With a new and stable Government in place now, we expect a clear revival in investment climate.

Arundhati Bhattacharya


Dear Shareholders,

It gives me great pleasure to place before you the highlights of your Bank's performance during the financial year 2013- 14. Details of the achievements and initiatives taken by your Bank are provided in the enclosed Annual Report for the year 2013-14.


The global economic environment has broadly strengthened, and is likely to improve further, with much of the growth impetus emanating from advanced economies. The outlook for world economy is positive with 3.5% growth forecast for 2014.

India's GDP, according to the CSO, is expected to improve moderately to 4.7% in FY 2014 against 4.5% growth in the previous year. The recovery is led by agriculture and external sector. Agricultural GDP, including allied sector, is poised to grow by 4.7% in FY 2013-14, over three times higher than 1.4% in the previous year. On the external front, stable rupee and improvement in the Current Account Deficit (CAD) from 4.8% of GDP in FY 2013 to 1.7% estimated for FY 2014 is good news. The narrowing of CAD followed a lower trade deficit due to higher exports as well as moderation in imports.

The Indian economy is now on the threshold of a major transformation, with expectations of policy initiatives by the newly elected Central Government. The economy is on the road to smart recovery due to positive business sentiments, improved consumer confidence and more controlled inflation. The sectors which were significantly impacted by the crisis and slowdown in the economy are now showing definite signs of improvement. The challenge for maintaining disinflationary momentum over the medium term, however, remains on the horizon. A moderate recovery is likely to be seen in FY 2015 when real GDP may grow by 5.3%-5.5%.



The deposits of your Bank rose by 15.94% to `13,94,409 crores over the previous year's level of `12,02,740 crores. Due to higher growth as compared to the industry average, the market share of the Bank, in all scheduled commercial Bank deposits (ASCB), increased by 11 bps to 16.57% in March 2014. The Bank's policy to shed high cost bulk deposits and more reliance on retail deposits has paid dividends, which has resulted in increase in retail TD ratio from 41.87% to 45.47% during FY 2014. Due to higher reliance on retail deposits, coupled with healthy CASA of 44.43%, the ratio of CASA + retail TD to domestic deposits increased smartly to 89.89% in Mar 2014 from 88.37% in the previous year. Savings Bank Deposits increased by 13.1% to `4,69,262 crores from `4,14,907 crores in March 2013. I am glad to state that under Savings Bank, 421 lakhs new accounts were opened during the year which were 46.7% higher than 287 lakhs accounts opened during the previous year. In current account also, your Bank logged in a growth of 22.2% with new account accretion of 269 lakhs.


Advances of your Bank, after crossing the `10,00,000 crores mark last year, continued to grow at a healthy rate of 15.44% and reached `12,45,122 crores in FY 2014 against `10,78,557 crores in the previous year. Your Bank's advances remain well diversified across all verticals with the market share at 16.65%. Large Corporate advances rose from `1,75,831 crores in Mar 2013 to `2,42,719 crores in Mar 2014, registering a robust growth of 38.0%. Bank's loan to Mid-Corporate increased by 11.5% from `2,04,853 crores to `2,28,384 crores.

Taking advantage of favourable monsoons and increase in agricultural GDP growth of 4.7% in FY 2014, agriculture advances (direct + indirect) of your Bank grew by a healthy 23.9% to `1,54,715 crores. Through a Hub-and-Spoke Model with BC networks your Bank has established linkage with 69,000 villages for greater contact with customers residing in remote unbanked areas and bringing them into the banking fold. To capture the entire value chain and to reduce the slippages through risk mitigation, Agri products were reviewed and revamped critically.

SME advances, on the other hand, registered a negative growth of 2.37% in FY 2014 mainly due to decline in high yielding advances and continuing NPAs. A pilot was run to correct the flaws in the current model of SME delivery. The pilot has since been successfully concluded and a national roll out is commencing shortly. Under the new model, in order to provide specialised services to SME entrepreneurs as well as timely and adequate credit to this segment, 579 branches with a predominant portfolio of SME advances are being branded as 'SME Branches'. The objective is to identify these branches with a common nomenclature and develop them as centres of excellence for SME loan delivery.

Being the market leader in Home, Auto and Education loans, your Bank's retail growth story is impressive. Retail advances grew by 13.34% from `2,09,694 crores in Mar 2013 to `2,37,667 crores in Mar 2014. During the year, your Bank has recorded an all-time high growth of `21,271 crores in home loans and maintained its position as the country's largest home loan provider with a market share of 26.02%. Your Bank also maintains its retail market leadership in Auto loan financing and enjoys a market share of 21.41% as on Mar 2014.

Branch Expansion at Record High

During the financial year 2013-14, your Bank opened 1,053 branches, 57% of which were in rural and semi-urban areas taking the total number of branches of the Bank to 15,869. Our branches are well distributed among Metro, Urban and Rural areas. Myriad specialised branches have been opened during the year like four exclusive HNI branches, five new NRI branches, two new MCG branches at Ludhiana and Vijayawada, etc. These dedicated branches have an excellent ambience, along with a well-skilled team of officials to serve customers.

The International banking network of your Bank spans across 190 offices in 36 countries. The offices include 52 branches, 8 Representative Offices, 110 offices of the seven foreign banking subsidiaries and 20 other offices. During 2013-14, your Bank forayed into two new countries – in Botswana by establishing a subsidiary and in South Korea by opening a representative office.


Your Bank has gone beyond the usual domains of technology in terms of platform, solution, operational details and service content in a very aggressive manner to serve the excluded common citizen at minimal costs. The Bank's Core Banking Solutions (CBS) environment is benchmarked to establish the capability to support one billion accounts, over 250 million transactions in a day, and delivering a throughput of over 17,000 transactions per second.

The ATM footprint is being enlarged substantially through Brown Label ATMs,(which are being rolled out as totally outsourced initiative under guidance of the Ministry of Finance) as well as the CAPEX model ATMs. A wide variety of 51,491 ATMs (SBI group) and various types of cards have been deployed including 1,565 new cash Deposit Machines to facilitate cash deposit by customers.

Your Bank's internet banking portal provides a wide variety services to its retail and corporate customers anywhere, anytime. During 2013-14, myriad of new features have been added to our internet banking platform which attracted 39 lakh new users. The total internet banking users has now reached 169 lakhs as of Mar 2014.

In providing banking through Mobile Phones, your Bank is the market leader with a market share of 57% in transaction volume and 17% share in terms of value. During 2013-14, financial transactions worth `3,763 crores were executed through the Mobile Banking Service, resulting in an income of `6.43 crores from an aggregate of 95 lakh users.

Profit & Profitability

Prolonged slowdown in general macroeconomic conditions over the last three years has impacted business and profit of your Bank. However, the impact of slowdown was not symmetric across all the business verticals. On a consolidated basis, total business of your Bank increased by `3,58,234 crores from `22,81,297 crores in FY 2013 to `26,39,531 crores in FY 2014 - a robust growth of 15.7%. In line with the business growth, net interest income of your Bank increased by 11.17% from `44,329 crores in FY 2013 to `49,282 crores in FY 2014. Increase in interest income was on account of healthy NIM maintained by the Bank. The domestic NIM stands at 3.49% for FY14, unchanged from its levels in the last financial year. However, for the Group as a whole, the NIM declined marginally to 3.17% in FY 2014 from 3.34% in
FY 2013. The NIM for foreign offices for FY 2014 stands at 1.42%.

Due to higher provisioning requirement, the growth in Bank's interest and non-interest income did not translate into higher profit figures for this year. The operating profit of the Bank grew by 3.31% during this financial to `32,109 crores while, the net profits contracted by 22.78% to `10,891 crores. Contraction in net profit was on account of higher provisioning on NPAs which rose by `2,855.78 crores from `11,367.79 crores in FY 2013 to `14,223.57 crores in FY 2014. Apart from increase in provision on NPAs, your Bank also made additional provision to cover expenses towards wage revision, one time provision for pension due to change in mortality table and payment for pension and gratuity. The three heads combined under the 'additional provisioning' accounted for 13.29% or `4,751 crores of the total operating expenses of `35,726 crores for FY 2014.

Despite lower dividend of `496.86 crores in FY 2014 against `715.51 in
FY 2013 from Associate Banks/subsidiaries and joint ventures in India and abroad, non-interest income of your Bank grew handsomely by 15.69% to `18,552.92 crores in FY 2014 as against `16,036.84 crores in FY 2013.

Asset Quality

The slowdown in the economy has impacted the ability of borrowers to service debt which in turn affected asset quality of banks. Anticipating that a prolonged slowdown may further impact asset quality, your Bank has taken a number of steps to strengthen asset monitoring and recovery mechanism. Sustained efforts on this front yielded some success in the last quarter of FY 2014 with gross non-performing assets (NPA) and net NPA dropping by 78 bps and 67 bps respectively. The recoveries during the FY 2014 jumped by 62.3% to `7,738 crores from `4,766 crores in FY 2013. The recoveries under the write-off accounts also registered impressive growth of 44.7% over last year as the Bank was able to recover `1,543 crores by March 2014. The provisioning coverage ratio for FY 2014 was at a healthy 62.86%. For the FY 2014 as a whole the gross NPA and net NPA were contained to 4.95% and 2.57% respectively vis-à-vis 4.75% and 2.10% in FY 2013.

Capital Structure

Your Bank is now Basel-III compliant from FY 2013-14. The capital adequacy ratio of your Bank remained higher at 12.44%, against RBI's stipulation of 9%, with Tier I capital at 9.72% and Tier II at 2.72%. The CAR remains strong and the strength comes from three factors: i) Capital infusion of `2,000 crores by the GOI, ii) Fund raising through QIP `8,032 crores; and iii) Funds raising through Tier II Bonds `2000 crores. Your Bank continues to enjoy very good market valuations and is amongst the top ten Market cap companies.


I am happy to announce that the Board of Directors of your Bank has declared a dividend of `30 per share (300%) for the year ended 31st March, 2014.

New Initiatives

Your Bank embarked on several new business initiatives during the year which have started bearing fruit. We have identified four key areas of focus: NPA reduction, risk and mitigants, cost control and technology for better customer service.

For healthy CASA of 46% planned for the FY 2015, your Bank has linked medical insurance to Savings Bank account holders. Number of free multicity cheques was linked to the Average Quarterly Balance (AQB) of the account.

Considering emerging needs of the farmers in tune with market dynamics, the Bank has rolled out a new loan product, namely 'Multi- Purpose Agri Gold Loan', which is a hassle-free and tailor-made product for all investment credit needs, such as minor irrigation, horticulture and farm machinery, among others.

Your Bank has launched a new product named 'SBI HER Ghar', which offers a concession of 5 bps on the prevailing Home Loan interest rates for women borrowers. The Scheme has been well accepted in the market and now accounts for 24% of the incremental sanction of home loans.

For SME, your Bank has developed new risk-mitigated products, such as SBI Asset Backed Loan, SBI Fleet Finance Scheme and POS Linked Current Account with Overdraft Scheme.

For speedy on line payment/settlement, the Bank has launched 'SBIePay', to facilitate e-Commerce/ m-Commerce transactions among merchants, customers and various financial institutions for all kinds of e-Commerce payments.

In retail segment, your Bank has introduced online car loan application portal.

In the area of Internet Banking, your Bank has added several major new features to the Online SBI portal. For instance, online opening of Multi Option Fixed Deposit A/c, e-Annuity Deposit A/c, PPF A/c, self-blocking of lost ATM cards and a Smart phone application for internet banking users. This application is available on both Android and i-phone. For Corporates, the new added features include online Term Deposit Accounts, Digital Signature and Certificate based second factor authentication, etc.

For improving customer service and reduce crowd in banking hall your Bank has introduced: ATM cash recyclers, Bar-coded passbooks, cheque deposit machines, e-kiosk, Tab Banking, Social Networking, etc.

Your Bank has launched a new online instant remittance product 'Sri Lanka to India - SBI Flash' for remittances from Sri Lanka to India.

Associates and Subsidiaries

Associates and Subsidiaries of your Bank have performed reasonably well considering the current macro-economic scenario where the country is passing through tough times, business growth is below trend and profitability under pressure due to increase in NPAs and restructured assets. During the year, the 5 Associate banks saw their consolidated net profit at `2,777 crores as against `3,678 crores in the previous year. All these banks are well capitalised with Capital Adequacy Ratio of 11.20% and Credit Deposit ratio of 83.91%. Market share of associate banks reached 5.48% in deposits and 5.88% in advances as on last Friday of March 2014.

Of the non-banking subsidiaries, SBI Life Insurance Company Ltd. posted a net profit of `740 crores, 19% higher over `622 crores in the previous year. SBILIFE continues to be the leader in the private sector in terms of New Business Premium in FY 2013-14 and is recognised as the most trusted private life insurance brand 2013 by Economic Times. SBI Capital Market Ltd. posted a net profit of `262 crores which was slightly lower than `314 crores in the previous year, while SBI Cards and Payment Services (Pvt.) Ltd. the only stand-alone card issuing Company of your Bank continues to excel with a net profit of `293 crores 115% higher than `136 crores in the previous year. In FY 2014, SBI funds management recorded an excellent net profit of `156 crores, 81% higher than `86 crores in the previous year. Also, the market share of SBI Funds Management increased by 52 bps to 7.24% in Mar 2014.

Recognition & Awards

Efforts and initiatives undertaken by your Bank has received wide attention and appreciation in various fields. Your Bank was the proud recipient of many recognitions/awards during the year 2013-14, the notable among them being 'Best Trade Finance Bank 2014' by Global Finance Magazine, 'Innovation in Customer Data Management' award by The Banker, 'Industry Award for Excellence in Home Loan Banking' by The MY FM Stars of the Industry, 'Maximum ATMs in Different Locations' by Asian BFSI Awards. The Bank also awarded 'Training Provider of the Year' by Asia's Training & Development Excellence Awards 2013.

Additionally, the Bank has also received several national and international recognitions. Some of these are:

Your Bank won seven out of nine awards in the "IBA Banking Technology Awards" namely: (i) The Best Technology Bank of the Year, (ii) Best Internet Bank, (iii) Best use of Mobile Technology, (iv) Best use of Technology in Financial Inclusion, (v) Best Customer Management Initiative, (vi) Best use of Technology in Training and E-learning and (vii) Best use of Technology in Business Intelligence.

The Bank has garnered highest number of awards in CSR achievements during the year 2013-14, namely: (i) Asia's Best CSR Practice Award, 2013 instituted by CMO Asia and awarded to the Bank in Singapore; (ii) Asian BFSI Awards 2013-Best CSR Practices has been conferred to the Bank in Dubai; (iii) IPE BFSI Award 2013 - Best CSR Award, (iv) India's Most Ethical Companies Awards 2013 - Ethical Company in Banking; (v) ABP News 'BFSI-Best CSR Practices Award 2013 & Global CSR Excellence & Leadership, (vi) Blue Dart - Global CSR Excellence & Leadership Award. (Best use of CSR Practices in Banking Financial Sector) and Global CSR Excellence & Leadership Award 2013.

The subsidiaries of your Bank has also received a number of awards like, (i) SBI Cards has been awarded with Readers Digest Award for 'Most Trusted Credit Card Brand', (ii) SBI Life awarded the 'Best Life Insurance Provider 2013 (Runner Up) by Outlook Money, 'Most Trusted Private Life Insurance Brand 2013' by The Economic Times, Brand Equity and Nielsen Survey, Awards at the World HRD Congress - Dream Company to Work for 2014 in Private Insurance, Dream Employer of the Year-2014 – Ranked 4th and Employer Branding Award 2014' for Talent Management.

Looking Ahead

After assuming office in October 2013, I have identified six areas of focus: NPA reduction, risk management, cost control, improving delivery standards, non-interest income and leveraging technology. In order to improve in these areas the Bank has initiated number of steps as under:

NPA Reduction: (i) Early review of all small loans through LOS and high-value loans through LLMS (ii) Product wise data analysis for evolving credit-Scoring Models (iii) SMA committees met in 1092 meetings, 4667 accounts reviewed and upgraded, 2783 accounts, through Multi-tiered differentiated strategies for individual accounts and SARB brought under SAMG (iv) SME collection teams with 68 officials exclusively trained to restructure SME accounts –pilots rolled out (v) Consultant hired for developing predictive risk models to detect NPAs.

Risk Management: (i) Risk official to be member of all credit committees (ii) Agri-products reviewed and some revamped to capture entire value chain and reduce slippages through risk mitigation (iii) Focus on recognising, mitigating and reducing risk-awareness creation by ensuring that all training programmes to contain one module on risk (iv) Project studies to focus on operational risks and best practices in this regard.

Cost Control and non-interest income: (i) Under cost cutting- centralisation of insurance/back office of foreign offices (ii) to economise operation, a number of cost cutting measures introduced (iii) Productivity and efficiency parameters –Dashboards are piloted in four centres (iv) Concurrent Auditors to work online facilitating on- going monitoring by Inspection Department (v) Online tool for controllers visits.

Leveraging Technology and improving delivery Standards (i). Alternate Channel development – presence through Tab Banking, social networking - Facebook, Twitter, etc. (ii) revamped the complaint management system (iii) Bar- coded passbooks -3125 machine –e-kiosk (iv) 4300 ATM Cash Recyclers (v) Automatic Compliance System being evolved (vi) To ensure uniform delivery standards – training of 40,000 employees of which 25% already undertaken (vii) HR-Career path/mentoring of PO/TOs, Tracking systems have been developed to mitigate their pain points skill development through mandatory e-learning/self- learning (viii) Another mass communication programme being developed.

India's growth which bottomed out in FY 2013, witnessed encouraging trends during financial year 2014 in certain areas for instance, agriculture, exports, CAD, stable rupee and financial markets. The slowdown in the economy has not only impacted business growth of banks but also affected recovery and assets quality of banks.

We believe improvement in macroeconomic environment and expected revival in economic growth will help to mitigate risks and resolve problems of asset quality. With a new and stable Government in place now, we expect a clear revival in the investment climate. Higher spending on infrastructure, speedy implementation of projects and continuation of reforms will provide further impetus to growth.

With warm regards,

Yours sincerely,

(Arundhati Bhattacharya)