introduction to the subject

8/6/2019 Introduction to the Subject

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INTRODUCTION TO THE SUBJECT

Owning a piece of land or property is a lifetime dream for every individual. There aremany home loans provider in the market to make your dream come true. But before youopt for any home loan provider, you need to consider certain factors related to propertythat you are interested in buying and also about the salient features offered by a homeloan provider and also study some Home Loans and Home Insurance FAQs whichhelps in applying a Home Loan in India. And the most important thing is you shouldknow about each and every term related with Home Loans before applying for a Loan. Itis always advisable to consult a home loan expert or consultant before applying for ahome loan or purchasing a property.

You can take different types of home loans like Bridge Loans, Home constructionLoans, Home Equity Loans, Home Extension Loans, Home Improvement Loans, LandPurchase Loans etc for different schemes available in the market. There are differenttypes of home loans tailored to meet your needs.

y Home Purchase Loans: These are the basic forms of home loans used for purchasing of a new home.

y Home Improvement Loans : These loans are given for implementing repair works, healing and renovations in a home that has already been purchased.

y Home Construction Loans: These loans are available for the construction of anew home.

y Home Extension Loans: These loans are given for expanding or extending anexisting home. For eg : addition of an extra room etc.

y Home Conversion Loans: These loans are available for those who havefinanced the present home with a home loan and wish to purchase and move toanother home for which some extra funds are required. Through homeconversion loan, the existing loan is transferred to the new home including theextra amount required, eliminating the need of pre-payment of the previous loan.

y Land Purchase Loans : These loans are available for purchasing land for bothconstruction and investment purposes.

y B ridge Loans: Bridge loans are designed for people who wish to sell the existinghome and purchase another one. The bridge loans help finance the new home,until a buyer is found for the home.

OBJECTIVE OF MY STUDY 1 ) To study the cost of home loans provided by the bank.2 ) To know that which bank provide batter loan schemes.3 ) To analyze the home loan scheme by HDFC and SBI banks.4 ) To know the consumer perception about the home loan of PNB and SBI


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B A C K G R O U N D

1. S.B.I (STATE BANK OF INDIA) HISTORY

The roots of the State Bank of India rest in the first decade of 19 th century, when theBank of Calcutta, later renamed the Bank of Bengal, was established on 2 June 1806 .The Bank of Bengal was one of three Presidency banks, the other two being the Bankof Bombay (incorporated on 15 April 18 40) and the Bank of Madras (incorporated on 1 July 18 43 ). All three Presidency banks were incorporated as joint stock companies andwere the result of the royal charters. These three banks received the exclusive right toissue paper currency in 1861 with the Paper Currency Act, a right they retained until theformation of the Reserve Bank of India. The Presidency banks amalgamated on 27January 19 21 , and the reorganized banking entity took as its name : Imperial Bank of India. The Imperial Bank of India remained a joint stock company. Pursuant to theprovisions of the State Bank of India Act ( 1955) , the Reserve Bank of India, which isIndia's central bank, acquired a controlling interest in the Imperial Bank of India. On 3 0

April 1955 , the Imperial Bank of India became the State Bank of India. The governmentof India recently acquired the Reserve Bank of India's stake in SBI so as to remove anyconflict of interest because the RBI is the country's banking regulatory authority. In 1959 , the government passed the State Bank of India (Subsidiary Banks ) Act,enabling the State Bank of India to take over eight former state-associated banks as itssubsidiaries. On 13 September 2 008 , the State Bank of Saurashtra, one of its associatebanks, merged with the State Bank of India.SBI has acquired local banks in rescues.For instance, in 1985 , it acquired the Bank of Cochin in Kerala, which had 120 branches. SBI was the acquirer as its affiliate, the State Bank of Travancore, alreadyhad an extensive network in Kerala.

Associate b anks y State Bank of Bikaner & Jaipur y State Bank of Hyderabady State Bank of Mysorey State Bank of Patialay State Bank of Travancorey State Bank of Saurashtra - merged with SBI in 2 008 .


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y State Bank of Indore - merged with SBI in 2 010 .

Br anches of SBIy State Bank of India has 131 foreign offices in 32 countries across the globe.y SBI has about 2 5 ,000 ATMs (2 5 ,000 th ATM was inaugurated by the then

Chairman of State Bank Shri O.P.Bhatt on 3 1st March 2 011 , the day of hisretirement ); and SBI group (including associate banks ) has about 4 5 ,000 ATMs.

y SBI has 2 6 ,500 branches, including branches that belong to its associate banks.y SBI includes 99 34 5 offices in India.

VISION OF S.B.I

To be amongst most trusted power utility company of the country by providing environmentfriendly power on most cost effective basis, ensuring prosperity for its stakeholders and growthwith human face.

BOARD OF DIRECTORS

The current board of Directors for State Bank of India are : a. Mr. O P Bhatt - Chairmanb. Mr. R Sridharan - Managing Director c. Dr. Ashok Jhunjhunwala - Director d. Mr. Dileep C Choksi - Director e. Mr. S Venkatachalam - Director f. Mr. D Sundaram - Director g. Mr. G D Nadaf - Officer Employee director h. Mrs. Vasantha Bharucha - Director i. Dr. Rajiv Kumar - Director

j. Mr. Ashok Chawla - Director k. Mrs. Shyamana Gopinath - Director

S.B.I HOME LO AN POLICIES

Low SBI home loan interest rates have always been the main reasonfor attracting more customers. Considered as one of the safest andmost economical vendor, SBI interest rate is hugely dictated by marketnorms and changes made by RBI. SBI had launched a new SBI home


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loan rate scheme for all the new applicants where they can avail home loan by payingSBI home loan interest rate of just 8% in the first year. SBI home loan rate have beenfixed at 9 .5% for next two years. After the completion of these 3 years, the applicant willbe charged SBI home loans interest rates based on the fixed SBI home loan interestrates or floating SBI home loans interest rates as selected by the customer.

SBI interest rate is divided into two main slabs. SBI home loan rates for amount up to 3 0 lakhs and SBI home loan interest rate above this value. Here are some useful detailsabout SBI home loan rates for value of loan below 3 0 lakhs :

y SBI home loans interest rates till the first anniversary of the disbursement of loans should be only 8% . These SBI home loan interest rates are lowest in thecountry.

y SBI home loan interest rate is fixed at 9% for next couple of years.y SBI home loans interest rates will then be dependent upon floating SBI home

loan rate or fixed SBI home loan interest rates. If the user selects the option of

fixed SBI home loans interest rates, then the value of the SBI home loan rate willbe fixed 1% below the current SBAR value. When the user selects floating SBIinterest rate, then after three months their SBI home loan rates will be 2 % belowthe current SBAR value.

Some facts about SBI interest rate on amount above the value of 3 0 lakhs :

y SBI home loan interest rate for the loan which is greater than 3 0 lakhs would alsoremain at 8% for the first year and in next 2 years, loan seeker has to bay SBIhome loan rate of 9 .5% .

y SBI home loan interest rates will then be dependent on whether the user selects

floating SBI home loan rate or fixed SBI interest rate. For fixed SBI home loansinterest rates seekers, the value of SBI interest rate will be 0 .5% below the SBARvalue and people looking for floating SBI home loan rates have to pay SBI homeloan interest rate that is 1% below SBAR value.

More details on SBI home loan rates and SBI home loan interest rates could begathered by visiting the official website or by contacting the nearest SBI branch today ; though this information on SBI home loan rates and SBI home loan interest rate willsurely help in taking loan from SBI. For latest information on SBI home loans interestrates, keep visiting our site.

Home Loan Interest Rates

Interest rate on home loan is something that one has to pay in lieu of the loan providedby the bank/financial institution. Home loan Interest rate is very important element whenit comes to choosing a home loan for a customer & it also helps the customer on takingright decision or on pinning down that through which bank or financial institution he or she can go for. Depending on this interest rate, the loan amount and the tenure of the


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loan, your EMI is calculated which is how you repay your loan to the bank. In case theinterest rate is higher, the EMI would be higher and in case the interest rate is lower, theEMI would be lower. Thus y choosing a bank with a lower interest rate, you cancertainly increase your monthly savings. But please keep in mind that interest rate is notthe only criteria to choose a loan. There are various other parameters as well. The EMI

is calculated on a monthly reducing balance method.Your home loan eligibility or how much loan you are eligible for is also calculated on thebasis of the interest rates. In case you opt for a bank with a lower interest rate, thenyour eligibility will be higher compared to a bank that is offering a higher interest rate.

Ty pes of Home Loan Interest Rate:-

1) Fixed Interest Rate: A rate which is set In-advance or which is predetermined for entire term of Home Loan.

.

2) Floating Interest Rate: A rate which is linked to a benchmark rate or the base rateof the bank or the financial institution. The floating home loan interest rate will changeas and when the bank will change its benchmark rate or the base rate.

2 . H.D.F.C ( Housing Development FinanceCorporationLimited )

HISTORY

HDFC Bank was incorporated in 199 4 by Housing Development Finance CorporationLimited (HDFC ), India's largest housing finance company. It was among the firstcompanies to receive an 'in principle' approval from the Reserve Bank of India (RBI ) toset up a bank in the private sector. The Bank started operations as a scheduledcommercial bank in January 1995 under the RBI's liberalization policies. Times BankLimited (owned by Bennett, Coleman & Co. / Times Group ) was merged with HDFCBank Ltd., in 2 000 . This was the first merger of two private banks in India. Shareholders

of Times Bank received 1 share of HDFC Bank for every 5 .7 5 shares of Times Bank. In2008 HDFC Bank acquired Centurion Bank of Punjab taking its total branches to morethan 1 ,000 . The amalgamated bank emerged with a base of about Rs. 1 , 22, 000 croreand net advances of about Rs. 89 ,000 crore. The balance sheet size of the combinedentity is more than Rs. 1 ,63,000 crore.

D ist r ibu tion netwo r k


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HDFC Bank is headquartered in Mumbai. The Bank has a network of 172 5 branchesspread in 7 80 cities across India. All branches are linked on an online real-time basis.Customers in over 500 locations are also serviced through Telephone Banking. TheBank has a presence in all major industrial and commercial centers across the country.Being a clearing/settlement bank to various leading stock exchanges, the Bank has

branches in the centers where the NSE/BSE has a strong and active member base.The Bank also has 5 ,016 networked ATMs across these cities. Moreover, HDFC Bank's

ATM network can be accessed by all domestic and international Visa/MasterCard, VisaElectron/Maestro, Plus/Cirrus and American Express Credit/Charge cardholders .

VISION OF H.D.F.C

U can make lots of Money. Very easy to get started! Once it picks up, the system buildsyour income for you!

Board of Directors

Director A N Roy

Managing Director Aditya Puri

Director Ashim Samanta

Director Bobby Parikh

Chairman Chander Mohan Vasudev

Director Harish Engineer

Director Pandit Palande

Director Paresh Sukthankar

Director Partho Datta

Director Renu Karnad


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HDFC HOM E LOAN (India )

Home loans breathe in oxygen of life into your dream, your home. But the market being

jam-packed with so many financial institutions offering wide array of home loans itbecomes difficult to make the right choice. Here you have to make a wise decision, it isbetter to look for an eminent financial institution offering good home loan options andsomething extra. HDFC Home Loans have the potential to fulfill all the criteria withflawless perfection.

The excess that HDFC Home Loans offers above lucrative loan programs is thesatisfaction factor by catering the best in realizing your desire. And nonetheless, manycustomers throughout the country will stand as testimony to this fact. Initially, theobjective of HDFC was shooting up residential housing stock and promoting homeownership in India. But now apart from home loans offered by HDFC it has diversifiedinto deposit products, property related services and training facility. HDFC also offersspecialized financial services to worldwide customer base through partnership withseveral financial institutions. HDFC Home Loans are tailored according to individualneeds and repayment capacities. You can also take HDFC home improvement loans tofinance improvements to escalate the value of your home and to provide a better environment to your living. Even if you are an existing customer of HDFC you can takeHDFC home improvement loans. HDFC Home Loans also include Home Extension

Loans which you can avail to add space to your house, be it a romantic terrace or achoosy enclosed balcony. You can also take HDFC Home Equity Loans to use up thecash built-up in your housing unit. Some other loans provided by HDFC are short termbridging loans, land purchase loans and professional loans.


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RESEARCH DESIGN Design of Research :

The research will be exploratory in nature. A population of peoples who take home loan

from these banks will be considered for this study. I will try to explore about the home

loans which would make a difference in the behavior of the consumer. Effort will be

made to throw light on most of the factors which have either indirect or direct effect on

the behavior of the consumer. I will also explore the impact of home loans on the market

share of the banks.

Sampling plan:

Population : The study aimed to include the customers of SBI and PNB in nawanshahr,to make a comparative analysis of home loan schemes of these two banks..

Sample Size : A Sample size of 100 respondents will be taken for the current studybecause it is not possible to cover the whole universe in the available time period. So itis necessary to take the sample size. In 100 respondents 50 respondents from PNB and50 from SBI. The sample wills the peoples of age group lying between eighteen to thirtyyears. The sample will be taken in the form of strata based On the age, sex,and gender.

Sampling technique :

The sampling technique will be probabilistic sampling more specifically the random

convenient and judgemental sampling will be used. As in probabilistic sampling the

select unit for observation with known probabilities so that statistically sound

assumptions are supported from the sample to entire population so that we had positive

probability of being selected into the sample. I will go for stratified random sampling as

we are interested to study the home loan by SBI and PNB banks, so we will make the

strata on the basis of age, occupation, income, gender. And from each strata we will go

for random sampling


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Sources of Data:I will use primary source of data that is structured questionnaire. As these banks areestablished from so many years, so many researchers have done research on this

topic, so we will find secondary data also and also use this data for the help of thisresearch. So, this research data will collected from the primary source and secondarysource our method of collecting the data is from the questionnaire that will be filled bythe respondent from the sample, it will be structured questionnaire

Tools and Techniques :

As no study could be successfully completed without proper tools & techniques, same

with my project. For the better presentation and right explanation I used tools of

statistics and computer very frequently and I am very thankful to all those tools for

helping me a lot. Basic tools which I used for project are :

- BA R CH ARTS

- PIE CH ARTS

- TAB LES

Bar charts and pie charts are very useful tools for every research to show the result in

a clear, simple way. Because I used bar charts and pie charts in my project for

showing data in a systematic way. So I need not necessary for any observer to read all

the theoretical detail, simple on seeing the charts anybody that what is being said.

Technological Tools:

1) MS -WORD2) MS-EXCEL


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R eview of lite r at ur e

1. HDFC BEHIND SBI HOME LOAN POLICY (THE TIMES OF INDIA)

On Tuesday, HDFC announced its home loan polic y as like running SBI is dual rateHome loan policy under which bank charged fixed rate for some tenure and thenfloating rate for a loan of Rs 3 0 lac for 2 0 years, HDFC will be changed a fixed rate i.e8 .2 5% up to march 2 01 2 and then a floating rate i.e. 500 basis points below the PrimeLending Rate (PLR ), currently is 13.7 5% on another hand, already SBI is charging 8% for first year and 8 .5% for next two year and from fourth year the borrow can optbetween a fixed and a floating rate, SBIs floating rate in 27 5 basis points less than itsPLR i.e. 11 .7 5% .

When SBI launched its popular scheme it was vehemently criticized by HDFC chairmanMr. Deepak Parekh but due to abundant liquidity and fierce competition, HDFCaccepted similar scheme. This scheme is only for new customers who apply before Jan31 , 2 010 and avail at least a part disbursement before March 3 1 , 2 010 . While the fixedrate will remain the same irrespective of the loan amount, the floating rate will vary withthe loan amount.

HDFC now has three slab i.e loans up to 3 0 lacs, between, 3 0 to 50 lakh and Rs 50 lakh& above .On Tuesday, HDFC announced its home loan polic y as like running SBI isdual rate Home loan policy under which bank charged fixed rate for some tenure andthen floating rate for a loan of Rs 3 0 lac for 2 0 years, HDFC will be changed a fixed ratei.e 8.2 5% up to march 2 01 2 and then a floating rate i.e. 500 basis points below thePrime Lending Rate (PLR ), currently is 13.7 5% on another hand, already SBI ischarging 8% for first year and 8 .5% for next two year and from fourth year the borrowcan opt between a fixed and a floating rate, SBIs floating rate in 27 5 basis points lessthan its PLR i.e. 11 .7 5% .


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2 .C ompa r ison b etween Sb i H ome L oans And H dfc H ome L oans (HINDUST AN TIMES)

Home loan is designed to help you acquire the dream home you wished to buy. HomeLoan is finalized by individuals after considering the home loan interest. HDFC HomeLoans or SBI Home Loans or any other home loan from any bank is taken for purchaseor construction of a new house/flat, Purchase an existing (old ) house/flat, Extension,repair, renovation or alteration of a house/flat or purchase a plot meant for constructionof a dwelling unit. The Home loan interest differs from banks to banks also depends onfactors like loan amount, tenure, type of home loan rates (fixed home loan rate or floating home loan rate ) etc. Also to get HDFC Home Loans or SBI Home Loans or anyother banks home loan there is certain eligibility criteria. Also there are factors likerepayment capacity, age, educational qualification, stability and continuity of income,

number of dependents, co-applicant income, assets, liabilities, saving habits and more.

With home loan rates taken into consideration lets compare two banks with regards tohome loan, as SBI home loans and HDFC home loans.

SBI Home Loans come to you on the solid foundation of trust and transparency built inthe tradition of State Bank of India. SBI Home Loan For Loan amount upto Rs. 3 0 Lacs. (w.e.f. 01 .July.2 009)

SBI Home Loan or Home loan rate during the first year (i.e. till first anniversary datefrom the date of first disbursement ) is fixed at 8% p.a.

SBI Home Loan or Home Loan rate during next two years is fixed at 8 .5% p. a. SBI Home Loan or Home Loan rate after three years may be Fixed or Floating as per the borrowers choice made at the time of sanction. If floating home loan rate option ischosen, then the home loan rates will be 2.7 5% below SBAR (State Bank AdvanceRate ). If fixed home loan rate option is chosen, then the home loan rates will be 1 .2 5% below SBAR prevailing on the third anniversary date from the date of first disbursementof SBI home loan and shall have a reset frequency of 5 years from the third anniversary

date of the SBI home loan. Fixed interest shall be subject to force-majeure clause.

For SBI home Loan amount above 3 0 lacs SBI Home Loan rates is fixed at 8% p.a.and 9% p.a. for first and second years of taking the SBI Home Loan, respectively andfor third year if floating home loan rates option is chosen, then the home loan rate willbe 1 .7 5% below SBAR . If fixed home loan rate option is chosen, then the home loanrate will be 0 .75% below SBAR.


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HDFC Home Loans

HDFCs objective, from the beginning, has been to enhance residential housing stockand promote home ownership by way of HDFC Home loans.

HDFC home loans or floating home loan rates for new customers are

9 .7 5 per cent for HDFC home loans up to Rs 3 0 lakhs.

10 .75 per cent for HDFC home loans more than 3 0 lakhs.

The Home loan interest is very important in determining the uptake of this home loan bythe masses. The home loan interest has come down allowing many individuals to takethe plunge. According measures are taken by government and also other financial

institutions including banks to further reduce the home loan interest thus encouragingmore and more people to take home loan. From the above table it is seen that both thebanks HDFC bank and SBI bank offer similar home loan interest with regards to HDFCHome Loans and SBI Home Loans .Some banks also try to gain more customers byprompting incentives in the way, waive off the charges for processing anddocumentation, for certain category of housing finance loans.

With increasing competition among banks, interest rates would be a deciding factor asto which bank can offer the least interest rates and which would be higher on interestrates but will try to gain customers through prompt incentives by waiving of the chargesfor processing and documentation, for home loans.


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3 . HDFC H ome L oan (RBI )

In India where the economic market is one the top in offering world class opportunities

in the fields of education, technology, research, medical and mainly real estate.

From previous few decades, Indian real estate is among the top rated sector while

yielding high return in short period of time. After analyzing all this, huge number

investors and business personnel entered into real estate in India to examine their

business hands. Besides these, numbers of Indian banks also approach to international

market in order to offer home loans with different categories to make compatible with

different sections of the society. Among these indian banks, Housing Development AndFinance Corporation - HDFC is one of the well known and favorable banks offer home

loans with different plans and schemes. Here with HDFC you will find numbers of

different plans including land purchase loan, home improvement loan, short term

bridging loan, home extension loan and home equity loans that offer wide variety of

home loan schemes especially for business personnel, job workers, employers,

residents and non residents of India. HDFC home loan is among the top rated home

loan providers of India with different home loan product and services. Here you can

select fixed or floating rate of interest with an attractive loan schemes. Passport size

photograph, latest salary slip, form 16 and many more things need to be submitted with

hdfc home loan. Different providers have different pattern to offer home loans. Like for

salaried customers, self employed businessman and for self employed professionals

comprises different eligibility to apply hdfc home loans. Here with 123realestates bring

you with complete information about hdfc home loan application, eligibility, online form

and many more things regarding how to apply home loan from different providers.


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SBI Home Loan(RBI OFFICIAL WEBSITE)

State Bank Of India is one of the reputed government banks of india is famous for

offering quality and reliable services to its clients. SBI is among of those with goodname and favorable for applying home loan. SBI home loan brings you with different

categories of home loans with different interest rates and procedures. In these days

when numbers of banks have come up with their different home loans schemes and

programs.SBI is on the top while offering quality services to its clients from all across

the nation. State Bank Of India is famous for offering home door services That

compatible with all types of income groups where you can also find complete guidance

about legal formalities and documentation needed to apply for the sbi home loans. The

whole process is to made with no hidden costs and also hassle free from client point of

view. Here different sbi home loans comprise different interest rates along with different

procedures in terms of maximum amount apply that you can calculate with the help of

sbi home loan calculator.

SBI Flexi, SBI Maxgain, SBI Realty and SBI Freedom are the two most favorable and

popular home loans schemes offered by State Bank Of India to Indian residents. Under

these loans programs one can apply for the renovation, new construction,

reconstruction, and for buying new house. Here with 123realestates you will get detail

information about sbi home loan application form, sbi home loan calculator, sbi home

loan eligibility and lots more regarding home loans providers of the nation.

COMPARISION OF INTEREST RATES OF BOTH THE BANKS

Name of theBank

Loan Up to Rs.20 Lacs

Rs. 20 lacs+ to Rs.30 lacs

Rs. 30 lacs + to Rs. 75 lacs Other Features

State Bankof India

9 .25 % fixedfor 5 yearsand resettableafter 5 years

8% for 1st Year and10.75% floatingfrom second year onwards effectiveinterest rate 10 .36

8% for 1st Year and10.75% floating fromsecond year onwardseffective interest rate 10 .36 % floating approx.EMI for

No processing feesand no pre-

payment charges if pre-paid fromsavings or


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EMI is Rs.916 per Rs. 1lac of loan consumerscan also

choose theoption in thenext column if they so desire

% floatingapprox.EMI for 1styear fixed at Rs. 836and if floating ratestays at 10.25% atthe end of year 1 theEMI will beincreased to Rs.1009 per Rs. 1 lac of loan W eighted ave r age EMI wor ks out to R s. 989/- pe rR s. 1 lac of loan

1st year fixed at Rs. 836and if floating rate stays at10.25% at the end of year 1the EMI will be increasedto Rs. 1009 per Rs. 1 lac of loan W eighted ave r age EMI wo r ks out to R s.989/- pe r R s. 1 lac of loan

windfall. 2% prepayment chargesotherwise Legalfees payable extra.Free linked lifeinsurance policy for loans up to Rs.20 lacs only takenunder 9.25%scheme.Rates for Loans up to Rs. 20lacs taken under 9.25% schemeavailable

HDFC Ltd. 9 .75 % -

Floating EMIof Rs. 949/- per lac of loan

9 .75 % - Floating

EMI of Rs. 949/- per lac of loan

10 .75 % - Floating EMI

of Rs. 1015/- per lac of loan

Processing Fees

0.50% to 1 %PrepaymentCharges @ 3%Rates availabletill further notice

SBI special home loan boon or bane(SBI WEBSITE)

The launch of low-rate home loan products by Indias largest bank State Bank of India (SBI ) sent its rivals into a huddle. Peers called the move a gimmick, butthey could not avoid the war triggered by the banks so-called teaser rates andinstead had to join it. SBI justified its new products SBI Easy Loan and SBI

Advantage Home Plan for amounts up to Rs 50 lakh and above Rs 50 lakh as apart of the process to build its credit portfolio. To counter these rates, LICHousing Finance came out with a floating rate offer of 8 .5 per cent while the

leading private player HDFC Bank rolled out home loans at 8 .7 5 per cent floating.See Table 1 for rates.

Highlights

o SBI low-rate home loan schemes are extended up to March 3 1 , 2 010


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o There are no processing charges/fees on these loanso 8 per cent interest rate is available for the first year on loans up to Rs 50

lakh and tenure of 2 5 years

Home Loan: IN TERES T RAT ESn in India

With most banks interest rates hovering in double digits, SBIs rates came as abreather to new home loan seekers. But experts think otherwise, they cautionedborrowers that this could be a trap whereby one has to part with more money inthe end. Is it true? What should a buyer do to avail better rates? Let us see. Inthis article, we would assume that rates remain the same throughout the loantenure as indicated in the table below.

Table 1: Home Loan Rates for 20 Yrs.

SBI LIC HF HDFC

< Rs. 50 lakh 8%1, 8.5% 2 & 9%3 8.50% 8.75%

> Rs. 50 lakh but less than Rs. 75 lakh 8%4, 9%5 & 10% 6 8.50% 9.75%

1 First year rate; 2 Second & third year rate; 3 After 3rd year, it is at 9 % at current

SBAR; 4 First year rate; 5 Second & third year rate; 6 After 3rd year, it is at 10 % atcurrent SBAR

Table 2: Home Loan Basket for a Loan of Rs. 40 lakh

SBI LIC HF HDFC

Loan Amount (Rs. ) 40,00,000 40,00,000 40,00,000

Interest Rate 8%1, 8.5% 2 & 93 8.50% 8.75%

Interest Payment1 (Rs. ) 9,68,283 9,89,106 10,19,108

Portion of Total Interest Paid 21.33% 22.84% 22.73%

Total Interest Paid (Rs. ) 45,38,536 43,31,103 44,83,623

Effective Interest Rate 8.84% 8.50% 8.75%

Processing Fee 2 0.00% 0.50% 0.50%


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8.84% 8.53% 8.78%

Table 3: Loan Basket for a Loan of Rs 60 lakh

SBI LIC HF HDFC

Loan Amount (Rs. ) 60,00,000 60,00,000 60,00,000

Interest Rate 8%4, 9%5 & 10% 6 8.50% 9.75%

Interest Payment 1 (Rs. ) 15,11,138 14,83,659 16,96,455

Portion of Total Interest Paid 19.90% 22.84% 22.34%

Total Interest Paid (Rs. ) 75,95,295 64,96,655 75,92,401

Effective Interest Rate 9.68% 8.50% 9.75%

Processing Fee 2 0.00% 0.50% 0.50%

Net Interest Rate 9.68% 8.53% 9.78%

However, for a Rs. 60 -lakh loan, the current SBI rate does not seem to beattractive as the total interest payment in this case is higher, for it attracts ahigher rate of 10 per cent after three years. SBIs total interest component in thefirst three years is Rs 15 .11 lakh as compared to Rs 14. 84 lakh and Rs 16 .96 lakh of LIC HF and HDFC. But the total interest paid is Rs 7 5 .95 lakh which iscomparatively higher than Rs 64. 97 lakh and Rs 7 5 .92 lakh in case of LIC HFand HDFC. Moreover, the processing fees in SBI has been waived till March 3 1 ,2010 , hence, the net interest rates would be as shown in Table 2. Here, againLIC HF offers the best deal at the current rate of 8 .5 per cent which is the lowestin this category.

Moreover, private lender HDFC Bank has loan rates higher than its PSU peers.So, EMI payments for private players may rise at an alarmed rate if the interestrate in the market hardens, thus, impacting a borrowers cash outflows.

Hence, there are scenarios where individuals can have different options :


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o If you are an existing home loan borrower who wants to shift to new rates,you can either negotiate with your existing bank for a levelled interest rateor shift to PSU banks if they offer better rates. In this case, even after paying a prepayment penalty, you can save a good amount in EMIpayment.

o New borrowers can always consider new schemes offered by PSU banksas interest payments in the first three years would be comparatively less.

ANNUAL REPORT OF BOTH THE BANKS(Financial Performance)

Profit

The Operating Profit of the Bank for 2 009 -10 stood at Rs. 18 ,32 0 .91 crores ascomparedto Rs. 17, 915 .23 crores in 2 008 -09 registering a growth of 2.2 6% . The Bankhas posted a NetProfit of Rs. 9 ,166 .05 crores for 2 009 -10 as compared to Rs. 9 ,121 .23crores in 2 008 -09 registering a moderate growth of 0 .49% .

While Net Interest Income recorded a growth of 13.4 1% and Other Income increasedby17. 95% , Operating Expenses increased by 2 9 .84% attributable to higher staff costand otherexpenses.

Dividend

The Bank has increased dividend to Rs. 3 0 .00 per share (3 00%) {(inclusive of interimdividend of Rs. 10 .00 per share ( 100%) already paid )} from Rs. 2 9 .00 per share(290%) in thelast year.

Net Interest Income

The Net Interest Income of the Bank registered a growth of 13.4 1% from Rs.20 ,873. 14crores in 2 008 -09 to Rs. 23, 671.44 crores in 2 009 -10 . This was due to growthin interestincome on advances and investments.

The gross interest income from global operations rose from Rs. 63,7 88 .43 crorestoRs.7 0 ,99 3.92 crores during the year. This was mainly due to higher interest incomeonadvances.


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Interest income on advances in India registered an increase from Rs. 42, 989 .3 6 croresin2 008 -09 to Rs. 47, 633.47 crores in 2 009 -10 despite decline in the average yield onadvancesin India from 10 .15% in 2 008 -09 to 9 .66% in 2 009 -10 . Interest income onadvances atforeign offices has decreased by 12. 19% .

Income from resources deployed in Treasury operations in India increased by17. 85% mainly due to higher average resources deployed. However, the average yield,which was7. 10% in 2 008 -09 , has decreased to 6 .52% in 2 009 -10 .

Total interest expenses of global operations increased from Rs. 42, 915 .2 9 croresin2 008 -09 to Rs. 47,322.4 8 crores in 2 009 -10 . Interest expenses on deposits in Indiaduring2 009 -10 recorded an increase of 15 .04% compared to the previous year,whereas the averagelevel of deposits in India grew by 2 5 .05% and the average cost of deposits declined from 6 .3 0% in 2 008 -09 to 5 .80% in 2 009 -10 .

Non-Interest Income

Non-interest income stood at Rs. 14, 968 .15 crores in 2 009 -10 as against Rs.12, 690 .79crores in 2 008 -09 .

During the year, the Bank received an income of Rs. 573.4 8 crores (Rs.4 09 .60 croresinthe previous year ) by way of dividends from Associate Banks/subsidiaries and

jointventures in India and abroad.

Operating Expenses

There was an increase of 3 0 .85% in the Staff Cost from Rs. 9 ,747.3 1 crores in 2 008 -09 toRs. 12,7 54.65 crores in 2 009 -10 attributable to higher pension provisioning andincreasedstaff strength. Staff Cost included an amount of Rs. 1 ,99 7 crores towardsadditionalpension provision and Rs. 2, 559 crores towards wage revision provisions ascompared toRs. 1 ,4 69 crores and Rs. 1 ,414 crores respectively in the previous years.

Other Operating Expenses have also registered an increase of 2 8 .3 5% mainly duetoincrease in expenses on rent, taxes and lighting, depreciation on theBanksproperties, law charges, postage and telephones, repairs & maintenance totheBanks properties, insurance and miscellaneous expenditure.

Operating Expenses, comprising both staff cost and other operating expenses,haveregistered an increase of 2 9 .84% over the previous year.

Major CH ANGES made in 2009-10 were as under:

Rs. 98 7. 99 crores towards write-back for depreciation on investments,excludingamortization of premium on Held to Maturity category (as against provisionofRs.7 07. 17 crores in 2 008 -09) .


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Rs. 6 ,166 .62 crores towards Provision for Tax, excluding deferred tax creditofRs. 1 ,4 07.7 5 crores (as against Rs. 5 ,971 .52 crores in 2 008 -09 excluding deferred taxcreditof Rs. 1 ,055 .10 crores ).

Rs. 5 ,147. 86 crores (net of write-back ) for non-performing assets (asagainstRs.2,474. 96 crores in 2 008 -09) .

Rs. 80 .06 crores towards Standard Assets (as against Rs. 234. 82 crores in2 008 -09) .Including the current years provision, the total provision held onStandard Assets(domestic offices ) amounts to Rs. 2,2 92.72 crores.

Table: 1 Ke y Performance Indicators

Indicators S B I S BI Group

2009 -10

2008 -09

2009 -10

2008 -09

Return on Average Assets ( %) 0 .88 1 .04 0 .88 0 .94Return on Equity ( %) 14. 84 15 .07 14. 55 16 .3 0 Expenses to Income ( %) (Operating Expenses to TotalNet Income ) 52. 59 46 .62 63. 10 52. 65

Basic Earnings Per Share (Rs. ) 144.37 143.77 18 4. 82 172. 68 Diluted Earnings Per Share (Rs. ) 144.37 143.77 18 4. 82 172. 68 Capital Adequacy Ratio ( %) (Basel-I ) 12. 00 12. 97 11 .89 12. 90 Tier I 8 .4 6 8 .53 8 .08 8 .2 1 Tier II 3. 54 4.44 3. 81 4. 69 Capital Adequacy Ratio ( %) (Basel-II ) 13.3 9 14.2 5 13.4 9 14. 17Tier I 9 .4 5 9 .3 8 9 .2 8 9 .03Tier II 3. 94 4. 87 4.2 1 5 .14Net NPAs to Net Advances ( %) 1 .72 1 .7 9 1 .57 1 .4 9


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FINDINGS AND SUGGES TION

QUES TIONN AIRE

Q UESTIONNAIRE

Q 1. On Which bank you depend for your home loan tansaction?

A) SBI B) HDFC

Q 2. From who many year s you are associated with this bank?

A) Less than 1 year B) More than 1 year

Q 3. How do you come to know about the home loan schemes of this bank?

A) News paper B) T.VB) Internet D) Other sources

Q 4. Are you aware of Product and services (related to loan) provided by anyone?

A) Yes B) Now

Q 5. Are you aware of this type of home loan?

A) Home purchase loan B) home improvement loan

C) Home equity loan D) home extension loan

E) Home construction loan F) Land purchase loan


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Q 6. ARE you aware of all terms& condition of home loan?

A) Yes B) NO

Q 7.Your bank offers which type of services?

A) Mobile banking B)net banking C) forex banking

Q 8.Which feature you like most in loan segments?

A) Less paper work B)attractive interest rate

C) Transparency D) simple & fast processing

E) Flexibility to choose an E.M.I F) Longer tenure lone for easy repayment

Q 9.Do you satisfied with the after home loan services provided by your bank are

best as compare to other bank?

A) Strongly agree B) agree

C) Strongly disagree D) disagree

Q 10.Does the cost of home loan is appropriate according to your demand?

A) YES B) NO

Q 11.Are you satisfy with the employee s behavior of the bank?

A) YES B) NO


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Q 12.Are you satisfy by the time taken in sanctioning the loan?

A) YES B)NO

Q 13. Have you face any difficulty during taking the loan?

A) YES B) NO

IF YES PLEASE SPECIFY ..

Q 14.Which grade you want to give of home loan schemes of your bank?

A) Excellent B)Good

C) Average D) below average

Q 15. Any suggestion that you want to give ..


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SWO T ANAY SIS OF S B I

S TRENGH TS

1) BRAND N AME2) M ARKE T LE ADER3) WIDE DIS TRIBUTION NE TWORK4) GOV T. OWNED

WE AKNESS

1) MG T. STRUC TURE2) NON PERFORMING ASSES T 3) MORDERNISING

OPPER TUNITIES

1) MERGERS OF ASSOCI AT EBA NKS

2) ADDITION OF BRANCHES3) GO FOR FOREIGN EXPENSION

THRE AT S

1) ADVEN T OF MNC BA NKS2) HIGHER EXPEC TAT ION OF

CONSUMER3) EMPOL YEE S TRIKE


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SWO T ANAY SIS OF HDFC

S TRENG TH

y Right strategy for the right products.y Superior customer service vs. competitors.y Great Brand Image.y Products have required accreditation.y High degree of customer satisfaction.y Good place to work

WE AKNESS

y Some gaps in range for certain sectors.y Customer service staff needs training.y Processes and systems, etcy

Management cover insufficient.y Sectoral growth is constrained by lowunemployment

THRE AT S

y Legislation could impact.y Great risk involvedy

Very high competition prevailing industry.y Vulnerable to reactive attack by major competitors.y Lack of infrastructure in rural areas could constraininvestment.

OPPOR TUNITY

y Profit margins will be good.y Could extend to overseas broadly.y

New specialist applications.y Could seek better customer deals.y Fast-track career developmentopportunities on an industry-wide basis.


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ANAY SIS OF THE D ATA COLLEC TED FROM QUES TIONN AIRE

1 . PIE CH AT S

Home loan percentage as per servey

31%

42%

15%

12%

PERCENTAGE AS PER SERVEYSBI HDFC ICICI OTHERS


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S AT ISF ACTION LEVEL

40%

60%

SATISFACTION LEVEL IN %

S. .I H.D.F.C


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E .1 Agri Business:

Table : 6 Agriculture Highlights

(Amount in Rs. crores ) Particulars As on 31 .03 .2009 As on 31 .03 .2010 Growth % Deposits 12,4 07 14, 981 20 .7 5

Advances 54, 678 63,723 16 .54

Achievements / initiatives during the year

The growth, as above, could be achieved despite the following :

i. Delayed monsoons leading to a drought like situation and floods had hit thecreditdemand in the first half of the year.

ii. Adjustment of Rs. 1 ,2 56 crores of Debt Waiver claim received fromGoI(reimbursement ).

iii. Around Rs. 1 ,600 crores received from Other Farmers eligible under DebtRelief Scheme being their 7 5% share.

The Bank has crossed the 18% Benchmark for agri priority sector advances in theFY2010 by achieving 18 .08% of ANBC (18.46% as at March 2009 & 18.37% as atMarch2008) .

The Bank has recorded Rs. 34, 179 crores disbursement (102% of annual target ofRs.33,500 crores of Agri disbursements) under Flow of Credit toAgriculture asagainst Rs. 2 8 ,442 crores (against annual target of Rs. 28,000crores in FY 2009) andfinanced 12.32 lacs new farmers against the target of 7.7 0 lacsduring the year.

Special drought relief schemes to support farmers

The Scheme was launched in September 2 009 , whereby concessions in interest rates,loanprocessing charges, margin money, moratorium period etc., have been offered for minorirrigation loans upto Rs. 2 5 lacs and crop loans above Rs. 3 lacs and upto Rs. 2 5 lacs (croploans upto Rs. 3 lacs are covered under Interest subvention scheme of GoI) .Rs. 600 crores was disbursed under Crop Loans and Rs. 150 crores under Minor Irrigation during FY2 010 .

Produce Marketing loans (PML)


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PML was launched exclusively for farmers at concessionary interest rate of 8% (Rs.1,269 crores disbursed during the FY 2010).

Special focus was given to cover beneficiaries of Agricultural Debt Waiver & DebtRelief Scheme who became eligible for new loans (24 lacs farmers covered so far out of41

lacs beneficiaries under the Scheme). New Product

Organic Farming (OF)

Financing of farmers, who want to switch over from traditional method to organicfarmingfor improving returns, has since been launched by the Bank in September 2 009 infiveCircles i.e. New Delhi, Bangalore, Mumbai, Hyderabad, and Chennai.

Tractor Sanjeevani

The scheme allows additional loan for Tractor repairs, maintenance, upgradationandaddition of new implements.

Krishi Kal yan

It is a C ombo product of K CC and PML.

Thrust continues to be laid on Contract Farming and Value Chain Financing

Corporate tie-ups were entered into for capacity building in horticulture activities,seed-

production, cultivation of medicinal plants and quality input supply to farmers.MoUsigned with National Horticultural Board (NHB ) as a preferred Banker.

Stimulus was given by way of sub-PLR loans for setting up high techclean-milk dairyunits in Punjab and high-value integrated Poultry units inTamil Nadu / Union Territory of Pudducherry.

Collateral Management Services were expanded through further accreditations, toensureminimum loss to commodities lending under Produce Marketing Loan (PML ).

Bonding with Farmers :

To enhance customer awareness and ensure continued relationship with thefarmingcommunity, various initiatives have been continued under Bonding withFarmers.

Achievements during FY 2 010 are given in the table :

Initiative Achievement


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Villages adopted (SBI ka Apna Gaon) 210 Farmers Clubs formed 5 ,2 90 Farmers Meets conducted 52,2 51

S B I Hari yali Ganga : Circles are conducting some of the FarmersMeet as FarmersTraining Programmes by scaling it up with the activeparticipation of the Circleauthorities and Agri Technical persons from the AgriculturalUniversities / KVK /NABARD / ICAR / APEDA etc. These Farmers Training Programmes havebeenrenamed as SB I Hari yali Ganga to command more reach andinvolvement of farmers.

Apart from the regular farmers meet, one such Hariyali Gangaprogramme is beingconducted per quarter per region beginning from January 2 010 (28programmes have,so far, been conducted ).

E .2 .Regional Rural Banks (RR Bs)

Migration to Core Banking Solutions (C BS) Platform

As per Government of India guidelines, all RRBs have to be migrated to CBS bySeptember2 011 . The Bank has sponsored 17 RRBs. Out of 17 RRBs, 5 RRBs, with1 ,3 65 branches, havealready been migrated to CBS. The Bank has a plan of migratingthe remaining RRBs to CBSplatform before 3 0 th September 2 010 .

Capital to Risk Weighted Assets Ratio (CR AR)

The Government has constituted a committee (Chairman : Dr K. C. Chakrabarty ) withrepresentatives from the Government, Public Sector Banks, RRBs and theNABARD to examinethe financials of the RRBs and suggest a roadmap to raise theCRAR of RRBs to nine percentby March 2 01 2. The Committee is in the process of finalization of its report. The Bankwill accordingly induct its share (3 5%) of Capital.

Credit Deposit (CD) Ratio

We have ensured continuous growth in the CD ratio of RRBs from 59 .2 9% in March2009 to61 .08 % in March 2 010 for the development of rural economy.

Profitabilit y

Profit of all RRBs, sponsored by the Bank, has increased to Rs. 33 1 .08 crores ason3 1 .03.2 010 from Rs. 2 03.3 1 crores as on 3 1 .03.2 009 , registering a growth of 62. 84% .

E .3 . I Credit Assistance provided to Scheduled Castes and Scheduled Tribes

The credit assistance provided by the Bank to Scheduled Castes and ScheduledTribesstands at Rs. 11 ,872. 80 crores and forms 6 .3 1% of total Priority Sector advancesof theBank as on 3 1 .03.2 010 .


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E .3 . II Coverage of Unbanked B locks

Under the directions of Government of India, the Bank took active initiative andhasdrawn up a plan of action to extend banking services in unbanked blocks, allotted toit bythe respective SLBCs.

E .3 . III Strategies to improve Credit Deposit (CD) Ratio

To improve the CD ratio of the Bank, wherever it is less than 60% , thefollowingmeasures have been initiated :

i) Monitoring the performance under the existing system of District LevelConsultativeCommittee (DLCC ) in districts having CD ratio between 4 0% and 60% .

ii) Special Sub-Committees of DLCC are set up to monitor the performance of districtswhere CD ratio is between 2 0% and 4 0% .

iii) Districts with CD ratio of less than 2 0% are treated on a special footing.

E .3 . IV Rural Self Emplo yment Training Institutes (RSE TIs)

RSETIs offer free, unique and intensive short-term residential self-emplo ymenttraining programmes with free food and accommodation, designedspecifically for ruralyouth. Under the guidance of Ministry of Rural Development(MoRD ), GoI, the Bank hasestablished 67 RSETIs as on 3 1 .03.2 010 in the lead districtsacross the country ; conducted 1 ,74 8 training programmes ; trained 4 6 ,626 candidatesand arranged credit linkage to 18 ,019 beneficiaries.

E .3 . V Advances to Weaker Section

The Bank has extended advances to the tune of Rs. 56 ,085 crores as on 3 1 .03.2 010 totheweaker sections, which is 12. 14% of Adjusted Net Bank Credit (ANBC ) against thebenchmarkof 10% of the ANBC set by the Reserve Bank of India.

E .4 . Prime Ministers New 15 Point Programme for the Welfare of MinoritiesandImplementation of Sachar Committee recommendations

The Bank has implemented Prime Ministers New 15 Point Programme for the Welfareof

Minorities, whose important objective is to ensure that an appropriate percentage ofthePriority Sector Lending is targeted for the minority communities and that the benefitsof various Government sponsored schemes reach the underprivileged, particularlythedisadvantaged section of Minority Communities (Christians, Muslims, Buddhists,Sikhs andZoroastrians ).

The year-wise position in respect of our financial assistance to Minority Communitiesinthe identified Minority Concentration Districts (MCDs ) is given below :


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Table : 7 Credit Assistance to Minorities

Period ason

No . of districts identified b y GoI(MCDs)

No . of A /cs

Amount (Rs . incrores)

March 2 00 7 44 7. 94 lacs 2 106

March 2 008 121 9 .88 lacs 3 516 March 2 009 121 9 .91 lacs 5091 March 2 010 121 8 .2 9 lacs 9434

Minority cells for co-ordination have already been created at Local Head Officeleveland Nodal Officers have been designated to monitor the progress in lending tominoritycommunities as well as to redress the grievances of minority communities.

As per Sachar Committee recommendations, our Bank has opened 24 0 new branchesinunder-banked / unbanked areas in MCDs during the financial year 2 009 -10 .

All the lead district managers have been advised to monitor applicationsreceived fromminority communities and their disposal. Also, quarterly informationregarding MinorityLending is updated on the Banks Website.

F . MARKE TING-CROSS SELLING DEP ARTMENT

The large network of branches of the State Bank Group is being leveraged todeliverPara banking products of SBI Life Insurance Co., SBI Mutual Fund, SBI Card andother thirdparty companies having tie-up arrangement with SBI, thereby offering wider range offinancial products to our customers.

During the year, the Bank covered 17.73 lacs lives under various schemes of SBILifeInsurance. Grameen Shakti, a micro-insurance product was launched in 8 statescovering 2, 92, 150 lacs lives. Also, for encouraging investment among smallinvestors, theBank distributed Chhota SIP (Systematic Investment Plan ) product bywhichmiddle income group customers can invest regularly in the Mutual Fund. A total of 34, 56 3customers were covered in the year under the scheme. Looking at the popularity,the HealthInsurance product covering nine critical illness named Criti 9 introducedinBangalore on pilot basis was extended across the country. Over the counter paymentoptionwas extended to SBI Card customers thus transforming the company into theindustry leaderin payment options.

G . CORPOR AT E S TRAT EG Y & NEW BUSINESSES

The New Businesses Department has been successful in achieving the objectiveswithwhich it was set up. Two new lines of business viz. Custodial Services andGeneralInsurance have been successfully set up and are in the process of stabilization.Otherinitiatives being pursued are Private Equity, Financial Planning & AdvisoryServices(FP&AS ) and Mobile Banking. During the year, the consultants, appointed for


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assistingthe Bank to consolidate the Payment Solution Business, have since submittedtheirrecommendations. Seven niche areas viz. Mobile Banking, Merchant AcquisitionBusiness, SMECurrent account and Supply Chain Finance, Savings Bank, CashManagement Product, NRIremittances and Govt. Business have been identified for implementing a comprehensivestrategy, an aggressive business plan, improved

processes and matching organizationalstructure. New initiatives taken up during theyear are Merchant Acquisition and PaymentSolutions.

Financial Planning and Advisor y Services (FP & AS)

In the wake of recent development in regulatory position regarding distributionoffinancial products through advisory mode rather than the distribution mode andalsoconsidering the Swarup Committee recommendations on "Consumer awarenessand Investorprotection", our Financial Planning and Advisory Services, launched inMarch 2 009 ,addresses the needs of the modern day customers as also the regulatoryconcerns.

Under this service, customers are guided to finalise their financial goals viz.childseducation/marriage, buying a house, building a retirement corpus etc., andare advised asuite of products comprising mutual funds, fixed deposits and insuranceproducts. TheService was initially launched in 50 2 branches which has been extended to 924branches by March 2 010 (including 500 branches in Super Circle of Excellence subset ).

Further, the Bank plans to introduce Wealth Management services in a phased manner in2 010 -11 to help HNI (High Net-worth Individual ) clients to preserve and grow their wealth.

Demat & Online Trading Demat services and eZ-trade@sbi (Online Trading ) Services are now available atmorethan 2, 800 branches across India making our Bank one of the largest players intheindustry in terms of the reach / distribution. In FY 2 009 -10 , the Bank has crossedthemilestone of having more than 2 lacs Demat account holders in its fold.

The 3-in- 1 account i.e. eZ-trade@sbi is offered in alliance with SBICAP SecuritiesLtd.(SSL ) and Motilal Oswal Securities Ltd. (MOSL ). The product offers convenientonlinetrading facility in Equities and Derivatives. The customers can access our DematServiceseither from the comfort of home or office through our Internet Banking

facility(OnlineSBI.com ) or through our Mobile Banking platform (SB Freedom ).Our objective for the next financial year is to further broad base our reach,whilecontinuously honing our products by adding more value added services andconveniences forthe customers.

Pa yment Solutions


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The Bank is in the process of implementing "Integrated Payment Hub" as theprimaryprocessor of all payment activities. This will facilitate substantial revenuegeneration for this business segment. With a view to providing more focus on payment,Organisationalrestructuring is also under way.

Mobile Banking Service (M BS)

Mobile Banking Service is convenient, user friendly, secure and offers 24X7inexpensivebanking services to customers. This is expected to increase customer satisfaction andthus, will be a customer retention tool, in addition to reinforcing brandrecognition.State Bank Freedom has been launched in all our branches and is availableover application(on SMS/ GPRS ), Wireless Application Protocol and USSD(Unstructured Supplementary ServiceData ).

For application / WAP based MBS, the facilities available include Accountenquiry(balance enquiry and mini statement ), Cheque Book request, Demat Account

enquiries, FundTransfer within the Bank and to other Banks in India, Mobile Top ups,recharge of TataSky, obtaining PINs of other DTHs, Bill Payment, Payment of premiumof SBI Life.Facilities in the pipeline include Railway / Airline ticket booking through MBS,StateBank Mobile Banking as payment option in the Shopping application of leadingaggregatorsand Recharge of e-Tag of Gurgaon-Delhi Highway. For MBS over USSD,fund transfer, accountenquiry and mobile top up are offered. The Bank is alsoconsidering integration with IVRplatform for merchant payments and introduction of Mobile Wallets. As on 3 1 -03-2 010 , atotal number of 2, 18 ,434 customers had registeredfor full fledged MB services.

NEF T /R TGS

Substantial growth in both inward and outward RTGS/NEFT remittances has beenachieveddue to sustained efforts for migrating more Corporates and individuals toRTGS/NEFT. TheBank has maintained its leadership position in RTGS (with a marketshare of 14. 15% as on3 1 .03.2 010) and also has a significant position in NEFTregistering a growth of 135 .7 1% over the last year. Both remittance facilities areavailable through internet banking andacross the counter, while NEFT has also beenenabled over Mobile Banking.

Debit Cards

Promotion Campaigns & Loyalty Rewards Programs have significantly helpedinincreasing the Debit Card usage at the Point-of-Sale terminal. In addition to our existingSBI Shopping & ATM Debit Card, SBI Gold International Debit Card and SBIYuva Card,the Bank has recently launched Platinum International Debit Card to cater tothe needs ofHNI & Affluent customers. As on 3 1 .03.2 010 , the Bank has a total of 7 0 .96 millionDebit Cards.

Prepaid Cards


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The Bank has already set up an Infrastructure Fund in collaboration withMacquarieGroup, Australia and IFC, Washington to invest into Indian Infrastructuresector. Allnecessary regulatory approvals have been obtained. The first closing of theinternationalleg of the fund was done with commitments of USD 1 .037 billion (includingSBIscommitment of Rupee equivalent of USD 150 million ). The fund raising of the

Domestic Legof the Fund is in progress.The Bank is in the process of signing a Joint Venture agreement for setting up aGeneralPurpose Private Equity Fund with Sovereign entities of Oman.

Merchant Acquiring Business

During the year, the Bank decided to foray into Merchant Acquiring Business(MAB).There are only 5 lacs Point of Sales (PoS ) terminals in India as against amerchant baseof 15 million. The Bank plans to deploy 6 lacs Point of Sales terminalsduring first fiveyears of its operations. The deployment will be across all geographies

viz., Metro, Urban,Semi-urban and rural. The initiative would facilitate Banks debit cardacceptanceacross the country as the facility is presently available at Metro, Urban andtouristcentres only. It is proposed to conduct the Merchant Acquiring Business under aseparatecompany with an experienced and reputed global partner. The Bank has sincefinalised VISAINC. and ELAVON as JV Partner.

H. INTERN AT IONAL BA NKING GROUP

H.1 OPER AT ION OF FOREIGN OFFICES

The asset level of foreign branches (excluding subsidiaries ) rose by 2 9% , from

USD2 1 .52 billion in March 2 009 to USD 27.7 8 billion in March 2 010 . During FY 2 010 ,netcustomer credit grew by 27 % from USD 17, 015 million to USD 2 1 ,561 million,customerdeposits grew by 42 % , from USD 6 ,7 18 million to USD 9 ,568 million and netprofit rose by 55% , from USD 144 million to USD 22 5 million.

Overseas Expansion

The number of foreign offices increased from 92 as on 3 1 st March 2 009 to 142as on 3 1 st March 2 010 spread across 32 countries. The offices comprised 42branches, 8 Representative Offices, 2 marketing offices, 2 sub offices, 2 extensioncounters, 82offices of the six foreign banking subsidiaries, an associate (Bank ofBhutan ), equity

investments in a foreign bank (Sterling Bank, Nigeria ) and 2 managedexchangecompanies.

New Offices opened during the year are as under :

six new overseas offices at Clementi, Marine Parade and Toa Payoh in Singapore,Kowloonin Hong Kong, Harrow in UK and Lenasia in South Africa,


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one branch by the Banks wholly owned USA subsidiary, SBI (California ) Ltd.,atWashington DC and

5 , 3 and 1 offices respectively by the Banks other overseas subsidiaries namelyBankSBI Indonesia, Nepal SBI Bank Ltd. and SBI Mauritius Ltd.

The Bank increased its stake from 50% to 55% in Nepal SBI Bank Ltd during the FY2010 ,making it the Banks sixth foreign banking subsidiary.

Resource Management

Despite volatile global market conditions, the Banks foreign officesmaintainedcomfortable liquidity position. During the year, the Bank raised, through itsforeignoffices, USD 7 50 million for 5 years, under the Banks MTN programme. Thisissue inOctober 2 009 was concluded at the tightest Asian senior debt pricing (mid swapplus 190 bps ) in the USD bond market.

NRI B usiness

NRI Deposits grew by Rs. 1 ,06 7 crores during the year and reached a level of Rs.50 ,01 7crores in March 2 010 . Advances to NRIs recorded a growth of Rs. 16 2 croreswithoutstandings of Rs. 1 ,3 80 crores as on 3 1st March 2 010 .

Remittances grew from Rs. 27, 632 crores in FY 2 009 to Rs. 37,3 19 crores in FY2010 ,clocking a growth of 3 5% . The Bank had a tie-up with 22 exchange companies for routingremittances through SBI.

During the year, seven new NRI branches were opened at Baroda, Ludhiana,Mangalore,Nawashahar, New Delhi, Pune and Salt Lake (Kolkata ), taking the number of NRI branchesfrom 13 to 2 0 .

International toll free numbers were operationalised in 17 countries for improvedcustomer care.

H.2 DOMES TIC OPER AT IONS

Merchant Banking

The Bank retained the leadership as Mandated Lead Arranger and Book Runner forsyndicated loans in Asia Pacific (excluding Japan but including Australia ) in 2 009 .Twelvesyndication deals aggregating USD 10 ,845 million and 16 bilateral dealsaggregating USD73 6 million were concluded in 2 009 -10 . Seven merger and acquisitiondeals aggregating USD7,43 0 million with Banks participation level of USD 74 5 millionfructified duringthe year.

Global Link Services (GLS)


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GLS, a specialized outfit, caters to speedier processing of transactions. In theyear2 009 -10 , GLS on behalf of domestic branches, handled 1 ,3 0 ,059 export bills and1 ,52, 951 foreign currency cheque collections aggregating USD 14. 09 billion. In addition,it handled2 9 ,24,4 68 inward remittance transactions amounting to USD 2. 94 billion fromvariouscentres in the Middle East, UK and USA.

Correspondent Relations

The Bank has entered into correspondent banking arrangement with 50 2reputedinternational banks to extend seamless services to varied clients. ThesecorrespondentBanks are located in 124 countries. The Bank also has 2, 051 Relationship ManagementApplication (RMA ) arrangements for SWIFT, facilitatingspeedier flow of financialmessages.

Countr y Risk and Bank Exposures

The Bank has in place Country Risk Management Policies in tune with RBIguidelines.These policies outline a robust risk management model with prescriptions for Country,Bank, Product and Counterparty exposure limits. Both Country-wise and Bank-wise exposurelimits are monitored and reviewed on a regular basis. The exposureceilings andclassifications are moderated in line with the dynamics of their risk profiles.Periodicalcorrective steps are initiated to safeguard the Banks interests.

I. ASSOCI AT ES AND SU BSIDI ARIES

I.1 The State Bank Group with a network of 17,337 branches including 4, 841 branchesof its six Associate Banks dominates the banking industry in India. In addition

tobanking, the Group, through its various subsidiaries, provides a whole range of financialservices, which include Life Insurance, Merchant Banking, Mutual Funds, CreditCard,Factoring, Security trading, Pension Fund Management and Primary Dealership inthe MoneyMarket.

I.2 Associate Banks

SBIs six Associate Banks had a market share of 6 .63% in deposits and 6 .88% inadvances as on last Friday of March 2 010 .

Table : 8 Performance Highlights of Associate Banks ( AB s)

(Amounts in Rs. crores ) As on 31 .03 .2009 As on 31 .03 .2010 Change (%)

Total Assets 3, 12, 943 3, 59 ,010 14.72 Agg. Deposits 2,64,77 9 3, 02, 835 14.37Total Advances 1 ,98 ,58 3 2,2 8 ,605 15 .12Operating Profit 5 ,4 95 .05 6 ,598 .72 2 0 .08


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Net Profit 2,774.47 3,2 66 .57 17.74Credit Deposit Ratio 7 5 .00% 75 .4 9% 0 .4 9 Capital Adequacy Ratio 12. 96% 13. 66% 0 .7 0 Gross NPA 2, 699 .91 3, 99 7. 57 4 8 .06

Net NPA 1 ,191 .2 6 1 ,961 .09 64. 62Return on Equity 19 .83% 18 .73 % -1 .10

I.3 S B I Commercial & International Bank Ltd . (S B ICI)

As at the end of March 2 010 , the aggregate deposits and total advances of SBICIstoodat Rs. 4 91 .52 crores and Rs. 2 07.98 crores respectively. The Bank recorded anoperating andnet profit of Rs.3.34 crores and Rs.3. 14 crores respectively. The net NPAsas at the endof March 2 010 was NIL.

I.4 S B I Capital Markets Limited (S B ICAP)

On 2 9 .03.2 010 , SBICAP has become a wholly owned subsidiary of SBI by buying outtheentire shareholding ( 13. 84%) of Asian Development Bank in SBICAPS.

SBICAP is a full service investment banking outfit offering Project AdvisoryServices,arrangement of Structured Finance, Capital Market Services like EquityIssuances, Mergers& Acquisitions and arrangement of Private Equity etc. TheCompany, during the year,has further consolidated its dominant position as arrangers of debt for the corporatesector both in the infrastructure as well as non-infrastructuresectors.

The following achievements are some of the recognitions won by the Company duringtheyear :

IFR Asia has awarded the company as India Loan House of the year. The Company has been conferred with "Bank of the year" in Asia Pacificby ThompsonReuters (PFI ) for Leadership in Project Finance.

Power Deal of the Year (Sasan ), Road Deal of the Year (Yamuna Expressway ) andTelecom Deal of the Year (Aircel ) by Euromoney.

Oil & Gas Deal of the Year (Cairn India ) by Thomson Reuters (PFI ). Ranked No. 1 in: i. Mandated Lead Arranger Global PF Loans with 14.3 % Market Share.

ii. Financial Advisor- Global PF Loans with 17.3 % Market Share.


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iii. Loans Mandated Arranger Asia ex-Japan with 17. 5% Market Share.

iv. Loans Book Runner Asia ex-Japan with 16 .8% Market Share.

The company has posted a PAT of Rs. 150 .10 crores as on 3 1 st March2 010 as againstRs. 92. 08 crores (excluding extraordinary income of Rs. 74. 98 crores ) as on3 1 .03.2 009 ,registering YoY growth of 63. 01% .

Declared an interim dividend of 140% .I.5 S B ICAP Securities Limited (SSL)

SSL, which commenced its operations in June 2 006 , is a broking company offeringequitybroking services to retail and institutional clients both in cash as well as inFuturesand Options segments. It is also engaged in Sales & Distribution of other financialproducts like Mutual Funds etc. The Company has launched e-broking services

to the clientsof SBI and Associate Banks. SSL has 7 0 branches and 17 franchisees andoffers Demat,e-broking, e-IPO and e-MF

Table : 9 Performance Highlights of the Associate Banks as at March 2010

(Rs. incrores )

Name of theBank

S BI's share in thecapital (%) Deposits Advances

OperatingProfit Net Profit

State Bank of Bikaner &Jaipur 75 45 ,509 35 ,56 3 90 3.73 4 55 .16 Hyderabad 100 75 ,2 60 53,344 1 ,72 0 .7 9 822.7 1 Indore 98 .05 30 ,045 23, 943 673.23 3 07.77Mysore 92.33 3 8 ,437 2 9 ,874 937.4 0 44 5 .77Patiala 100 64, 09 3 4 6 ,990 1 ,3 07.7 1 550 .89 Travancore 7 5 49 ,4 91 38 ,891 1 ,055 .86 68 4.27All 6 Banks 3,02,835 2,28,605 6,598 .72 3,266 .57

services to both retail and institutional clients. SSL currently has more than

1 ,10 ,000 customers in their books, which include more than 86 ,000 e-broking clients.The Companyhas posted a profit of Rs. 8 .11 crores as on 3 1 .03.2 010 as against a lossof Rs. 1 .32 croresas on 3 1 .03.2 009 .

I.6 S B ICAPS Ventures Limited (SVL)

SBICAPS Ventures Limited (SVL ), a USD 100 million Venture Capital Fund, jointlyheldwith SBI Holdings Inc. (Softbank ), Japan. The Fund has invested USD 8 million in


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twocompanies and a number of investment proposals are being examined. The scopeof the fundcovers all sectors except real estate and financial services. The Companyhas posted aprofit of Rs. 1 .00 crore as against a loss of Rs. 0 .07 crore as on 3 1 .03.2 009 .

I.7 S B ICAP (UK) Ltd .

SBICAP (UK ) Ltd., a three year old Company, has booked revenue of Rs.4.4 0 crores uptoMarch 2 010 as against Rs.2. 14 crores as on March 2 009 . The company has posted anet profitof Rs. 1 .92 crores as on March 2 010 , as against Rs. 0 .44 crore in thecorresponding periodlast year due to diversification of income streams.

I.8 S B ICAP TRUS TEE Co Ltd (S TCL)

SBICAP TRUSTEE Co Ltd (STCL ) has commenced security trustee business witheffect from 1 st August 2 008 . The Companys gross income for the year ended31 .03.2 010 isRs.3.7 8 crores and net profit is Rs. 1 .94 crores.

I.9 S B I DFHI L TD

SBI group holds 67.01% share in the Company, which is a primary dealer. For the period ended 3 1 st March 2 010 , the Companys PAT wasRs. 89 .23 crores asagainst Rs. 66 .94 crores as on March 2 009 with YoY growth of 33 % .

Increased market share in the Primary Dealer Segment from 14.24 % to 17. 08% . The Company is rated No. 1 in the league of Primary Dealers in India.I.10 S B I Cards & Pa yments Services Pvt . Ltd . (S B ICSPL)

SBI Cards, the only stand-alone credit card issuing company in India, is a jointventurebetween State Bank of India and GE Capital Services, wherein SBI holds 60% stake.

The "Cards in Force" (CIF ) of the Company stands at 2 6 .62 lacs and thereceivablesare at Rs. 1 ,7 65 crores at the end of March 2 010 .

The Company has posted a Loss before Tax of Rs. 15 3. 54 crores as on March 2 010 asagainst a Loss before Tax of Rs. 185 .12 crores as on 3 1 .03.2 009 .

SBI Cards has emerged as the most trusted brand by being the undisputedGoldAward winner in Readers Digest Trusted Brands Survey 2 009 in Credit Cardcategory.

Launched "mShop" a unique mobile application that will allow theCardholders to makepurchase on their mobile.


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I.11 . S B I Life Insurance Compan y Limited (S BILIFE)

SBI Life has a unique multi-distribution model comprising Bancassurance,RetailAgency & Institutional Alliances and Group Corporate Channels for distributionofinsurance products.

Ranked 1 st worldwide in terms of number of Million Dollar Round Table(MDRT ) members.

CARE has assigned iAAA rating to the company for consecutive 3 years in a row. Company tops the list of private sector insurance companies, improving itspositionfrom 2 nd rank in terms of New Business Premium, as per IRDA rankings.

Gross Premium of the Company has crossed the milestone of Rs. 10 ,000 crorestoRs. 10 ,10 4 crores as on 3 1 .03.2 010 registering a YoY growth of 4 0% .

The market share of SBI Life in the total industry improved to 6 .44 % as against 6% inMarch 2 009 and to 18 .34 % amongst private insurers from 16% as at March 2 009 .

Recorded a PAT of Rs. 27 6 crores as on 3 1.03.2 010 as against a loss of Rs. 2 6croresas on 3 1 .03.2 009 .

The Assets Under Management of SBI Life recorded a growth of 96% YoYto reachRs. 2 8 ,551 crores.

Number of new Individual policies written during 2 009 -10 is 13. 53 lacs asagainst 9 .37lacs during the same period last year.I.12 . S B I Funds Management (P) Ltd . (S B IFMPL)

SBIFMPL, the Mutual Fund arm of SBI, is the 7 th largest Fund House interms of "Assets Under Management" and a leading player in the market with 5 .9millioninvestors.

The schemes of the Fund House have performed consistently over the years andhaveemerged as the preferred investment for investors.

The company has posted a PAT of Rs. 7 5 .87 crores as on 3 1 .03.2 010 registeringYoYgrowth of 10% . The average "Assets Under Management" (AUM ) of the company as at March2 010 stood at Rs. 37,4 17 crores (market share 5 .01%) .

I.13 S B I Global Factors Ltd (SGFL)


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The merger of SBI Factors & Commercial Services Private Ltd. with GlobalTradeFinance Ltd. has been completed on 11 th February 2 010 after obtainingnecessary legaland regulatory approvals.

The merged entity is now called as "SBI Global Factors Ltd." The merger of two subsidiaries was effected to improve the market share indomesticand international factoring business as also to have synergy in operations andoptimisingefficiency.

SGFL commands 80% plus market share in this niche segment of factoring. The recession in the economy has severely impacted MSMEs and exports leadingtosharp rise in delinquencies in the factoring portfolio of SGFL.

During the year ended 3 1 st March 2 010 , the turnover of the companywas Rs. 12, 978 crores. The company earned a PAT of Rs. 6 .58 crores as on March 2 010 .I.14 S B I Pension Funds Pvt . Ltd . (S BIPF)

SBIPF is one of the three Fund Managers appointed by Pension Fund Regulatory&Development Authority (PFRDA ) for management of Pension Funds under the NewPensionSystem for Central Government (except Armed Forces ) and State GovernmentEmployees. SBIPF,a wholly owned subsidiary of the State Bank Group, commenced itsoperations from April2 008 . SBIPF has got the mandate to manage 54% of the total

corpus of pension fundsreceived under the New Pension System. The total "Assets Under Management of the company as on 3 1 st March 2 010 was Rs.2,277. 50 crores (YoY growth of 94. 12%) .

The Company recorded a net profit of Rs.2. 85 lacs. During the financial year, the company has been leading consistently in theGovt.Pension Scheme and State Govt. Scheme and has been in 1 st or 2 nd position in a fewother schemes.

Important Developments during the year in Associates & Subsidiaries: Government of India has given in-principle approval to the Bank for acquiringStateBank of Indore, one of its Associate Banks and the proposal is awaiting finalapprovalfrom RBI and GoI.


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The Bank has also decided to merge SBICI Bank, a wholly owned domesticbankingsubsidiary, with itself to bring about further synergy and efficiency. Necessaryapprovalis awaited from the Government of India.

The Bank has merged SBI Factors & Commercial Services Pvt. Ltd with GlobalTradeFinance Ltd., and the merged entity is now known as "SBI Global FactorsLtd."

Credit Agricole S.A. (CA ) and Societe Generale (SG ) have combined their assetmanagement operations and renamed it as Amundi, which is set to combine theentirety ofCAAM group, the asset management arm of CA and the European and Asianactivities ofSGs asset management business, SGAM, as well as 2 0% of TCW, its assetmanagementsubsidiary in the USA. The combined entity will be the 4 th largestassetmanager in Europe and the 9 th globally. As part of this, the shares of SBIFMPLheld by SGAM will be transferred to Amundi. An application has been madewith SEBI fornecessary approval, which is awaited.

J. ASSE T QU ALITY

NP A Management

The position of NPA reduction as on 3 1 .03.2 010 is given hereunder :

Table : 10 Asset Qualit y (Rs . in crores) 1 Gross NPAs 19 ,535 Gross NPA Percentage 3. 05% 2 Net NPAs 10 ,870

Net NPA Percentage 1 .72 % 3 Cash Recovery in NPA 2, 059 4 Up-gradation to Standard Assets5 Write offs 1 ,991 6 Gross reduction in NPAs (3+4+ 5) 8 ,0227 Fresh slippages of Standard Assets to NPA category 11 ,8438 Recovery in written off accounts 990

Restructuring of impaired Standard Assets as well as viable non-performingassets,both under CDR mechanism as well as under the Banks own scheme, have beengiven

top priority for arresting new additions and reducing the existing level of NPAs.

Proactive steps have also been taken for prevention of NPAs. The Bank referred 8 cases with aggregate exposure of Rs. 2, 995 crores toCDRmechanism this year out of a total of 3 1 cases with aggregate exposure of Rs.20 ,15 4 croresreferred to CDR by the Whole Banking system. Thus, our share in the


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debt in the casesreferred was 14. 86% by value. In all cases, timely intervention enabledthe accounts toretain their standard asset status.

3 Financial Assets involving principal outstanding of Rs. 23. 84 crores have beensold toother banks/ARCs during the year.

K. INFORM AT ION TECHNOLOG Y

i) Networking: The Bank has implemented a secure, robust and scalableWANarchitecture connecting 18 ,189 Branches/Offices and 2 1 ,4 85 ATMs of State BankGroupthrough leased lines, VSATs and CDMA technology, supporting all criticalbusinessapplications.

ii) Core Banking: The Banks CBS implementation is among the worldslargest.Several technical enhancements, such as multi-streaming of key batch programshavefacilitated elongation of the business operations window. Many importantfunctionalities,

such as, Defence Salary Package, ASBA, Universal Passbook etc., havebeensuccessfully introduced in the application to meet specific requirements of Govt.,Corporate and individual customers.

iii) AT M: With 2 1 ,4 85 ATMs, the network of State Bank Group ATM is among thelargestin the world, offering several value-added services such as Utility Bill Payment,Temple/Trust Donations, Card to Card Transfer etc. A loyalty Rewards program, the firstof itskind, was launched to encourage the usage of Debit Cards at PoS terminals. Akeyinitiative is the planned launch of low cost rural ATMs, of which 3 00 will be poweredbysolar energy. Rolling-out of multifunctional kiosks has been initiated for offeringfacilities like non-cash ATM transactions, Internet Banking transaction, passbook

printingetc., through these kiosks.iv) Internet Banking: The Banks Internet Banking product has been rated veryhigh for its customer friendly user interface and the range of products and servicesoffered toretail and corporate customers. Some of the new features enabled during theyear include, online payment of commercial taxes in 15 States, ASBA, NRI eZ-trade,PensionSlip, SMS alerts for on-line transactions, virtual keyboard, VISA money transfer,UPSC/SSCrecruitment application fee payment, e-TDR/ STDR etc. A Loyalty Rewardsprogram for retailinternet customers was also launched during the year.

v) Pa yment S ystems Group: The year has witnessed a sharp increase in volume of

RTGSand NEFT transactions. A Payment Tracking System has been implementedthrough SMS onmobile as also through the Contact Centre to enable customers knowthe status of theirRTGS/NEFT remittance. A second Contact Centre on Customer VoicePortal was set up atVadodara during the year. A complaint Management System hasbeen implemented at ContactCentre wherein the cash related ATM complaints from thecustomers are resolved. Keeping inview the requirement of senior citizens, a PensionManagement System was introduced atContact Centre enabling the pensioners tomake enquiry on their pension details throughContact Centre.


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vi) Mobile Banking: A host of Mobile Banking services, such as fundstransfers,enquiries, cheque book requests, bill payments, Mobile Top-up, recharging of DTH services,Demat account enquiry are currently being offered.

vii) Enterprise Data Warehouse: The Enterprise Data Warehouse Project (EDWP )

waslaunched during the year. While a few business critical reports are already beingprovidedby EDWP, the end users will have access to all regular and ad hoc reportsrequired foroperational and decision making requirements through a web portal in aphased manner.

viii) Information Securit y: The Bank has implemented a robust IT PolicyandInformation System Security Policy which is in line with international bestpractices.These policies are reviewed periodically and suitably strengthened in order toaddressemerging threats. Regular Security Drills and Employee Awareness programsare conducted toensure security and increase awareness among staff.

ix) Foreign Offices: All the application/database instances of our 125 foreignoffices in23 countries are now centrally located at the Banks Data Centre atBelapur, with theDisaster Recovery Site located at Chennai. Internet banking has beenextended to 119 foreign offices. 7 5 ATMs of foreign centres are connected to our ATMSwitch.

x) Regional Rural Bank (RR B ) Computerisation : In pursuance to RBI guidelines,aProject was initiated to bring the RRBs on to CBS platform using"B@ncs24"application software through the ASP model. As on 3 1 .03.2 010 , all branchesof six RRBssponsored by State Bank Group have been migrated to CBS. RRBcomputerization on CoreBanking platform will be completed during the financial year 2010 -11 .

xi) State Bank Institute of Information and Communication Management (S B IICM):Theinstitute has introduced a variety of training programmes in tune with theBanksrequirements. SBIICM has conducted 2 65 programmes covering 6 ,885 officialswith a capacityutilisation of 10 3. 92% during the financial year 2 009 -10 .

xii) Awards & Accolades: During the year, the Bank has won the following awardsinthe IT area :

Nasscom CNBC IT User Award 2 009 for the proactive and holistic approach toITadoption and the seamless alignment of IT with business strategy.

Financial Innovator Award for Central Plan Scheme Monitoring for harnessingtheflexibility, scalability and reliability of technology to remove obstacles to progressandcreate new opportunities.

IBA, Finacle & TFCI Banking Technology Awards 2 009: "Technology Bank ofthe Year" Award.


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Miscellaneous Operations

L Risk Management & Internal Controls

M Customer Service & Corporate Social

Responsibility

N Corporate Communication & Change

O Organisational Planning

P Right to Information Act.

Q Human Resources Department

R Business Process Re-engineering

S Official Language

T Banking Operation Department

U Super Circle of Excellence

V Credit Policy and Procedures

Department

L. RISK M ANAGEMEN T & INTERN AL CON TROLS

Risk Management in S B I

L.1 Risk Management Structure

An independent Risk Governance Structure is in place for Integrated RiskManagementcovering Credit, Market, Operational and Group Risks. This frameworkvisualisesempowerment of Business Units at the operating level, with technology beingthe keydriver, enabling identification and management of risk at the place of origination.

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

The Risk Management Committee of the Board (RMCB ) has the overallresponsibilityto monitor and manage Enterprise Wide Risk. RMCB is supported by theCredit RiskManagement Committee(CRMC ), Market Risk ManagementCommittee(MRMC ), Operational RiskManagement Committee (ORMC ), Group RiskManagement Committee (GRMC ) and Asset LiabilityManagement Committee (ALCO ).


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All the above mentioned Committees, except ALCO, are headed by theManagingDirector & Chief Credit and Risk Officer who is also the Chairman of RMCB.

ALCO isheaded by the Deputy Managing Director & Chief Financial Officer.

Risk Management is perceived as an enabler for business growth and instrategicbusiness planning, by aligning business strategy to the underlying risks. This isachievedby constantly reassessing the interdependencies / interfaces amongst eachsilo of Risk andbusiness functions.

L.2 Basel II Implementation

As per RBI Guidelines, the Bank has migrated to Basel II Framework as on 3 1 st March2008 . Simultaneously, the Bank has initiated the process of fine tuning the systems&procedures, IT capabilities and Risk Governance Structure to meet the requirementsof the Advanced Approaches.

Various initiatives such as new Credit Risk Assessment Models, independentvalidationof Internal Ratings and improvement in Loan Data Quality would facilitateefficient use of Capital as well as smooth transition to Advanced Approaches.

Efforts are on hand to enhance the degree of awareness at the Operating levelinalignment with better risk management practices, Basel II requirements andoverarching aimof conservation and optimum use of capital.

Keeping in view the changes that the Banks portfolios may undergo instressedsituations, the Bank has in place a Policy which provides a framework forconducting theStress Tests at periodic intervals and initiating remedial measureswherever warranted.

The scope of the tests are constantly reviewed to include morestringent scenarios.L.3 Credit Risk Management

Credit Risk Management Process encompasses Identification, Assessment,Measurement, Monitoring and Control of the Credit Exposures. Welldefined basic riskmeasures such as CRA Models, Industry Exposure Norms,Counterparty Exposure Limits,Substantial Exposure Limits, etc., have been put in place.

Frequency of Stress Tests in respect of Credit Risk has been increased fromAnnual toHalf-yearly, to identify Credit Risk at an early stage and to initiateappropriate measures

to contain/ mitigate Credit Risk.L.4 Market Risk Management

Market Risk Management is governed by the Board approved policies forInvestment,Private Equity & Venture Capital, Trading in Bonds, Equities, ForeignExchange andDerivatives.


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Exposure, Stop Loss, Modified Duration, PV 01 (PV is Price value of 1

introduction to the subject

Documents