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State Bank of India

BSE: 500112 | NSE: SBIN ISIN: INE062A01020
Market Cap: [Rs.Cr.] 1,93,720.10 Face Value: [Rs.] 1
Industry: Banks - Public Sector

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Global Economic ScEnario

There is a whiff of optimism in the air. The outlook for global growth seems to be turning for the better with the Euro Area Q1 GDP growth at 0.4%, a bright spot in a weak global economy. The International Monetary Fund (IMF) continues to project the global output growth at 3.5% in 2015, which is a marginal improvement over the 3.4% achieved in 2014. While the advanced economies (AE) have shown some improvement, the growth across AE and emerging bloc continues to diverge substantially. Emerging market and developing economies accounted for three-fourths of global growth in 2014 and this trend is unlikely to tilt in favour of AE in near future.

As far as Euro Area was concerned, only the German performance was the big surprise on the downside although the setback was largely on the external front with domestic demand remaining strong. In contrast, Spain, France and Italy’s growth accelerated on the back of strong household consumption (albeit helped by energy consumption), defying the negative messages from the persistently weak manufacturing PMIs.

While the Q1 growth data caution against expecting a big growth bounce in the Euro Area, we are confident that the fundamental macro drivers remain in place to lift activity further going forward. Greece though remains a serious concern. However, if the strong growth momentum continues, potential spill overs from a Greek accident on to the rest of Europe may be limited.

Elsewhere 2015 will be the year when global economy will witness a structural break owing to complex forces such as population ageing and declining potential growth; global shocks, such as lower oil prices and many country or region-specific factors, such as crisis legacies and exchange rate swings triggered by actual and unexpected changes in monetary policies. China’s shift to ‘new normal’ is judged by many as a one such major structural shift, which may have cascading effects across the globe. Over the next five to ten years, the ‘new normal’ strategy will recalibrate China’s domestic economy towards domestic consumption by reducing the share of investments in GDP and correcting the twin surplus in its balance of payments thus altering demand for capital and commodities.

Although full global recovery that is realising pre-crisis levels of growth - have still not been met; normalisation of fiscal and monetary policies continues to be the agenda of Governments across the world. Equally important, there is now a greater realisation among members of global community that balance of economics influence has changed and supporting institutions have not caught up. This realisation was clearly visible when the BRICS announced the formation of New Development Bank and a large number of countries joined the China led of Asia Infrastructure Investment Bank to fill the vacuum unaddressed by existing institutions.


The Indian economy is poised for a gradual recovery. GDP based on new series grew by 7.3% in FY2015 compared to 6.9% in FY2014 and 5.1% in FY2013. Central Statistical Organisation (CSO) introduced a new measure of growth called Gross Value Added (GVA) in line with the international perspective. On GVA basis, economy is expected to grow by 7.5% in FY2015 on the back of robust growth in services (10.5%) and industry (5.6%).

The forecast for deficit monsoon this year is a matter of concern given the fact that unseasonal rains, accompanied by hailstorm and frost during early part of March 2015 in various parts of the country, had adversely impacted Rabi crops. Hence, the country’s food-grain production is expected to decline by 3.2% to 257 million tonnes in FY2015 crop year (July to June) from the record 265 million tonnes in FY2014. However, the good news is that rain fall in the initial phase of monsoon was 12% more than normal.

Industrial growth, however, recently gained momentum and grew by 2.8% in FY2015 (4.1% in April 2015), as compared to negative growth of 0.1% in the previous fiscal, still way below its potential level. While mining and manufacturing sub-sector grew in the range of 1-2%, it is the electricity sub-sector which continued to generate some optimism in the industrial scenario, but its buoyancy was inadequate to counter the weakness of other constituent sectors.

Inflation,both Wholesale Price Index (WPI) and Consumer Price Index (CPI), remained modest during the latter part of FY2015. During FY2015, WPI inflation stood at 2.1% (average) compared to 6.0% in the previous fiscal. The sharp contraction in fuel prices contributed to the decline in the WPI. CPI inflation, based on new base, also declined to 6% (from 9.6% in last fiscal).

On the external front, improvement in the current account deficit (CAD) from 1.7% of GDP in FY2014 to 1.3% for FY2015 is a positive sign. Exports for FY2015 declined by 1.23% and settled at US$310.5 billion, mainly due to sluggish economic recovery among major trade partners. Similarly, imports for FY2015 was US$447.5 billion as against US$ 450.2 billion in FY2014, a contraction of 0.59% over the same period last year. Merchandise trade deficit for the year ended 31st March 2015 widened by US$1.3 billion at US$137 billion despite the windfall gains from lower crude imports.

Financing the CAD is no more an issue for the economy as the net portfolio capital inflows (FII) in FY2015 has registered a massive growth of 415% over the previous year inflows to reach US$45.7 billion and net foreign direct investment (FDI) for FY2015 has crossed US$34.9 billion, 61.2% higher than the net FDI inflow of the corresponding period last year. Net FII and FDI inflow together have crossed US$80.6 billion in FY2015, highest inflow ever since FY1991. Notably, stable capital flows equity and direct investment to total reserves) are now at 15.6%, a 5 year high with import cover of more than 9 months, a 4 year high.


Due to the sluggish economic environment, banking business has been impacted. In the year FY2015 (fortnight ended 20th March, 2015), credit growth of the ASCB stood at 9.00%, compared to FY2014 (21st March, 2014) growth of 13.9%. The sharp deceleration in credit is due to a high base effect, reduced corporate demand for bank loans, finance from other non-bank sources such as QIP and ECB. Meanwhile, deposits growth was at 10.7%, compared to last year’s growth of 14.1%. This reduced growth in deposits is due to high base effect, since RBI allowed banks to mobilize deposits through FCNR (B) in September, 2013.

RBI kept the key interest rates unchanged till 15th January, 2015 but thereafter reduced 75 bps three times (25 bps each) to enhance the credit offtake in the system. Further, to ease pressure on liquidity, RBI has slashed SLR by 100 bps to 21.5%. However, as a part of monetary transmission, deposit rate of major banks for more than one year maturity softened from 8.00%-9.25% in FY2014 to 8.00%-8.75% in FY2015, and base rate of major banks remains steady at 10.00%-10.25% throughout the year. To push the retail loans, a number of banks have reduced lending rates in some business segments such as housing, auto loans etc., without reducing the base rate of the Bank. Growth deceleration impinging on corporate profitability and move to system-driven identification of NPAs, the pressure on asset quality of the banks continued, due to a variety of reasons both internal and external.

Broad money (M3) growth remained low during Q3 and Q4 of FY2014. With credit and deposit growth moving broadly in tandem, liquidity conditions in the system remained comfortable throughout, barring transient liquidity mismatches due to frictional factors alluded to earlier.

To provide banking facilities to every household in the country by 26th January, 2015, the Prime Minister launched a nation-wide new programme, namely ‘Pradhan Mantri Jan Dhan Yojana’ (PMJDY) on 28th August, 2014. This ambitious programme targeted the poor who have no access to financial services, with an objective that easy access to the banking system can materially lift India’s economic prosperity. Also the Direct Benefits Transfers (DBTs) will plug the loopholes in the system to stop leakages in PDS, subsidy and other social welfare schemes in the country by centre/states/municipalities etc. The banks have crossed the target of opening 7.5 crores bank accounts by a huge margin opening 12.5 (portfolio crores accounts in phase I.

In a new development, RBI is likely to issue new bank licenses to "Small Finance Banks (SFB)" and "Payments Banks" during FY2016, which apart from providing an impetus to financial inclusion, is expected to intensify competition in banking sector in the medium term. Further, Government has allowed PSU banks to reduce the Government‘s stake up to 51%, to meet the capital requirements under Basel III.


India’s growth outlook is quite optimistic in the coming years. Various institutions such as IMF and the World Bank are also very confident about India’s growth and even according to the IMF, India’s growth would outpace China’s growth in 2016. Initiatives such as ‘Make in India’ and ‘Pradan Mantri Jan Dhan Yojna’, etc. and the plethora of reform measures taken by the Government have renewed fresh hope and optimism around the Indian economy.

In a recent development, the Indian Meteorological Department’s (IMD) forecast of deficit rains have triggered widespread discussions about India’s food grain production, agriculture’s GDP growth and its contribution to the economy and concerns about food inflation in the current fiscal. Whatever may be the course of Monsoon 2015 going forward, fears of drought are unfounded at this point of time.

There is a great rejuvenated optimism among corporates and industrialists regarding improving investment climate and fast project clearances. On the one hand, the quantum of projects stalled/abandoned has been reduced significantly commencements of new projects are also increasing.

FY2015 ended with a missed target for exports. Gradual recovery of the major trade partners is expected to ease the concern in the current fiscal. FY2016 CAD is expected to be at 1.5% of GDP. Change in the domestic GDP base and improvement in the external demand sentiment is expected to push the exports further. Declining crude oil, metal and commodity prices in the international market are expected to ease trade deficit.

The much awaited Foreign Trade Policy (FTP) 2015-20 unveiled by Government on 1st April, 2015, provides a framework for increasing exports of goods and services, generation of employment and increasing value addition in the country, in keeping with the "Make in India" vision of Prime Minister. The focus of the new FTP is to support both manufacturing and services sectors, with a special emphasis on improving the ‘ease of doing business’ by providing a stable and sustainable policy environment for foreign trade in both merchandise and services. However, the new FTP target of a US$900 billion of goods and services export by 2020 is almost double the present level. To achieve the target, exports need to grow by about 15% in nominal dollar terms every year, roughly at a higher rate than the economy grows. But comparing the target with the actual performance of the sector, it seems to be an achievable one.


Futures & Options Quote
Expiry Date :
2,491.95    [12.65] ([0.51]%)
Instrument: FUTSTK
Expiry Date: 31-Jul-2014
Open Price: 2,511
Average Price: 2,506.25
No. of Contracts Traded: 30,741
Open Interest: 32,05,625
Underlying: SBIN
Market Lot: 125
Previous Close: 2,491.95
Day's High | Low: 2,534.05 | 2,475.55
Turnover (Cr.): 963.06
Open Int. Change: -7,97,375 ([19.92]% )
Key Information

Key Executives:

Arundhati Bhattacharya , Chairman

Urjit R Patel , Nominee (Govt)

Tribhuwan Nath Chaturvedi , Nominee (Govt)

Sunil Mehta , Director (Shareholder)

Company Head Office / Quarters:

State Bank Bhavan 14th Floor,
Madame Cama Road Nariman Point,
Phone : Maharashtra-91-22-22740841/42/43/44/45/46/47/48 / Maharashtra-
Fax : Maharashtra-91-22-22855348 / Maharashtra-
E-mail : gm.snb@sbi.co.in/investor.complaints@sbi.co.in
Web : http://www.sbi.co.in


Datamatics Financial Services
Plot No B-5 MIDC ,Part B Cross Lane ,Marol Andheri(E) ,Mumbai-400093

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