ECONOMIC BACKDROP AND BANKING ENVIRONMENT
Global Economic Scenario
The global economic environment has broadly strengthened, and is likely to improve
further, with much of the growth impetus emanating from advanced economies. However,
global growth still remains uneven with strengthening of the US economy, subdued growth in
the Euro Area and Japan and slowdown in Emerging Markets and Developing Economies (EMDC).
Although full global recovery is a distant prospect, normalisation of fiscal policies is
now on the agenda of governments across the world.
The prices of global energy items and non-fuel commodities reduced by 1% and 1.2%,
respectively, due to lower demand in 2013. However, the decline in commodity prices
reflected disproportionately on consumer inflation. For the advanced countries, consumer
inflation declined by 0.6% to 1.4% in 2013, while in the EMDC it exhibited downward
rigidity and declined marginally by 0.2% to 5.8%.
The policy responses of major central banks (the US, ECB and Japan) no more resemble
the coordination of the earlier years. The US Federal Reserves Quantitative Easing
programme is expected to witness major unwinding before the end of 2014. However,
conditions in Euro Zone and Japan may constrain the European Central Bank (ECB) and Bank
of Japan to scale down monetary expansion programmes. In such a scenario, we may enter
into a new phase of asymmetric policy responses, where both ECB and Bank of Japan will be
expanding, while the US will, in part, contracting. These policy stances may heighten the
uncertainty associated with global growth momentum. The impact on asset prices and
commodity prices thus will remain uncertain.
Indias Economic Scenario
India remains one of the fastest growing economies of the world. However, the
countrys growth momentum has remained subdued for two consecutive years, reflecting
weak and fragile global growth and domestic supply constraints. Indias GDP growth
improved moderately to 4.7% in FY 2013-14 against 4.5% in the previous year, and is
estimated to increase further to 5.3%-5.5% in the current financial year (SBI estimates).
The forecast for below normal rainfall in current fiscal does not augur well for
agricultural production. There were also unseasonal rains, accompanied by hailstorm and
frost during early part of March 2014 in various parts of the country, adversely impacting
Rabi crops. However, the good thing is that, led by higher crop production, agricultural
GDP including allied sector is poised to grow by 4.7% in FY 2013-14, over three times
higher than 1.4% in the previous year. Industrial growth continues to remain sluggish due
to lackluster investment climate, stalled projects and subdued consumption demand.
Persistent contraction in the mining sector, owing to regulatory and environmental hurdles
also contributed to the overall decline in industrial activity.
However, the electricity sub-sector grew smartly by 5.9% in FY 2013-14 against 2.3% in
the previous year. It continued to generate some optimism amidst a bleak industrial
scenario, but its buoyancy was clearly inadequate to counter the weakness of other
constituent sectors. With the formation of a stable Government at the Centre with renewed
focus on reforms, economic activity across all sectors is likely to pick up pace.
Inflation, both Wholesale Price Index (WPI) and Consumer Price Index (CPI), remains a
matter of concern. Both the build-up of inflation during April - November 2013 and the
subsequent fall in inflation during December - February 2013-14 was driven by food prices.
During the period June - December 2013, inflation in food articles remained in
double digits, while in manufactured products it was stable at around 3% throughout the
year. In fuel and power sector, inflation rose to 8.9% in April 2014 from 8.3% in April
2013. The core inflation remained below 3% during April November 2013 but
thereafter rose gradually to 3.50% by end of March 2014. However, it again declined to
3.40% in April 2014.
The Indian economy is now on the threshold of a major transformation, with expectations
of policy initiatives by the newly elected Central Government.
On the external front, improvement in the current account deficit (CAD) from 4.7% of
GDP in FY 2012-13 to 1.7% for FY 2013-14 is good news. The narrowing of CAD followed a
lower trade deficit due to higher exports as well as moderation in imports. With a gradual
recovery in key partner economies, Indias exports began to improve in July 2013;
this was also helped by rupee depreciation. During FY 2013-14, exports grew by 3.98%,
while imports contracted by 8.1%. It resulted in sharp contraction in trade deficit from
USD 190.3 bn in March 2013 to USD 138.6 bn in March 2014, primarily due to a 40% decline
in gold imports. Going forward, with a likely improvement in world GDP and global trade,
export growth is likely to recover in 2014-15.
Due to various measures taken by the RBI since September 2013, surge in capital inflows
led to reserve accretion. This is yet another positive development during the financial
year 2013-14. The RBIs swap windows for banks mobilisation of fresh FCNR(B)
deposits and overseas borrowing helped to build reserve during September - November 2013.
With the revival of portfolio flows since December 2013, Indias forex reserves
reached USD 314.9 billion (as on 16th May, 2014), an accretion of USD 22.9 bn over that of
a year ago. With a lower CAD and build-up of foreign exchange reserves, the downward
pressure on the currency and the volatility in the Indian rupee have subsided down. The
rupee has also moved in a narrow range of Rs.60.10 to Rs.62.99 per US dollar since
End-November 2013 to March 2014. In fact, during this period the rupee outstripped most of
the other emerging market currencies.
The Indian economy is now on the threshold of a major transformation, with expectations
of policy initiatives by the newly elected Central Government. The economy is on the road
to modest recovery with cautiously positive business sentiments, improved consumer
confidence and more controlled inflation. The sectors which were significantly impacted by
the crisis and slowdown in the economy are now showing definite signs of improvement. The
challenge for maintaining disinflationary momentum over the medium term, however, remains
on the horizon. A moderate recovery is likely to set in 2014-15 and real GDP may grow by
5.3% to 5.5%.
However, data revisions for previous quarters and the consequent changes in base
effects impart uncertainty to the growth trajectory ahead. The pace of recovery,
nevertheless, is likely to be modest. It is likely to be supported by investment activity
picking up due to part resolution of stalled projects and improved business and consumer
In an interesting development, the Indian Meteorological Departments (IMD)
forecast of below normal rains have triggered widespread discussions about Indias
production of food grains, agricultures contribution to the GDP and concerns about
food inflation in the current fiscal. Whatever may be the course of Monsoon 2014 going
forward, fears of drought are unfounded at this point of time.
The outlook for industrial activity is positive. Industrial growth, which had been
subdued in the past two fiscal, is now likely to gather momentum with moderately stronger
global growth, improving export competitiveness and implementation of recently approved
investment projects. The new Central Governments reforms focus should also act as an
impetus to growth.
In the baseline scenario, commodity prices will remain muted during 2014. In the
current scenario, global food and meal prices are likely to moderate. According to the US
Energy Information Administration (EIA), the Brent crude oil price is projected to average
USD 105 and USD 101 per barrel in 2014 and 2015, respectively, thus imparting a clear
Going forward, while the global commodity price scenario provides some comfort, the
rate of inflation may decelerate further from what has been witnessed in recent months.
In the coming years, we may see a fascinating scenario emerging in the India-China
growth debate. While India is now focusing on increasing its share of manufacturing sector
to 25% by 2025, China has already embarked on a mission of significantly revamping its
services sector. The strategy of shifting the Chinese economy towards a service-sector
bias may sooner or later impact Indias services trade balance. However, considering
Chinas growing ageing population such structural transformation would take a while
Banking Industry Developments
Being one of the top 10 global economies with a billion-plus population, India offers a
significant potential for the banking sector to grow. In addition, one third of the
countrys population still remains outside the purview of formal banking offering the
Indian banking industry a rare opportunity to grow and help facilitate the nations
inclusive growth agenda.
Going forward, the countrys Rs.81 trillion (USD 1.34 trillion) banking industry
may see more participants and greater healthy competition. Two new banks have already
received licences from the RBI i.e. IDFC and Bandhan Group, which apart from providing
impetus to financial inclusion, is expected to intensify competition in the banking sector
in the medium term.
Going forward, the countrys Rs.81 trillion (USD 1.34 trillion) banking
industry may see more participants and greater healthy competition
In addition, by postponing the implementation of Basel III capital accord by one year,
RBI has given some breathing space to banks struggling with plummeting margins and lower
profitability on account of increase in NPAs. The Reserve Bank of Indias (RBI) new
norms will further encourage banks to identify potential bad loans and take corrective
As a part of monetary transmission, base rate of major banks inched up from
9.70%-10.25% in April 2013 to 10.0% -10.25% in March 2014, while deposit rates were
readjusted from 7.5%-9.00% to 8.0%-9.25% in the same period.
While aggregate deposit of All Scheduled Commercial Banks (ASCBs) grew by 14.1% in FY
2013-14 against 14.2% growth in FY 2012-13, credit expanded by 13.9% against 14.1% in the
The Reserve Bank of Indias (RBI) new norms will further encourage banks to
identify potential bad loans and take corrective actions.
Given the system wide economic slowdown, the financial performance of the Bank during
the financial year ended 31st March, 2014, remained satisfactory. The Bank registered a
good growth in Operating Profit during the fourth quarter of the year as compared to
previous quarters. The Operating Profit of the Bank for 2013-14 was higher at Rs.32,109.24
crores, as compared to Rs.31,081.72 crores in 2012-13, an increase of 3.31%.
The Bank posted a Net Profit of Rs.10,891.17 crores for 2013-14, as compared to
Rs.14,104.98 crores in 2012-13, i.e. a decline of 22.78% on the back of higher
Net Interest Income
Due to higher growth in the advances and investment portfolios, the gross interest
income from global operations rose from Rs.1,19,655.10 crores to Rs.1,36,350.80 crores
during the year registering a growth of 13.95%.
The Net Interest Income of the Bank correspondingly registered a growth of 11.17% from
Rs.44,329.30 crores in 2012-13 to Rs.49,282.17 crores in 2013-14.
Interest income on advances in India increased from Rs.85,782.26 crores in 2012-13 to
Rs.97,674.91 crores in 2013-14 registering a growth of 13.86%, due to higher volumes.
However, the average yield on advances in India has declined from 10.54% in 2012-13 to
10.30% in 2013-14.
Income from resources deployed in treasury operations in India increased by 15.24%
mainly due to higher average resources deployed. The average yield has also increased to
7.65% in 2013-14 from 7.54% in 2012-13.
Total interest expenses of global operations increased from Rs.75,325.80 crores in
2012-13 to Rs.87,068.63 crores in 2013-14. Interest expenses on deposits in India during
2013-14 recorded an increase of 15.65% compared to the previous year. The average cost of
deposits has increased by 6 basis points from 6.29% in 2012-13 to 6.35% in 2013-14,
whereas the average level of deposits in India grew by 14.55%.
Non-interest income increased by 15.69% to Rs.18,552.92 crores in 2013-14 as against
Rs.16,036.84 crores in 2012-13. During the year, the Bank received an income of Rs.496.86
crores (Rs.715.51 crores in the previous year) by way of dividends from Associate
Banks/subsidiaries and joint ventures in India and abroad.
There was an increase of 22.43% in the Staff Cost from Rs.18,380.90 crores in 2012-13
to Rs.22,504.28 crores in 2013-14. The main reasons for increase were higher provision for
pension liability due to revision in mortality table from 01.04.2013, impact of which was
Rs.2,400.00 crores and provision for wage revision to the tune of Rs.1,814.00 crores.
Other Operating Expenses registered an increase of 21.26% mainly due to increase in
expenses on rent, taxes and lighting, law charges, postage, telephones, printing and
stationery, insurance and miscellaneous expenditure.
Provisions and Contingencies
Major amounts of provisions made in 2013-14 were as under:
Rs.14,223.57 crores (net of write-back) for non-performing assets (as against
Rs.11,367.79 crores in 2012-13).
Rs.1,260.69 crores towards Standard Assets (as against Rs.749.61crores in
2012-13), including the current years provision, the total provision held on
Standard Assets amounts to Rs.6,575.43 crores.
Rs.5,282.71 crores towards Provision for Tax in 2013-14, (as against Rs.5,845.91
crores in 2012-13).
Rs.563.25 crores provisions for depreciation on investments, excluding
amortisation of premium on Held to Maturity category (as against Rs.961.29
crores write back towards depreciation on investments in 2012-13).
Reserves and Surplus
An amount of Rs.3,339.62 crores (as against Rs.4,417.86 crores in 2012-13) has
been transferred to Statutory Reserves.
An amount of Rs.216.75 crores (as against Rs.19.17 crores in 2012-13) has been
transferred to Capital Reserves.
An amount of Rs.4,796.63 crores (as against Rs.6,453.26 crores in 2012-13) has
been transferred to other Reserves.
The total assets of the Bank increased by 14.43% from Rs.15,66,211.27 crores at the end
of March 2013 to Rs.17,92,234.60 crores as at the end of March 2014. During the period,
the loan portfolio increased by 15.70% from Rs.10,45,616.55 crores to Rs.12,09,828.72
crores. Investments increased by 13.52% from Rs.3,50,877.51 crores to Rs.3,98,308.19
crores as at the end of March 2014. A major portion of the investment was in the domestic
market in government securities.
The Banks aggregate liabilities (excluding capital and reserves) rose by 14.08%
from Rs.14,67,327.59 crores on 31st March, 2013 to Rs.16,73,952.35 crores on 31st March,
2014. The increase in liabilities was mainly contributed by increase in deposits and
borrowings. The Global deposits rose by 15.94% and stood at Rs.13,94,408.50 crores as on
31st March, 2014 against Rs.12,02,739.57 crores as on 31st March 2013. The borrowings
increased by 8.24% from Rs.1,69,182.71 crores at the end of March 2013 to Rs.1,83,130.88
crores as at the end of March 2014.
I. CORE OPERATIONS
At SBI, we believe customers represent the foundation of our achievements across
decades. It is their continuing support in our vision that has helped us strengthen our
legacy as the nations most successful commercial Bank. Therefore, all our strategies
and initiatives revolve around the Customer and his/her preferences and
Our Customer Service link, available 24 x 7 on SBI-Online, has the option of
Online/Offline Complaint Registration. Also Online/Offline Appreciation/ Feedback portal
provides the feeling of Customer Delight, to our customers.
The Bank was the first in India to introduce a code of Fair Banking Practices in the
country called Towards Excellence. The code reflects the Banks
continuing commitment to provide world-class banking services to all sections of society.
Towards this purpose, SBI has laid down several policies:
Policy on Grievance Redressal
Cheque Collection Policy
Policy on Depositors Rights
Policy on Security Repossession/Code of Conduct for Recovery Agents
Policy on Multi-city Cheque
SBIs Contact Centre caters to customers through inbound calls and e-mails. It has
emerged as a strong alternate channel and is providing following customer services:
Account Information to customers having ATM-cum-Debit Card (Balance info, last
five transactions, among others).
Debit Card hot-listing and Status of the debit card, ATM PIN re-generation
Information on products and services and lead registration.
Registration of complaints.
Pension particulars (Basic Pension, Dearness allowances, status of life
certificate, among others).
Online trouble shooting for Mobile Banking, Internet Banking and Mobi-cash.
Status of NEFT/RTGS and SBI Express Remittances.
Contact Centre is available 24x7 through 2 toll free helpline nos. 1800 11
2211/1800 425 3800 and toll number 08026599990. Bank has 4 Contact Centres at Vadodara,
Bangalore, Agra & Kolkata.
This helpline provides a human interface of the Bank, thus helping in migrating
the customers from branches. It is estimated that it helps in reducing footfalls at
branches by an average of 20 customers/day per branch.
It is handling approximately 3.50 lakhs calls/day in 12 languages including
Hindi and English. Out of this, Customer Service Representatives attend approx. 80,000
calls, whereas the remaining calls are served on self-service options through Interactive
Voice Response System (IVRS).
It is also responding to e-mails received on major SBI Corporate IDs like
email@example.com, ibanking@ sbi.co.in, firstname.lastname@example.org, feedback.
In keeping with our Vision Statement, SBI strives to achieve one of the highest
standards in customer service. Customers have direct access to relevant Authorities,
Controllers and the Management at the apex. Two days in a month are observed as
Customer Day, when Branch Head & Administration Officers are available to
receive suggestions from customers and resolve their grievances.
The Banks mandate is to redress customer grievances within maximum three weeks of
receipt, as against a 30-day timeline prescribed in the BCSBI Code. All ATM related
customer complaints are redressed within seven days (prescribed by the RBI). The Bank has
put in place a Compensation Policy to compensate aggrieved customers financially for any
slippage in services extended.
Fraud Prevention and Monitoring
The Bank has taken several measures to strengthen the internal control mechanism to
I. Business Groups
A) National Banking Group
B) Corporate Banking Group
C) Mid Corporate Group
D) International Banking Group
E) Global Market Operation
A) National Banking Group
The National Banking Group (NBG) is the largest business vertical of the Bank,
anchoring 95.24% of total domestic deposits and 52.05% of total domestic advances, as on
31st March, 2014. It is also the largest business vertical in terms of branch network and
RBU, PBBU, ReH & HD and SME business units are having business portfolios above
Rupees One Lakh crores, each.
Exhibit 1: Branch Expansion Trend
|Branches added during FY 2013-14
* Excluding 24 BPR/ other outfits (RACPCs, CPCs, etc.)
Exhibit 2: NBG Business Performance
Rs. (in crores)
|Segmental Advances (non-food)
* excluding account transfer to MCG during FY 2013-14
Financial Inclusion (FI)
The Bank has set up 45,487 Business Correspondent (BC) Customer Service Points
through alliances both at the national and regional level.
The Bank is offering various technologically enabled products through BC
channel, such as Savings Bank, flexi RD, STDR, remittance and SB-OD facilities.
The Bank has achieved 100% coverage across 31,729 villages during FY 2013-14.
The cumulative coverage totalled 52,260 villages.
Over 11,423 BC outlets have been set up across urban/ metro centres, which cater
to the requirements of migrant labourers and vendors, among others. During FY 2013-14, 226
lakhs remittance transactions for Rs.9,983 crores were registered through BC channel.
During FY 2013-14, the Bank has opened 1.50 crores small accounts with
simplified KYC, taking the overall tally to 3.53 crores accounts.
The transactions volume through the BC Channel has grown to Rs.22,525 crores
during FY 2013-14 as against Rs.13,033 crores during FY 2012-13.
To facilitate transactions through alternate channels, the Bank has issued 24
lakhs FI Rupay ATM Debit Cards to FI customers.
Linking of villages to branches through CSPs in a hub-and-spoke model has been
launched and 69,749 villages have been linked so far. A facility of depositing loan
repayments at 31,919 BC outlets has also been enabled.
Direct Benefit Transfer (DBT) Scheme has been successfully rolled-out. The Bank
has successfully completed 27.41 lakhs transactions amounting to Rs.505 crores as
Sponsoring Bank in addition to handling 7.1 lakhs transactions amounting to Rs.98.61
crores as Receiving Bank. Overall 1.36 crores accounts were linked with Aadhaar across the
SBI is the sole Sponsoring Bank for DBT for LPG transactions, which are
processed centrally for all the three Oil Marketing Companies; over 8.98 crores
transactions amounting Rs.5,393 crores were successfully processed.
Over 4.46 lakhs SHGs are credit linked with credit deployment of Rs.5,134
crores. Our market share in SHGs is 22%.
The Bank retained its leadership in Agri Business by crossing Rs.1,16,081 crores
under agri-segmental advances covering over 1.13 crores customers. A total of 5.13 lakhs
new customers were brought in the Banks fold during FY 2013-14.
Short-term production credit constituting KCC and Agri Gold Loan, recorded 14%
Average agri loan ticket size increased to Rs.1.03 lakhs through migration of
crop loans to revised Kisan Credit Card scheme operated through ATM enabled State Bank
The number of Kisan Credit Card issued by Bank crossed 61.60 lakhs during FY
Flow of Credit to Agriculture
As in the past, the Bank has surpassed Agri credit flow target set by GOI during FY
Exhibit 4: Flow of Credit to Agriculture Trend
New Products Launched
To meet the emerging needs of the farmer in tune with market dynamics, the Bank has
rolled out new loan products - Multi-Purpose Agri Gold Loan a hassle-free and
tailor-made product to tap the potential in Agri Gold Loan business for all investment
credit needs, such as minor irrigation, horticulture and farm machinery, among others.
To create awareness among farmers and to improve coverage/penetration of the
Banks Agri products, special campaigns were launched.
KCC Campaign: To drive growth in KCC loan portfolio through renewal and
migration of existing KCC accounts under the revised KCC scheme, a business of Rs.6,841
crores was garnered under the campaign in FY 2013-14.
Swarnadhara Campaign: To promote Agri gold loans and Multi-Purpose Agri
Gold Loan, the campaign was re-launched quarterly and mobilised a business of Rs.4,342
crores during FY 2013-14.
Tractor Loan Carnival: To promote New Tractor Loan scheme, which
was dovetailed to capture and regain the competitive tractor market and garnered a
business of Rs.274 crores in FY 2013-14.
Krishi Plus: To target the existing high-value agri borrowers (limit of Rs.3
lakhs and above) with good track record for the sanction of an additional loan to capture
growth with quality. A total of 4,148 accounts, aggregating to Rs.108.15 crores, have been
sanctioned under the campaign.
Bonding with Farmers
SBI Ka Apna Goan Scheme: During FY 2013-14, 121 new villages were adopted
under SBI Ka Apna Goan Scheme for overall development, taking the total number
of villages adopted to 1,393.
Farmers Club: A total of 145 new Farmer Clubs were formed for fostering
continued relationship with the farming community taking the total number of Farmer Clubs
to 10,670 as on 31st March, 2014.
Hub-and-Spoke Model with BC network: The Bank has established linkage with 67,489
villages through 34,064 rural CSPs for scouting applications from customers residing in
remote unbanked areas and bringing them into the banking fold.
Loan Origination Software (LOS): Loan Origination Software applications support
tracking and recording all processes from sourcing to sanction, documentation, control and
subsequent account opening in CBS, resulting in avoidance of repetitive work.
Personal Banking Business Unit (PBBU)
Domestic Deposits have grown by Rs.1,17,100 crores (16.87%) and Advances by Rs.6,702
crores (7.43%) as on 31st March, 2014. CASA Deposit has grown by 15.51% and CASA Ratio as
on 31.03.2014 is 46.95%. During the year, we have taken the following steps to strengthen
our Savings Bank product and to make it more competitive:
Online Account opening facility has been popularised.
Personal Accident Insurance was enhanced by adding two new insurance cover slabs
of Rs.10 lakhs and Rs.20 lakhs.
Medical Insurance was introduced for Savings Bank Account holders.
Number of free multicity cheques was linked to the Average Quarterly Balance
The above mentioned initiatives strengthened customer acquisition.
The number of Premier Banking customers has increased from 2,78,509 to 3,57,679
customers during FY 2013-14. There is 27% growth in deposits in this segment.
During the year, four exclusive HNI branches and 45 new PBBs were opened.
During FY 2013-14, NRI Deposits have grown by Rs.32,518 cro