CHAPTER - Ill

PROFILE OF STATE BANK OF INDIA

MUTUAL FUND

31 32 33

ORIGIN AND GROWTH OF STATE BANK OF INDIA ORGANISATION & SlRlJCTURE OF SBI SBI AS A NEW GENERATION BANK N P A MANAGEMENT SBI MUTUAL FUND - A N OVERVIEW SBI MUTUAL FUND SCHEMES

34
35

36

3.1

ORIGIN AND GRONTH OF STATE BANK OF INDIA (S.B.I.) The orig~nof State Bank of 1r:dia goes back to the first decade of the

of Bank of Calcutta in Calcutta on nineteenth century w ~ t hthe establ~shir~ent 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 sponsored by the Government of Bengal the first jolnt stock bank of B-itish lnd~a July 1843; The Bank of Bombay (15"' April 1840! and the Bank of Madras (lS' 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~nuedw~thit at many places where the Reserve Bank d ~ d not l have offices The bank was also the b#ggesttenderer at the Treasury b ~ lauction conducted by the Reserve Bank on behalf of the Government f?.eserve Bank made certain amendments to the constitution of Imperial t Into a purely comrr~ercialbank. The bank was permitted to Bank convert~ngc undertake foreign exchange business and executor and trustee bus~nessfor 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 ~ g h starldard of integrity in its operations inspired confidence In its depositors and enabled the lmper~alBank to acquire a pre-eminent position in the Indian banking ~ndustryand also to secure a v~talplace 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

Bank of lndia had till then confined their operations to the urban including lmper~al 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~atebanks. ,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~ngthe State Bank of lifaia to take over sewn former State assoc~atedbanks 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,
100 'roles shares of Rs. 10 each. The issued capital which has been dlvlded ~nto
s Rs.526.30 crores The shares are held by the Reserve of State Bank of lndia 1

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 It consists of a Chairman and a Vlce-

Directors consisting of twenty lnemberc

Chairman who are to be appoir~tedby the Central Government in consultation with Reserve Bank. Two Mariaglrig Direct015are to be appointed by the Central Board with approval of the (;entral Governnif:rlt private shareholders
e~qht cllrecto::

SIX directors are to be elected by the

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 The performance of

loans of all scheduled commercial banks in the country.

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 5 5 655 ( 2 5 9%) were sub-staff. category, and the remalnlng 1

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 ~ each n 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~sionmak1r-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~ceCredit (Committee and Circle Credit Committees have been streamlined Slmplified anc conclse cred~tappraisal formats have

been des~gnedto 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~ngrate 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~ngthe 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

1
I

SI. No.

1
I

Shareholder's Category

% of shares

1I

1.

1 Reserve Bank of India

Non-residents (Flls/OCBs/NRls) Financial Institutions including Insurance Co.s Mutual FundslBankslGovt. Cos

I
1 !
I
-~ -

59.73
18.31 11.58 1.30 6.24 2.84
~

2. 3.
4.

5.

/ Domestic Cos nrusts

Others .~ lnclud~ng Resident lndivlduals Number of ShareholdersJmJakh) ~-

~.

7.37

Source : SBI Annual Reoorl :!Otll

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

r--Months , SBI s share Prlce (BSE

~~ ~ ~

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

.-

June '00

-~
~~~

October'00 November '00 December '00

Source : SBI A ~ i i i i i ; l Report l 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~desflnanclal ser, f:es through its Non-Banking Subsidiaries, including merchant banklng services -und management, leasing and factoring services and prlrrlary deal~ngin govel ment securities. SBICAPS, the Bank's

merchant banklng subsldlary contlnueo ts dom~nancein the capital market. The Bank's fund management subsldlary company, next to :he Li 71
3 2 . 2 DOMESTIC BRANCH ~ E T W O R K
IS

lidla's second largest asset management

State Bank of lndla s Comrnerclal b a w n g 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 ,iid metropolitan areas respectively. This wide spread branch network er~ablesthe Bank to raise a substantial and stable deposit base, to prov~dea 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)

deposlts and 84 per cent The NBG commands dbout 59 per cerlt ~f the domest~c of the domest~cadvances 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~lturaland :nst~tutional customers, Central and State Government ent~tlesand per:;onal bank rig customers. It also services the needs of indiv~dualsinciud~nghlgh net worth ndlv~dualsas 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~onas well as other services such as cash management and personal banklng advlsory services. The Comnierc~alNetwork 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. 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 ~ g hnet worth lndlvlduals for the personal segment products Gold Bank~ngHouslr~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 Grou~. The Corporate Account Group an exclusive unit for top corporate and is This

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~tsat 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 onefifth 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~ngactivi.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 The

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

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 Nom~nalservice charges levled

No restrict~ons on number of transact~ons 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 Recurr~ngDeposits des~gnedfor regular savings Monthly deposits of a

V)

fixed amount for a flxed pard Multi Opt~on Deposit Scheme avablable at computerised bl-anches. A fixed

VI)

deposit with flexible features, Automatic overdrafts linked. Premature withdrawal of part I full amount allowed withdrawal by cheque. allowed. b) Advance Schemes Special Scheme of finance for professionals and self employed for Higher rates of interest

1)

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~wermargins of loan ranging 20%-15% Long repayment schedules up to 20 years allowed. iii) Consumer F~nanceScheme for purchase of consumer durables ranging Loan amount up to a

from computers to carpets including two wheelers.

rnaxlmum of 2 lakhs allowed Repayment offered by bank as check-off fac~l~ty wherever poss~ble Lower rnarglns of b a n ranglng between 20% allowed up to 5 years repayment t ~ m e iv) Car Loan Scheme for pl~rchase oi' new cars Ijeeps Isecond hand cars not
LC

15%

Long

more than 3 years old rriaxim8Jrnloan

to 8 lakhs. Third party guarantee not Long repayment time up to 7 years

required tf check-off facility 1 s available allowed by bank

V)

Educat~onLoan Scheme for stuales In India and abroasd at recognized

schools (colleges/institutions tc meet tult~onfees 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-. repayment terms for loans alloweol. vi) Gold Loan Scheme aga~nctpledge of gold ornaments. Low marglns and Easy

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, Thrs facility is eligible for employees of State

etc. family functrons, hosp~talizat~on

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~nstmortgage 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
Net Profit

Year
1

No of

Depos~ts

Loans

lnvestmerlts

Brancnes

I
i

1999-00
-

,
I

8,996

.
i ,

1,916,821
~~~

98,102
~

i
'

92.000

i
!
.

2,051

I
i

C. -

2000-01

9 326

:!,42,828
~

1,13,590

i 1,22,876 1,604 ( L

Source : A r ~ r ? ~ Reoort ia/ of SBI 1:996-97to 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 I n 31 countries wtth a network of 52 branchesioffices The

bank's fore~gnoffices trlclude branches at London, New York. Frankfurt, Paris, Hong Ken!; and Tokyc. With the introduction of Euro in January 1999, the Bank's and Parls acquired capability to open accounts and offices in Antweep Fral~kfurt 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 Cooperation 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 ~ositionas 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~versifyingfinancial services sector, while

continuing ernphas:~or1 its df!velopment bank~ngrole.'' 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 and core institutional values. standards of eiticiency and professional~sm ii) iii) iv) Retain position in the country as pioneer in development banking Maximise shareholder value through high-sustained earnings per share 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 s retlecrea of technology 1
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 Calcutta and Chenna~ Two lnnovatlve path-breaklng projects, namely, Electronic Nostro
iri

New Delhi, and one each in Bangalore,

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~mesettlement 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~nst14 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 three years. Table 3.5
~iiatio of 1999 to 2001 March Net Non-Performin@sset
~~~

Table 3 5 explains the Net NPA Ratio of SBI for last

~~

Year --

-~~-

t
1

I
I

31st March 1999 31st March 2000 - ~-- - -~-

7.25
6.41

~~

, -

~~

L-

31st March 2001 . _ _ _-- -

_ _ _ 6.03

__I

Source : SB1 Annual Report 200 1

Figure 3.1

7.6

'T

Net NPA Ratio

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 f u - nd:.;/ . 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~declto prov~dean alternative for investors and SBI Mutual Fund was horrt SBI Capita! Markets Ltd., a wholly owned subsidiary of

was appoir~tedas Trustees and Managers to the fund. SBI State Bank of lnd~a 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~nclpalTrustee 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~rishedpersonalities 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

3 6 . 1 Regular lncome Scher'es Magnum Regular lncorne Scbe,*~i 87 iMRlS 1987) was the first scheme launched by the fund ano followed b y three others
it
,

comnie~>i+d from 1st January 1988.

This was

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~fiedIS 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~chcommenced from 1st July 1991. MMlS 98(1) whlch commenced from 3rd February 1 498 and MMlS 98(11)whlch commenced from 31st October 1998 suggests
IS

The investnient objective of the scheme as the name MMlS 89

to provide a monthly return on indestment to the investor

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

Scheme, whlch was to be redeemed c n 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 as were permitted. Investors were therefore Section 80 CC and other seci~rities Issues el~g~ble under section 80CC of the Income Tax saved the trouble of seek~ng 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

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

substantial realized incorne arid capital (-ippreciation. To achieve the investment objective, investments are niainly rriade
if!

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 The policy followed is to invest primarily in equities

appreciation to the investor 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:

ihe 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

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

The

illrrl

of this fund 1 s to provlde capital appreciation

equittes

3 6 . 8 Magnum Liqu~ Bontl Fund

Magnum L~quiBond

IS

a h u [ i a ~ e dper cent debt fund that provides The fund offers h ~ g h degree of safety is

investors superior r~sks adjusted return5

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 This was converted Into open-

Tax Act to Investors under Sec 88 of the lr~come 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 3.6.1IMagnurn 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~ghergrowth potentlal because of the A sector fund focuses on invest~ng in shares of It provrdes an opportunity to the

nature of busmess thev are rn

such a sector which has high growth potential

cornrnon investor to participate in the growth of such sector wrth an investrble an?ountwithin his range The four important funds under MSFU are1)

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

provide investors with cap~talappreciation 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 arif is distributed by way of div~dendor of the scheme 1 s similar to that of cash plan reinvested. The oblect~ve
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 1 Commencement 01/01/98 01104/98 01I10194 S i 3 v i n l-22/02/91 01/01/92 Face Value 10 10 10 100 100

MMPS-93 MGLF-94 MELS-91

4" '
"
~

Growth

~-

~~

:Tax

MGIFTS-92-A.-

''
~

rlE:rwthl
-

. .

, L ID ebt
,I
.
~

~-

22/02/2001
.

10

Monthly
~~

annual
-

I Quarterl'r

~~

,
-

~ ~ - .
~

~-

~~

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

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

Growth Schemes $ever?1 a x Sav~ng Schemes, one Balanced Fund, two Openended Funds and two Debt Funds existed as on 31.03.2001