Thus bank deals with various types of operations and activities. This project try to
find out how these core and miscellaneous operations are helping the Bank to pool out the profit
and maintain it’s stand in the industry.

5
 CONTENTS

Sr. No. Topic Page No.

1. Introduction 7

2. OBJECTIVES OF THE PROJECT 8

3. COMPANY PROFILE 9

4. THEORETICAL BACKGROUND 24

5. RESEARCH METHODOLOGY 27

6. DATA ANALYSIS AND INTERPRETATION 29

7. CONCLUSION 75

8. BIBLIOGRAPHY 76

9. ANNEXURE 1 --

10. ANNEXURE 2 --

6
1.Introduction to Topic
Every financial manager is involved in financial decision making and financial planning
in order to take right decision at right time, on the other hand he also very keen to know
that decisions taken by him are serving well to the company or not. Decisions taken by
him are taken by him are always taken in to two types of environment ie.(Internal,
External),means both the sources affect the performance of the manager as well as
company.
The project “STUDY OF PERFORMANCE INDICATORS OF BANKS” focuses
on how external and internal environment help to the banks. Project seeks to find out how
various types of core and miscellaneous operations of the State Bank of India helps banks
to pool out profit. These operations helps bank to not only in financial aspect but also in
social and cultural enhancement of the bank as well as society

Financial management has assumed greater importance today as the financial

strategies required to survive in the competitive environment have become very
important. In the financial markets also new instruments, concepts and new technologies
are coming up and one must say that a finance manager of today is operating in a more
complex environment. A study of theories, concepts and new technologies involved in
financial management.

7
2. OBJECTIVES

1. To obtain a true insight into financial position of the company.

2. To obtain the strengths and opportunities of the banks by studying comparative

financial and competitive indicators of the company.

3. To draw the correct picture of the financial operations of the company in

terms of liquidity, solvency, turnover, profitability etc.

4. To find out the reasons for unsatisfactory results.

8
3. HISTORY AND PROFILE OF THE COMPANY

The origin of the State Bank of India goes back to the first decade of the
nineteenth century with the establishment of the Bank of Calcutta in Calcutta on 2 June
1806.Three years later the bank received its charter and was re-designed as the Bank of
Bengal (2 January 1809). A unique institution, it was the first joint-stock bank of British
India sponsored by the Government of Bengal. The Bank of Bombay (15 April 1840) and
the Bank of Madras (1 July 1843) followed the Bank of Bengal. These three banks
remained at the apex of modern banking in India till their amalgamation as the Imperial
Bank of India on 27 January 1921.

Primarily Anglo-Indian creations, the three presidency banks came into existence
either as a result of the compulsions of imperial finance or by the felt needs of local
European commerce and were not imposed from outside in an arbitrary manner to
modernize India's economy. Their evolution was, however, shaped by ideas culled from
similar developments in Europe and England, and was influenced by changes occurring
in the structure of both the local trading environment and those in the relations of the
Indian economy to the economy of Europe and the global economic framework.

Establishment

The establishment of the Bank of Bengal marked the advent of limited liability, joint-
stock banking in India. So was the associated innovation in banking, viz. the decision to
allow the Bank of Bengal to issue notes, which would be accepted for payment of public
revenues within a restricted geographical area. This right of note issue was very valuable
not only for the Bank of Bengal but also its two siblings, the Banks of Bombay and
Madras. It meant an accretion to the capital of the banks, a capital on which the
proprietors did not have to pay any interest. The concept of deposit banking was also an
innovation because the practice of accepting money for safekeeping (and in some cases,

9
even investment on behalf of the clients) by the indigenous bankers had not spread as a
general habit in most parts of India. But, for a long time, and especially upto the time that
the three presidency banks had a right of note issue, bank notes and government balances
made up the bulk of the investible resources of the banks. The three banks were governed
by royal charters, which were revised from time to time. Each charter provided for a
share capital, four-fifth of which were privately subscribed and the rest owned by the
provincial government. The members of the board of directors, which managed the
affairs of each bank, were mostly proprietary directors representing the large European
managing agency houses in India. The rest were government nominees, invariably civil
servants, one of whom was elected as the president of the board.

Business

The business of the banks was initially confined to discounting of bills of

exchange or other negotiable private securities, keeping cash accounts and receiving
deposits and issuing and circulating cash notes. Loans were restricted to Rs.one lakh and
the period of accommodation confined to three months only. The security for such loans
was public securities, commonly called Company's Paper, bullion, treasure, plate, jewels,
or goods 'not of a perishable nature' and no interest could be charged beyond a rate of
twelve per cent. Loans against goods like opium, indigo, salt woolens, cotton, cotton
piece goods, mule twist and silk goods were also granted but such finance by way of cash
credits gained momentum only from the third decade of the nineteenth century. All
commodities, including tea, sugar and jute, which began to be financed later, were either
pledged or hypothecated to the bank. Demand promissory notes were signed by the
borrower in favour of the guarantor, which was in turn endorsed to the bank. Lending
against shares of the banks or on the mortgage of houses, land or other real property was,
however, forbidden.
Indians were the principal borrowers against deposit of Company's paper, while
the business of discounts on private as well as salary bills was almost the exclusive
monopoly of individuals Europeans and their partnership firms. But the main function of
the three banks, as far as the government was concerned, was to help the latter raise loans

10
from time to time and also provide a degree of stability to the prices of government
securities.

Some important Milestones

• Major change in the conditions

• Presidency Banks Act 1976

• Presidency Banks of Bengal

• Imperial Bank

• First Five Year Plan

• Nationalization of banks

11
STATE BANK OF INDIA AN OVERVIEW

State Bank of India is the premier commercial bank of the country and, among its
strengths, the following would merit attention. The largest commercial bank in the
country with branches spread all over India, besides having presence in all the time zones
of the world covering several countries. As the largest financial institution in India, SBI is
well positioned to capture growth in India’s dynamic banking market and is seen as a
macro economic proxy for the Indian economy.
The bank along with its non-banking subsidiaries has emerged as a financial
services supermarket offering the entire gamut of financial services including investment
banking, housing finance, factoring, project finance, asset management primary
dealership, securities trading, credit card, gold banking, insurance, etc. The subsidiaries
have been built into highly focused, efficient and tech-savy organisation which works
closely with the customer relationship groups in order to cross-sell products building on
Group synergy.
SBI is an excellent brand name that is synonymous with trust and security. SBI is
the only bank in India to be ranked among the top 100 banks in the world and also among
the top 20 banks in Asia in the annual
survey by “The Banker”.
With a 16.00% market share for advances and a 16.78% market share for deposits
(December 2005), SBI has a very strong presence. The Operating profit of the Bank
crossed the Rs.10000-crore mark in the year 2004-05. The aggregage deposits of the
Bank stood at Rs.363731.00 crores and advances stood at Rs. 247673.00 crores as at
31.12.2005. The Bank posted a Net Profit of Rs. 3553.38 cr for 9 month period ended
31st December 2005 compared to Rs. 3239.64 cr. in 9 month period ended 31st
December 2004, registering a growth of 9.68%
Operating Profit (Profit before Provisions & Contingencies) of the 9 month
period ended 31st December 2005 stood at Rs. 8022.05 cr as against the figure of Rs
8066.28 cr in corresponding period last year.
The Capital Adequacy ratio of the Bank stood at 12.49% as at 31.12.2005. The
Earnings Per Share stood at Rs.21.19.

12
 The bank has long standing relationship with 80% of Indian Bluechip corporates.
Substantial part of the corporate business of the bank is handled in five Strategic Business
Units (SBUs) - Corporate Accounts Group, Leasing SBU, Project Finance SBU, Mid
Corporate Group (MCG) and Stressed Assets Management Group (SAMG).
The Corporate Accounts Group (CAG) is a dedicated service group catering to about 298
top corporates and constitutes about 10.46% total credit portfolio of the bank and
29.67% of the Bank’s Commercial and institutional non-food credit with funded exposure
of Rs.26583.00 crores as at the 31st January, 2006 and offers our top clients high quality
relationship banking a broad product portfolio, competitive pricing and skilled credit
expertise.
The bank has developed an excellent inhouse staff training infrastructure
including a College, an Academy, an Institute for Rural Development and an Institute for
Information management and Communication Technology. Efforts are continuously
made to improve the motivation and morale of the bank’s employees through on-going
training and on-site initiatives.
Separate business units viz. Agri-Business Unit, Government Business Unit, P-
segment business unit and SME Business unit created for focused attention to respective
segments.
The Bank has taken the initiative in globalization and has plans for both organic
and inorganic growth globally. It has plans to increase its foreign offices from 52 to more
than 100 by March, 2007 and 125 by March 2008. Two new branches at Sylhet and
Golders Green, London became operational during the period April-September 2005
thereby taking the total number of foreign offices to 54 in 28 countries. The Bank also
opened its second offshore banking unit at Kochi. Commercial Bank of India Llc.,
Moscow a joint venture with Canara Bank also commenced commercial operations. All
foreign branches of the Bank except two newly opened ones at Sydney and Muscat ended
the half-year with a net profit. The Bank has also plans to acquire controlling interest in
foreign banks in strategic locations. SBI picked up a 51 per cent stake in Mauritius based
Indian Ocean International Bank Ltd (IOIB), in February 2005. In October, 2005,
SBI acquired 76 per cent stake in Giro Commercial Bank of Kenya, as part of its
strategy to increase presence in African continent and gradually emerge as a global

13
banking major. SBI has also acquired in November, 2005, a small Indonesian bank - PT
Bank IndoMonex - for about $6 million, to foray into Indonesia and expand presence in
the Asean region. SBI has been allowed to start operations in Saudi Arabia and is the first
bank to get license from Saudi Arabia’s Monetary Agency.

14
 Board Of Directors of State Bank Of
India

Sr. No. Name of Director Sec. of SBI Act, 1955

Shri O.P. Bhatt
1. 19(a)
Chairman
Shri S.K.Bhattacharyya
2. 19(b)
MD & CC&RO
3. Shri Suman Kumar Bery 19(c)
4. Dr. Ashok Jhunjhunwala 19(c)
5. Shri Dileep C. Choksi 19(c)
6. Shri S. Venkatachalam 19(c)
7. Dr. Deva Nand Balodhi 19(d)
8. Prof. Mohd. Salahuddin Ansari 19(d)
9. Dr.(Mrs.) Vasantha Bharucha 19(d)
10. Shri Arun Ramanathan 19(e)
11. Smt. Shyamala Gopinath 19(f)

Top ten share holders of State Bank Of India

(As on 31-03-2008)
Sr Name of the holder Equity held(%)
No
1 President of India 59.73
2 The Bank Of New York 6.68

15
 3 LIC of India 4.21
4 CLCA Merchant Bankers ltd. A/C 2.65
5 Europacific Growth Fund 1.31
6 Oriental Global Tamrind (Mauritius) 0.97
7 CITI Group Global Markets Mauritius 0.91
8 Fidelity Management And Research Co A/c 0.76
FID
9 ICICI Prudential Life Insurance Co 0.73
10 LIC of India Money Plus 0.73

187 PRODUCTS OF SBI and SBI Life

(Asset, Liability & Card Products of SBI and Insurance Products of SBI Life : At A Glance )

PER SEGMENT – DBD (Agl, SIB, C&I) DEPOSIT PRODUCTS FOR

ADVANCES PRODUCTS ADVANCES NRI (International Bkg)
Name of Products AGRICULTURAL 41. Standby Line of 1. Non-Resident External
HOUSING LOAN PRODUCTS Credit (SLC-WC) – Rupee ( N R E) Account
PRODUCTS 1. Kisan Credit 2. Foreign Currency Non-
C&I and SSI
1. Housing loan Card 42. Standby Line of Resident ( F C N R) Account
2. Credit Khazana 2. Kisan Gold Card 3. Non-Resident Ordinary ( N
Credit (SLC-TL) –
3. SBI- Shoppe Plus 3. General Credit
R O ) Account
C&I and SSI
4. HL for Earnest Money Card 4. Resident Foreign Currency
43. Standby Loan to
5. HL for NRI 4. TRACTOR LOAN
( R F C ) Account
Corporate for New
6. Gram Niwas PLUS SCHEME 5. Resident Foreign Currency
7. Sahyog Niwas 5. Krishi Plus Vehicles
(Domestic) (RFC-D) A/c

16
8. Spl Rural Housing Sch
9. Credit-cum-Subsidy
Scheme for Rural Housing
10. Tribal Plus
11. SBI-FLEXI Housing
Loan
12. “SBI-REALITY”
13. “SBI – MAXGAIN”
14. “SBI – FREEDOM”
15. “SBI – OPTIMA”
AUTO LOAN
PRODUCTS
16. Car (Auto) Loan
17. Car Loan – Overdraft
18. NRI Car Loan
19. Scoom -Two
Wheeler Loan
PERSONAL LOAN
PRODUCTS
20. Per Loan on
mortgage of Immovable
property
21. SBI Loans to
Pensioners 22. Jai Jawan
Pension
23. Personal Loan
24. SBI SARAL
25. Personal Loan –
Xpress Credit 26.
Festival Loan
27. SBI EASY TRAVEL
LOAN 28. APTECH
courses
29. SBI Education Plus
30. “SBI HOME-LINE”
Special Personal Loan
31. “SBI-Home Cash”
32. Mahila Shakti Scheme
33. SBI Career Loan 34.
SBI Reverse Mortgage
Loan
EDUCATIONAL LOAN
PRODUCTS
35. Education Loan
Scheme / SBI STUDENT
LOAN
36. SBI SCHOLAR
EDUCATION LOAN
37. Nursing Plus (merged
into Student/Education Loan)
38. Student Loan Scheme
(GSS)
39. RBI Education Loan
Scheme 44. Short Term Loan 6. Exchange Earner’s Foreign
6. Financing 2nd
Products for C & I Currency (EEFC) A/c
Hand/ Used 7. DOLLAR PREMIUM
Borowers
Tractors 45. Traders’ Easy ACCOUNT
7. Financing 8. SBI SUPREME
Loan (Mortgage
9. RELAX & GAIN
Power Tillers
Loan renamed)
8. Financing Seed STRUCTURED PRODUCTS
46. Working Capital
Processors PLASTIC CARD PRODUCTS
Finance for Trade &
9. CONTRACT
Service(C&I) OF SBI
FARMING 1. State Bank Cash Plus Card
47. Working Capital
10. Agl Advance
Finance for Private (ATM-cum-Debit Card)
against gold & 2. SBI Gold Debit Card
Builders(C&I) 3. Visa Gold International
silver ornaments
48. FINANCING TO
11. Produce Debit Card
PRIVATE BUILDERS 4. Combo Card
Market Loan
49. CHANNEL 5. SBI Vishwa Yatra Foreign
12. AGRI-CLINIC
FINANCING – Trade Travel Card
OR AGRI BUSINESS
Finance 6. SBI Pay Roll Card
CENTRE 7. SBI Gift Card
50. Auto Clean Sch
13. Capital 8. SBI Credit Card
51. Margin Money
Investment
Sch for KVIC
INSURANCE
Subsidy Sch for
52. P M R Y – Prime
Rural Godown
PRODUCTS OF SBI Life
Minister Rojgar 1. SUPER SURAKSHA – For
14. Land Purchase
Yojna All a/c holders
Sch for Small &
53. D I R 2. Home Loan Insurance 3.
Marginal farmers
(Differential Interest Car Loan Insurance
15. Finance for
Rate) Scheme 4. Tractor Loan Insurance
Cold Storage 5. SHAKTI - For SHG
54. Credit
16. Financing
Guarantee Fund Members
Private Cold 6. Life Long Pensions – For
Trust - Micro & Small
Storage/ Pvt KCC holders
Ent.
Warehouse for 7. SWADHAN - Group
55. Equity Fund Scheme 8. SUDARSHAN – Saving-
On- lending to
56. Entrepreneur Scheme cum-Insurance plan
farmers 57. Liberalized Sch 9. Life Long Pension –
17. M S T P
58. SBI Shoppe – Fin Retirement Plan
(Million Shallow
of shops 10. Money Back Plan
Tube well 59. PARYATAN PLUS 11. SCHOLAR – II – To secure
60. Transport Plus
Programme) child’s future
18. O F W M (On (replaces Parivahan 12. SHIELD - Term Insurance
13. KEYMAN – Protect Key
Farm Water Plus)-C&I
61. Loan Light / Med Personnel of Co.
Management)
14. EDUSHIELD – For
19. Artisan Credit Com Swaraj Mazda
Education Loan Borrower
Card Vehcle -SBF
15. SWADHAN – Life cover
20. S G S Y 62. Financing Com
with refund of premium
(Swarnjayant Gram Vehicle – Tie up
16. SETUBANDHAN –Life
Swarojgar Yojna) Ashok Leyland
Cover for NRI & Depend
21. S G S R Y 63. RICE MILL PLUS
17. HORIZON II– Unit linked
(Swrnjayanti (SSI) 64. DAL MILL
with life cover
Shahri Rojgar PLUS (SSI) 18. UNIT PLUS II
65. Gold Banking
Rojgar Yojna) 19. DHAN VRIDHI
22. S H G Sch 66. SBI
23. SHG Credit & Exporter Gold Card

17
Scheme Gold Card 67. SCHOOL PLUS
40. Gold Loan 41. 24. Financing Joint 68. Pre-ship/
Adv ag Shares & Libility Gr (JLG) of Express Vendor
Debentures Tenant Farmers Discount Scheme
42. Equity Plus 43. 25. ARTHIAS PLUS 69. CAR LOAN TO
Loans for Subscription to (Indirect Agl SME UNIT (New &
IPOs Finance) Old Vehicles)
44. Advance against 26. DAIRY PLUS 70. PETRO - CREDIT
71. Open Term Loan
Magnums 45. Units 27. DAIRY SOCIETY
– Mfg Sect 72. OTL
of UTI PLUS
46. Advance against Time 28. Broiler Plus Service Sec
29. Commodity 73. FINANCE TO
Deposits
47. Loan against NRE/ backed Warehouse RESTAURANTS
74. Foreign
FCNB Deposits Receipt Financing
48. Loan against NSC/ Currency
KVP/ IVP 49. LIC TRADE & INDUSTRIAL Denominated Loans
Policy (SIB /C&I/ SME (FCDL)
50. Pravasi Plus (Since
PRODUCTS) DEPOSITS
Withdrawn) 30. CYBER PLUS
51. Advances against RBI 31. DOCTOR (+)
(LIABILITY)
Relief Bonds PLUS SCHEME PRODUCTS
52. Advances against 32. SBI-Siemens 1. Multi Option
open ended Sch of Medical Equipment Deposit (MOD)
Mutual Fund Plus 2. Saving Plus
53. Medi-Plus Scheme 33. SSI – 3. Rich Savings
54. Rent Plus - ( also Account 4.
Swarojgar Credit
used as a DBD Product ) Super Saver TD Sch
Card (SCC)
55. Plus Schemes 5. Corporate Liquid
34. SME Credit
56. SBI VISHESH Term Deposit
Card or Small
57. “Bhagya Rekha Loan”
Business Credit (CLTD)
6. Liquid Term
Card
35. SME Credit Deposit Sch 7.
Plus Scheme Kisan Mitra Jama
36. SME Smart Yoj
Score System 8. Long Term
37. Stree Shakti Floating Rate
Package (SME Deposit
Business) 9. Senior Citizen
38. Corporate Deposit Scheme
Loan (C&II and SSI) 10. Kanakdhara
39. Flexi Loan – Deposit Scheme
General Purpose 11. Capgain Plus
Term Loan 12. CORE POWER
40. General (For CBS Branches)
Purpose Term Loan 13. MULTI CITY
– SSI CHQS
14.Corporate Salary
Package
15. SBI SME
POWERGAIN/
POWER PACK
16. SBI SAHAJ

18
 17. NO-FRILL
ACCOUNT
18. SBI TINY
19. SBI - SURABHI
19. SBI Tax
Savings Scheme
2006

HIGHLIGHTS OF ANNUAL REPORT-2007-08

(Rs. in Crore)

2007-08 2006-07 % CHANGE

TOTAL INCOME 57645 44007 30.99
TOTAL EXPENDITURE 44538 34007 30.97
NET PROFIT 6729 4541 48.18
EARNING PER SHARE (Rs) 126.62 86.10 47.06
RETURN ON AVG. ASSET% 1.01 0.84 20.24
RETURN ON EQUITY % 17.82 14.24 25.14
PROFIT PER EMPLOYEE (IN 372.57 236.81 57.33
THOUSAND)

PAIDUP CAPITAL & 49033 31298 56.66

RESERVE
DEPOSITS 537404 435521 23.39
ADVANCES 416768 337336 23.55
NO. OF DOMESTIC BRANCH 10186 9231 10.35
NO. OF FOREIGN OFFICES 84 83 1.20
CAPITAL ADEQUACY 13.47 12.34% 9.16
a.Tier-I 9.14 8.01
b. Tier-II 4.33 4.33
NET NPA 1.78% 1.56% 14.10

19
FINANCIAL PERFORMANCE

1.PROFIT:
The operating profit of the Bank is Rs.13107.55 cr as compared to Rs.9999.94 cr in
2006-07, registering a growth of 31.08%. The Bank has posted Net Profit of
Rs.6729.12 cr as compared to Rs.4531.31 cr as in 06-07 registering a growth of
48.18%.
Net Interest Income recorded growth of 13.04% and other income increased by 28.52%.
Operating expanses increased by 6.64%.

2. DIVIDEND:
The Bank has declared a dividend of 215%.

3.NET INTEREST INCOME:

Net Interest income has registered a growth of 13.04% from Rs.15058.20 cr in
06-07 to Rs.17021.23 cr in 07-08. This is due to growth in interest income on advances.
The Net Interest Margin was at healthy 3.07% in 2007-08. The gross interest income
from global operations rose from Rs.37242.33 cr in 06-07 to Rs.48950.31 cr in 07-08.
This is due to higher interest income on advances. Interest income on advances in India
increased from Rs.22872.66 cr in 06-07 to Rs.32162.68 cr in 07-08. This is due to higher
volume. Average yield on domestic advances increased from 8.67% in 06-07 to 9.90% in
07-08.

Income from resources deployed in treasury operations in India increased by

11.03% despite decline in average yield mainly due to higher average resources
deployed. The average yield, which was 6.99% in 06-07 declined to 6.92% in 07-08.

Total interest expenses of the global operations increased from Rs.22184.14 cr. in
06-07 to Rs.31929.08 cr in 2007-08. Interest expenses on deposit in India recorded an
increase of 45.56% compared to previous year, whereas the average level of deposits in

20
India grew by 22.09%. This resulted in an increase in average cost of deposit from 4.69%
in 06-07 to 5.59% in 2007-08.

4. NON INTEREST INCOME:

Non interest income stood at Rs.8694.93 cr in 07-08 as against Rs.6725.26 cr in

2006-07. During the year, the Bank received an income of Rs. 197.41 cr (Rs.598.12 cr in
06-07) by the way of dividend from Associate Banks/ subsidiaries and Joint Ventures in
India and abroad.

5. OPERATING EXPENSES:

There was marginal decline of 1.84% in the staff cost from Rs.7932.58 cr in 06-
07 to Rs.7785.87 cr in 07-08. Staff cost included an amount of Rs.575.00 cr towards
wage arrear. Other Operating expenses have also registered an increase of 23.94% This
is mainly due to increase in expenses on rent, taxes and lighting, insurance, postage,
telegrams and telephones, repairs and maintenance and miscellaneous expenses.

Total operating expenses have registered an increase of 6.64%.

6. PROVISIONS AND CONTINGENCIES:

Major amount of provisions are as under:

 Rs.88.68 cr towards provision for deprecation on investments, excluding

amortization of premium on “Held to Maturity” category ( as against
Rs.379.23 cr 2006-07)
 Rs.3823.50 cr towards provision for income tax including deferred tax credit
of Rs.219.43 cr ( as against Rs.3014.61 cr in 06-07 excluding deferred tax
credit of Rs.19.83 cr)

21
  Rs.566.97 cr towards Standard Asset (Rs.589.19 cr in 06-07) Total provision
for Standard Asset has become Rs.2069.38 crore.
 Rs.105.00 cr towards Fringe Benefit Tax.( as against 88.50 cr in 06-07).
 Rs.2000.94 cr (net of write back) for non-performing asset ( as against
Rs.1429.50 cr in 06-07)

7. RESERVES & SURPLUS:

An amount of Rs.4839.07 cr (as against Rs.3358.11 cr in 06-07) was transferred

to Statutory Reserve.

An amount of Rs. 304.35 cr. (as against Rs.321.15 cr in 06-07) was transferred to other
reserve.

An amount of Rs.62.18 cr was transferred to Investment Reserves. (Nil in 2006-07).

An amount of Rs.4075.64 cr was withdrawn from Other Reserves towards transitional

liability for complying with Accounting Standard-15-“Employee Benefit”

8. ASSETS:

The total asset of the bank increased by 27.35%, from Rs.5,66,565.24 cr in 06-07
to Rs.7,21,526.31 cr in 07-08.

During the period Loan portfolio increased by 23.55%, from 337336.49 cr in 06-07 to
416768.19 cr in 07-08.

Investment increased by 27.06%, from 1, 49,148.88 cr in 06-07 to Rs.189501.27 cr in

2007-08.

22
The Bank's market share in domestic advance was 15.28%as of March'2008.

9. LIABILITIES:

The Bank’s aggregate liabilities (excluding capital & reserves) rose by 25.64%,
from 5, 35,266.68 cr in 06-07 to Rs.6,72,493.65 cr in 2007-08.

This is mainly due to increase in deposits and borrowings.

The global deposit stood at Rs.5,37,403.94 cr., an increase of 23.39% over March’ 07.

Bank’s market share in aggregate deposit of all schedule commercial banks in India stood
at 15.44%.

23
4. THEROTICAL BACKGROUND
Performance Indicators are financial and non financial metrics used to help an organization to
define and measure progress toward organizational goals. pi can be delivered through Business
intelligence technique to access the present state of the business and to assist in prescribing a course of
action. The act of monitoring.
PI in real time is known as ‘business activity monitoring’. PI are frequently used value difficult to
measure activities like benefits of leadership development, service and satisfaction. PI are typically
tied to an organizational strategy.
Performance depends on nature of org and organizational strategy. They help an org to
measure progress towards the organizational goals, especially towards to quantify the knowledge
based processes.
It is a key part of a measurable objective, which is made up of a direction, benchmark target
and time frame.

Categorization of Indicators

Performance Indicators defines a set of values to measure against. These raw sets of values fed
to systems to summarize information against are called indicators. Indicators
Identifiable as possible candidates for PI can be summarized in to the sub-categories.

• Quantitative indicators which can be measured as a number.

• Practical indicators that interface with existing company processes.

• Directional indicators specifying whether an organization is getting better or not.

• Actionable indicators are sufficiently in a organizations control

Identifying indicators

24
 Performance Indicators differs from business to business to business. A school might
consider the failure rate of its student as a PI which might help the school to understand the
position in the educational community. Whereas business may consider the percentage of
income from return customers as potential PI.
But it is necessary for an organization to at least identify its PI. The key environments
for identifying PI are:

• Having a predetermined business process.

• Having clear goals/performance requirements for business processes.

• Having qualitative and quantitative measurement of result and comparison with set goals.

• Investigating variances and tweaking processes or resources to achieve short term goals.

Performance Indicators needs to be

• Specific
• Measurable
• Achievable
• Result oriented or relevant
• Time-bound

In practice, organizations and looking for key performance indicators discovers that it
is too difficult to measure the performance indicators exactly required to a particular business
or process objective. This tends to work but the analyst must be aware of the limitations of
what is being measured which is often a guide rather than an exact measurement.
Another serious issue in practice is that once PI is created, it becomes difficult to
change them as years can be lost.

25
 Bank Performance Indicators

Bank Performance Indicators is a comprehensive financial analysis tool for more complex
leading market. Enabling ‘what-if’ scenarios on analysis. It allows user to apply industry templates for
industry specific analysis and input and calculate user defined analysis. The user can also create
industry benchmarks and perform variance analysis.

Features of Banks Performance Indicators

• Long term financial and historical, prospective and cash-flow analysis capability.
• Summery and detailed extraction capability in chart of accounts.
• Detailed and summery level reporting
• Customized analysis templates.
• User-defined financial and operational ratios
• Multi currency and interest rate capability.

26
 5. RESEACH METHODOLOGY:

Research is essentially a systematic enquiry seeking facts through objective

verifiable methods in order to discover the relationship among them and to deduct from
them the principle of laws. It is really a method of critical thinking. It comprises of
defining and redefining problems, formulating hypothesis or suggested solutions,
collecting, organizing and evaluating data, making deductions and making conclusions
and at last, carefully testing the conclusions to determine whether they fit the formulated
hypothesis. Thus, the term research examination having as its aim the revision of
accepted conclusions, in the light of newly discovered facts.

At State bank ok India , I did research of various performance indicators of State Bank of
India on the basis of various operations done by SBI, its profits, growth, and expansion
plans of company in future and past trend of that scrip and accordingly I used to predict
the fluctuations that may occur in the share prices in future and used to guide our clients
at and for that I collected data in following way:

DATA COLLECTION
Data collection is a key activity of research. Data collection method is the backbone of
research. There are two types of data:
1. Primary data
2. Secondary data

Primary data:-

The Primary data is those which is collected as a fresh and for the first time and
thus happen to be original in character. The primary data is collected by me in the
following ways.

27
 SOURCES OF PRIMARY DATA COLLECTION
1. Direct interacting with the seniors employees, project guide (branch manager)
researchers and various business as well as administration offices.

Following are the offices and venues where I had an interaction with officers
of State Bank of India
State Bank of India, Mumbai Zonal Office ,Worli.
State Bank of India ,Local Head Offices Bandra Kurla Complex, Mumbai
State Bank of India, Learning centre (SBLC),Mumbai And Pune
2. Information collected at training program given by SBLC ,Bandra

Secondary data:-
The Secondary data are those which have already been collected by someone else
and which have been already been passed through the statistical process. In my
research the secondary data collected from company sales, production, and other
records.

SOURCES OF SECONDARY DATA COLLECTION

1. Information available on Internet
2. Print material available regarding companies
3. Available company database
4. Daily news updates about the current happenings of companies

5. Bank’s core banking system (banks@24)

28
6. DATA ANALYSIS AND INTERPRETATION

29
 PERFORMANCE INDICTORS OF THE STATE BANK OF INDIA
ON FOLLOWING CORE OPERATIONS AND MISCELLANEOUS
OPERATIONS.

Core Core Operations

A Global Markets

B Wholesale Banking Group

C Mid Corporate Group

D National Banking Group

E Rural Business Group

F Corporate Strategy & New Business

G International Banking Group

H Associates & Subsidiaries

I Asset Quality

J Information Technology

30
PERFORMANCE INDICTORS OF THE STATE BANK OF
INDIA

A. GLOBAL MARKETS

A.1 In keeping with its integrated approach to all treasury activities in various markets
in different time zones.i.e., Forex, Interest rate Bullion, Equality and Alternatives Assets ,
the Bank redesignated its Treasury Operations into “Global Markets”
A New state-of-the –art Dealing Room with online connectivity to all active forex
intensive Branches across the country was inaugurated at
Corporate Center in Mumbai with facilities machining the best in the industry. This
facility ensures continuous availability of market determined forex rates to our customers.

While trading profits form Fixed Income Portfolio came under pressure because of
higher interest rate regime, Global Market’s profits were contributed primarily by
trading in equity and mutual funds portfolio has increased by 321% Interest income form
investment portfolio increased in absolute terms due to the increase in the overall
Fixed Income portfolio from Rs.1,36,927.48 crore to Rs.1,73,239.24 crore RBI’s
decision to increase CRR rate from 6.00%to 7.50%in four stages during the year and
withdrawal of interest payable to CRR balances impacted overal income from Treasury
operations . Average yield on treasury operations net of income on CRR balances
increased from 6.45% to 7.35%.

The bank contained the interest rate risk of the Fixed Income Portfolio through a
combination of measures including reduction in the duration of the portfolio and shifting

31
of securities with a book value of Rs.9,662 Crore form Available for Sale portfolio to
Held to Maturity portfolio.
Trading v alums in forex operations increased substantially from Rs.7,67,889 crore
to Rs.11,74,029 crore there by increasing the exchange income from these operations by
59% Y-O-Y to Rs.321.64 crore form Rs.202.20 crore.
Interpretation:-
The year witnessed volatility in 10 year base yields which moved upwards to
8.38% during the year and finally closed at 7.94% as on 31st March 2008. Marginal slow
down in credit growth led to increase in overall Domestic investment portfolio by
Rs.36311.76 crore over 31st March 2007. Liquidity position remained comfortable during
most part of the year which helped the Bank to bring down high cost bulk deposits. In
the backdrop of higher interest rate regime. Bond Market conditions were less
conductive to trading opportunities. The Bank diversified its trading activity to Equity
and Mutual Fund portfolio to encash the opportunities available through the buoyant
capital markets during the year .

B . WHOLESALES BANKING GROUP

The Banks Wholesale Banking Group consists of three Strategic Business Units viz.,
Corporate Accounts Group, Project Finance & Leasing SBU and Stressed Assets
Management Group. The Bank has recently launched the “ Wholesale Banking Initiative”
to harness the SBI Group synergy for the benefit of the corporate customers by providing
them with a ‘ One Stop Shop’ facility for all their banking needs.
The initiatives aim at providing comprehensive, customized and specialized banking
solution to the corporates Thereby enhancing Bank’s share of business with them.

Particulars As on As on Growth
31.03.2007 31.03.2008 %
Deposits 6669 9823 47
Advances 37989 46042 21

32
1. Corporate Account Group{CAG}

The loan portfolio of CAG about 23% of the Bank’s Commercial and institutional
non-food credit and 12% of the domestic credit portfolio as on 31.o3.2008

SBI FAST, the cash MANAGEMENT product [CMP] , in addition to offering

collections and payments services, also facilititates the corporates liquidity management
by offering various value added products. These include auto sweep facility,
customized MIS and reconciliation support, automated bulk NEFT,ECS and RTGS
payments with reconciliation support etc. It has started processing of centralized
payments in bulk [Income Tax Refund Orders] and has put in place a call centre for this
purpose. CMP is well poised to enter new areas like customized e-payments and e-
collections with Straight Through Processing.

2. Project Finance & Leasing SBU

The Project Finance SBU focuses on funding core projects like power, telecom,
roads, ports, airports, SEZ and others, It also handles non-infrastructure projects with
certain ceilings on minimum project costs. During the year, the focus was on syndication
and underwriting of project loans. Project Finance-SBU took up projects invoicing total
debt of Rs.92,558 crore and achieved sanctions of Rs. 20,195 crore, while it syndicated
Rs.54,951 crore with other banks during the year 07-08.

33
3.. Stressed Assets Management Group [SANG]
The performance of SAMG during the year 2007-08 is given in Table No.3 below.
Table: SAMG-Highlights

[Amount in Rs crore]

1 Cash Recovery in NPA 337

2 Up gradation to Standard assets 53
3 Write Off 368
4 Gross reduction in NPAs[1+2+3] 758
5 Recovery in written off accounts 336

Stressed Assets Management Group[SAMG] was initially set up to take over all
NAPs with outstanding of Rs.5 crore and above for focused efforts in resolution of
NPAs. The coverage has new been extended to Rs.1.00 crore and above across the
country.

92 Stressed Assets Resolution Ventures [SARCSs] have been opened across the
country for more focused resolution of NPAs with outstanding upto Rs.1 crore in SME
and Personal segments. Out of these, 44 independent SARCs are being brought under
SAMG in a phased manner to give further fillip to the Bank’s recovery efforts. I n this
direction,9 SARCs have already been brought under the control of SAMG during the
year. The performance if SARCs is encouraging and we expect to make substantial
progress in the Management of NPAs.
Interpretation:-

With focused initiatives on fee-based income fee-based income registered an impressive

62% growth during the year.

34
CAG continued on the growth trajectory in forex business registering a YOY growth of
79% and contributed 49 of the total domestic forex turnover of the Bank

C. MID CORPORATE GROUP

The Mid-Corporate Group [MCG] has been immensely successful in attraction the
business if Mid-Corporate units through relationship management and quicker credit
processing. To give added focus to this segment during the year, a Dy. Managing
Director & Group Executive [Mid-Corporate] was posted to independently held the
operations of the Mid-Corporate Group
Table:MCG-Highlight
[Amount in Rs.crore]

Particulars As on As on Growth
31.03.2007 31.03.2008 %
Advances
[Incl.Food] 68,446 76,338 11.5
Advances
[excl.food] 60,138 73,874 23
Offsite
Advance 27,445 35,128 28
Total 87,583 1,09,002 24
Advance
[excl,food]
Deposits 10,011 11,648 16

• The Group handles about 30% of the total non-food advances of the Bank
and operates through 8 Regional Offices situated across the country. It is
estimated that 38% of the Mid-Corporate universe in the country is
covered by the bank. The Coverage is expected to be extended to more
centers during the current year.

35
 • 695 new mid corporate client were added to the MCG during the year
• The total credit portfolio [fund based]of the Group stood at Rs.1,09,002
crore as on 31st March,2008. This is more than the aggregate business
handled by many of the top banks in the country.

• The average yield on advances want up form 8.76% in March 2007 to

9.73% in March 2008.

Initiatives Taken
Syndication Desks have been created to two Regional Offices, Mumbai
and Chennai, to tap the opportunities available for syndicating working capital facilities.
• Project Finance Calls have been set up in Chennai and New Delhi
Regions.
Substantial business in the form of IPOs /PRIVATE Equity /Debt
Syndication/Foreign Currency Loans/Overseas acquisitions/External Commercial
Borrowings has been arranged for MCG client through SNOCAPS/Foreign Offices.

New Products

• A new product, Construction Equipment loan, to cater to Construction

Companies has been launched.

C.2.Gold Banking

A separate Department ,Precious Metals Department, has been created at the Bank’s
Corporate Centre for the purpose of boosting the Gold Banking business.

The Bank launched retail sale of gold coins which is now available at 250 branches
across the country. The scheme would be extended to cover 1000 brenches in a
phased manner during the current year.

36
 While 52 Branches are authorized for metal loans and bulk sale of gold to Jewellery
manufactures the number is being increased to 70.

Gold Deposit Scheme has been revived for institutions like temples, trusts, etc.

D. NATIONAL BANKING GROUP

37
 The bank’s National Banking Group[ NBG] consists of three Business Groups
viz., Personal Banking, Small & Medium Enterprise [sme], and Government
Banking.

During the year Bank achieved a milestone by opening its 10,000th Branch at
Punduvayal, Sivaganga District in Tamil Nadu, which was inaugurated by Hon.
Finance Minister Shri P.Chidambaram .

During the year, as many as 965 branches were opened, and at the end of March
2008 the bank has a vast network of 10,186 Branches to reach out to customers, even
in the remotest parts of the country.

Table:5 NBG- Highlights

[Amount in Rs. Crore]

Particulars As on As on Growth
31.03.2007 31.03.2008 %
Deposits[excluding
Inter bank] 3,67,524 4,54,883 23.77
Advances
[including food
But excluding
Inter banking] 1,98,701 2,44,617 23.11
Advances
[excluding food] 1,95,531 2,43,068 24.31

D.1.Personal Banking Business Unit

38
 During the year, Personal Banking domestic deposits have grown form
Rs.1,90,870 crore to Rs.2,36,645 crore Showing a growth of Rs45775 crore [23.98%] as
against Rs.27684 crore during the previous year.

During the year, Personal Baking grown form Rs.73,590 crore to Rs.88549 crore,
showing a growth of Rs.14,959 crore [20.33%] as against Rs.12,530 crore during the
previous year.

SBI emerged as a leader this year in terms of Individual Home Loan

disbursements among SCBs & HFCs as on 31.12.2007/ Bank was voted, for the second
year in a row, as The Most Preferred Housing Loan Provider in CNBC AWAAZ
Consumer Awards for 2007 along with the Most Preferred Bank award in a survey
conducted by CNBC TV 18 in association with AG Nielsen & Company covering more
than 10,000 respondents across 21cities and 13 small towns.

New products introduced during the year were3 SBI Reverse Mortgage Loan and
SBI Home Plus in the area of Home Loan. Repayment period for Home Loans has now
been increased upto 25 years to facilitate lower repayment obligations and applications
are now accepted online through Bank’s website.
The Bank had opened 78.65 lac New Savings Bank Account during the year as against
62.40 lac previous year. The Auto Loan portfolio has shown a healthy growth of Rs.1,645
crore in absolute trems ,which is 29.89% higher than last year’s growth.

SBI is market leader in Education Loans and has a market share of 24% amongst
PSU Banks. The growth in Education Loans during the year is Rs.1,112 crore which is
33.67% higher over March 2007.

SBI Scholar Loan is extended to the students joining 52 elite institutions like
IIMs/IIT/s/AIIMS/ Management Institutes etc. at concessions interest rates and terms.

39
 Web based registration of applications for Education Loans was launched by
Hon’ble Finance Minister on 14 th November 2007. In principle sanctions are given
online for SBI Scholar Loans.

D.2 SME Business Unit [SMEBU]

SME Business Unit is implementing multiple straregies to maintain Bank’s premier

position in SME financing.
Advances to SME sector increased to Rs.76,329 crore as on31/03.2008 from
Rs.58,674 crore of the previous year registering a Y-0-Y growth of 30%.
Deposits under SME sector increased to Rs.1,65,168 crore as at the end of March
2008 from Rs.1,23,054 crore of previous year, recording a growth of 34% during the
year.

Initiatives taken

• Customer Relationship Executives gave been recruited from the Market

and placed in potential SME branches for serving effectively Medium
Enterprises.

• Traders Bonanza has been conducted and loans sanctioned to more than
60,000 traders.

D.3 Government Business Unit [GBU]

The following initiatives were taken in Government Business.

A] Electronic Accounting System in Excise and Service Tax [EASIEST] for indirect
taxes was extended to the entire country.

40
B] E-Payment of Central Excise, Service Tax, customs Duty, Rail Freight
introduced.

C] Centralized Pension Processing Centre[CPPC] were established at all LHOs

covering 5814 branches [18.80 lac accounts]. Remaining branches will be
covered in a phased manner.

D] Cyber Treasury for online collection of State Government taxes has been
extended to the State of Madhya Pradesh, Chhatisgarah, Rajasthan and Gujarat for
collection VATG/CST and the solution is being offered to other State
Governments shortly.
Interpretation:-
Strategies adopted by the bank to attract SME business are proving fruitful as
deposits of the sme group are increased considerably. some new products should be
launched by the Banks as SME segment is having vast potentials. Loans and advances
should be provided to SME segment as per government policies.

E. RURAL BUSINESS GROUP

During the year 2007-08 Rural Business Group of the Bank Comprising rural and
semi urban branches, accounting for about 70% of the branch network of the Bank grew
by Rs.29,807crore in deposit representing a growth 22.8% and Rs.18,734 crore in
advances representing a growth of 23.4% . This was against a growth of Rs. 16,367 crore
in deposit and Rs.17,684 crore in the advances in the previous year. Market share of
Rural and Sámi Urban branches during the year upto December 2007 has improved by
0.92% in deposit and 0.98% in advances. Bank’s share in current year growth upto
December 2007 was 32,04% in deposit and 31.97% in advances

41
1. AGRI BUSINESS

Table : 6 Agriculture – Highlights

[Amount in Rs. Crore]

Particulars As on As on Growth
31.03.2007 31.03.2008 %
Deposit 6,460 8058 25
Advances 33,8578 42806 26

As against the benchmark of 18% set by RBI , the Bank for the first time crossed
the benchmark and recorded its Agricultural Advances at 18.37% if Adducted Net Bank
Credit [ANBC] As at March 2008.

The following important themes have been adopted by the Bank to foster its
Agricultural business.

“Growth with Quality”

Thrust is laid on contract farming and value chain financing. Special scoring model has
been introduced for financing tractors which aims to improve the quality of the advance.

42
The Bank, in order to diversify its Agricultural Business Plan covering Horticulture,
Dairy, Fisheries, Food processing and Biotechnology.

“Bonding with farmers”

As a sustainable business strategy, the Bank is focusing on Bonding with Farmers. Under
the scheme of SBI Ka Apna Gaon, on of the broad business themes is adoption of
villages for overall development and economic upliftment and so far 237 villages have
been adopted.

240 Farmers Clubs were promoted and as many as 30,000 farmers meets [Credit and
Recovery Camps] were organized by the Bank during the year.

2. Micro Finance and Financial Inclusion

A major initiative taken in the area of financial inclusion has been the introduction of SBI
Tiny Smart Cards to the financially excluded. This, in simples terms can be defined as
bank in a box. The Card is highly secured as it works on the bio-metric validation of the
customer. More than two lacs ASBI Tiny Smart Cards have been issued as at the end of
March 2008 . The Smart Card project together with the Business Correspondent model
has been successfully piloted and rolled out nation-wide. The Bank has been able to
cover more than 10 thousand unbanked villages, including far flung areas of North-
Eastern, Eastern and Central parts of the county. SBI Tiny Cards are used of opening ‘
No Frills Accounts’ .and providing basic banking services, These cards are also used to
route government payments direct of beneficiaries in 6 Districts of Andhra Pradesh for
example, payment of wages under National Rural Employment Guarantee Programme
[NREGP] and Social Security Pension scheme [SSP] . The scheme is being extended tp
other States as various other State Governments have approached the Bank for the
purpose.

43
3. Self Help Group [SHGs]

The bank is the market leader in SHG-Bank Credit linkage Programme since its
inception. In the year 2003 , Bank had set a challenging target of credit linking 1 million
SHGs by March 2008 which has been achieved. Cumulatively, the Bank has credit
linked 10,18,481 SHGs and disbursed loan to the extent of Rs. 5077.72 crore so far.
Bank has brought out unique products of SHGs, viz., SHG Credit Card/ SHG Gold ,
Sahayog Niwas- a housing product for SHGs . We are the first bank to recruit officers
form market exclusively for promoting micro finance,. SBI has won awards for topping
in SHG-Bank Credit Linkage in Orissa, Jharkhand, Maharashtra Uttarakhand, Tamil
Nadu and Uttar Pradesh. SBI has sponsored and financially supported NGO
‘SAMANWITA’ in collaboration with Government of Orissa.

4. The Rural Business Strategy

The Rural Business Strategy drawn up by the envisaged setting up a multi –

pronged sourcing force, coupled with back-end processing capacity by way of Rural
Central Processing Centers. The front end marketing force compressed, besides the
branches, alternate channels like Officers Marketing & Recovery [OMR] and the
Business Facilitators/ Business Correspondents.

MRT Channel: The OMRs not only source high value Agriculture segment loans, but
also all types of deposits, loans and cross-selling products across all the segments. The
Bank has more than 3000 OMRs and planning to recruit additional 3000 OMRs during
2008-09.

44
Business Facilitators [BF] Business Correspondents [BC] Channel:
Utilizing the liberalization permitted by RBI, The Bank has entered into various national
level alliance with entities such as India Post, ITC Limited, Drishtee Foundation and Zero
Microfinance And Savings Support Foundation.

INDIA POST

India post has been engaged as a Business Correspondent [BC]. The BC alliance
with India Post is currently functioning in 110 post offices is six states. The India Post
alliances is being extended to other states also . Besides, BCs and BFs are also being
engaged at the regional levees. The BC model has enabled the Bank to reach hitherto
unbanked and under banked areas.

Rural CPC

To meet the requirement of processing of the increased business flowing form the
alternate channels ,10 Rural Central Processing centre [RCPCs have been set up across
the country, which is proposed to the scaled up to 100 CRPCS In the year 2008-09.

E.2 Regional Rural Banks [RRBs]

Post amalgamation Bank has got 16 RRBs with a network of 2,351 branches
spread over 115 districts and 16 states in the Country. The aggregate deposits and
advances of the sponsored RRBs stood at Rs. 13,573 crore and Rs/7,856 crore
respectively as on 31st March 2008 . The profit have jumped for Rs.32.77Crore as on
March 2007 to Rs.115.68 as on March 2008. During the year, a remittance product-
Gamin Pay Order [GOP]was introduced for facilitating remittances from remote areas to

45
increase fee income in RRBs. Post amalgamation, RRBs have broad based their product
profile by introducing Debt Swap Scheme, ware House Receipt Financing .

E.3 Credit Assistance provided to Scheduled Castes and Scheduled

Tribes.

The credit assistance provided by the Bank to SCs and STs stands at Rs.6,883
crore out of total priority sector advance of Rs. 1,32,300 crore.

Recovery position
SC/ST borrowers [Scheme-wise]:

Scheme Recovery %
Prime Minister’s Rozgar Yojna 31.85
[PMRY]
Swarnajayanti Gram Swarozgar Yojana 35.57
[SGSY]
Swarnahayanti Shahari Rozgar Yojana 36.25
{SYSRY}
Scheme for Liberation& Rehabilitation of Scavengers [SLRS] 29.53
Differential Rate of Interest[DRI] 65.82

Prime Minister’s New 15 Point Programme for the Welfare of

Minorities.

46
 All commercial banks have been advised to ensure smooth flow of bank credit to
minority communities [Sikhs, Muslims, Christians, Zoroastrians and Buddhists]. The
Government of India directed the banks to prepare a road map laying down specific
State-wise annual targets over the next 3 years to ensure that Priority Sector lending to
Minority Communities is raised to 15% by the end of 2009 10. The Number of Minority
concentration districts [MCDs] which were 44 in March 2007 , has been enhanced to 121
in the financial year 2007-08. [Our present landings to Minority Communities ijn
identified districts constitute 13.50% of the priority sector advances of these identified
districts.

During the financial year 2007-08 , our Bank has opened 256 New branches in
the MCDs. Further, 140 centers have been identities for opening of new branches. Nobel
officers have been designated for co-ordination minority cell related work at all our Local
Head Offices. Our Lead District Managers have been advised to intervals and take
corrective steps wherever the performance is low.

Our financial assistance to minority Communities in the identified Minority concentration

districts is furnished hereunder:
Table : Credit Assistance to Minorities
[Amount in Rs. Crore]
Period No of Districts No of A/cs Amount
Identified by GOI
Mar.2006 44 5.93 lacs 1016
Mar.2007 44 7.94 lacs 2106
Mar.2008 121 9.88 lacs 3516

Our Local Head Offices have been advised to have special publicity campaigns
for creating awareness of our schemes to Minorities. Villages level meetings are being
conducted to create awareness of financial assistance to Minorities in all the service area
villages of the bank apart form Visual and Print media. 28 Training Camps and Melas

47
were arranged by our branches in MCDs wherein 1.87,1563 members of minority
communities participated.

Information on assistance to Minorities has beebn put on our Bank;s Website. We

are new targeting two schemes-SBI Talent Awards Scheme and adoption of a Girl Child
Scheme, at out branches in MCDs.
INTERPRETATION:-
The policy of Financial Inclusion provoked by our finance minister of State Bank
Of India is having vital part. As per the information sources SBI is having largest
numbers of the SHG accounts. Loans are provided to the SHG account holders at 4% as
per national policy.
The segment of rural business mostly includes small scale business houses .These
business houses can produce better market to the bank if bank concentrated on agri
business as well as complementary agri business,
• like animal husbandry ,
• food processing,
• natural fertilizers ,
• agro exports

F. CORPORATE STRATEGY & NEW BUSINESSES

In order to maintain our premier position in the financial services arena the Bank
has institutionalized innovation and change. Against this backdrop, land in order to
quickly identify and respond to emerging opportunities the Bank created the position of

48
Dy Managing Director [Corporate Strategy & New Businesses] in the year 2006 . During
the last one and a half year, various new Business initiatives have been undertaken by
the Bank, as under:

F.1 Pension Fund Business:

State Bank of India has been appointed as a sponsor of Pension Fund Manager
[PFM] by PFRDA to manage the pension funds of Central and State Govt. employees
under New Pension System [NPS] of Govt. of India. SBI Pension Funds Pvt. Ltd. Has
been incorporated as a wholly owned subsidiary of State Bank of India to manage the
pension funds under NPS. The Company has been allocated the largest share [55% ] In
the person fund corpus.

F.2 Financial Planning and Advisory Services[FP&AS]:

Financial Planning and advisory Service s initiative is forded on deepening the

existing relationship of the bank with mass affluent land high-end customers and help
them in managing their assets through a max of products/ strategies. Our relationship
managers will advises the customers to meet their needs of protraction, invest in various
classes of assets through investment planning, retirement and real estate plans. Going
forward, we plan to commence wealth management services by March 2009 and further
introduce private banking by March 2012.

49
F.4 Mobile Banking:

The proliferation of mobiles has led to the emergence of a new channel for the
delivery of basic banking services and small value e- commerce services. Considering
the immense potential and the cost effectiveness of delivery, the Bank has decided to
introduces mobile telephone based banking services which we plan to commence before
the end of the first quarter of 2008-09.

F.5 Private Equity:

The Bank has identified private equity inj different areas as a key new business,
The rapid expansion of Indian economy, especially in growth sector like Technology,
Parma, Health Carfe, Realty and Infrastructure,. has opened up large opportunities of
equity funding which have continuously shown superior returns. The Bank is at an
advanced stage of preparedness for setting up various equity funds . Regulatory approval
processes and JV formation are under implementation and a few funds are expected to be
floated by the end of the first half of the financial year.

F6 Non-Life Insurance:

While SBI Life is meeting a part of the requirements under Protection Services,
the insurance offering bouquet will be complete with the inclusion of General Insurance
produces, greatly enhancing the customer value proposition at our vast branch network
and enhancing the brand value of the Bank. With this end in view the Bank has decided
to enter General Insurance Business through the Join venture route. The Bank aspires to
be amongst the top 3 players in the General Insurance space within a period of 10 yars. It
is expected that the JV partner will be identified shortly and MOU/Definitive

50
Agreement[s] will be signed during the quarter ending June’08 After this process,
Insurance regulators [IRDA] and RBI will be approached for seeking regulatory
Clearance . We anticipate the start of the business by the year end .

F7.Merchant Acquisition Business:

The increase in usage of cards of various kinds provides huge opportunities. We

are in the process of entering merchant acquisition services through a Join venture
subsidiary in order to bring in the best practices and services at per with international
benchmarks. We expect this business to grow substantially over the next few years and
achieve market leadership position.

Interpretation:-
Business in the Pension business has been decreased in these years as the business
of the same business is about to offer by the GOI to other private banks also.
Products launched by the bank as mobile banking are really innovative and user-
friendly as it will surely decrease the cost of the other operating expenses of the banks
and it will surely produce a good state of technology.

G. INTERNATIONAL BANKING GROUP

Operations of Foreign Offices

51
 As on 31.03.2008 , the Bank had a network of 84 oversees offices spread over 32
countries covering all time zones.
Net Profit form Bank’s oversees operations [including subsidiaries and joint
ventures with more than 50% shareholding] registered a growth of 84% during the fiscal
year mainly driven by significant growth of 48% in Net Customer Credit.

1. Resource Management

The bank was able to manage growth despite tight liquidity position in the global
markets due to issues arising out of the US sub-prime mortgage crisis. This because the
cores focus area remained on primary deposit mobilization which stood in good stead in
this period of extreme or extreme volatility.
Despite volatile and challenging global market conditions, the Bank successfully
entered the Malaysian Ringgit denominated bond market. This represented first ever
MYR bond issue by an Indian borrower in the Malaysian market.

2. NRI Business

NRI remittances business routed through Bank’s foreign offices during the year
registered a growth of more than 160% . This online USD and GBP remittance products
more than doubled in the year,SBI- Nepal Express Remit has been lunched form select
Indian branches for enabling speed remittances to Nepal.
Instant Transfer remittance facility, lunched in Mar07, was extended to 51 foreign
offices in 18 countries. Internet enable instant Transfer was lunched from, Nepal and
Bahrain offices; this product will be extended to other countries shortly.
Tie ups with two exchange companies in O man and UAE In addition to the
existing ten were operationalised to expend the Bank’s outreach in the Middle East and
boost remittances . A tie up with Arab National Bank for remittances form Saudi Arabia
was entered into in 2007-08.

52
3. Overseas Expansion

SBI became the first Indian bank to receive approval form Monetary Authority of
Singapore for Qualifying Full Bank license, which enables a foreign bank to open up to
25 offices/branches in Singapore. During the year 2007 -08 SBI received approval form
local regulators to open one more branch each in New York.USA and male. Besides,
process of opening of a branch oricess of opening of a branch at Jeddah, Saudi Arabia
was initiated in 2007-08

4. Domestic Operations

Export Credit

The Bank’s outstanding export credit stood at Rs. 26,531 crore, thereby
registering a growth of more than 21% over previous year.
Project Export Finance
State Bank of India is an active participant in financing project export activities
involving bidding and execution of turnkey / civil construction contracts and export of
engineering goods on deferred payment basis, as also service exports.
During the period April 2007 to March 2008 , the Bank supported 31 project
export proposals with contract value aggregation Rs.13,489 crore, in 13 countries.
Bank’s aggregate exposure as at the end of March 2008 was Rs. 993 crore.

5. Merchant Banking

53
 The Bank further intensified its thrust in the area of syndicated foreign currency
loans and participated in corporate syndicated loan deals amounting to USD
27,575million during April 2007 to March 2008 ,besides extending several bilateral
facilities aggregating USS 933 million.
Bank has participated to extent of US $ 3,038 million in 31 Merger and Acquisition deals
aggregation US $ 1,073 million in 13 deals aggregation US $ 5,375 million during the
previous year.

The Bank was ranked No.1 in the Asia Pacific [excluding Japan and Australia ] In
the mandated arranger/book runner league table for syndicated loans by IFR Asia.

6. Global link services activities(GLS)

GLS of the bank facilitates export payments, other overseas collection and inward
collections and inward remittances, thereby improving the profitability of the bank
improving the profitability of the foreign exchange operations of the bank. During the
fiscal year 2007-2008,GLS,on behalf of the domestic branches of the bank handled
153715 export bills and 232468 foreign currency checks aggregating USD 19.55 billion
during the year against 13.30 billion in the previous year. In addition ,GLS handled
674,341 transactions amounting to USD 941.84 million under inward remittance facility.

Interpretation:-
SBI became the first Indian bank to receive approval form Monetary Authority of
Singapore for Qualifying Full Bank license, which enables a foreign bank to open up to
25 offices/branches in Singapore. Bank is having economical power to have an
economical power to mergers acquisitions overseas. As the doors for foreign banks are
being in 2009, if bank want to be ready to face the competition at the time bank should go
for international M&As .

54
H. Associates and Subsidiaries

The state Bank group with network 15118 branches including 4932 branches of
its seven associates banks dominates the banking industry in India. In addition to
banking, the Group, through its various subsidiaries provides a wide range of financial
services which include life insurance Merchant Banking, Mutual Funds, Credit Cards,
Factoring, Securities trading and primary dealership in the Primary Market.

Associate Banks

SBI’s seven associate banks had a market share of 7.29% in deposits and 7.44%
in advances in March 2008.

Performance Highlights of Associate Banks(ABs)

As on 31.03.2008 Growth (%)
Agg Assets 289642 21.07
Agg Deposits 234167 19.07
Agg Advances 178375 21.64
Operating Profit 4336 1.03
Net profit 2777 12.11

SBI commercial and International Ltd. (SBICI)

As at end of the March 2008, aggregate deposits and total deposits ASSOCIATE
BANKS: The State Bank Group with network of 15118 branches including 4932

55
branches of its seven Associate Banks dominates the banking Industry. Bank has
seven associate banks with market share of 7.29% in deposit and 7.44% in advances
as on 31.03.2008.
Gross NPA ratio of associate banks has improved from 1.83% in March'2007 to
1.48% in March’08. Net NPA ratio was 0.61%.
SBI CAPITAL MARKET LTD:

The Company has posted a PAT of Rs.142.19 cr in March’08 as against Rs.71.18

cr in March’07. SBICAP is ranked as no.1 Mandated Lead Arranger for the third time in
the Asia Pecific Region (including Japan).

SBICAP SECURITIES LIMITED (SSL):

SSL is a broking company offering equity broking services to retail and
institutional clients. It is also engaged in sales & distribution of
Other financial products like Mutual Funds. The company’s net profit for the year
increased three folds to Rs.12.21 cr from Rs.4.04 cr last year.

SBICAPS VENTURE LIMITED (SVL):

SVL has set up a USD 100 million, Knowledge Sector Fund, jointly with SBI
Holding Inc. Soft Bank Japan.

SBICAP UK LTD:
SBICAP UK is aggressively marketing for potential clients and arranging for
them Foreign Currency Convertible Bond(FCCBs) Private Equitiesand Cross Border
Merger and Acquisitions transaction.

SBI DFHI LTD:

SBI group holds 67.01% of company's paid up capital, while Nationalised Bank
holds 22.46%. All India financial institutions and Private sectors banks hold 5.84% and
Asian Development Bank holds 4.69% as on 31.03.2008. The company has earned profit

56
of Rs.85.68 cr in 07-08. Total secondary market turnover was Rs.49491.26 crore. The
market share under proprietary trading was 3.10%.

SBI CARDS & PAYMENT SERVICES (P) LTD (SBICSPL):

During the year 5.3 lacs additional cards were issued increasing the Cards in
Force (CIF) to 32 at the end of March’08.

SBI LIFE INSURANCE COMPANY LTD:

Gross premium income was over Rs.5622 crore for the period ended
March'08. The company has added 19 lacs new lives during the year. It has been ranked
5th across the world in terms of number of Million Dollar Round Table members of 2007.

SBIFUNDS MANAGEMENT (P) LTD.:

SBIFMPL was adjudged "Mutual Fund of the Year" by CNBC /TV18/CRISIL.

The schemes of SBI Mutual Fund received 11 awards for their outstanding performance
during the year.
The total assets under management are Rs.26490 cr as against Rs.17016 cr in
31.03.2007. The value of portfolio assets managed was Rs.5003 cr as on 31.03.08 as
against Rs.1372 cr in 31.03.2007. The company reported a net profit of Rs.70.37 cr. as
on 31.03.2008 as against Rs.29.78 cr previous year.

SBI FACTORS & COMMERCIAL SERVICES PVT. LTD.:

Asset level of the company increased by 56% from Rs.1220 cr in 06-07 to

Rs.1908 cr in 2007-08. It recorded a growth of 53% in total income and ended the
year with a PBT of Rs.43.17 cr as against Rs.2036 cr last year. PAT was Rs.28.38
cr as against Rs.13.17 cr last year.

57
The performance highlights of the associate banks as at march 2008 are
as under:
(amount in Rs crore)
Name of the bank SBI’s share Deposits Advances Operating Net profit
In cap (%) profit
State bank of 75 32701 25319 661.18 315.00
Bikaner&Jaipur
Hyderabad 100 51796 35915 991.19 556.99
Indore 98.05 24076 18352 451.20 234.01
Mysore 92.33 26781 21315 567.52 318.86
Patiyala 100 48186 36706 779.33 413.73
Saurashtra 100 15968 12325 176.85 51.99
Travancore 75 34658 28442 709.09 386.11

All 7 banks - 234167 178375 4336.36 2276.69

Interpretation :-
As other associates banks are also performing good, these banks can be used as
vast market for cross selling of SBI life, SBI mutual funds products and schemes.
Some possible mergers of SBI with its group(SBS specially) can produce a good
market for good market as it will provide readymade well-equipped branches in certain
areas and will provide valued customers.

Following table shows net profit earned by SBI and group

58
 9000
8000
7000
6000
5000
SBI
4000
SBG
3000
2000
1000
0
2005-06 2006-07 2007-08

Net profit of SBI and SBG for last 3 years

59
I. ASSET QUALITY:

The position of NPA reduction as on 31.03.2008 was as under:

S Particulars Amount in crore

No.
1 Gross NPA 12837.34
2 Gross NPA % 3.04%
3 Net NPA 7424.34
4 Net NPA % 1.78%
5 Cash Recovery in NPA 1732.15
6 Upgradation of Standard Asset 1516.84
7 Write Off 1242.52
8 Gross Reduction (3+4+5) 4491.51
9 Recovery in written off account 838.64

MOVEMENT OF NPA

PARTICULARS 31.03.2008 31.03.2007

60
 Net NPA 1.78% 1.56%

MOVEMENT OF NPA (GROSS)

Opening Balance 9998.22 9628.14
Addition during the year 7899.04 4963.87
Reduction during the year 5059.92 4593.79
Closing Balance 12837.34 9998.22

MOVEMENT OF NPA (NET)

Opening Balance 5257.72 4911.41
Addition during the year 5063.06 3538.50
Reduction during the year 2896.45 3192.19
Closing Balance 7424.33 5257.72

MOVEMENT OF PROVISIONS FOR NPAs

Opening Balance 4740.50 4716.73
Addition during the year 2835.98 1425.37
Reduction during the year 2163.47 1401.60
Closing Balance 5413.01 4740.50

CDR system has done well as a resolution option for stressed asset. Out of 1645
companies brought under CDR from the entire banking system, SBI has exposure in 61%
cases (i.e 101 companies with Rs.7649 cr.)

Out of these 21% of CDR cases i.e 22 companies carrying 29% exposure (Rs.2196 crore)
have been revived and have since been exited CDR due to improved performance.

Two Financial Assets involving principal outstanding of Rs.25.22 cr have been

sold to other bank/ ARCIL during the year.

One asset with exposure of Rs.9.00 crore has been purchased.

Interpretation:-
In view of the unfavorable climate and availability of alternative funding options
at cheaper cost, the Bank decided not to write leases during the current year also. As at

61
the end of March 2008, the disbursements and capitalization were “NIL” and profit
amounted to Rs. 8.81 crore.

J. Information technology

J.1. Core Banking: Core Banking Solution (CBS) presently covers 9390 domestic
branches transacting more than 98% of the Bank’s domestic business. CBS offers
anytime anywhere banking through Multicity
Cheques and other products. Our 407 branches have been enabled for Core integrated
Trade Finance solution. We have provided to our customers a full
featured internet frontend ‘eTradeSBI’ for their trade related transactions.

J.2. Internet Banking: Internet Banking has been implemented at 9112 domestic
branches, and is used by retail banking as well as Corporate customers for enquiry,
downloading account statements, e-rail, eticketing
for Indian Airlines, e-tax, fee payment, e-pay (online utility bill payment), Bulk payments
by corporate, funds transfer to customers of our Bank
as well as of other banks through Visa Money Transfer, RTGS and NEFT. Our Corporate
Internet Banking.

(CINB) enables our corporate customers to transactalmost all of their banking

transactions through internet. Through our fully featured CINB account ‘Vistaar’
(Freedom), corporates can make transactions upto an amount of Rs 500 crore per
transaction from their own offices. CINB customers can also submit online requests for
issue of drafts. They can also make payments to EPFO, DGFT and OLTAS besides
making payments to their suppliers and vendors.

J.3. Foreign Offices Project: Finacle software for Treasury and Core Banking Solution
has been implemented at 82 foreign offices in 32 countries. Our 70 foreign offices have
been enabled in 17 countries to offer Internet Banking. INR remittance facility through

62
Internet Banking has been provided to branches in 11 countries. This facility will be
extended to all the foreign branches soon. ATM facilities have also been provided in 7 of
our
foreign offices.

J.4. ATMs: We have the largest ATM network in the

country with 8460 ATMs of State Bank Group installed throughout the length and
breadth of the country. Our ATMs are enabled for various value
added services like payment of utility bills, mobile top up, SBI card bill payment, SBI
Life premium payment, donation to Trusts / Temples and funds transfer. Further, bilateral
sharing of ATMs with thirteen banks has brought additional 10500 ATMs within the
reach of our customers. We have plans to scale up our ATM network to 15000 by March
2009 and to 25000 by March 2010.

J.5. Payment Systems Group: Through our Payment Systems Group (PSG), we have
enabled 8817 branches for RTGS and 9425 branches for NEFT. We also introduced
Instant Inward Rupee remittances from Foreign Offices (FOs) for direct credit to CBS
accounts in any of the State Bank Group branches. This facility has also been integrated
with RTGS and
NEFT enabling Foreign Offices to send Rupee remittances to any Bank in the country.
On-line Rupee remittance facility to beneficiaries in Nepal
from authorised CBS branches of SBI is another product introduced during the year.
Other banks in the country can also effect Rupee remittances to
Nepal through this facility by originating the transactions at their end and forwarding
them through NEFT to the Payment Hub at PSG.

J.6. Information Security: IT Policy and IS Security Policy have been implemented
after being benchmarked against best global practices. The Bank’s Information Systems
are regularly reviewed to ensure that these are adequately secure.

63
J.7. Networking: State Bank Connect, the Wide Area Networking (WAN) project of the
Bank, is capable of carrying data, voice and video in a secure way. All Applications
requiring connectivity now ride on the State Bank Connect backbone. A total of 14625
branches / offices have so far been brought under State Bank Connect.

Interpretation:-
Banks IT initiatives have played a major role in transforming the Bank into a
highly responsive organization to meet the challenges of a globalize economy. The Bank
is pursuing an aggressive IT policy as a strategic initiative to meet the growing
competition for business, achieve efficiency in internal operations and meet customer
expectations. With this end in view, the reach of our IT initiatives was expanded to cover
more banking touch points and overall business.
Bank has introduced various new technologies in recent year like BASEL2,
Internet, etc which is giving bank less cost of operation as well as easy solutions.

Miscellaneous Operations
1.. Risk Management & Internal controls
2. Business Intelligence

64
3. Corporate Communication & Change
4. Human Resources Management

1. RISK MANAGEMENT & INTERNALCONTROLS

RISK MANAGEMENT IN SBI

1. Risk Management Structure

● An independent Risk Governance structure in line with the international best practices
has been put in place in the Bank. In view of the growing volume and complexity in
business, risk management has assumed critical importance. Accordingly, the Bank has
elevated the risk function to Board level by appointing the Managing Director as Chief
Risk Officer to ensure
this crucial function gets the importance it deserves.
● The Bank has Board approved policies and procedures in place to measure, manage,
mitigate various risks such as Credit, Market, Operational, Liquidity, and Interest Rate
Risks across all its portfolios.

65
● The Risk Management Committee of the Board oversees the policy and strategy for
risk management. In addition, various Risk Committees, namely the Credit Risk
Management, Asset Liability, Market Risk Management and
Operational Risk Management Committees are in place to monitor risks in their
respective areas on an ongoing basis.
K.2. Migration to Basel II
● The Bank, as per RBI Guidelines, has migrated to Basel II as on 31st March 2008 with
the Standardized Approach for Credit Risk and Basic Indicator Approach for Operational
Risk, having already implemented Standardized Duration Method for Market Risk with
effect from 31.03.2006. Simultaneously, processes have been set in train for fine-tuning
Systems & Procedures, Information Technology capabilities and Risk Governance
Structure to meet the requirements of the Advanced Approaches.

K.3. Credit Risk Management

● Credit Risk Management processes encompass identification, assessment,

measurement, monitoring and control of the credit exposures.
● The Bank has multiple Credit Risk Assessment models in place covering
Manufacturing, Trade, Non-Banking Financial Corporations, Banks and
Primary Dealers. The Credit Risk Models developed for Manufacturing and Trading
sectors have been refined to conform to the requirements
under Advanced Internal Based Approach of Basel II. The other models are also being
reviewed.
● The Bank conducts Industry studies to assess the Risk prevalent in each industry and
also gives guidelines to operating functionaries in lending
to these industries. Industry wise exposure limits are fixed and monitored regularly.

66
● The Bank manages its portfolio of loan assets with a view to limiting concentrations in
terms of risk quality, geography, industry, maturity and
large exposure.

K.4. Market Risk Management

● Market risk is the risk that the value of the “on” & “off” balance sheet positions of the
Bank will be adversely affected by movements in market
variables viz: interest rates, exchange rates, equity and commodity prices.
● Market Risk Management is governed by Board approved Policies for Investment and
Trading in Bonds, Equities and Foreign Exchange. The
identification, measurement, monitoring and reporting of Market Risk is done by the
Market risk Management Department which is a part of
the independent Risk Governance Structure of the Bank.
● Exposure, Stop loss and Duration limits have been prescribed. These limits along with
other management action triggers, are tracked daily and necessary action initiated as
required to control and manage Market Risk.
● In addition, Value at Risk (VaR) is generated on a daily basis for the purpose of close
monitoring. Back testing of VaR numbers is also carried out to validate these
measurements. The portfolio is also subjected to Stress testing under various scenarios so
that a proper understanding of the otential losses under extreme price movements is
always kept in view.

K.5. Operational Risk Management

● Operational risk is the risk of losses resulting from inadequate or failed internal
processes, people and systems or from external events. Operational
risk includes legal and regulatory risk but excludes strategic and reputational risks.
● The Bank manages Operational risks by putting in place and maintaining a
comprehensive system of internal controls and policies. The Operational

67
Risk Management Policy of the Bank establishes a consistent framework for systematic
and proactive identification, assessment, measurement, monitoring, and mitigation of
operational risk. The policy applies to all business and functional areas within the Bank,
and is supplemented by operational systems, procedures and guidelines which are
periodically updated.
● All key processes, risks and controls are documented and periodic assessments of risks
and controls are carried out. The Bank has initiated steps for creation of a loss database
with a view to graduate to Advanced Measurement Approaches under the Basel II
Guidelines.
● The objective of the Bank’s Operational Risk Management is to continuously review
systems and control mechanisms, create awareness of
operational risk throughout the Bank, assign risk ownership, alignment of risk
management activities with business strategy, and ensuring
compliance with regulatory requirements.

K.6. Asset Liability Management

The Asset Liability Management (ALCO) of the Bank is engaged in evolving appropriate
systems and procedures for ongoing identification and analysis of Market Risk which
comprises mainly the Liquidity Risk Management and Interest Rate Risk Management. It
also conducts a detailed Behavioral Analysis of the components of Assets & Liabilities
besides
Balance Sheet simulation, on an on-going basis. The Market Related Funds Transfer
Pricing (MRFTP), a scientific internal funds transfer pricing, evolved a a supplement to
Assets Liability Management (ALM)
has been rolled out to all branches under National Banking Group (NBG) from 1st April
2007, thus covering all branches of the Bank under the revised
transfer pricing from 1st April 2007. The revised transfer pricing helps in ascertaining the
true profitability of branches by comparing the product

68
prices with the market rates.

K.7. Country Risk & Bank Exposure

Prudent exposure risk management is being ensured by setting up appropriate bank

exposure limits product-wise, on a large number of Foreign Banks. Substantial
counterparty bank limits for handling letters of credit, bank guarantees, forex and money
market activities are in place. Limits are also set up for Investment/ Lines of Credit
related exposures on acceptable banks, in order to clear bankable propositions.
The Country Risk Management Policy, in line with RBI guidelines for setting up country
exposure limits, is in place, and the overall country risk for the Bank as a whole is
monitored on a regular basis.

K.8. Internal Controls

1 The Bank has an in-built internal control system with well-defined responsibilities at
each level. The Inspection & Management Audit Department of the Bank carries out 3
streams of audit, viz. Inspection
and Audit, Credit audit and Management Audit, covering different facets of the Bank’s
activities.

2. Inspection and Audit

Risk Focused Internal Audit (RFIA), an adjunct to risk based supervision, as per RBI
directives, was introduced in the Bank’s audit system on 1.04.2003.
All domestic Branches have been segregated into 3 groups on the basis of business
profile and risk exposures, and are being subjected to RFIA.

69
3. Credit Audit

Credit Audit aims at achieving continuous improvement in the quality of the Commercial
Credit portfolio with exposures of Rs.5 crore and above. Duly
aligned with Risk Focused Internal Audit, it examines the probability of default,
identifies risks and suggests risk mitigation measures.

4. Management Audit
Management audit has been reoriented to focus on the effectiveness of risk management
in processes and procedures. Management Audit of six Circles was taken up and
completed during the current year.

5. Vigilance

Vigilance Department of the Bank oversees 3 primary aspects of vigilance: Preventive,

Detective and Punitive. This is achieved through various means,
i.e through linkages with the training system, customer education, Inspection & Audit
Department, as well as suitable incentive schemes.

L. BUSINESS INTELLIGENCE

MIS in the Bank is being constantly assessed, upgraded and fine tuned to cater to
the growing information requirements of various user departments and operational units.
A Data Warehousing Project conceived as a single source for all data required for support
in decision making, analysis, forecast and reporting is under progress.

70
Interpretation:-
BI systems provide bank historical, current, and predictive views
of business operations, most often using data that has been gathered into a data
warehouse or a data mart and occasionally working from operational data. Elements
support the use of this information by assisting in the extraction, analysis, and reporting
of information. Applications tackle sales, production, financial, and many other sources
of business data for purposes that include, notably, business performance management.
Bank is having its IT centre at CBD Belapur ,New Mumbai, where the data of all
branches is processed and secured.

M.CORPORATE COMMUINICATION & CHANGE

A professional Study conducted by Xavier Institute of Management,

Bhuvaneswar, found that Parivartan had brought about a perceptible positive
change in each of the 25 Identified Customer Service parameters. As a part of the
Transformation process, special brain storming Conclaves were held for the Top
management of the bank where various transformational initiatives were identified and
discussed with fixed time lines, for each business and group head in the bank. Many of
these initiatives were completed during the year and many are being closely followed up
for implementation at grass root level.
Interpretation;-
During the year, the first Mass Internal Communication Programme named
"Parivartan" was rolled out across the Bank. Over 3300 inclusive Two
Day workshops were conducted by over 360 specially trained Trainers in a span of 100
days covering 1,30,000 employees. Never in the history of the bank had so many been
trained in so short a time. The workshops caught the imagination of all employees and
unleashed a new positive energy.

Q. Human Resources

1.Learnig and Development

71
Bank has taken several key initiatives to motivate and retain manpower.
In order to channelize the energy created by the ‘Parivartan’ campaign,The bank has
launched the landmark exercise for creation of new Vision, mission and values statement
which will be in place shortly.
Young officers are encouraged to take up management education by a way of scholarship
tie up with S.P.Jain Institute of management .50 officers have been enrolled for
programme on the trial basis.
Bank is strong in the area of the training and development through the 4 apex level
colleges ,45 learning centers across the country. E-learning project has been launched to
enable any where, anytime learning.

2.HRMS:

For leveraging technology in employees management area, bank has started

automation of its HR processes through SAP-ERP-HRMS software. Once fully
implemented ,it will not only create a central repository of all employees data but also
will make available a variety of services like online request submission and viewing of
individual data etc. to all the employees across the State Bank Group on an Real Time
basis

Employees Share purchase Scheme:-

The bank also launched ESPS along with the to right issue with the objectives of
providing incentives to eligible employees, to stimulate their efforts towards the
continued success of state bank and to provide a mean to attract, reward and retain the
talent in the Bank, to reward eligible employees as also to encourage equity ownership
by them.

72
 The price was fixed at Rs.1590/- (the face value of 1 share Rs 10/-) per equity
share the scheme opened on 28-03-2008 and closed on 30-04-2008

Staff strength
The bank had a total strength of 1,79,205 on 31-march 2008.Of the which 32.23%
are officers, 42.87% are clerical staff and remaining 24.90% are clerical

Categories Total strength

Officers 57765
Clerical 76813
Sub-Staff 44622
Total 179205

400
350
300
250
200 Profit Per
150 Employee

100
50
0
2005-06 2006-07 2007-08
Interpretation:-

73
 HR retention policy of the bank is very effective. Bank provide it’s banks.
Employees who are subject to be permanent are supposed to be governed as per
provisions of the its cadre for all benefit including gratuity as per service conditions,
contributory PF leave fare concession, encashment of leave, medical facility,
accommodation facilities as permissible under banks rule.
As Bank has introduced employees share purchase scheme (ESPS 2008) with concession
rates employees have got good opportunity to invest in shares with good company.
Shares has also performed well during the year.

7.CONCLUSION AND SUGGESTION:-

a. The business environment of the company is reasonably good.

b. The company s track record is always oriented towards profitable

growth and with strong fundamentals.

c. As per information bank has not shown such a interest in the Small
scale industries, bank should go with the such business.

d. Bank should take corrective actions towards problems of understaffing

of the branches.

e. Action on priority basis should be taken against pending jobs for more
than three months.

f. Bank should provide more product training to its staff as bank is

having more than 190 products and staff is not well acquainted with
the products although the products are superior than any other
company are unable to sale due to insufficient knowledge of the staff.

g. Bank should concentrate on cross selling of various products like SBI-

Life ,SBI-Mutual Funds, Shares.

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 h. Bank should provide access to each branches for government business
like pensions and Provident fund.

i. Number of FOREX transaction branches should be increased,

. 8. BIBLIOGRAPHY

1. I M Pande FINANCE MANAGEMENT Vikas Publication.

2. DR. S N Maheshwari FUNDAMENTALS OF FINANCIAL MANAGEMENT

Sultan Chand & Publications.

3. N M Vechlekar FINANCIAL MANAGEMENT Vikas Prakashan.

4. core banking system of the SBI

5. www.sbionline.com

6.www.misonlinesbi.com

7.www.sbimail.com

8.www.google.co.in

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9.intranet system of SBI

10.www.sbi.org.in

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