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State Bank of India
Industry : Finance - Banks - Public Sector
BSE Code : 500112
NSE Code : SBIN
Business Group : Public Sector
LTP (Rs.) : 298.35  (2.55) [NSE]
ISIN No : INE062A01020
Face Value/M Lot : 1.00/1
P/E Ratio : 986.28
Market Cap : 237,889.51 Cr
You can view the entire text of Notes to accounts of the company for the latest year.
Year End : 03 / 2017

A. Basis of Preparation:

The Bank’s financial statements are prepared under the historical cost convention, on the accrual basis of accounting on going concern basis, unless otherwise stated and conform in all material aspects to Generally Accepted Accounting Principles (GAAP) in India, which comprise applicable statutory provisions, regulatory norms/ guidelines prescribed by the Reserve Bank of India (RBI), Banking Regulation Act 1949, Accounting Standards issued by the Institute of Chartered Accountants of India (ICAI), and the practices prevalent in the banking industry in India.

B. Use of Estimates:

The preparation of financial statements requires the management to make estimates and assumptions considered in the reported amount of assets and liabilities (including contingent liabilities) as on the date of the financial statements and the reported income and expenses during the reporting period. Management believes that the estimates used in preparation of the financial statements are prudent and reasonable. Future results could differ from these estimates.

1. Share Capital

a) During the year, the Bank received application money of Rs.5,681.00 crore (Previous Year Rs.5,393.00 crore), including share premium of Rs.5,659.93 crore (Previous Year Rs.5,373.34 crore), from Government of India against preferential issue of 21,07,27,400 equity shares (Previous Year 19,65, 59,390) equity shares of Rs.1 each to Government of India. The equity shares were allotted on 20.01.2017.

b) Expenses in relation to the issue of shares: Rs.6.17 crore (Previous Year Rs.8.66 crore) is debited to Share Premium Account.

2. Innovative Perpetual Debt Instruments (IPDI)

The details of IPDI issued which qualify for Hybrid Tier I Capital and outstanding are as under:

3. Subordinated Debts

The bonds are unsecured, long term, non-convertible and are redeemable at par. The details of outstanding subordinate debts are as under:-

4.1. Investments

1. The Details of investments and the movement of provisions held towards depreciation on investments of the Bank are given below:

Notes:

a. Securities amounting to Rs.18,676.03 crore (Previous Year Rs.2,827.96 crore) are kept as margin with Clearing Corporation of India Limited (CCIL)/ NSCCL/MCX/USEIL/ NSEIL/BSE towards Securities Settlement.

b. During the year the Bank infused additional capital in its subsidiaries and associates viz. i) State Bank of Patiala Rs.4,160 crore3 (previous year Rs.799.99 crore) ii) SBI Infra Management Solutions Pvt Ltd. Rs.10 crore, iii) SBI General Insurance Co Limited Rs.166.50 crore (74%) iv) Arunachal Pradesh Rural Bank Rs.2.13 crore

*Out of the total capital infusion of Rs.4,160 crore, an amount of Rs.1,760 crore paid on 30.03.2017 has been disclosed under “Investment Suspense Account”, since allotment was pending as at year end.

c. During the year, the Bank has sold 390,00,000 equity shares of SBI Life insurance Company limited at a profit of Rs.1,755 crore. Thus the Bank stake reduced from 74% to 70.10%.

d. Jio Payments Bank Limited has been incorporated as a Joint Venture on November 10, 2016 in which SBI and Reliance Industries Limited are Joint Partners with stake of 30% and 70% respectively. SBI has infused Rs.39.60 crore as capital into the said Joint Venture till 31.03.2017

2. Repo Transactions (including Liquidity Adjustment Facility (LAF))

The details of securities sold and purchased under repos and reverse repos including LAF during the year are given below:

3. Non-SLR Investment Portfolio

a) Issuer composition of Non SLR Investments

The issuer composition of Non-SLR investments of the Bank is given below:

(Figures in brackets are for Previous Year)

* Investment in Equity, Equity Oriented Mutual Funds, Venture Capital, Rated Assets Backed Securities, Central Government Securities and ARCIL are not segregated under these categories as these are exempt from rating/listing guidelines.

** Investments in Subsidiaries/Joint Ventures have not been segregated into various categories as these are not covered under relevant RBI Guidelines.

b) Non Performing Non-SLR Investments

4. Sales and Transfers of Securities to/from HTM Category

The value of sales and transfers of securities to/from HTM Category does not exceed 5% of the book value of investment held in HTM category at the beginning of the year.

a. Risk Exposure in Derivatives (A) Qualitative Risk Exposure

i. The Bank currently deals in over-the-counter (OTC) interest rate and currency derivatives as also in Interest Rate Futures and Exchange Traded Currency Derivatives. Interest Rate Derivatives dealt by the Bank are rupee interest rate swaps, foreign currency interest rate swaps and forward rate agreements, cap, floor and collars. Currency derivatives dealt by the Bank are currency swaps, rupee dollar options and cross-currency options. The products are offered to the Bank’s customers to hedge their exposures and the Bank enters into derivatives contracts to cover such exposures. Derivatives are used by the Bank both for trading as well as hedging balance sheet items. The Bank also runs option position in USD/INR, which is managed through various types of loss limits and Greek limits.

ii. Derivative transactions carry market risk i.e. the probable loss the Bank may incur as a result of adverse movements in interest rates/ exchange rates/equity prices and credit risk i.e. the probable loss the Bank may incur if the counterparties fail to meet their obligations. The Bank’s “Policy for Derivatives” approved by the Board prescribes the market risk parameters (Greek limits, Loss Limits, cut-loss triggers, open position limits, duration, modified duration, PV01 etc.) as well as customer eligibility criteria (credit rating, tenure of relationship, limits and customer appropriateness and suitability of policy (CAS) etc.) for entering into derivative transactions. Credit risk is controlled by entering into derivative transactions only with counterparties satisfying the criteria prescribed in the Policy. Appropriate limits are set for the counterparties taking into account their ability to honour obligations and the Bank enters into ISDA agreement with each counterparty.

iii. The Asset Liability Management Committee (ALCO) of the Bank oversees efficient management of these risks. The Bank’s Market Risk Management Department (MRMD) identifies, measures, monitors market risk associated with derivative transactions, assists ALCO in controlling and managing these risks and reports compliance with policy prescriptions to the Risk Management Committee of the Board (RMCB) at regular intervals.

iv. The accounting policy for derivatives has been drawn-up in accordance with RBI guidelines, the details of which are presented under Schedule 17: Significant Accounting Policies (SAP) for the financial year 2016-17.

v. Interest Rate Swaps are mainly used at Foreign Offices for hedging of the assets and liabilities.

vi. Apart from hedging swaps, swaps at Foreign Offices consist of back to back swaps done at our Foreign Offices which are done mainly for hedging of FCNR deposits at Global Markets, Kolkata.

vii. Majority of the swaps were done with First class counterparty banks.

viii. Derivative transactions comprise of swaps which are disclosed as contingent liabilities. The swaps are categorised as trading or hedging.

ix. Derivative deals are entered into with only those interbank participants for whom counterparty exposure limits are sanctioned. Similarly, derivative deals entered into with only those corporates for whom credit exposure limit is sanctioned. Collateral requirements for derivative transactions are laid down as a part of credit sanction terms on a case by case basis. Such collateral requirements are determined based on usual credit appraisal process. The Bank retains the right to terminate transactions as a risk mitigation measure in certain cases.

@ The swaps amounting to Rs.4,988.14 crore (Previous Year Rs.7,811.17 crore) entered with the Bank’s own foreign offices are not shown here as they are for hedging of FCNB corpus and hence not marked to market.

# IRS/FRA amounting to Rs.9,299.54 crore (Previous Year Rs.11,232.11 crore) entered with the Bank’s own Foreign offices and other banks are not shown here as they are for hedging of FCNB corpus and hence not marked to market.

* The forward contract deals with our own Foreign Offices are not included. Currency Derivatives Rs.Nil (Previous Year Rs.Nil) and Interest Rate Derivatives Rs.Nil (Previous Year Rs.Nil)

1. The outstanding notional amount of derivatives done between Global Markets Unit and International Banking Group as on 31st March 2017 amounted to Rs.7,571.57 crore (Previous Year Rs.19,043.28 crore) and the derivatives done in-between SBI Foreign Offices as on 31st March 2017 amounted to Rs.16,955.57 crore (Previous Year Rs.18,071.97 crore).

2. The outstanding notional amount of interest rate derivatives which are not marked -to-market (MTM) where the underlying Assets/ Liabilities are not marked to market as on 31st March 2017 amounted to Rs.53,675.54 crore (Previous Year Rs.66,453.24 crore).

4.2. Asset Quality

a) Non-Performing Assets

Opening and closing balances provision for NPAs include ECGC claims received and held pending adjustment of Rs.Nil (Previous Year Rs.62.64 crore) and Rs.1.97 crore (Previous Year Rs.67.27 crore) respectively.

b) The disclosures relating to the divergence for the financial year 2015-16 in respect of provisions made by the bank against non-performing assets (excluding provisions made against standard assets) mandated in circular No. DBR.BP.BC.No.63/21.04.018/2016-17 dated 18th April 2017 issued by RBI is not applicable to the Bank.

4.3. Exposures

The Bank is lending to sectors, which are sensitive to asset price fluctuations.

a) Real Estate Sector

b) Capital Market

c) Risk Category wise Country Exposure

As per the extant RBI guidelines, the country exposure of the Bank is categorised into various risk categories listed in the following table. The country exposure (net funded) of the Bank for any country does not exceed 1% of its total assets except on USA, hence provision for the country exposure on USA has been made.

d) Single Borrower and Group Borrower exposure limits exceeded by the Bank

The Bank had taken single borrower exposure & Group Borrower exposure within the prudential limit prescribed by RBI.

e) Unsecured Advances

4.5. Miscellaneous

a. Disclosure of Penalties

Central Bank of Oman levied penalty of Rs.0.13 crore (Omani Riyal 8000) on Muscat branch for non compliance to some of the provisions of Banking Law 2000 & circulars of Central Bank of Oman.

b. Penalty for Bouncing of SGL forms

No penalty has been levied on the Bank for bouncing of SGL Forms.

4.6. Disclosure Requirements as per the Accounting Standards

a) Employee Benefits

i. Defined Benefit Plans

1. Employee’s Pension Plan and Gratuity Plan

The following table sets out the status of the Defined Benefit Pension Plan and Gratuity Plan as per the actuarial valuation by the independent Actuary appointed by the Bank:-

The estimates of future salary growth, factored in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors such as supply and demand in the employment market. Such estimates are very long term and are not based on limited past experience / immediate future. Empirical evidence also suggests that in very long term, consistent high salary growth rates are not possible, which has been relied upon by the auditors.

2. Employees’ Provident Fund

Actuarial valuation carried out in respect of interest shortfall in the Provident Fund Trust of the Bank, as per Deterministic Approach shows “Nil” liability, hence no provision is made in F.Y. 2016-17.

There is a guaranteed return applicable to liability under SBI Employees Provident Fund which shall not be lower of either:

(a) one half percent above the average standard rate (adjusted up or down to the interest one quarter per cent) quoted by the bank for new deposits fixed for twelve months in the preceding year (ending on the preceding the 31st day of March); or

(b) three percent per annum, subject to approval of Executive Committee.

ii. Defined Contribution Plan:

The Bank has a Defined Contribution Pension Scheme (DCPS) applicable to all categories of officers and employees joining the Bank on or after August 1, 2010. The Scheme is managed by NPS Trust under the aegis of the Pension Fund Regulatory and Development Authority. National Securities Depository Limited has been appointed as the Central Record Keeping Agency for the NPS. During F.Y.2016-17, the Bank has contributed Rs.218.15 crore (Previous Year Rs.191.18 crore).

iii. Long Term Employee Benefits (Unfunded Obligation):

(A) Accumulating Compensated Absences (Privilege Leave)

The following table sets out the status of Accumulating Compensated Absences (Privilege Leave) as per the actuarial valuation by the independent Actuary appointed by the Bank:-

(B) Other Long Term Employee Benefits

Amount of Rs.46.94 Crore (Previous Year ‘ (-) 7.62 Crore) is provided/ (written back) towards Other Long Term Employee Benefits as per the actuarial valuation by the independent Actuary appointed by the Bank and is included under the head “Payments to and Provisions for Employees” in Profit and Loss Account.

b) Segment Reporting:

1. Segment Identification

I. Primary (Business Segment)

The following are the primary segments of the Bank:- Treasury

- Corporate / Wholesale Banking

- Retail Banking

- Other Banking Business

The present accounting and information system of the Bank does not support capturing and extraction of the data in respect of the above segments separately. However, based on the present internal, organisational and management reporting structure and the nature of their risk and returns, the data on the primary segments have been computed as under:

i. Treasury -

The Treasury Segment includes the entire investment portfolio and trading in foreign exchange contracts and derivative contracts. The revenue of the treasury segment primarily consists of fees and gains or losses from trading operations and interest income on the investment portfolio.

ii. Corporate / Wholesale Banking -

The Corporate / Wholesale Banking segment comprises the lending activities of Corporate Accounts Group, Mid Corporate Accounts Group and Stressed Assets Management Group. These include providing loans and transaction services to corporate and institutional clients and further include non-treasury operations of foreign offices.

iii. Retail Banking -

The Retail Banking Segment comprises of branches in National Banking Group, which primarily includes Personal Banking activities including lending activities to corporate customers having banking relations with branches in the National Banking Group. This segment also includes agency business and ATMs.

iii) Other Banking business -

Segments not classified under (i) to (iii) above are classified under this primary segment.

II. Secondary (Geographical Segment)

i) Domestic Operations - Branches/Offices having operations in India

ii) Foreign Operations - Branches/Offices having operations outside India and offshore Banking units having operations in India

III. Pricing of Inter-segmental Transfers

The Retail Banking segment is the primary resource mobilising unit. The Corporate/Wholesale Banking and Treasury segments are recipient of funds from Retail Banking. Market related Funds Transfer Pricing (MRFTP) is followed under which a separate unit called Funding Centre has been created. The Funding Centre notionally buys funds that the business units raise in the form of deposits or borrowings and notionally sell funds to business units engaged in creating assets.

IV. Allocation of Expenses, Assets and Liabilities

Expenses incurred at Corporate Centre establishments directly attributable either to Corporate / Wholesale and Retail Banking Operations or to Treasury Operations segment, are allocated accordingly. Expenses not directly attributable are allocated on the basis of the ratio of number of employees in each segment/ratio of directly attributable expenses.

The Bank has certain common assets and liabilities, which cannot be attributed to any segment, and the same are treated as unallocated.

c) Related Party Disclosures:

1. Related Parties

A. SUBSIDIARIES

i. DOMESTIC BANKING SUBSIDIARIES (merged w. e. f. 1st April 2017)

1. State Bank of Bikaner & Jaipur

2. State Bank of Hyderabad

3. State Bank of Mysore

4. State Bank of Patiala

5. State Bank of Travancore

ii. FOREIGN BANKING SUBSIDIARIES

1. SBI (Mauritius) Ltd.

2. SBI Canada Bank

3. State Bank of India (California)

4. Commercial Indo Bank Llc , Moscow

5. PT Bank SBI Indonesia

6. Nepal SBI Bank Ltd.

7. Bank SBI Botswana Limited

iii. DOMESTIC NON-BANKING SUBSIDIARIES

1. SBI Capital Markets Ltd.

2. SBI DFHI Ltd.

3. SBI Mutual Fund Trustee Company Pvt. Ltd.

4. SBICAP Securities Ltd.

5. SBICAP Ventures Ltd.

6. SBICAP Trustee Company Ltd.

7. SBI Cards and Payment Services Pvt. Ltd.

8. SBI Funds Management Pvt. Ltd.

9. SBI Life Insurance Company Ltd.

10. SBI Pension Funds Pvt. Ltd.

11. SBI - SG Global Securities Services Pvt. Ltd.

12. SBI Global Factors Ltd.

13. SBI General Insurance Company Ltd.

14. SBI Payment Services Pvt. Ltd.

15. SBI Foundation

16. SBI Infra Management Solutions Pvt. Ltd

iv. FOREIGN NON-BANKING SUBSIDIARIES

1. SBICAP (UK) Ltd.

2. SBI Funds Management (International) Pvt. Ltd.

3. SBICAP (Singapore) Ltd.

4. State Bank of India Servicos Limitada

5. Nepal SBI Merchant Banking Limited

B. JOINTLY CONTROLLED ENTITIES

1. GE Capital Business Process Management Services Pvt. Ltd

2. C-Edge Technologies Ltd.

3. Macquarie SBI Infrastructure Management Pte. Ltd.

4. Macquarie SBI Infrastructure Trustee Ltd.

5. SBI Macquarie Infrastructure Management Pvt. Ltd.

6. SBI Macquarie Infrastructure Trustee Pvt. Ltd.

7. Oman India Joint Investment Fund - Management Company Pvt. Ltd.

8. Oman India Joint Investment Fund - Trustee Company Pvt. Ltd.

9. Jio Payments Bank Ltd.

C. ASSOCIATES

i. Regional Rural Banks

1. Andhra Pradesh Grameena Vikas Bank

2. Arunachal Pradesh Rural Bank

3. Chhattisgarh Rajya Gramin Bank

4. Ellaquai Dehati Bank

5. Meghalaya Rural Bank

6. Langpi Dehangi Rural Bank

7. Madhyanchal Gramin Bank

8. Mizoram Rural Bank

9. Nagaland Rural Bank

10. Purvanchal Bank

11. Saurashtra Gramin Bank

12. Utkal Grameen Bank

13. Uttarakhand Gramin Bank

14. Vananchal Gramin Bank

15. Rajasthan Marudhara Gramin Bank

16. Telangana Grameena Bank

17. Kaveri Grameena Bank

18. Malwa Gramin Bank

ii. Others

1. SBI Home Finance Ltd.(under liquidation)

2. The Clearing Corporation of India Ltd.

3. Bank of Bhutan Ltd.

D. Key Management Personnel of the Bank

1. Smt. Arundhati Bhattacharya, Chairman

2. Shri V.G. Kannan, Managing Director (Associates & Subsidiaries) up to 31.07.2016

3. Shri B. Sriram, Managing Director (Corporate Banking Group)

4. Shri Rajnish Kumar, Managing Director (National Banking Group)

5. Shri P. K. Gupta, Managing Director (Compliance & Risk)

6. Shri Dinesh Kumar Khara, Managing Director (Associates & Subsidiaries) from 09.08.2016

2. Parties with whom transactions were entered into during the year

No disclosure is required in respect of related parties, which are “State-controlled Enterprises” as per paragraph 9 of Accounting Standard (AS) 18. Further, in terms of paragraph 5 of AS 18, transactions in the nature of Banker-Customer relationship have not been disclosed including those with Key Management Personnel and relatives of Key Management Personnel.

d) Liability for Operating Leases

Premises taken on operating lease are given below:

Operating leases primarily comprise office premises and staff residences, which are renewable at the option of the Bank.

(i) Liability for Premises taken on Non-Cancellable operating lease are given below

(ii) Amount of lease payments recognised in the P&L Account for operating leases is Rs.2,582.72 crore (Rs.2,110.27 crore)

e) Earnings per Share

The Bank reports basic and diluted earnings per equity share in accordance with Accounting Standard 20 - “Earnings per Share”. “Basic earnings” per share is computed by dividing net profit after tax by the weighted average number of equity shares outstanding during the year.

f) Accounting for Taxes on Income:

a. Current Tax :-

During the year the Bank has debited to Profit & Loss Account Rs.4,165.83 crore (Previous Year Rs.4,003.27 crore) on account of current tax. The Current Tax in India has been calculated in accordance with the provisions of Income Tax Act 1961 after taking appropriate relief for taxes paid in foreign jurisdictions.

b. Deferred Tax :-

During the year, Rs.337.78 crore has been debited to Profit and Loss Account (Previous Year Rs.245.47 crore debited) on account of deferred tax.

The Bank has a net Deferred Tax Liability (DTL) of Rs.2,561.87crore (Previous Year net DTL of Rs.2,212.44 crore), which comprises of DTL of Rs.2,989.77crore (Previous Year Rs.2,684.96 crore) included under ‘Other Liabilities and Provisions’ and Deferred Tax Assets (DTA) of Rs.427.90 crore (Previous Year Rs.472.52 crore) included under ‘Other Assets’. The major components of DTA and DTL is given below:

h) Impairment of Assets

In the opinion of the Bank’s Management, there is no indication of impairment to the assets during the year to which Accounting Standard 28 - “Impairment of Assets” applies.

4.5. Additional Disclosures

1. Provisions and Contingencies recognised in Profit and Loss Account

2. Floating Provisions

3. Draw down from Reserves

During the year, no draw down has been made from reserves.

4. Status of complaints

A. Customer complaints (including complaints relating to ATM transactions)

5. Payment to Micro, Small & Medium Enterprises under the Micro, Small & Medium Enterprises Development Act, 2006

There has been no reported cases of delayed payments of the principal amount or interest due thereon to Micro, Small & Medium Enterprises.

6. Letter of Comfort issued for Subsidiaries

The Bank has issued no letters of comfort outstanding on behalf of its subsidiaries. as on 31st March 2017. (Previous Year: Rs.Nil).

7. Provisioning Coverage Ratio (PCR):

The Provisioning to Gross Non-Performing Assets ratio of the Bank as on 31st March 2017 is 65.95 % (Previous Year 60.69%).

8. Fees/remuneration received in respect of the bancassurance business

9. Concentration of Deposits, Advances Exposures & NPAs (computed as per directions of RBI)

a) Concentration of Deposits

b) Concentration of Advances

c) Concentration of Exposures

d) Concentration of NPAs

10. Unhedged Foreign Currency Exposure

The Bank in accordance with RBI Circular No. DBOD.No.BP.BC.85/21.06.200/2013-14 dated January 15, 2014 on ‘Capital and Provisioning Requirements for Exposure to entites has provided for Unhedged Foreign Currency Exposure’. An amount of Rs.110.74 crore (Previous Year Rs.161.21 crore) was held as on 31st March 2017 for towards Currency Induced Credit Risk and Capital allocated for Currency Induced Credit Risk amounting to Rs.246.98 crore (Previous Year Rs.237.62 crore).

11. Liquidity Coverage Ratio (LCR):

a) Standalone LCR

Liquidity Coverage Ratio (LCR) standard has been introduced with the objective that a bank maintains an adequate level of unencumbered High Quality Liquid Assets (HQLAs) that can be converted into cash to meet its liquidity needs for a 30 calendar day time horizon under a significantly severe liquidity stress scenario.

Stock of high quality liquid assets (HQLAs)

LCR has been defined as: -

Total net cash outflow over the next 30 calendar days

Liquid assets comprise of high quality assets that can be readily encashed or used as collateral to obtain cash in a range of stress scenarios. There are two categories of assets included in the stock of HQLAs, viz. Level 1 and Level 2 assets. While Level 1 assets are with 0% haircut, Level 2A and Level 2 B assets are with 15% and 50% haircuts respectively. The total net cash outflow is the total expected cash outflows minus total expected cash inflows for the subsequent 30 calendar days. Total expected cash outflows are calculated by multiplying the outstanding balances of various categories or types of liabilities and off-balance sheet commitments by the rates at which they are expected to run off or be drawn down. Total expected cash inflows are calculated by multiplying the outstanding balances of various categories of contractual receivables by the rates at which they are expected to flow in up to an aggregate cap of 75% of total expected cash outflows.

In terms of RBI Circular FMRD.DIRD.10/14.03.002/2015-16 dated May 19,2016, the Bank has, with effect from October 3, 2016, considered its repo/ reverse repo transactions under Liquidity Adjustment Facility (LAF) and Marginal Standing Facility (MSF) of RBI as Borrowings/ Lending respectively as against the earlier practice of including the same under investments.

Note 1 : As per RBI guidelines, the LCR disclosure should be based on the simple average of daily observations for the quarter starting from March 31, 2017. In view of the same, the Bank has commenced computation of the LCR on a daily basis from January 1, 2017 taking 64 data points. Note 2 : The above data represent simple average of monthly observations for the respective quarters.

The LCR position is above the minimum 80% prescribed by RBI. Bank’s LCR comes to 144.06% based on daily average of three months (Q4 FY16-17). The average HQLA for the quarter was Rs 5,10,555 Crs, of which, Level 1 assets constituted 93.49% of total HQLA. Government securities constituted 96.62% of Total Level 1 Assets. Level 2 A Assets constitutes 5.33% of total HQLA and Level 2B assets constitutes 1.18% of total HQLA. The net cash outflow position has gone up on account of growth of Balance Sheet size. Derivative exposures are considered insignificant due to almost matching inflows and outflows position. During the quarter, LCR for USD (significant Foreign Currency constituting more than 5% of the Balance Sheet of the Bank) was 87.45% on average.

Liquidity Management in the Bank is driven by the ALM Policy of the Bank and regulatory prescriptions. The Domestic and International Treasuries are reporting to the Asset Liability Management Committee (ALCO). The ALCO has been empowered by the Bank’s Board to formulate the Bank’s funding strategies to ensure that the funding sources are well diversified and is consistent with the operational requirements of the Bank. All the major decisions of ALCO are being reported to the Bank’s Board periodically. In addition to daily/monthly LCR reporting, Bank prepares daily Structural Liquidity statements to assess the liquidity needs of the Bank on an ongoing basis.

The Bank has been maintaining HQLA mainly in the form of SLR investments over and above the mandatory requirements. Retail deposits constitute major portion of total funding sources, which are well diversified. Management is of the view that the Bank has sufficient liquidity cover to meet its likely future short term requirements.

b. Consolidated LCR

The RBI through a supplementary guideline issued on March 31, 2015 had stipulated the implementation of LCR at a consolidated level from January 1, 2016. Accordingly, SBI Group has been computing the Consolidated LCR.

The entities covered in the Group LCR are six Domestic Banking and seven Overseas Banking Subsidiaries. These are State Bank of India, State Bank of Bikaner and Jaipur, State Bank of Hyderabad, State Bank of Patiala, State Bank of Mysore, State Bank of Travancore, Bank SBI Botswana Ltd, Commercial Indo Bank LLC, Moscow, Nepal SBI Bank Ltd., State Bank of India (California) Ltd, SBI Canada Bank, State Bank of India (Mauritius) Ltd, PT Bank SBI Indonesia.

The Group has been maintaining HQLA mainly in the form of SLR investments over and above the mandatory requirements. Retail deposits constitute major portion of total funding sources, and such funding sources are well diversified. Management is of the view that the Bank has sufficient liquidity cover to meet its likely future short term requirements.

12. Fraud Reported and provision made during the year:

Out of the total frauds of Rs.2,424.74 crore (837 cases) reported during the year an amount of Rs.2,360.37 crore (278 cases) represents advances declared as frauds.

With an additional provision of Rs.302.05 crore during the year the frauds have been fully provided for.

13. Inter Office Accounts

Inter Office Accounts between branches, controlling offices, local head offices and corporate centre establishments are being reconciled on an ongoing basis and no material effect is expected on the profit and loss account of the current year.

14. Sale of Assets to Reconstruction Companies

Shortfall on account of sale of assets to reconstruction companies during the year amounting to Rs.48.59 crore (Previous Year Rs.461.39 crore) and also unamortised amount as at March 31, 2016 amounting to Rs.1,131.01 crore has been fully amortised in the current year.

15. Counter Cyclical Provisioning Buffer (CCPB)

RBI vide Circular No. DBR.No.BP.BC.79/21.04.048/2014-15 dated March 30, 2015 on ‘Utilisation of Floating Provisions/Counter Cyclical Provisioning Buffer’ has allowed the banks, to utilise up to 50 per cent of CCPB held by them as on December 31, 2014, for making specific provisions for Non-Performing Assets (NPAs) as per the policy approved by the Bank’s Board of Directors. During the year, the Bank has not utilized the CCPB for making specific provision for NPAs.

16. Food Credit

In accordance with RBI instruction, the Bank has made a provision of 7.5% amounting to Rs.856 crore (Previous Year Rs.543.50 crore) against outstanding in the long term food credit advance to a State Government.

17. Revaluation of Bank’s Properties:

a) During the year, the Bank has revalued immovable properties based on the reports obtained from the external independent valuers. The revaluation surplus was credited to revaluation reserve, and the closing balance as at March, 31, 2017 (net of amount transferred to General Reserve) is Rs.31,585.65 crore.

b) In terms of RBI circular No.DBR No.BP.BC.83/21.06.201/2015-16 dated 01.03.2016 on Basel III capital regulations, the revaluation reserves have been reckoned as CET I Capital at a discount of 55%.

18. Acquisition of Banking subsidiaries & Bharatiya Mahila Bank Limited

The Government of India (GOI) has accorded sanction under sub-section (2) of section 35 of the State Bank of India Act, 1955, for acquisition of the five domestic Banking subsidiaries of State Bank of India (SBI) namely, State Bank of Bikaner & Jaipur (SBBJ), State Bank of Mysore (SBM), State Bank of Travancore (SBT), State Bank of Patiala (SBP), State Bank of Hyderabad (SBH) and for acquisition of Bharatiya Mahila Bank Limited (BMBL) (hereinafter collectively referred to as Transferor Banks) vide their orders dated February 22, 2017 and March 20, 2017. As per the GOI orders, these schemes for acquisition shall come into effect on April 1, 2017 (hereafter referred to as the effective date).

The undertakings of the Transferor Banks which shall be deemed to include all business, assets, liabilities, reserves and surplus, present or contingent and all other rights and interest arising out of such property as were immediately before the effective date in the ownership, possession or power of the Transferor Banks shall be transferred to and will vest in SBI on and from the effective date.

Necessary accounting adjustments in this regard will be made on the effective date.

19. Previous year figures have been regrouped/reclassified, wherever necessary, to confirm to current year classification. In cases where disclosures have been made for the first time in terms of RBI guidelines / Accounting Standards, previous year’s figures have not been mentioned.

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