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State Bank of India
Industry : Finance - Banks - Public Sector
BSE Code : 500112
NSE Code : SBIN
Business Group : SBI Group
LTP (Rs.) : 2,017.30  (57.90) [NSE]
ISIN No : INE062A01012
Face Value/M Lot : 10.00/1
P/E Ratio : 8.41
Market Cap : 150,606.19 Cr
You can view the entire text of Notes to accounts of the company for the latest year.
Year End : 03 / 2013
A. Basis of Preparation

The Banks financial statements are prepared under the historical cost convention, on the accrual basis of accounting, 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 Reserve Bank of India (RBI), 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 of the date of the financial statements and the reported income and expenses during the reporting period. Management believes that the estimates used in the 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 has allotted 129,88,697 shares of Rs. 10/- each for cash at a premium of Rs. 2,302.78 per equity share aggregating to Rs. 3004 crore under Preferential Allotment to GOI. Out of the total subscription of Rs. 3004 crore received from GOI, an amount of Rs. 12.99 crore was transferred to Share Capital Account and Rs. 2991.01 crore to Share Premium Account.

b) The Bank has allotted 436 equity shares of Rs. 10/- each for cash at a premium of Rs. 1,580/- per equity share aggregating to Rs. 6,93,240/- out of shares kept in abeyance under Right Issue - 2008. Out of the total subscription of Rs. 6,93,240/- received, Rs. 4360/- was transferred to Share Capital Account and Rs. 6,88,880/- to Share Premium Account.

c) The Bank has kept in abeyance the allotment of 83,075 (Previous Year 83,511) Equity Shares of Rs. 10/- each issued as a part of Rights issue, since they are subject to title disputes or are subjudice.

d) Expenses in relation to the issue of shares: Rs. 3.73 crore debited to Share Premium Account.

* If the Bank does not exercise call option by 15th May 2017, the interest rate will be raised and fixed rate will be converted to floating rate.

# If the Bank does not exercise call option by 27th June 2017, the interest rate will be raised and fixed rate will be converted to floating rate.

b. Investments amounting to Rs. 6,070.97 crore (Previous Year Rs. 5520.21 Crore) are kept as margin with Clearing Corporation of India Limited/NSCCL/ MCX/ USEIL towards Securities Settlement.

d. During the year, GE Capital Business Process Management Services Private Limited bought back 13,59,598 shares from the Bank at Rs. 141 per share , the Bank continues to hold 40% (previous year 40 %) stake in the joint venture. The Bank exited from two RRBs as per details given below

* 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. Others include an amount of Rs. 13,330.20 crore (Previous Year Rs. 15,942.94) under RIDF Scheme of NABARD.

C. Disclosures on Risk Exposure in Derivatives (A) Qualitative Disclosure

i. The Bank currently deals in over-the-counter (OTC) interest rate and currency derivatives as also in Interest Rate and Currency Futures. Interest Rate Derivatives dealt by the Bank are rupee interest rate swaps, foreign currency interest rate swaps and forward rate agreements. Currency derivatives dealt by the Bank are currency swaps, rupee dollar options, exchange traded options and cross- currency options. The products are offered to the Banks 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 on balance sheet items. The Bank also deals in a mix of these generic instruments. The Bank has done Option deals and Structured Products with customers.

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 Banks "Policy for Derivatives" approved by the Board prescribes the market risk parameters (cut-loss triggers, open position limits, duration, modified duration, PV01 etc.) as well as customer eligibility criteria (credit rating, tenure of relationship 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 Banks 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 2012-13.

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.

$ The swaps amounting to Rs. 6,574.73 crore (Previous Year Rs. 7,276.19 crore) entered with the Banks 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. 10,338.05 crore(Previous Year Rs. 7,600.95 crore) entered with the Banks own Foreign offices 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. 4,349.04 crore ( Previous Year Rs. 1,260.56 crore) and Interest Rate Derivatives - Rs. 167.53 crore (Previous Year Rs. 159.56 crore)

1. The outstanding notional amount of derivatives done between Global Markets department and International Banking Group department as on 31st March 2013 amounted to Rs. 21,429.35 crore (Previous Year Rs. 16,297.26 crore) and the derivatives done between SBI Foreign Offices as on 31st March 2013 amounted to Rs. 35,082.63 crore ( Previous Year Rs. 30,663.90 crore).

2. The outstanding notional amount of interest rate derivatives which are not marked to market where the underlying Assets/Liabilities are not marked to market as on 31st March 2013 amounted to Rs. 80,144.28 crore ( Rs. 57,756.33 crore).

3. Credit Default Swap : Outstanding as on 31st March 2013 amounted to Rs. 54.29 crore (Previous Year Rs. 546.90 crore).

2.1. Miscellaneous

a) Disclosure of Penalties imposed by RBI

Nil (Previous year Rs. 0.10 crore)

b) Penalty for Bouncing of SGL forms

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

2.2. Disclosure Requirements as per Accounting Standards

a) Employee Benefits

i. Defined Benefit Plans

1. Employees 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. 2012-13.

The following table sets out the status of Provident Fund as per the actuarial valuation by the independent Actuary appointed by the Bank:-

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.2012-13, the Bank has contributed Rs. 67.73 crore (Previous Year Rs. 52.47crore).

iii. Other Long Term Employee Benefits

Amount of Rs. 502.25 Crore (Previous Year Rs. 531.33 Crore) is provided towards 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.

iv. 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.

During the year, the Bank has further refined the segmental transfer pricing mechanism in order to report more relevant segment results. This change effects the segment results inter se and has no impact on the financials of the bank. The effect of the change on the segment results is not fairly determined.

c) Related Party Disclosures:

1. Related Parties

A. SUBSIDIARIES

i. DOMESTIC BANKING SUBSIDIARIES

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. State Bank of India (Canada)

3. State Bank of India (California)

4. Commercial Bank of India LLC, Moscow

5. PT Bank SBI Indonesia

6. Nepal SBI Bank Ltd.

iii. DOMESTIC NON-BANKING SUBSIDIARIES

1. SBI Capital Markets Ltd.

2. SBI DFHI Ltd.

3. SBI Mutual Funds Trustee Company Pvt. Ltd.

4. SBICAP Securities Ltd.

5. SBICAPS Ventures Ltd.

6. SBICAP Trustees 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.

iv. FOREIGN NON-BANKING SUBSIDIARIES

1. SBICAP (UK) Ltd.

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

3. SBICAP (Singapore) Ltd.

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 Trustees Ltd.

5. SBI Macquarie Infrastructure Management Pvt. Ltd.

6. SBI Macquarie Infrastructure Trustees Pvt. Ltd.

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

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

C. ASSOCIATES

i. Regional Rural Banks

1. Andhra Pradesh Grameena Vikas Bank

2. Arunachal Pradesh Rural Bank

3. Kaveri Grameena Bank

4. Chhattisgarh Gramin Bank

5. Deccan Grameena Bank

6. Ellaquai Dehati Bank

7. Meghalaya Rural Bank

8. Krishna Grameena Bank

9. Langpi Dehangi Rural Bank

10. Madhyanchal Gramin Bank

11. Malwa Gramin Bank

12. Mizoram Rural Bank

13. Marudhara Gramin Bank

14. Nagaland Rural Bank

15. Parvatiya Gramin Bank (upto 14.02.2013)

16. Purvanchal Gramin Bank

17. Samastipur Kshetriya Gramin Bank (upto 14.10.2012)

18. Saurashtra Gramin Bank

19. Utkal Grameen Bank

20. Uttarakhand Gramin Bank

21. Vananchal Gramin Bank

22. Vidisha Bhopal Kshetriya Gramin Bank (upto 07.10.2012)

ii. Others

1. SBI Home Finance Ltd.

2. The Clearing Corporation of India Ltd.

3. Bank of Bhutan Ltd.

D. Key Management Personnel of the Bank

1. Shri Pratip Chaudhuri, Chairman

2. Shri Hemant G. Contractor Managing Director & Group Executive (International Banking)

3. Shri A. Krishna Kumar, Managing Director & Group Executive (National Banking)

4. Shri Diwakar Gupta, Managing Director & Chief Financial Officer

5. Shri S. Vishvanathan, Managing Director & Group Executive (Associates & Subsidiaries) (from 9.10.2012)

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.

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

i. Deferred Tax :-

a. During the year, Rs. 107.97 crore [Previous Year Rs. 455.93 crore debited] has been credited to Profit and Loss Account on account of deferred tax.

b. During the year, the Bank has recognised deferred tax asset on provision for leave encashment, which was hitherto not being done. Accordingly, an amount of Rs. 922.15 crore ( including Rs. 783.62 crore relating to period upto 31.03.2012) has been accounted for in the current year.

ii. The Bank has net deferred tax liability of Rs. 628.92 crore (Previous Year net deferred tax asset of Rs. 180.63 crore), which is included under Other Liabilities and Provisions (Previous Year Other Assets). The breakup of deferred tax assets and liabilities into major items is given below:

# Includes tax credit arising out of provision for leave encashment for employees of Rs. 922.15 crore.

* Includes Rs. 917.04 crore (Previous Year Rs. 536.56 Crore) transferred from Income Tax Account.

h) Impairment of Assets

In the opinion of the Banks Management, there is no impairment to the assets during the year to which Accounting Standard 28 - "Impairment of Assets" applies.

3. With regard to disclosures relating to Micro, Small & Medium Enterprises under the Micro, Small & Medium Enterprises Development Act, 2006, there have been no reported cases of delayed payments or of interest payments due to delay in such payments to Micro, Small & Medium Enterprises.

4. Letter of Comfort issued for Subsidiaries

The Bank has issued letters of comfort on behalf of its subsidiaries. Outstanding letters of comfort as on 31st March 2013 aggregate to Rs. 477.19 Crore (Previous Year: Rs. 2086.56 Crore). In the Banks assessment no financial impact is likely to arise.

5. Provisioning Coverage Ratio:

The Provisioning to Gross Non-Performing Assets ratio of the Bank as on 31st March 2013 is 66.58% (Previous Year 68.10%).

6. Unamortised Gratuity Liabilities

In accordance with RBI circular no. DBOD.BP.BC.80/21.04.018/2010-11 dated February 9, 2011 the Bank has opted to amortise the additional liability on account of enhancement in Gratuity limit over a period of 5 years beginning with the financial year ended March 31, 2011. Accordingly, the Bank has charged a sum of Rs. 100 crore to the Profit and Loss Account, being the proportionate amount for the financial year ended March 31, 2013. The unrecognised liability of Rs. 200 crore as on March 31, 2013 will be amortised proportionately in accordance with the above circular.

7. Inter Office Accounts

Inter Office Accounts between branches, controlling offices and 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.

8. Specific Provision for NPAs

During the year, the Bank has made specific provisions of Rs. 706.26 crore (previous year Rs. 1350 crore) for certain Non- performing domestic advances to provide for estimated actual loss in collectible amounts.

9. Pending Wage Agreement

The Ninth Bipartite Settlement entered into by the Indian Banks Association on behalf of the member Banks with the All India Unions of Workmen expired on 31st October 2012. Pending execution of agreement for wage revision, to be effective from 1st November 2012, a provision of Rs. 720 Crore has been made during the year.

Further, the Bank has made an adhoc additional provision of Rs. 225 crore towards Superannuation Schemes and other long term employee benefits, over and above the actuarial valuations.

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

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