CHAPTER - Ill

PROFILE OF STATE BANK OF INDIA

MUTUAL FUND

31

ORIGIN AND GROWTH OF STATE BANK OF INDIA

32

ORGANISATION & SlRlJCTURE OF SBI

33

SBI AS A NEW GENERATION BANK

34

N P A MANAGEMENT

35

SBI MUTUAL FUND - A N OVERVIEW

36

SBI MUTUAL FUND SCHEMES

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
the first jolnt stock bank of B-itish lnd~asponsored by the Government of Bengal
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 ~ dnot
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
Bank convert~ngct Into a purely comrr~ercialbank. The bank was permitted to
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 hstarldard 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

including lmper~alBank 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~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~rastitraand
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 ~nto100 '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

under the control of a Central Board of

15

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

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 ( 2 5 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 ~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

redeemable, subordinated

prlvate placement of unsecured, non-convertible

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~fthe 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

SI. No.

Shareholder's Category

I
1.

1 Reserve Bank of India

Non-residents (Flls/OCBs/NRls)

3.

Financial Institutions including Insurance Co.s

4.

Mutual FundslBankslGovt. Cos

/ Domestic Cos nrusts

Others
.~

Source : SBI Annual Reoorl :!Otll

1
!
I

lnclud~ngResident
lndivlduals

Number of ShareholdersJmJakh)
~-

59.73
18.31

2.

5.

% of shares

-~ -

11.58
1.30
6.24
2.84
~

7.37

~.

1I

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

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

Compari~esiTrustand 2 84 perc:ent by Resldent lndlv~duals

Market Pr~ceData 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 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

IS

lidla's second largest asset management

company, next to :he Li 71

3 2 . 2 DOMESTIC BRANCH ~ E T W O R K

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~onalBanklng Group (NBG)

The NBG commands dbout 59 per cerlt ~f the domest~cdeposlts and 84 per cent
of the domest~cadvances of the Bank It prov~desbanklng 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~tutionalcustomers, 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~ntsamong 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 ~ g hnet worth lndlvlduals for the personal segment
products Gold Bank~ngHouslr~gfinances and Consumer finance are other thrust
areas of the Bank
ii) The Corporate Bank~ngGroup
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

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~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 ~najorclients 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

appointed a consultant of international repute to ident~fythe 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~nalservice 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

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

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

lv)

term deposits and v~ce'versa permitted

Recurr~ngDeposits des~gnedfor regular savings

V)

Monthly deposits of a

fixed amount for a flxed pard

VI)

Multi Opt~onDeposit 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~csetc 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

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 b a n ranglng between 20%

15%

Long

repayment t ~ m eallowed up to 5 years

iv)

Car Loan Scheme for pl~rchaseoi' new cars Ijeeps Isecond hand cars not

more than 3 years old rriaxim8Jrnloan

LC

required tf check-off facility 1s available

to 8 lakhs. Third party guarantee not

Long repayment time up to 7 years

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-.

Easy

repayment terms for loans alloweol.

vi)

Gold Loan Scheme aga~nctpledge 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,

etc.
family functrons, hosp~talizat~on

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~nstmortgage of property, pensloner's

loans, loan against approved securit~esetc

Table 3 4
Worklng ot SBI for 'the years 1996-97 to 2000-'01
(Rs. in Crores)
.

-~

Year

No of
1

I
i

1999-00

Depos~ts

Loans

8,996

1,916,821

98,102

--

~~~

2000-01

C.
-

~p~~

lnvestmerlts

Net Profit

Brancnes

~~~

9 326

,i

:!,42,828

1,13,590

i
'

92.000

i
!
.

2,051

I
i

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 In 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
offices in Antweep Fral~kfurtand Parls acquired capability to open accounts and
handle transact~onsin 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

SBI AS A NEW GENERATION BANK

3.3.

"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~onsale
Premier Ind~arlF~nancialServices Group with global perspective, world-class

i)

standards of eiticiency and professional~smand 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~deInterbank 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

iri

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~IOIbass 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~nancialNetwork (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

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

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

--

~~

~~~

Year
--

-~~-

t
1

31st March 1999

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

L-

7.25

~~

31st March
2001
.
_ _ _-- -

Source : SB1 Annual Report 200 1

, -

~~

6.41

_ _ _ 6.03

__I

Figure 3.1

'T

Net NPA Ratio

7.6

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 fu
- nd:.;/.business after the Government of 11id1aissued permission to do mutual fund
business. Till 1987 Unit Trust of lnd~aNas 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

State Bank of lnd~awas appoir~tedas 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~thvast 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~redraKumar as Directors.
3.6

SBI MUTUAL FUND SCHEMES

3 6 . 1 Regular lncome Scher'es

Magnum Regular lncorne Scbe,*~i87 iMRlS 1987) was the first scheme
launched by the fund ano
followed b y three others

it

comnie~>i+dfrom 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

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 c n 31st March 1993, has been extended up
to 31st December 1996 at a h~gherrnonthly pay out of 15 per cent per annum for

those investors who have ex~srcisedthii 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~ritiesas were permitted. Investors were therefore
under section 80CC of the Income Tax
saved the trouble of seek~ngIssues el~g~ble
act 1961

3.6.4 80 CC
: 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~ngS'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

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

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.

commenced from 20th November 199:

It

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

objective, the funds are malnly ~nvestediri equlties and equ~tyrelated instruments
as well as in money market instruments
The other schemes exlsting are

3.6 7 Magnum Equ~tyFund

Magnum Equlty Fuqd was converted into open-end scheme with effect
fromlst January 1998
through the investment

The
in

illrrl

of this fund 1s 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

investors superior r~sksadjusted return5

The fund offers h ~ g hdegree 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~comeTax 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
3.6.1IMagnurn 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

nature of busmess thev are rn

A sector fund focuses on invest~ngin 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?ountwithin his range The four important funds under MSFU are1)

IT FUND

IS

a part of sec'ror fund umbrella launched w~ththe 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.il

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~ghlyIlquld 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

reinvested. The oblect~veof 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

7Scheme
1

Growth

MMPS-93

~-

4"
'

Commencement

Face Value

01/01/98

10

01104/98

10

01I10194

10

22/02/91

100

01/01/92

100

~~

MGLF-94

"

MELS-91

:Tax

MGIFTS-92-A.-

S i 3 v i n l--

''
~

rlE:rwthl
-

,L
ID
ebt

Monthly

,I

I Quarterl'r

~~

. .

annual
-

~-

22/02/2001

10

-.

~~

~ ~ - .

~-

~~

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

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

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