CHAPTER - Ill

PROFILE OF STATE BANK OF INDIA

MUTUAL FUND

3 1 ORIGIN AND GROWTH OF STATE BANK OF INDIA

3 2 ORGANISATION & SlRlJCTURE OF SBI

3 3 SBI AS A NEW GENERATION BANK

3 4 N P A MANAGEMENT

3 5 SBI MUTUAL FUND - A N OVERVIEW

3 6 SBI MUTUAL FUND SCHEMES

3.1 ORIGIN AND GRONTH OF STATE BANK OF INDIA (S.B.I.)

The orig~n of State Bank of 1r:dia goes back to the first decade of the

nineteenth century w~th the establ~shir~ent of Bank of Calcutta in Calcutta on

second June 1806 Three years late, the bank received its charter and was

redesigned as the Bank of Bengal (2"" :anuary 1809). A unique institution, it was

the first jolnt stock bank of B-itish lnd~a sponsored by the Government of Bengal

The Bank of Bombay (15"' April 1840! and the Bank of Madras (lS' July 1843;

followed the Bank of Bengal These three banks remalned at the apex of modern

banking in lndia till 1921

The Presidency Banks of Bengal, Bombay and Madras with their 70

branches were merged in 27Ih January i921 to form the imperial Bank of lndia.

The new bank took on the triple role of a Commercial bank, a banker's bank and a

banker to the Government. But th~s creation was preceded by years of

deliberations on the need for 'State Bank of lndia.' lmperial Bank was a halfway

house combining the functions of a commercial bank and a quasi central bank.

The establishment of the Reserve Bank of lndia as the Central Bank of

the country in 1935 ended th'e quasi-central banking role of the Imperial Bank.

The latter ceased to be banker to the Government of lndia and instead became

agent of the Reserve Bank for the transaction of government busmess at centres

at which the central bank was not established. But it continued to maintain

currency chests and small coiri depots and operate the remittance facilities

scheme for other banks and the public on terms stipulated by the Reserve Bank.

It also acted as a banker's bank by holdlng their surplus cash and granting them

advances against authorized s,ecurities The management of the bank clearing

houses also cont~nued w~th it at many places where the Reserve Bank d ~ d not

have offices The bank was also the b#ggest tenderer at the Treasury b~ l l auction

conducted by the Reserve Bank on behalf of the Government

f?.eserve Bank made certain amendments to the constitution of Imperial

Bank convert~ng ct Into a purely comrr~ercial bank. The bank was permitted to

undertake foreign exchange business and executor and trustee bus~ness for the

first time The lnlperlal Bank during the three and a half decades of its existence

recorded an impressive growth in terms of offices; reserves, depos~ts. investment

and advances. The h~gh starldard of integrity in its operations inspired confidence

In its depositors and enabled the lmper~al Bank to acquire a pre-eminent position

in the Indian banking ~ndustry and also to secure a v~tal place in the country's

economic life.

When lndia attamed freedom, the Imperial Bank had a capital base

(including reserves) of Rs. 11.85 crores, deposits and advances of Rs. 275.14

crores and 72.94 crores respectively and a net work of 172 branches and more

than 200 sub offices extending all over the country.

In 1951. when the Frrst Five Year Plan was launched, the development of

rural lndia was glven the highest priority The commercial banks of the country

including lmper~al Bank of lndia had till then confined their operations to the urban

sector and were not equrpped to respond to the emergent needs of economic

regeneration of the rural areas. Therefore to serve the economy in general and

the rural sector in part~cular, the All lndia Rural Credit Survey Committee

recommended the creation of a state partnered and state sponsored bank by

taking over the Imperial Bank ol' India, integrating with it, the former state owned

or state assoc~ate banks. ,4ccordingl! an Act was passed in Parliament in May

1955 and the State Bank crf lndia was constituted on 1'' July 1955. Later. the

State Bank of l n d ~ a (Subsidiary Banks) Act was passed in 1959, enabl~ng the

State Bank of lifaia to take over sewn former State assoc~ated banks as its

subsidiaries (late: (lamed Assc~ciatesj S.B.I. holds not less than 55 per cent of

the issued caplta c:t each subsidiary bai:k. Subsidiaries are: -

State Barik ot Bikaner & Jaipur

State Bank of Hyderabad

State bar^ of indore

State ban^ of Mysore

State Bank of Patlala

State Bank ot Sai~rastitra and

State Bank of Travanc.ore

The State Bank of lndia was thus born with a new sense of social purpose

aided by 480 offices compri:;ing branches, sub-offices and three Local Head

Ofices inherited from the !rnperial Bank. The concept of banking as mere

depositories of the community's savings and lenders to creditworthy parties was

soon to give way to the concept of purposeful banking by serving the growing and

diversified financial needs of planned economic development.

3.2 ORGANISATIONS AND STRUCTURE OF SBI

The State Barik of lndia has art authorized capital of Hs.1000 crores,

which has been dlvlded ~nto 100 'roles shares of Rs. 10 each. The issued capital

of State Bank of lndia 1s Rs.526.30 crores The shares are held by the Reserve

Bank, Insurance Companies anli the general public. At the end of March 2000, the

paid up capital and resewes of the Bank were Rs. 12,147 crores

The management of the SBI 15 under the control of a Central Board of

Directors consisting of twenty lnemberc It consists of a Chairman and a Vlce-

Chairman who are to be appoir~ted by the Central Government in consultation with

Reserve Bank. Two Mariaglrig Direct015 are to be appointed by the Central Board

with approval of the (;entral Governnif:rlt SIX directors are to be elected by the

private shareholders e~qht cllrecto:: are to be nominated by the Central

Government in c;orisuItatiori wlth the Yeserve Bank to represent territorial and

economic interests (Ine director is t~, De nominated by the Central Government

and one is to be nominated by tlie Reselve Bank

State BanK of lridia is the larilest Commercial bank in India in terms of

profits, assets, aeposits. branches aria employees. On March 31st 2001, the

Bank had total assets ot Rs 3,15,644 crore, total deposits of Rs. 2,42,828 crore,

total advances of Rs 1 13.590 crore total net profit of Rs. 1,604 crore through a

network of 9,026 branches The Bank commanded about one-fifth of deposits and

loans of all scheduled commercial banks in the country. The performance of

S.B.I. for the years 1999-2000 and 2000-2001 is illustrated in Table 3.1.

The bank had total staff strength of 2,14,845 on 31st March 2001. Of this,

52,459 (24.4%) were officers, 1,06.731 (49.7%) belonged to the Award staff

category, and the remalnlng 155 655 ( 25 9%) were sub-staff.

Three Strategic Bus1n'es:s Units (SBUsl under the Corporate Banking Group

have been set up for iocused attentior to very large corporate customers, lease

finance and project flnance. all re:)ortlng directly to the corporate oftice.

Distinguishing feature of the SBUs at.! lnteyratlon of operational planning with

operations w ~ t h ~ n each SBU, a 'focused delivery system with appropriate specialist

inputs and focused attention on profitab1~:y

Functionaries at various level5 have been delegated higher financial

powers to ensure foster dec~sion mak1r-g in credit areas and disposal of a large

number of credit proposals t i t operating units level. A Committee approach has

been adopted, both at the Apex and Clrcle levels, for sanction of large advances

For this purpose, Central Off~ce Credit (Committee and Circle Credit Committees

have been streamlined Slmplified anc conclse cred~t appraisal formats have

been des~gned to ensure imprclvement in the quality of credit decisions, better

quality of assets and reduction of Non-Performing Assets.

3.2.1 CAPITAL AND SHARE HOLDING PATTERN

The RBI required that S.H.I. and other Indian banks having foreign ofices

maintain a total adequacy ratlo of eight per cent by March 31sr 1994 and nine per

cent by May 31st, 2000 Subsequently SBI was the first public sector bank to

shore up its capital base and its capital adequacy ratio has consistently remained

above the minimum eight per cent. In Fiscal Year 1994, the Bank raised Rs.

22,104 million through the issue of shares and Rs.10,000 mrllion through the issue

of unsecured redeemable subordinated float~ng rate bonds. In October 1996, the

Bank successfully floated the G'DR issue as the 'Asian Equity issue of the year' for

its being a well planned, well priced and well executed issue that continued to

perform well for the investors.

Dur~ng the year 1999-2000, th? Bank augmented its Tler II capltal by

prlvate placement of unsecured, non-convertible redeemable, subordinated

bonds in the nature of promls!joly notes aggregatlng to Rs 9 358 70 m~lllon

Reserve Bank of lndla is the stngle largest shareholder c~f the Bank. SBl's

shares and bonds are ltsted for tradlng on all the major Indian Stock exchanges

namely, Bombay Stock Exchange and Stock Exchanges at New Delhl, Kolkotta,

Chennai and Ahemedabad; at the National Stock exchanges only the Bank':;

shares are llsted S B I has one ot the largest market capltallzation of a.1

companies traded on such exchanges. The total number of shareholders as on

31st March 2001 was 7 37 lakh The ownership pattern of shares and the Market

price datas are explatned in Tabie 3.2 and 3.3.

Table 3.2

Ownership pattern of SBl's Shares

I 1 SI. No. 1 Shareholder's Category 1 % of shares 1

I I 1 1. 1 Reserve Bank of India I 59.73

Others lnclud~ng Resident - lndivlduals - - -~ - ~ ~. - .~ 2.84

Number of ShareholdersJmJakh) ~- 7.37

Source : SBI Annual Reoorl :!Otll

2.

3.

4.

5. / Domestic Cos nrusts I

6.24

Non-residents (Flls/OCBs/NRls) 18.31

Financial Institutions including Insurance Co.s 1 11.58

Mutual FundslBankslGovt. Cos ! 1.30

Reserve Bank of India owns 59 73 per cent shares of SBI. 18.31 per cent

owned by non-res~dents 11 58 per cell1 by Financial institutions, 1.30 per cent by

mutual funds I banks arid Sovernmer>t companies, 6 24 per cent by Domest~c

Compari~esiTrust and 2 84 perc:ent by Resldent lndlv~duals

Market Pr~ce ~~ Data iClosing Values) (From April 2000-March 01 r--- ~

Months ~ , .- SBI s - share Prlce (BSE

June '00 -~ ~~~

October '00 --

November '00

December '00

Source : SBI A~i i i i i ; l l Report 2001

Market prlce at closlng values ot SBI share price at high level of 267 45 on

March 2001 and low level of 155-95 on October 2000 recorded Market prlce data

at BSE sensex, hlgh value recorded at 5,541.54 on April 2000 and low value at

3,5040.65 on March 2001

The Bank prov~des flnanclal ser, f:es through its Non-Banking Subsidiaries,

including merchant banklng services -und management, leasing and factoring

services and prlrrlary deal~ng in govel ment securities. SBICAPS, the Bank's

merchant banklng subsldlary contlnueo ts dom~nance in the capital market. The

Bank's fund management subsldlary IS lidla's second largest asset management

company, next to :he Li 71

32.2 DOMESTIC BRANCH ~ETWORK

State Bank of lndla s Comrnerclal bawng business is through its nationwide

network of 9.019 branches The Bank's domestic branches represent

approximately 14 per cent of all bank branches in India. About 46 per cent of the

Bank's branches are located i~ urbar , i id metropolitan areas respectively. This

wide spread branch network er~ables the Bank to raise a substantial and stable

deposit base, to prov~de a wide range of lending products and other financial

services and to diversify lendin(] risks geographically as well as by type of credit

risk and customer The Bank's ability to diversify and enhance the quality of

service related to its deposit taking as well as its lending activities and other

financial services IS a fundamental strength of the Bank

I) The Nat~onal Banklng Group (NBG)

The NBG commands dbout 59 per cerlt ~f the domest~c deposlts and 84 per cent

of the domest~c advances of the Bank It prov~des banklng services to customers

spread over the country through two networks, namely, Development and

personal Banking Network and Commercial Network

The Development and Personal Banking Network is sometimes referred

to as the bank's 'retail banking' business subgroup. The network represents the

backbone of the Bank and encompasses the vast majority of the Bank's assets,

loans, deposits branches and employees. The D&PB network focuses on the

Bank's small industr~al agrlc~ltural and :nst~tutional customers, Central and State

Government ent~tles and per:;onal bank rig customers. It also services the needs

of indiv~duals inciud~ng hlgh net worth ndlv~duals as well as engages in home

finance. The branches iri the D&PB ne1"uork generally provide lending facilities of

less than Rs. 2 5 rnlll~on as well as other services such as cash management and

personal banklng advlsory services.

The Comnierc~al Network focusias on large and medium-sized industrial

corporations and services the large accri~nts among Bank's small industries, high

technology agr~cultural concerns and biose of its corporate customers. This

network provides lendlng facilities of Rs ' 5 million and above.

The NBG glve high prionty to personal banklng The Bank's sixty Personal

Banking Branches targets h~gh net worth lndlvlduals for the personal segment

products Gold Bank~ng Houslr~g finances and Consumer finance are other thrust

areas of the Bank

ii) The Corporate Bank~ng Group

The Bank's Corporate Banklng Group consists of three Strategic Business

Units (SBUs) created to service's the Bank's top 150 to 200 corporate customers.

SBUs are the Corporate Accounts Grc~lp. Leasing Group and Project Finance

G r o u ~ .

The Corporate Account Group IS an exclusive unit for top corporate and is

characterized by relationship banking and delayered credit process for speedy

decision-making The CAG branches are fully computerized with most customers

able to access their accour~ts at the dank via computer. The total number of

corporates served by the CAG rose to 195 as on 31st March 2000.

The Leas~ng SBU c.aters to -he leasing requirements of the Bank's

corporate customers served by the Corporate Banking Group and the National

Banking Group The Group offers all Iypes of f~nanc~al lease:<, particularly tax-

based structures. each of which is tailored to suit the reauirements of the

customer

The Project Finance SBlJ was set up in response to banking deregulation

and ensuing growth In Infrastructure projects in lndia. The ~najor clients of SBU

are power, petrochem~cal!j, telecommunications. cement steel, metals.

automobiles, engineering and similar industries

iii) Domestic Busrness

SBI is the largest deposit-taking bank in India, holding approximately one-

fifth of all domestlc deposits. About three-fourth of the Bank's deposits are from

its retail customers, reflecting its large customer base. Around 14 per cent of its

domestic deposits are in the form of interest free current accounts and about 25

per cent are in the form of low interest savings account. This access to millions of

small deposits throughout the country provides SBI with a stable funding base for

all its o~erations.

The Bank makes to a ,wide range of public sector and private sector

commercial and lndustrlal cuslomers and agricultural customers It extends

working capital facilities and short-term ioans. Loans of medium to long maturity

are extended to finance capital investment including home loans to individuals.

The Bank's retail Dank~ng activi.ties are wide spread cover among others, housing

finance, consumer finance, loans to agriculture, small scale industries, small

business finance, retaii traders, professional and other self-employed persons. By

the end of March 2000 the Bank's priority sector lending accourlted for 40.42 per

cent of its net bank credit

The Bank proposes tc enter intc Insurance business through subs~diary

where in it will offel 26 per cent equit) to the foreign partner The Bank has

appointed a consultant of international repute to ident~fy the foreign partner The

Bank expects the overseas partner to make important contributron in the areas of

technology and product develop~ient

The Bank has entered into a Memorandum of Understanding wit HDFC

Bank, the Dun and Bradstreet and the Trans Union for setting up a world-class

credit information Bureau in India. The main objective of the Bureau will be to

institute an effective mechanism for mitigating credit risks and enhance the quality

of credit decisions in the bankin'g industry

iv) SBl's Deposit & Loan Schemes

a) Deposit Schemes

I ) Current Accounts Ourrent accounts are designed for busine!js transact~ons

No restrict~ons on number of transact~ons Nom~nal service charges levled

annually Standing lnstructrons accepted

ii) Savings Bank Accounts designed for depositor of savings 1 surpluses. Cheque

book facility available to the customers. Interest allowed at 4.5 per cent p.a.

iii) Term Deposrts deslgrlecl for fixed periods. Accepted term deposits for any

period ranging from 15 days to 10 years. lnterest payable at desired periodicity

(monthly ! quarterly etc I for deposits of 1 year and above. Earns higher Interest

at rates rangrng from 5 per cent to 10.75 per cent. Automatic renewal facility

available to the customers

lv) Special Term Depos~ts: Reinvestment of interest allowed. Conversion to

term deposits and v~ce 'versa permitted

V) Recurr~ng Deposits des~gned for regular savings Monthly deposits of a

fixed amount for a flxed pard

VI) Multi Opt~on Deposit Scheme avablable at computerised bl-anches. A fixed

deposit with flexible features, Automatic overdrafts linked. Premature withdrawal

of part I full amount allowed withdrawal by cheque. Higher rates of interest

allowed.

b) Advance Schemes

1) Special Scheme of finance for professionals and self employed for

acquisition I renovation 1 exten'sion of business premises, acquisition of vehicles I

setting up of clin~cs etc Both term loan and working capital facilities available.

ir) Housing Loan Schemes for construction / outright purchase of house/flat.

Security-mortgage of property i' third party guarantee required. Lc~wer margins of

loan ranging 20%-15% Long repayment schedules up to 20 years allowed.

iii) Consumer F~nance Scheme for purchase of consumer durables ranging

from computers to carpets including two wheelers. Loan amount up to a

rnaxlmum of 2 lakhs allowed Repayment offered by bank as check-off fac~l~ty

wherever poss~ble Lower rnarglns of ban ranglng between 20% - 15% Long

repayment t~me allowed up to 5 years

iv) Car Loan Scheme for pl~rchase oi' new cars I jeeps I second hand cars not

more than 3 years old rriaxim8Jrn loan L C to 8 lakhs. Third party guarantee not

required tf check-off facility 1s available Long repayment time up to 7 years

allowed by bank

V) Educat~on Loan Scheme for stuales In India and abroasd at recognized

schools (colleges/institutions tc meet tult~on fees and other fees, cost of books I

equipment / maintenance cost and cost of passage in case of studies abroad.

Loans amount granted ranging from Rs 4,0001- to Rs. 10.00.0001-. Easy

repayment terms for loans alloweol.

vi) Gold Loan Scheme aga~nct pledge of gold ornaments. Low marglns and

low rates of interest offered

vii) Demand Loan Scheme against bank's own fixed deposits 1 NSCS 1 KVPS I

IVPS and other acceptable securities. Low rate of interest - 2% above the rate

payable on banks own fixed deposits. Easy repayment schemes.

V~II) Personal Loan Scheme to meet personal expenses for travel, marriage,

family functrons, hosp~talizat~on etc. Thrs facility is eligible for employees of State

1 Central Government organiz:ations, PSUs. MNCs and reputed Public Ltd.,

companies. No securlty required and easy repayment terms.

ix) Other Schemes such as loan aga~nst mortgage of property, pensloner's

loans, loan against approved securit~es etc

Table 3 4

Worklng ot SBI for 'the years 1996-97 to 2000-'01

(Rs. in Crores) . -~ ~ - . . ~~~ ~p~~

1 Year No of Depos~ts Loans lnvestmerlts Net Profit I

1 Brancnes

I i i 1999-00 , 8,996 1,916,821 98,102 i

. -- ~~~ ~

92.000 ! 2,051 I i - - . i I

I i 2000-01 , 9 326 :!,42,828

i 1,13,590 ' 1,22,876

C. - 1 , ~

1,604 ( ---L

Source : Ar~r?~ ia / Reoort of SBI 1:996-97 to 2000-01

The deposits and loans Increase from year to year. The Net Profit varied. Last

year, the net profit decreased because of the implementation of voluntary

retirement scheme in the Bank. The Table 3.4 shows a satisfactory growth in the

business.

3.2.3 INTERNATIONAL BANt<IFJG

The Bank IS also engaged In international banking principally for its Indian

customers. The International Banking Group services the needs of the Bank's

domestic corporate and other customers in financing import and export

transactions An increasln'g number of Bank's corporate customers access

international funds through SBl's international branch network as well as its 720

correspondent Banks The kink's products include foreign exchange, letter of

credit, guarantees remittances, acceptances and collections. Its loan syndication

activity covers arranging, parliclpating and underwriting foreign currency loans. It

also provides shoit-term finarlces through buyer and supplier's credit. The Bank

has foreign offices In 31 countries wtth a network of 52 branchesioffices The

bank's fore~gn offices trlclude branches at London, New York. Frankfurt, Paris,

Hong Ken!; and Tokyc. With the introduction of Euro in January 1999, the Bank's

offices in Antweep Fral~kfurt and Parls acquired capability to open accounts and

handle transact~ons in Ed)-o

3.2.4 INTERNATIONAL CONSUL'TANCY

The Bank is registered as a consultant with several multilateral funding

institutions Including the World Baslk, the Common Wealth Fund for Technical Co-

operation C I K , The Food and Agriculture Organization, the European Bank for

Reconstruction and Development, the Asian Development Bank and the African

Development Bank

3.2.5 GLOBAL LINK SERVICES

The Bank's new Ilnk office, Global Link Service was set up in 1997 to

provide international correspondent banklng services to the Bank's branches as

well as to other banks it alms to provide an efficient system for realizing the

proceeds of clean and documentary collections drawn on overseas centers. The

GLS offers correspondent banking products on matching terms with similar

products of foreign banks

3.3. SBI AS A NEW GENERATION BANK

"To retain the Bank s ~osition as the premier Indian Financial Services

Group, with the world class standards and significant global business, committed

to excellence In ci,sron;rr shareholder -;rid employee satisfaction and to play a

leading role in ! r ~ ~i<l.!iir~!ir-~c and d~versifying financial services sector, while

continuing ernphas:~ or1 its df!velopment bank~ng role.'' This is the Mission of

State Bank of lnd~a

The SBl's vis~ons ale

i) Premier Ind~arl F~nancial Services Group with global perspective, world-class

standards of eiticiency and professional~sm and core institutional values.

ii) Retain position in the country as pioneer in development banking

iii) Maximise shareholder value through high-sustained earnings per share

iv) Institution with a culture of mutual care and commitment, a satisfying and

exciting work environment and continuous learning opportunities.

3.3.1 TECHNOLOGY ORIENTATION

The Bank's effort to Improve efficiency and customer service through use

of technology 1s retlecrea iri the rapid pact of its branch computerization As at

the end of March 2001, the Bank had 2555 fully computerized branches, covering

71 per cent of the Banks businc?ss. The Bank has 139 ATMs, in 52 cities. The

Society for Worldw~de Interbank Financial Telecommunication (SWIFT) network of

the Bank handling 85 per cent of the Bank's forex remittances, cover 146

branches and the SBI Data net (a PC-Modem telex network) covers 1,120

branches. With a view to helping the customers to have access to the information

regarding their accounts round-the-clock through lnternet, the Bank has

introduced 'Online SBI' from the 1st August. This is initially being introduced in

eight branches, three in Mumbai, two i r i New Delhi, and one each in Bangalore,

Calcutta and Chenna~

Two lnnovatlve path-breaklng projects, namely, Electronic Nostro

Account Reconciliat~on (ELEIVOR) and State Bank Electronic Payments System

(STEPS) became operational in December 2000 and January 2001 respectively.

Both the projects were conceived, developed and implemented with in-house

expertise and success was widely acc.lairned ELENOR dealing with on-line

nostro account reconcil~ation (enabled orrline reporting of forex transactions from

444 forex intensive branches. STEPS was launched to facilitate instantaneous

electronic transfer of funds at 326 branches. During the year, the project

Electronic Reconciliation (e-RtfCON) was extended to 1300 fully computerized

branches for electronic transmission of inter-branch data for reconciliation through

the lnternet.

The significant improvements made by Bank in the field of technologies are:-

- Electronic Data interchange projects for handling customer transactions at

airport and seaports mada operattonal at eleven centers

lntroduction of Computerized Printin9 of Drafts.

Opening of MlCR and ECS Centres for Electronic Clearing Services

Introduction of extended Business Hours (7 to 12 Hours) and 7 Days

Banking.

Remote login fac~lit~es 'or Corporate Customers Implemented in over 70

branches coverlng about 400 custorners

Tele Banking introduced on a P~IOI bass at 38 branches in Mumbai Circle

of the Bank

Internet Banking started on a p~lc: c-isis on August at eleven branches.

The 46 VSATs of the Bank untit: I latan F~nancial Network (INFINET) - set

up by RBI were merged with 1 l i ' ' i s k l s of the Bank under its Corporate

Banking Group Network The Bank now has a network covering 161

VSATs in 130 cltles extending the coverage to almost the entire country.

During the year, the Bank established 'SBI HELPLINE' at LHO centres,

equipped with Toll-Free Telephone Lines, Fax and E-Mail for providing

quick and complete information on Bank's products and services, and to

enable the customers to have their grievances redressed through

Electronic Medla in addition to normal channel of complaints received by

mail.

The SBI Home Page was thoroughly redesigned and revamped during the

year. The site facilities attracted a large number of visitors to the site.

3.4 NPA MANAGEMENT

The SBl's NPA management policy lays stress on early identification of

problem loans, effective response to early warning signals adherence to the time

norms for corrective action and recovery including one-time settlements. Under

the RBI guidelines, the Bank approved one-t~me settlement for Rs. 718 crore in

respect of 1 95 lakh accounts with NPAs uoto Rs 5 crore and made cash

recovery of Rs 384 crores

At the end of March 2001 the Banks gross and net NPA stood at 12 53

per cent and 6 03 per cent respectivrly as aga~nst 14 25 per cent and 6 41 per

cent respectively in the previous year

The Bank actively participated in the rehabilitation of the units having

potential for turnaround as also approved by the BlFR The BlFR has identified

512 units (including 59 Public Sector Undertakings) financed by the Bank as sick.

Out of these, the BlFR approved rehabilitation packages for 96 units, involving an

amount of Rs 763 crore Table 3 5 explains the Net NPA Ratio of SBI for last

three years.

Table 3.5

Net Non-Performin@sset - ~~~ - ~- iiatio of 1999 to 2001 March

Year -- ~~ -- - -~~ - I t 1

31 st March 1999 I

7.25 -

31 - st ~- March - - -~ - 2000 - ~~ , - ~~ 6.41

31st March 2001 L- - - - . _ _ _- _ _ _ 6.03

7 __I

Source : SB1 Annual Report 200 1

Figure 3.1

Net NPA Ratio

7.6 'T

3lst March 1899 3lst March 2000 31.t March 2001

The State Bank of India has, over the years, richly merlted its status as

the flagship of Indian banking and continues with its endeavour to achieve its

Mission objective. It has been in the forefront in all areas of banking - traditional,

developmental and diversified. In several fields, the Bank has pioneered

innovative measures and contributed significantly to the growth of the lndian

economy, improving its own profitability over the years and operating efficiently.

1 , ., 3.5 SBI MUTUAL FUND --AN OVERVIEW I-

.',, 's. '

The State Bank of India is the first public sector bank to start mutual - fund:.;/ .-

business after the Government of 11id1a issued permission to do mutual fund

business. Till 1987 Unit Trust of lnd~a Nas the only Mutual Fund operating in the

country. In 1987 SBI uec~decl to prov~de an alternative for investors and SBI

Mutual Fund was horrt SBI Capita! Markets Ltd., a wholly owned subsidiary of

State Bank of lnd~a was appoir~ted as Trustees and Managers to the fund. SBI

Mutual Fund was the f~rst bank spor.,sored Mutual Fund, the pioneer in an

untapped field w~th vast potent~al.

The SBI Mutual Furid !aunched !ts first scheme- 'Magnum Regular Income

Scheme 87' in 1987 and ~nob~lized Ks ! 31 crore from 90,000 investors while in

2000, the Fund with an investor base of over 2.8 million spread over 23 schemes

mobilized Rs.2079 crores

Till 1992, SBI Capital Markets Ltd operated as Trustees and Managers to

the Fund The mantle of management has now passed on to SBI Fund

Management Ltd., another wholly owned subsidiary of the State Bank of lndia,

which was incorporated on 7tP February 1992. This company took over the

management of the Fund witn effect from 14th May 1993. State Bank of lndia

now operates as F'r~nclpal Trustee to the fund The Board of Trustees headed by

Dr. A.M. Khusro. Edltor of Financial Express and former Member of the Planning

Commission, includes dlstlng~rished personalities like Prof. S.K. Barua, Smt. (Dr)

Malati Anagol, Shrr M.M. Chltale and Shrr Vepa Kamesam.

The Board of Directorlj of SBI Fund Management Ltd. includes reputed

personalities like Shri. Janaki Ballabh as Chairman, Shri. Niamatulla as Managing

Director, Shri. S L Rao. Shri. R G Kare. Shri. (Dr) Ajay Shah, Shri Manu

Chadha, Shrr. D P Roy and Shri. B~redra Kumar as Directors.

3.6 SBI MUTUAL FUND SCHEMES

36.1 Regular lncome Scher'es

Magnum Regular lncorne Scbe,*~i 87 iMRlS 1987) was the first scheme ,

launched by the fund ano it comnie~>i+d from 1st January 1988. This was

followed by three others h4agnurr regular lncome Scheme 1989, which

commenced from 1st Aprll 1989. Magnor, Regular lncome Scheme 1990 which

commenced from 1st August 1990 and MRlS 1993 launched on 15th February

1993. The investment objective of the Regular Income Scheme is to achieve a

combination of income and growth and to provide a regular income to the investor.

The target return spec~fied IS a mlnimum of 12 per cent along with some capital

appreciation. To achieve the investment objective, the scheme follows a policy of

investing predominantly in fixed income securlt~es

3 6 2 Monthly lncome Schemes

There are four schemes wl-rlch fall under thls head, namely, Magnum

Monthly lncome Scheme 89 (MMlS 89) whlch commenced from 1st September,

1989, MMlS 91, wh~ch commenced from 1st July 1991. MMlS 98(1) whlch

commenced from 3rd February 1 498 and MMlS 98(11) whlch commenced from

31st October 1998 The investnient objective of the scheme as the name

suggests IS to provide a monthly return on indestment to the investor MMlS 89

offered a target return of a mlnlmurn of 12 per cent per annum monthly pay out

Scheme, whlch was to be redeemed cn 31st March 1993, has been extended up - to 31st December 1996 at a h~gher rnonthly pay out of 15 per cent per annum for

those investors who have ex~srcised thii option of extension. MMlS 91 targets at a

return of 13 per cent per al?n!Jm with monthly pay out. MMlS 98(i) assured a

monthly income of 12 5 per cent per ai-num MMlS 98(1i) offered monthly income

combining the safety of higt- quality aebt instrument and return on equity. The

investment policy followed by the scheme is to invest mainly in fixed income

securities

3.6.3 80 CC Schemes

Magnum Tax Saving C;cheme 8889 MTSS 88-89 which commenced from

1st April 1989, and MTSS 90 are the schemes falling into this category. MTSS

88-89 were redeemed on 31s:: Marcn 1954 at Rs. 2221- with a capital appreciation

of 122 per cent and MTSS 90. redeemed on 31st March 95 at Rs. 1721- with a

capital appreciation of 72 per cent. The investment objective of these schemes

was to enable subscribers to benefit urtder Sec 80 CC of the lncome Tax Act

1961. The policy followed was to invest in eligible issues of the capital under

Section 80 CC and other seci~rities as were permitted. Investors were therefore

saved the trouble of seek~ng Issues el~g~ble under section 80CC of the Income Tax

act 1961

3.6.4 80 C:C B Schemes

The 80 CC B Schemelj are Magnum Equity Linked Saving Scheme 91

(MELS 91), which commenced from ';st Apr11 1991 and Magnum Growing

Investment from Tax Sav~ng S'zherne Plan A, 1992 (Magnum GIFTS-92 Plan A).

which commenced from 1st April 1992, offer benefits to investors under Sec 80

CC €3 of lncome Tax Act Magnum GIFTS Plan 0, 1992 launched in 1992 also

offer benefits to Investors urder Sec YO CCB of Income Tax Act. MELS-95

launched in 1st April 1995 and MELS-96 launched in 1996 offer benefits under

Sec 88 of IT Act The investment otljective is to enable subscribers to benefit

under Sec 80CC I3 and 88 of lnco.n+, tax Act 1961 and aims at achieving

substantial realized incorne arid capital (-ippreciation. To achieve the investment

objective, investments are niainly rriade i f ! equltles and equity related instruments

and also in money rnarket or other liquid iristrurnents

3.6.5 Growth Schemes

Magnum Multiplier Scheme, 1990 (MMS-90) which commenced fromlst

January 1991, Magnum Express (MEX-9' which commenced from 1st April 1991,

Magnum Multiplier 'Plus Schernf 1993 jllllMPS-93) which commenced operations

on 1st March1993 as close-ended growth scheme, Magnum Global Fund

Scheme, 1994 (MGF-94) which was launched onlst October 1994 are the growth

schemes of the fund. These four schemes aim at providing long-term capital

appreciation to the investor The policy followed is to invest primarily in equities

related instruments.

3.6.6. Cumulative Income Schemes

Magnum Triple IS the only cumulative Income scheme of the Fund. It

commenced from 20th November 199: i he investment objective of the scheme

is that the investor recelves a surn equal to thrice the amount initially invested or

more at the end of 90 months from the date of allotment To achieve the

objective, the funds are malnly ~nvested iri equlties and equ~ty related instruments

as well as in money market instruments

The other schemes exlsting are

3.6 7 Magnum Equ~ty Fund

Magnum Equlty Fuqd was converted into open-end scheme with effect

fromlst January 1998 The illrrl of this fund 1s to provlde capital appreciation

through the investment in equittes

36 .8 Magnum Liqu~ Bontl Fund

Magnum L~qui Bond I S a hu [ ia~ed per cent debt fund that provides

investors superior r~sks adjusted return5 The fund offers h~gh degree of safety is

80 per cent of the investments are made in Government Securities and Triple-A

rated papers. Maximum market liquidity !s the objective of the fund. This fund

was launched in December 1998

3.6.9 Magnum Tax Gain Scheme

MTGS-93 IS a tax saving scheme whlch was launched to offer tax benefits

to Investors under Sec 88 of the lr~come Tax Act This was converted Into open-

ended scheme from November 1999

3.6.10 Magnum Balanced Fund

MBALF-95 was launched on 31st August 1995. The main objective 3f the

scheme is to provide growth through appreciation of capital. It may also provide

periodic income through declaration of div~dends

3.6.1 IMagnurn Sector Fund Umbrella

MSFU-99 is an umbrella fl~n'3, which covers under its fold four sub-funds.

devoted to Information Technology, Pharma. Fast Moving Consumer Goods, and

Contra fund. Investors will have the option of choosing one or more sector for

investing and will be able to freely switch across sectors, without any load.

A sector comprises of companies that manufacture or offer products of a

srmilar nature Some sectois have a h~gher growth potentlal because of the

nature of busmess thev are rn A sector fund focuses on invest~ng in shares of

such a sector which has high growth potential It provrdes an opportunity to the

cornrnon investor to participate in the growth of such sector wrth an investrble

an?ount within his range The four important funds under MSFU are-

1 ) IT FUND IS a part of sec'ror fund umbrella launched w~th the objective to

provide investors with capital appreciation through equrty investment in the IT

sertor

1) Pharma fund IS the part 01 the sector fund umbrella whlch alms at long

term capital galns by investment in tile pharmaceutical sector

1i.l FMCG Fund is a part of sector fund umbrella launched with the objective to

provide investors with cap~tal appreciation through equity investment in the Fast

Moving Consumer Goods Sector

iii) Contra Fund is the part of sector fund umbrella, with a view to providing

investors with long-term gains in stocks, which are currently out of favour but are

likely to gain returns in long term.

36.12 Magnum lnsta Cash Fund

Magnum lnsta Cash Fund 'was launcned onl3th May 1999. The main

objective of the scheme is to activate the short-term money investment providing

superior returns consistent with a high degree of liquidity. This fund offers two

options to investors - Cash Plan and Dividend Plan.

Cash Plan is h~ghly Ilquld ncome sctleme The main objective is to provide

investors with an investment opportunity lhkely to be superior to returns offered by

comparable investment avenues, through nvestment in debt and money market

Instruments.

Dividend Plan, the average maturltv of assets IS longer than that of cash

plan appreciation in net asset value. ~f ar i f is distributed by way of div~dend or

reinvested. The oblect~ve of the scheme 1s similar to that of cash plan

3 6.13 Magnum Rising lncome Sch,eme 1993 (MRIS-93)

The Scheme commenced operation from December 1993. Its objective is

to provide the Investors regular income through dividend. MRIS-89 and MRIS-90

were also regular Income schemes but these schemes redeemed on 30th June

1993 and 31st July 1995 respectively.

The Scheme-wise Distrit)ution of SBI Mutual as on 2000-2001 illustrated in

Table 3.6

Table 3 6

Scheme-wise Distribution of SBI MF as on 2000-2001 7-

Scheme Commencement

1 Growth t ~-

01/01/98

MMPS-93 4" 01 104/98 ~~

MGLF-94 ' "

~

01 I1 0194

MELS-91 :Tax S i 3 v i n l -- 22/02/91

MGIFTS-92-A 1 01/01/92 '' .- ~

Face Value

10

10

10

100

100

Source. S,5/ Mciic;c:: 1~1114c: Ailnlral Report 2000-2001

- . ~

4 I rlE:rwthl . . . , LD I I ebt ~ ~- ~ 22/02/2001 10

Monthly ~~ , I ~ -.

I Quarterl'r t - -

Tt-~e Table shows that there are three Regular Income Schemes, five

. ~~ ~

annual , ~ ~ - . ~

- ~- ~- ~

Growth Schemes $ever? 1 ax Sav~ng Schemes, one Balanced Fund, two Open-

ended Funds and two Debt Funds existed as on 31.03.2001

-

I