STATE BANK OF MYSORE
ANNUAL REPORT 2011-2012
To the State Bank of India, Reserve Bank of India and the Central
Government, in terms of Section 43(1) of State Bank of India (Subsidiary
Banks) Act, 1959.
1. MANAGEMENT DISCUSSIONS AND ANALYSIS
1.1 Macro Economic Scenario and Banking environment
1.1.1 The global economy witnessed fresh spells of crisis during 2011-12,
with domestic business and consumer confidence dampening on the back of the
deepening sovereign debt crisis in Europe. Global commodity prices,
particularly those of food and metals, softened from high levels, even as
crude oil prices remain elevated and are a major source of uncertainty and
risk. All emerging and developing economies (EDEs) witnessed higher
inflationary pressures with consumer price inflation for EDE rising to 7.2%
for 2011, while that for advanced economies (AEs) was 2.7%.
1.1.2 During each of the previous two years, 2009-10 and 2010-11, India`s
gross domestic product (GDP) (at factor cost) grew by 8.4% per annum.
Further, during 2010-11, the GDP at market price grew by a remarkable 9.6%.
This performance, coming in the wake of one of the biggest global
recessions in history, was outstanding. It fed expectation that India`s
short economic downturn in 2008-09, when the GDP grew by 6.7%, was behind
us and the economy was on its way to full fledged recovery. The services
sector continued to do well and agriculture recovered but the mood in the
economy was increasingly being set by the industrial sector and, in
particular, manufacturing, which constitutes 75.5% of industrial value
added. The advance estimates of the Central Statistics Office (CSO) has
placed growth in real GDP at 6.9% in 2011-12.
1.1.3 Wholesale price index (WPI) inflation, after remaining in an elevated
zone at over 9% through the year, has been falling sharply since December,
2011, aided by lower food prices, a global economic slowdown, and the
impact of nearly two year of domestic monetary policy tightening and other
measures put in place by the government. Monetary policy remained focused
on controlling inflation and anchoring inflationary expectation, with 13
adjustments in policy rates since March 2010, which has slowed growth.
These effects, coupled with a favorable base effect in prices and continued
global slowdown, are expected to moderate inflation to around 6.5 to 7.0%
by March 2012; inflation is expected to come down further during 2012-13.
1.1.4 In the Banking sector, the funding constraints in international
financial markets could impact both the availability and cost of foreign
funding for banks and corporates. Since the Indian financial system is bank
dominated, banks` ability to withstand stress is critical to overall
financial stability. Indian Banks, however, remain robust, notwithstanding
a decline in capital to risk-weighted assets ratio and a rise in non
performing asset levels in the recent past.
1.1.5. The monetary policy of RBI remained focused on controlling inflation
and anchoring inflationary expectations. However, money market liquidity
tightened significantly since November 2011 partly due to dollar sales by
RBI. Credit growth slowed and demand for credit weakened in response to
slackness in real activity. RBI kept the monetary policy rate on hold since
December 2011 based on forward looking assessment of risk to growth and
moderation in inflation. RBI`s March 15th policy statement indicated that a
turnaround in the monetary cycle would depend on the shaping up of growth-
inflation dynamics ahead.
* Repo Rate: The anti-inflationary monetary policy stance adopted by RBI
since early 2010 continued till October 2011. Factoring in the switchover
from Reverse repo mode to Repo mode, the effective policy rate tightening
was 525 bps during this period. In continuation of its policy stance,
during 2011-12 the movement in Repo rate was by 175 bps to 8.50 percent.
* Reverse Repo Rate: The reverse repo rate under the LAF at the beginning
of the year was at 5.75 percent and was hiked by 175 bps during 2011-12 in
tandem with repo rate. The spread between repo and reverse repo rate
continued at 100 bps.
* Cash Reserve Ratio: Cash Reserve Ratio was at 6 percent since April 24th,
2010. RBI with due review of current and evolving liquidity conditions cut
the cash reserve ratio (CRR) by 125 bps from 6% to 4.75% between Jan and
* Statutory Liquidity Ratio: SLR remained unchanged at 24 percent during
The overall monetary and liquidity conditions prevailing in the system
reflect a monitory policy stance focused on the necessity to contain
inflation while at the same time accommodative of growth.
1.1.6 To sum up, growth of the economy in 2011-12 has the following
* Headline inflation expected to moderate further in next few months and
remain stable thereafter.
* Steps taken to bridge gaps in distribution, storage and marketing systems
have helped in more effective management of inflation.
* Developments in India`s external trade in the first half of the current
year have been encouraging.
* Current account deficit at 3.6% of GDP for 2011-12 and reduced net
capital inflow in the 2nd and 3rd quarter put pressure on exchange rate.
* Deterioration in fiscal balance in 2011-12 due to slippages in direct tax
revenue and increased subsidies.
1.2 ECONOMY OF KARNATAKA
1.2.1 The Karnataka economy is one of the leading economies in the country
in terms of economic development. It is the eighth largest State in terms
of geographical area (1.92 lakh km). Karnataka economy is largely service
oriented with the agricultural and the industrial sector contributing
substantially. The state is the largest producer of coffee, raw silk and
sandalwood in the country and also adding considerably to the horticulture
production of the country. The major manufacturing oriented industries in
the state include sugar, paper and cement. The cottage and mineral based
industries also add a good percentage of revenues to the state.
1.2.2 Karnataka has become one of the country`s global economic players
owing to its various industries in the field of electronics, software,
biotechnology and other small and medium scale industries. The capital city
Bengaluru is the silicon valley of India. Most of the global IT companies
have their offices in Bangalore and the city has the reputation of having
maximum number of R&D centres in the country.
1.2.3 Global recession and slowdown in the Indian economy notwithstanding,
the gross state domestic product (GSDP) of Karnataka is estimated to be 6.4
percent this fiscal (2011-12)
1.2.4 The growth has slowed down from the earlier 8.2 per cent during 2010-
11, mainly due to the strong agriculture and services growth. The state`s
economy is expected to reach Rs. 2, 97,964 crore in 2011-12 as against
Rs.2,79,932 crore in the previous year. The economic performance has been
led by a strong dominance of the service sector which is likely to grow by
10.6 per cent in 2011-12. During 201011, the services sector had shown a
growth of 9.1 per cent. "The state`s various initiatives in the primary
sector, especially in agriculture and allied activities, have contributed
to better redistribution of wealth and inclusive growth" as per pre budget
survey of Karnataka for 2011-12 released on 22.3.2012. The growth rate of
the industrial sector is estimated to have decreased to 3.6 per cent due to
constraints in the mining and manufacturing sectors. However, agriculture
and allied sectors have contracted 2.9 per cent due to a decline in crop
area following the drought conditions and floods. Composition of GSDP shows
a further decline in the share of agriculture and allied activities sector
from 16.9 per cent and 28.6 per cent in 2010-11 to 15.9 per cent and 27.7
per cent respectively in 2011-12. At the same time, a marginal increase in
the composition of the services sector from 54.6 per cent to 56.3 per cent
is apparent. During the last few years, the services sector has been the
largest component of GSDP in Karnataka. Due to drought conditions in major
parts of the state, and the failure of Kharif and Rabi crops during 2011-
12, the state`s food grain production is likely to be 12.42 million tonnes
as against the target of 13 million tonnes.
The per capita GSDP at constant prices is expected to increase from
Rs.47,310 in 2010-11 to Rs. 49,843 in 2011-12, showing a growth of 5.4 per
1.2.5 The state`s revenue resources are showing signs of recovery from
2010-11, with revenue receipts (as a percentage of GSDP) expected to
increase to 15.27 per cent in 2011-12 (from 14.49 per cent in 2010-11).
Karnataka`s fiscal deficit (as a percentage of GSDP) has reduced to 2.87
per cent in 2011-12 as compared to 3.23 per cent in 2008-09.
1.2.6. The state`s own tax revenues increased from Rs. 25,987 crore in
200708 to Rs. 43,817 crore during 2011-12 at a CAGR of 14 per cent. The
share of development expenditure in the total expenditure has significantly
increased from 8.95 per cent in 2005-06 to 13.23 per cent in 2011-12.
1.2.7. Karnataka is one of India`s leading states in terms of economic
development. Its PCI is at Rs. 59,763. The state`s gross state domestic
product (GSDP) grew the fastest in the country. Half of the state`s GSDP
comes from the services sector. Bangalore hailed as India`s Silicon Valley
contributes substantially to the IT and ITeS industry.
1.2.8. The Business growth of the Bank depends to a large extent on the
Karnataka economy since more than 81% branches (598 out of 737 as on 31st
March 2012) are located in Karnataka. The budget size and state plan 2012-
13 envisages a total expenditure of Rs. 102742 crores on various
development activities and regulatory functions of the Government, which is
an increase of 20.42% over the budget of Rs. 85319 crores 2011-12.
Karnataka is emerging as a major investment destination in the southern
part of the country. To accelerate development of the State, the Government
has given special thrust on infrastructural facilities such as large scale
improvement of roads with private partnership, construction of airports at
various places and setting up of power projects. Irrigation has also been
getting adequate thrust. Substantial investments are being proposed in the
city of Bangalore also, to improve the infrastructural facilities.
Investments are committed in different industries including steel, power
and tourism in the state, by reputed industrial groups, in the coming
years. These aspects of state of economy offer good growth opportunity for
2. REVIEW OF BANKING OPERATIONS
2.1. Market Share and Business Growth
2.1.1. The business levels of the Bank and the position of market share in
the recent years are furnished hereunder.
Year ended 31st March 2008 2009 2010 2011 2012
Aggregate Deposits 26,781 32,388 38437 42779 49663
Percentage of growth 25.17 20.94 18.68 11.30 16.09
Market share % 0.84 0.84 0.86 0.79 0.78*
Total Advances 21,315 25,880 29874 34442 40653
Percentage of growth 27.09 21.42 15.43 15.29 18.03
Market share % 0.90 0.93 0.92 0.87 0.85*
ASCB as on 30.03.2012
2.1.2. The Bank has seen continuity in growth during the current year also
with aggregate deposits reaching Rs. 49663 crores, a growth of Rs. 6884
crores at 16.09% and total advances reaching a level of Rs..40653 crores
recording a growth of Rs. 6211 crores at 18.03%. As on 30.03.2012 the
Bank`s market share in deposits decreased to 0.78% from 0.79%, and the
Bank`s market share in Advances also reduced to 0.85% from 0.87% during the
year 2011-12. The marginal decline in the market share is on account of
subdued growth in advances at 15.76% as on 30.3.2012 as against ASCB growth
of 19.35%. The market share under advances marginally declined,
notwithstanding to the fact an increase in growth rate in advances from
15.29% as on 31st March 2011 to 18.03% as on 31st March 2012. The Bank is
proposing a corporate business plan for the year 2012-13 to improve its
retail business base & hence improve its market share.
2.2 Key Performance Indicators
2009-10 2010-11 2011-12
1. Net Profit (Rs. in Crores) 445.77 500.62 369.15
2. Return on Assets (%) 1.06 1.03 0.67
3. Return on Equity (%) 21.50 16.17 10.82
4. Expenses-Income Ratio (%) 43.60 43.87 49.55
5. Earnings per Share (in Rs.) 111.07* 121.66 78.88
6. Gross NPA to Gross Advances (%) 2.00 2.51 3.70
7. Net NPA to Net Advance (%) 1.02 1.38 1.93
EPS restated on account of Rights Issue during financial year 2010-11.
Total Income of the Bank increased by 23.39% from Rs.4534 crores as at 31st
March, 2011 to Rs.5595 crores in 31st March,2012. Interest Income increased
from Rs.4079 crores to Rs. 5078 crores (24.50%). Average Yield on Advances
increased from 10.33% in 2010-11 to 11.44% during 2011-12, while Average
Yield on Investments increased from 6.95% as on 31st March 2011 to 7.22% as
on 31st March,2012. Non Interest Income increased by Rs. 61 crores (13.45%)
from Rs.455 crores to Rs. 516 crores; the growth in profit from sale of
securities from Rs. 13.62 crores to Rs. 38.60 crores. The ratio of Non-
Interest Income to Total Income was lower at 9.23% (10.04% last year).
The Total Expenditure (before provisions and contingencies) increased by
34.96% from Rs.3361 crores in 2010-11 to Rs. 4535 crores in 2011-12. While
Interest Expenses increased by Rs. 1051 crores (43%) the Operating Expenses
increased by Rs. 124 crores (13%) during the current year. The Average Cost
of Deposits increased from 5.56% in March, 2011 to 7.09% in March, 2012
predominantly owing to reduction in CASA share from 33.97% (31.03.11) to
While the Operating Profit decreased from Rs.1173.75 crores in 2010-11 to
Rs. 1059.61 crores in 2011-12 (down by 9.72%), the Net Profit decreased
from Rs. 500.62 crores to Rs. 369.15 crores (26.26%). The decline in net
profits was predominantly on account of the necessity to provide more on
our non-performing assets. Return on Assets (ROA) decreased from 1.03% to
0.67% and Return on Equity (ROE) decreased from 16.17% to 10.82% during the
2.6. Capital Adequacy Ratio
The Capital Adequacy Ratio under Basel II guidelines stands at 12.55% as on
31st March 2012, against 13.76% as on 31st March 2011. The Capital Adequacy
Ratio of the Bank, however, is above the statutory requirement of 9%.
The Board of Directors has declared a dividend of 100% (Rs.10 per equity
share of Rs.10/-) for the year 2011-12. This will involve a pay-out of
Rs.54.39 crores including the tax component. The pay out ratio for 2011-12
works out to 12.68% as against 9.35% for 2010-11.
3. BUSINESS REVIEW
3.1.1. The Total Deposits of the Bank grew by Rs. 6961 crores to reach the
level of Rs. 50186 crores and the Average Total Deposits grew by Rs.5475.05
crores (13.71%) during the year 2011-12. While the Aggregate Deposits
(total deposits excluding inter bank deposits) stood at Rs. 49663 crores as
at the end of 31st March 2012 recording a growth of Rs. 6884 crores
(16.09%) during the year, the share of CASA deposits to Aggregate Deposits
decreased from 33.97% as on 31st March 2011 to 32.03% as at 31st March
3.1.2. Personal Segment Deposits
The Personal segment deposits grew by Rs. 4100 crores, registering a growth
of 21.07% to reach a level of Rs. 23562 crores as on 31st March 2012.
Campaigns were conducted to increase the Personal segment deposit base of
the Bank. As a result the share of Personal segment deposits in the
aggregate deposits has increased to 47.44% during the year from 45.49%. The
number of deposit accounts under Personal segment has increased by 7,08,574
during the year.
To increase Savings Bank growth under Personal segment three new deposit
products viz. Mybank Suraksha Savings, Mybank Suraksha Savings Plus and
Mybank Suraksha Time deposit account were introduced. These products
provide depositors free Accidental death cover upto Rs. 5.00 lacs
3.2. Credit Expansion
3.2.1. While the total advances of the Bank increased from Rs. 34442 crores
to Rs. 40653 crores registering a growth of Rs. 6211 crores (18.03%) during
the year, net advances (i.e. net of NPA related/floating Provisions, and
outstanding under Staff Festival Advance) of the Bank increased from
Rs.34030 crores as on 31st March 2011 to Rs. 39835 crores as at 31st
March,2012. Credit Deposit Ratio of the Bank increased from 80.51% as on
31st March 2011 to 81.86% as at 31st March 2012. The Average Total Advances
grew by Rs. 4543 crores (14.66%) during the year.
3.2.2. The Head Office Credit Committee - I (HOCC-I) with the Managing
Director as Chairman and Head Office Credit Committee - II (HOCC-II) with
the Chief General Manager as Chairman, which have been set up in order to
make the credit process speedier and to take decisions through a committee
approach, held 63 and 38 meetings respectively to facilitate growth in Non-
food Advances. In addition, Zonal Office Credit Committees are functioning
at all the five Modules of the Bank, while in respect of DGM headed
branches, a committee called HOCC-III is functioning.
3.3 Personal Segment Advances
Personal segment advances grew by Rs. 443 crores to reach a level of
Rs.5815 crores. Housing loans grew by 235 crores and reached a level of
Rs.3216 crores. The Bank has introduced a new scheme Mybank Suraksha Loan,
which provides loans to cover the life insurance premium for Home loan
borrowers. To increase the Gold loan business under Personal segment a
Special Campaign was conducted. As a result gold loans grew by Rs. 31
crores to reach a level of Rs. 58 crores.
The Bank has waived Pre-payment penalty/Pre-closure charges for floating
rate Housing loans and Car loans. The Bank has introduced a facility of
applying online for Home loans and Car loans besides Education loans.
3.4. Priority Sector Lending and Social Banking
3.4.1. The total credit provided to the Priority Sector for the year ended
March 2012 stood at Rs.11631.10 crores, which constitutes 34.16% of the
Adjusted Net Bank Credit (ANBC). Segment wise status of these advances are
* Agriculture: The direct agricultural advances increased by 16.87% from
Rs. 3767.94 Crores to Rs. 4403.68 Crores. However, the overall agricultural
advances declined by 2.43% from Rs. 5377.75 Crores to Rs. 5247.21 Crores
mainly due to decrease in indirect agriculture from Rs. 1609.81 crores to
Rs. 843.53 crores.
* Micro and Small Enterprises
(MSE): The Bank`s advances to Micro and Small Enterprises as on 31.03.2012
is Rs. 3353.68 crores.
* Personal & Services Banking (P&SB): While housing loans under priority
sector grew by 2.85% and reached a level of Rs. 2465.34 crores during the
year, education loans grew by over 1.66% and reached a level of 564.87
crores during 2011-12.
3.5. Agriculture Finance
3.5.1. During the year ended 31st March 2012, the Bank has sanctioned 57295
Kissan Credit Cards amounting to Rs. 1000.31 crores. A special campaign was
also conducted during the year for coverage of all eligible farmers with
KCC limits and all non-farmers in rural areas with SB-cum-OD Limit in the
bank`s Service Area.
3.6. Micro and Small Enterprises (Manufacturing)
3.6.1. The Bank`s advances to Micro and Small Enterprises (Manufacturing)
as on 31.03.2012 is Rs. 2209.07 Crores.
3.6.2. While continuing all the existing products and schemes introduced to
take care of the varying financial needs of the sector, the Bank has
introduced MyBank Surya Kiran Scheme to extend finance for purchase of
Solar Photo Voltaic home Lighting system at a concessionary rate of
interest. The bank has introduced a Scheme for issuance of Weavers Credit
Card for the handloom weavers for their working capital and investment
requirements. Bank has several schemes to cater to the needs of Micro and
Small Enterprises (Manufacturing) sector.
3.7. Micro and Small Enterprises (Services)
3.7.1. The Bank`s advances to Micro and Small Enterprises (Services) as on
31.03.2012 is Rs. 1346.99 Crores.
3.7.2. The Bank has introduced Mybank Home Stay to help development of
tourism in the State of Karnataka. Initially the Scheme is restricted to
branches in Kodagu and Chikmagaluru District.
3.8. Credit Guarantee Scheme
3.8.1.The Bank continued to extend collateral free financial assistance to
MSE sector by participating in Credit Guarantee Scheme of CGTMSE. The
maximum limit of coverage under the scheme is Rs. 100 lakhs. As at 31st
March 2012, 6169 accounts amounting to Rs. 349.23 crores were covered under
3.9. Assistance to Weaker Sections of the Society
3.9.1. The Bank continued to extend financial assistance to Weaker Sections
of the Society comprising of small & marginal farmers with land holdings of
5 acres or less, landless labourers, tenant farmers etc., village & cottage
industries whose individual limits does not exceed Rs. 50,000/-, SJSRY,
SGSY, SLRS, DRI, Self-Help Groups and advances to SC/ST beneficiaries. The
outstanding amount under lending to Weaker Sections at Rs. 4756 crores as
at the end of March 2012 constitutes 13.97% of ANBC, as against the
stipulated benchmark of 10%.
3.10. Assistance to Women Entrepreneurs
3.10.1.A booklet on "Charter for Women" containing the details of
concessions available to women has been supplied to all the branches for
display and distribution. The Bank`s total credit to women as at the end of
March 2012 stood at Rs. 2006 crores covering 140461 beneficiaries, which
work out to 5.89% of Adjusted Net Bank Credit as against the stipulated
benchmark of 5%.
3.11. Measures to improve the economic conditions of Minority Communities
3.11.1. The Bank`s assistance to the minorities under various schemes as at
the end of March 2012 stood at Rs. 1359.87 crores covering 31298
beneficiaries, which forms 11.69% of Priority Sector Advances.
3.12. Government Sponsored Schemes
The position of assistance rendered under various Government sponsored
schemes by our Bank as at the end of March 2012 is as detailed below:-
3.12.1. Prime Minister`s Employment Generation Programme (PMEGP)
The Government of India has launched the new scheme "Prime Minister`s
Employment Generation Programme (PMEGP)" to empower first generation
entrepreneurs to set up micro enterprises across the country by merging the
earlier Prime Minister`s Rozgar Yojana (PMRY) and Khadi & Village
Industries Commission`s Rural Employment Generation Programme (REGP) from
the financial year 200809. The Bank has extended financial assistance of
Rs. 6.62 crores to 154 beneficiaries under PMEGP during the year. The
Bank`s total credit under PMEGP Scheme as at the end of March 2012 stood at
Rs. 41.50 Crores covering 812 beneficiaries.
3.12.2. Swarna Jayanthi Shahari Rojgar Yojana (SJSRY) Scheme
The Bank has extended financial assistance of Rs. 6.42 crores under SJSRY
during the year to 542 beneficiaries. Total amount outstanding under SJSRY
scheme as at the end of March 2012 is at Rs. 20.70 crores covering 4232
3.12.3. Differential Rate of Interest (DRI) Scheme
The Bank`s advances under DRI scheme stood at Rs. 15.94 crores as at the
end of March 2012 covering 16790 beneficiaries and the share of advances to
SC/ST beneficiaries within this is 52.24% 8.32 crores).
3.12.4. Swarna Jayanthi Gram Swarozgar Yojana (SGSY) Scheme
The Bank has extended financial assistance of Rs. 359.00 lacs under SGSY
during the year to 92 group beneficiaries, and 120 individual beneficiaries
were also extended financial assistance to the tune of Rs. 76.00 lacs.
3.13.1. The total investments of the Bank in Government securities, other
approved securities and Non-SLR securities increased from Rs. 12,949 crores
as at the end of March 2011 to Rs. 14,786 crores as at the end of March
3.13.2. The Profit on sale of investments increased from Rs. 13.62 crores
in 2010-11 to Rs. 38.60 crores in 2011-12 due to churning in liquid mutual
funds & softening of G-Sec yields in the second half of the year. During
the year interest income from investments, registered a growth of Rs.135.66
crores (15.69%) over March, 2011 level.
3.13.3. While interest yield on investments increased from 6.95% (2010-11)
to 7.22% (2011-12) due to the fact that new securities purchased were at
higher yield levels, the yield on investments including profit on sale of
securities increased from 6.97% to 7.24% during the same period.
3.13.4 As part of Group Synergy exercise Integrated Forex Module was
introduced in the Bank effective from 05th September 2011. Foreign exchange
transactions are now under Core Banking Solutions.
3.13.5. The exchange profit generated from Foreign Exchange business during
the year 2011-12 was Rs.32.56 crores
3.14. International Banking
3.14.1. The level of Export Credit as on 31st March 2012 was Rs. 1,325.17
Crores (Rs. 1260.62 Crores as on 31st March 2011) constituting 3.85% of
ANBC. In order to encourage exports, more eligible exporting units were
offered Gold Card Scheme on competitive terms including interest rate
concession of 0.25%. Exporters` meets were arranged at strategic centers
3.14.2. NRI Deposits as on 31.03.2012 stood at Rs. 770.98 Crores showing an
increase of Rs. 114.30 crores as against Rs. 656.68 Crores, comprising of
FCNR(B)/RFC deposits of Rs. 189.02 Crores and NRE/NRO deposits of Rs.581.96
3.14.3. As at the end of the current financial year, the export credit
denominated in foreign currency stood at USD 136.02 million as at the end
of current financial year 2011-12, against USD 101.08 million as at the end
of previous year 2010-11.
3.14.4. The Bank has also been offering Foreign Currency Loans (FCNR(B)
Loans) to its customers at LIBOR linked rates which stood at USD 37.41
million as at the end of the current financial year 2011-12 as against USD
42.29 million as at the end of previous year 2010-11.
3.14.5. The Foreign Exchange Turnover of the Bank 2011-12 touched Rs.177988
crores (Merchant Turnover - Rs. 31583 crores and Trading Turnover
Rs.146405 crores) against the previous year level of Rs. 172001 crores
(Merchant Turnover - Rs. 34343 crores and Trading Turnover - Rs. 137658
3.14.6. As per Bank`s BPR objectives, the Bank had set up five Trade
Finance Central Processing Centres (TFCPC) at Bangalore, Chennai,
Hyderabad, Mumbai and New Delhi. During the current financial year (2011-
12), more branches have been linked to TFCPCs for extending quality service
3.15. Cross Selling
During the year the Bank sold 29135 policies of SBI Life Insurance Company
Ltd and collected a premium of Rs. 46.83 Crores. The Bank has collected a
premium of Rs. 19.76 Crores, while marketing General Insurance Products. In
respect of Investment Products, the Bank is selling Mutual Funds products
of SBI MF and UTI MF. Applications for SBI Credit Cards are also sourced by
the Bank. The Bank has earned an income of Rs. 8.77 Crores from Cross
Selling Business during the Year 2011.12.
3.16. Government Business
3.16.1. State Government Transactions: The bank has been handling a major
share (about 46% during 2011-12) of Government of Karnataka Transactions
for the past many years. About 86% of our total Government Business
emanates from State Government transactions and the turnover is directly
linked to the budget of the State Government. A turnover of Rs. 60,394
crore has been achieved during the year 2011-12.
3.16.2. Central Government Transactions: During the year 201112, business
from various Central Government Department like Postal, Railways, Defence,
Central Board of Direct Taxes, Central Board of Excise and business from
various Central Schemes like Public Provident Fund, Senior Citizens Savings
Scheme, etc., constituted approximately 14% of the Bank`s total Government
Business turnover. Our business turnover from Central Government
departments during the year 2011-12 was Rs. 10,075 crores over the turnover
of Rs. 9,628 crores registered during 2010-11 (up by Rs. 446 crores
3.16.3. income from Government Business: We have earned a commission of
Rs.68.06 crores (an increase of Rs. 3.30 crores) from Government business
during the year 2011-12. The average yield on Government transactions for
the year was 0.09%.
3.16.4. The New system of e-Payment of Commercial Taxes/VAT introduced by
Government of Karnataka has been successfully launched during the year in
3.16.5. We are actively involved in e-governance initiative of Govt, of
Karnataka in their proposed roll out of "Khajane-M" for integration of
operations of various stakeholders during 2012-13.
3.16.6. A major breakthrough was achieved by the bank in introducing a
"Straight Through Process" for timely and accurate transfer of New Pension
Scheme (NPS) subscriptions to the trustee bank account, to mitigate the
problem of reconciliation.
3.16.7. The Bank is actively involved in the e-governance initiatives of
Karnataka State Government for automation of all treasury payments.
3.17. Marketing Initiatives
3.17.1. For sustainable growth marketing of Bank`s products and services on
an ongoing basis, assumes central role in its operational activities. The
institutional setup to meet the new challenges in marketing, using the
power of technology, has accordingly been strengthened at various operating
levels. Besides, a Marketing Department functioning at Head Office,
marketing functionaries are also placed at Zonal/Regional offices. To
further strengthen the marketing activities, Customer Relationship Managers
are also placed in large branches.
3.17.2. Marketing efforts at various levels of the Bank have enabled the
Bank to open large number of the salary accounts of Government Employees.
3.17.3. Focused marketing efforts directed towards improving Retail/
Personal Segment advances by conducting Home Loan/Car Loan and Educational
Loan Melas at important centres of the Bank were conducted during the year.
With a view to provide our customers a wide basket of products, the Bank
has been introducing new products/services regularly.
3.17.4. Contact Centre - As a customer friendly service, State Bank of
Mysore has established a dedicated "SBM Contact Centre". The Centre is
provided with a toll free number 1800-425-2244 which is accessible from
throughout the country. A separate primary rate interface (pri) number 080-
22300020 is also provided. The information from the Contact Centre is
available in English, Hindi and Kannada and it provides services for 24
hours on 365 days (24*7*365) basis.
3.17.5. Customer Grievance Redressal: The Bank has launched a Customer
Redressal System called SMS Unhappy. The system facilitates customers to
air their feedback/ grievances through the process of a simple SMS message,
`Unhappy`, to 99 0002 0002. On receipt of the message, the Bank`s dedicated
Happy Room staff call back the customer for the purpose of Grievance
3.18. NPA Management
3.18.1. Liquidity crisis and the recession that followed adversely affected
many sectors of the economy lending to a spurt in Non Performance Assets.
The problems faced by the Iron & Steel and Aviation sector contributed to a
substantial increase in NPAs in the C & I Segment. This, coupled with
problems on the agricultural front, caused by severe drought in most part
of the state has resulted in the increase of NPAs from Rs. 864 crores as on
31st March 2011 to Rs. 1503 crores as on 31st March,2012. The Gross NPA
ratio increased from 2.51% to 3.70%. The net NPA ratio also increased from
1.38% to 1.93%. The provision for Non Performing Assets (including floating
provision and counter cyclical provisioning buffer) stood at Rs. 734 crores
(P.Y Rs. .396 crores). Provision Coverage Ratio is at 65.22%. An action
plan with measures including effective use of SARFAESI Act, rehabilitation
of viable units, and vigorous follow-up of DRT cases have been put in place
to reduce NPA levels.
3.18.2. Restructuring of Debts: The Bank continues to provide Restructuring
Packages within the framework of RBI guidelines to deserving borrowers
under the Rehabilitation Programme or under packages approved by CDR/ BIFR,
subject to the viability of the units being established. The Bank has
extended the package to 19569 (15879*) borrowal accounts with dues
amounting to Rs. 2671.23 (Rs. 2417*) crores. Towards diminution in their
fair value on account of economic loss caused in the process of
restructuring, provision to an extent of Rs. 90.95 (Rs. 80*) crores has
been made by the Bank.
*Indicates last year`s figure
3.19.Lead Bank Scheme
3.19.1. The Bank has been discharging Lead Bank responsibilities in three
districts viz., Mysore,Tumkur and Chamarajanagar, The Annual Credit Plan
for 2012-2013 has been launched. The combined annual credit plan target for
2012-2013 for all banks in the three districts has gone up to Rs. 6513.17
crores, from Rs. 5014.28 crores last year showing a growth of Rs. 1498.89
crores (29.89% growth).
3.19.2. In order to impart entrepreneurial skill and guidance to Unemployed
Youth, in general and rural youth in particular to enable them to become
gainfully self employed, the bank has established Training Centers
viz.,Mybank Institute for Promotion of Self Employment and Development
(MIPSED) at Hirehally Industrial Estate,Tumkur. A similar institute called
"JSS RUDSET" is established at Mariyala, Chamarajanagar Taluk, in
association with JSS Mahavidyapeetha. Both the institutes are being managed
by personnel on deputation from the Bank. During the year, both the centers
have conducted 104 programs, wherein 4269 trainees were given training.
3.20. Financial Inclusion
3.20.1 In terms of Reserve Bank of India directives, the Bank`s Board has
approved the Disaggregated Financial Inclusion plan to implement Financial
Inclusion plan covering 254 villages in Karnataka and 6 villages in Tamil
Nadu with population above 2000 (as per census 2001) and the same has been
submitted to RPCD, Reserve Bank of India.
3.20.2. Further the Bank has shouldered the responsibility of implementing
the smart card based EBT Scheme in Chamarajanagar District covering all the
villages in the District and the SSP scheme will be fully operational
3.20.3. Apart from this the Bank is participating in EBT program in Bellary
and Chitradurga Districts through the allotted service area villages.
3.20.4. The Bank has covered all the 254 villages with populations above
2000 in Karnataka and 6 villages in Tamil Nadu by appointing Business
Correspondents for providing minimum banking facilities to the rural
populace at their doorstep.
3.20.5. Further the Bank has established 3 Financial Literacy and Credit
Counseling Centers in 3 Lead District of the Bank to impart knowledge of
banking and to inculcate saving habits and the repayment responsibility of
loans availed among the rural populace.
3.21 .Self Help Group (SHG) Lending
The Bank has credit linked 10355 groups with an advance amount of Rs.
492.88 crores, during the current year, taking the cumulative total of such
credit linkage programme to 143313 groups with a financial outlay of Rs.
1692.66 crores upto 31st March 2012. These efforts of the Bank have been
recognized and the Bank has been awarded the Best Performance Award
instituted by NABARD under the Commercial Banks Category for its overall
performance under SHG Bank Linkage Programme for the year 201011. The Bank
has been the winner of either the 1st or the 2nd prize award since March
3.22.Regional Rural Banks (RRB)
3.22.1 Cauvery Kalpatharu Grameena Bank, the RRB sponsored by the Bank is
having its Head Office at Mysore, and covers 7 districts viz.,
Mysore.Hassan, Chamarajanagar, Tumkur, Bangalore Urban, Bangalaore Rural
and Ramanagara. The Bank has a net work of 230 branches, with the opening
of fifteen new branches. All the 230 branches have been functioning under
CBS. The total deposits and advances of the RRB, as on 31st March 2012,
stood at Rs. 2604 crores and Rs. 2042 crores, respectively (provisional).
The RRB has been the winner of the Best Bank Award instituted by NABARD
under RRB category for its overall performance under SHG Bank Linkage
program for the past six years continuously from March 2006 to March 2011.
4. HUMAN RESOURCES
4.1. Manpower Profile
4.1.1 Staff Strength: The total strength of the Bank as at the end of March
2012 stood as 10249 as against 9926 as at the end of March 2011. The staff
strength comprised of 3187 officers, 4914 clerical staff and 2148
subordinate staff. Of these, 814 are Ex-defence personnel, 161 belong to
physically handicapped category and 599 belong to Minority community.
4.1.2. Women`s Representation: As at the end of March 2012, there were 2821
Women employees (comprising of 382 Officers and 2439 Other Employees) in
the Bank compared to 2514 as at the end of March 2011 (Comprising of 358
Officers and 2156 Other Employees). The share of women employees rose from
25.32% as at 31.03.2011 to 27.52% as at 31.03.2012.
4.1.3. Scheduled Castes/Scheduled Tribes - Representation: As at the end of
March 2012, there were 1983 Scheduled Castes employees comprising of 588
Officers, 764 Clerical Staff and 631 Subordinate staff. There were 628
Scheduled Tribe employees comprising of 250 Officers, 239 Clerical staff
and 139 Subordinate staff as at the end of March 2012. All the guidelines
of the Government of India for safeguarding the interests of SC/ST
employees have been complied with.
4.1.4. Human Resources Management Solutions (HRMS): Bank has implemented
Human Resource Management Solutions (HRMS) to handle all HR activities in a
phased manner. Mechanization of HR activities has resulted in substantial
reduction of man power for HR activities and also helped in uniform HR
policy across the Bank.
4.2.1 Training Activities and Coverage:
To make progress in this competitive environment, it is imperative for the
Bank to hone the skills of its employees by imparting training to improve
their knowledge as well as soft skills. Further, it is necessary to
establish a high-performance work culture, both in the operational and
administrative areas. Towards this end, Bank`s learning centres at
Bangalore and Mysore are conducting training programmes on various topics
viz., credit appraisal (both basic and advanced), communication skills,
marketing, Behavioural Science, Personal Segment & MSME product awareness
etc. Several programmes, aimed at keeping the employees updated on the
latest technology developments like internet banking, mobile banking and
other alternate delivery channels were also conducted. All the programmes
are designed, keeping the customer-needs in mind. Bank has a focused
approach to training and intends to subject each employee to one or two
trainings within a span of 2 years.
4.2.2 Our Learning Centers at Bangalore and Mysore have conducted 181
training / workshops. During the year, a total of 5250 members of staff got
trained at our Learning Centers. Based on the job-role being played by the
officers, bank is regularly deputing them for training to Apex training
institutes of SBI and others like NIBM, IIBF, RBI`s College of Agri.
Banking etc. to update their knowledge with latest developments in the area
of Banking. During the year 608 officials were deputed to the Apex Training
Institutes of SBI and other premier training institutions. Bank also
conducted an exclusive work-shop for the Regional Heads of the Bank with
the assistance of faculty from State Bank Staff College, Hyderabad.
Training schedules were drawn up for imparting training to the Probationary
Officers and newly recruited clerical staff and both were carried out
4.2.3. Pre-examination and Pre-promotional training:
Pre-examination trainings for candidates belonging to SC/ST/Minority
communities and appearing for Probationary Officers/Clerical recruitment
examination for selection to Associate Banks of SBI were conducted during
the year at the Learning Centers, Bangalore & Mysore. Faculty guided the
participants in their preparation for the written examination and also
provided them with the reading material.
Pre-Promotion training programmes for SC/ST/Minority Community employees
were also conducted at the Learning Center, Bangalore during the year.
These trained candidates appeared for written examination for promotions
from subordinate cadre to clerical cadre, from clerical cadre to officers`
cadre and within officers` cadre, from JMGS I to MMGS II.
4.2.4. Training to CKGB Staff: Our Mysore Learning Centre had conducted
training programmes for officers & staff of Cauvery Kalapatru Grameen Bank
(sponsored by SBM). In the current year 9 training programmes for CKGB
employees were conducted covering 236 employees.
4.2.5. The Center also imparted pre-recruitment training to candidates
belonging to SC/ST/Minority/ Ex-Servicemen who applied for officers` posts
and Office Assistant posts in CKGB.
4.2.6. Training to retiring officers/staff:
To enable our retiring officers & staff to lead a happy, healthy and
peaceful retired life, our Learning Centre, Mysore conducted 7 special
training programmes for retiring employees, with inputs on financial
planning, health tips, yoga and relaxation techniques, during the year
2011-12 covering 246 employees.
5. INDUSTRIAL RELATION
5.1. Terminal Benefits to Retired Staff: The Bank gives due importance to
the settlement of terminal benefits well in time to the Staff on their
termination from service of the Bank either on superannuation or on other
grounds. During the current year 2011-2012 as many as 438 staff members
retired from the services of the Bank. Pension and Commutation benefits
wherever applicable have also been settled on top priority.
5.2. Defined Contributory Benefit Scheme:
Employees joining the services of the Bank after 01st April, 2010 are
eligible under the Defined Contributory Pension Scheme - which will be
governed by the provisions of New Pension Scheme introduced for employees
of Central Government with effect from 01.01.2004 and as modified from time
to time. As at the end of March, 2012 as many as 1156 are covered under
"Defined Contributory Benefit Scheme".
5.3. Staff Welfare Activities:
The major welfare measures extended to the members of the staff include
Holiday Homes, Group Insurance Cover, Scholarship Scheme, Farewell Scheme
for the retiring employees, Financial Assistance to the employees with
physically handicapped/mentally challenged children, Medical Expenses
Reimbursement Scheme etc,. During the year, Mysore and Goa Holiday Homes
were shifted to new hotels.
5.4. The Banks relationship with its employees remained harmonious and
cordial through out the year.
6. SUPPORT FUNCTIONS
6.1. Technology Up-gradation
6.1.1. Automated Teller Machines: Our customers can now transact through
802 of our ATMs and the daily average hits at these ATMs during the year
were 218. Our Bank has earned a record net income per ATM and we stand
first among the State Bank Group Banks in this respect. The Point-of-Sale
transactions have registered a consistent growth and with a view to further
increase the POS usage and e-commerce transactions, a new Card strategy has
been formulated and introduced in our Bank. Accordingly, new 16 digit Debit
Cards with Card Verification Value (CVV) have been rolled out.
6.1.2 Internet Banking:
www.onlinesbm.com, the Internet Banking portal of our Bank, facilitates
instant, convenient, secure and safe Banking Solutions, for both Corporate
and Personal Banking customers alike. Apart from regular e-Banking
functionalities, the Bank Customer can transfer funds through RTGS/NEFT/
SBGRPT, pay direct & indirect taxes, book train tickets online, make
utility bill payments, etc. A simplified version of the Corporate Internet
Banking, SARAL, was introduced during September 2011 for the use of micro
enterprises with single entrepreneur and small business enterprises managed
by individuals. The Bank has seen a 38.52% growth in Internet Banking
registrations with 1,68,379 customers, of which 16,585 are Corporate
6.1.3. Mobile Banking Service: State Bank Freedom is a simple, convenient,
secure, anywhere and anytime banking service offered by the Bank since
2009. Some of the functionalities available through this Mobile Banking
service include enquiry, funds transfer, cheque book requests, bill
payments, mobile top-ups, etc. The total number and volume of Mobile
Banking transactions during the year 2011-2012 increased by 52.17% and
6.1.4. Interbank Mobile Payment Service (IMPS): The functionality of
Interbank Mobile Payment Service (IMPS) through Mobile Banking has been
made live during March 2012. This service enables better and faster
transfer of funds by the customers using the mobile number of the recipient
instead of the account number. Funds can be remitted by a registered user
of our Bank`s Mobile Banking Service to a beneficiary holding a 7 digit
MMID (Mobile Money Identifier). The transfer is routed through National
Payment Corporation of India (NPCI).
6.1.5. Electronic Payment System:
Seamless and secure remittance of funds between accounts maintained at
different Banks/Branches are enabled through RTGS (Real Time Gross
Settlement) and NEFT (National Electronic Funds Transfer). Interbank
Electronic Funds transfer amongst the State Bank Group is available through
SBGRPT (State Bank Group Payment Transactions). The Bank has recorded
67.27% growth in NEFT Inward transactions and about 50% growth in SBGRPT
transactions during the year ending 31st March 2012.
Cheque Truncation System: CTS
(Cheque Truncation System) is basically an online image-based cheque
clearing system where cheque images and Magnetic Ink Character Recognition
(MICR) data are captured at the collecting Bank branch and transmitted
electronically. Introduced by Reserve Bank of India, the objective of CTS
is faster clearing of cheques through truncation or stopping of physical
movement of cheques. CTS has currently been successfully rolled out in
Chennai & Delhi, and has effectively benefited all our customers in these
centres. Coimbatore and Bangalore Centres will implement CTS shortly.
6.1.6. Bank`s Website:
The Bank`s website, http:// www.statebankofmysore.co.in, available in
English, Hindi and Kannada, hosts a variety of information on our Products
& Services, our Branches & ATMs, Interest Rates, Technology Initiatives
including e-Banking & Mobile Banking , NRI/Forex Services, Bank`s Profile &
Financials, various application form downloads, etc. For the benefit of the
visually challenged, an official text version of the web site has also been
hosted. The home page also provides a link to Grievance Redressal Mechanism
which includes feedback and complaints. The Bank`s website also facilitates
online requests for Home Loans, Car Loans, Education Loans and SME Loans.
Customers can now check their eligibility before submitting their
application and can also track the status of their loan application through
6.1.7 Green Initiatives: As part of the Green Initiative, the Bank is
moving towards less paper banking in all its administrative offices and
branches. The Bank`s intra-net web site `SBM Nest` has been put to
effective use for minimizing paper usage. SBM Nest is deployed as a channel
for routing all circular letters, instructions and interoffice
6.1.8. Green Channel Counter (GCC): is an innovative step towards migrating
from the traditional paper based banking in a limited way to card based
`Green Banking` focusing on reduction in paper usage as well as saving
transaction time. Transaction Posting Device (TPD), a machine used for this
purpose, is very similar to the POS (Point of Sale) machines used at
merchant establishments for card transactions. The initiative has been
successfully launched in our Bank in some of the Bangalore City Branches on
pilot basis. Cash deposit, withdrawal and intra-bank funds transfer up to
Rs. 40,000/- can be made using the ATM cum Debit Card at Green Channel
6.2. Business Continuity Planning
6.2.1. In the backdrop of growing complexity of financial products and the
increased leveraging of technology, operational risks have assumed critical
importance in recent times. The treatment of operational risk as a distinct
risk category along with credit and market risks in the Basel II framework
is a manifestation of the significance of operational risk in impacting the
risk profile of a Bank. Keeping this in mind our Bank has:-
* Adopted well defined IT Policy and IS Security Policy which is being
periodically reviewed and updated.
* Become a part of well established (common for State Bank Group) state-of-
the art IT infrastructure which is certified as BS 259992:2007 by BSI.
6.2.2. Our Bank has taken proactive measures to respond to business
discontinuities and ensure uninterrupted availability of all key business
resources that support critical banking functions. In this connection the
Bank has adopted a well defined Business Continuity Plan and Disaster
Recovery Plan Policy. Our Bank is part of a well established high-end
Business continuity and Disaster Recovery infrastructure which ensures
seamless continuity in case of need. The Disaster Recovery drill is being
conducted on a half-yearly basis during which the transactions of our
branches are routed through the DR site. In addition to this, the Bank has
a nearby site to ensure zero data loss in the event of a disaster. The Bank
has implemented Business Continuity Plan in all the branches and also in
the administrative offices together with periodic reviews and updates.
6.3. Management Information System (MIS):
6.3.1. The MIS Department consolidates and maintains the Credit Information
System (CIS) database apart from collating information from branches and
Head Office Departments for submission of various statements to Reserve
Bank of India like submission of Basic Statistical returns, Sectoral
Deployment of Funds etc,.
6.3.2. The scope of CIS has also been extended to submission of data
relating to Credit Information Bureau (India) Limited (CIBIL) and other
credit information companies (CICs).
6.3.3. The Department has developed a webpage in the SBMNEST, providing
useful information to the controlling offices and the branches. The
Department has also developed the software/formats of Balance Sheet, Profit
and Loss Account, MOC etc,, and has hosted the same in the SBMNEST for use
by the branches.
7. SYSTEMS AND PROCEDURES
7.1. Systems and Procedure Department is a special resource available at
Head Office for effective management of work organization concerning Bank`s
Systems and Procedures. The department regularly reviews the systems and
procedures in line with the technological developments in the areas of Core
Banking and the alternate delivery channels.
The department has, in the year under report, introduced Inter Office
Instrument in all branches/SBI and other Associate Banks in lieu of Demand
Draft and Banker`s Cheque payable in any branches of the Bank/SBI and
Associate Banks. The department has introduced Universal Pass Book for both
deposits and advances accounts. The department has promoted Government of
India Green Initiative Policy by effecting payments to vendors/contractors
7.2. The department also reviewed the service charges structure with regard
to locker, multicity cheques transactions, non-maintenance of any time
quarterly balance in SB accounts of P segment customers etc. The department
has also updated directory of offices and designed monthly visit report of
single officer branch/fence sitting branches.
8. CONTROL AND SUPERVISION
8.1. Risk Management:
8.1.1 The Bank has achieved substantial progress in the implementation of
risk management systems, envisaged in RBI guidelines. An Integrated Risk
Management approach is followed, with a well-designed organizational
structure consisting of committees, viz. Risk Management Committee of the
Board (RMCB) at the Board level, Asset Liability Management Committee
(ALCO), Credit Risk Management Committee (CRMC), Market Risk Management
Committee (MRMC) and Operational Risk Management Committee (ORMC). These
committees meet at periodic intervals to oversee the functions of Risk
Management and Asset Liability Management.
8.1.2 With regard to Credit Risk, a Credit Risk Mitigation and Collateral
Management Policy is in place. Bank has a comprehensive Loan Policy
document in place which addresses Credit Risk Management and is reviewed
and revised periodically.
8.1.3 Credit Risk Assessment System (CRAS) which is in the Bank has
separate models designed for trading and non-trading/service sectors. While
limit aggregating to Rs. 5.00 crores and above will warrant borrower as
well as facility ratings, limits from Rs. 25.00 lacs and upto Rs. 5.00
crores will carry only borrower rating.
8.1.4. With a view to controlling the risk relating to exposure on domestic
and foreign counterparty banks, detailed guidelines are laid down and bank-
wise exposure limits have been fixed and allocated among the various user/
departments/branches. The exposures taken at the branches/departments are
being monitored at periodic intervals.
8.1.5. For managing risks arising out of adverse movement in market
interest rates, currency exchange rates, equity prices and commodity
prices, the Market Risk Management Policy has been framed. A Back Testing
Policy envisaging testing of market risk measurement models is also
included in this policy.
8.1.6. Operational Risk Management Policy duly approved by the Board is put
in place. Monitoring through the process of audit has been tightened. As
part of Risk Based Supervision, the Bank has introduced Risk Focused
Internal Audit (RFIA) as the exclusive form of audit effective from 1st Aug
2003. The Audit Report Format (ARF) has been suitably modified and adopted.
A Fraud Risk Management Policy covering identification and control,
accountability, reporting and follow up measures has also been formulated
for effective control over incidence of fraud.
8.1.7. The Bank has put in place a policy on Disclosures as required by RBI
under Pillar-3 of Basel-ll and necessary disclosures are being made
periodically as stipulated.
8.1.8. Reserve Bank of India has issued final guidelines for migration to
Advanced Approaches for computation of Capital charge for Credit Risk, as
per Basel II guidelines, on 22.12.2011.
8.1.9. Having complied with the requirements of the basic approaches in
credit risk, market risk and operational risk for computation of capital
adequacy, the bank is preparing for migration to advanced approaches viz.
Internal Rating Based Approach in credit risk, Internal Models Approach in
market risk and Advanced Measurement Approach in operational risk for
computation of capital. With the proposed migration, Bank`s risk management
systems would be further strengthened.
8.1.10. To facilitate smooth migration to Advanced Approaches, individual
committees are in place for Credit Risk, Market Risk and Operational Risk
to interact with the Consultants and to oversee the execution of the
required tasks in time.
9. BUSINESS PROCESS RE-ENGINEERING (BPR)
9.1. The Bank has rolled out various BPR initiatives since 2004, in
consonance with the design principles provided by the Corporate Centre. The
BPR initiatives leverage technology to significantly enhance customers`
satisfaction and convenience. BPR initiatives rolled out over the years
have stabilized and started yielding desired results. So far 19 BPR
initiatives have been rolled out.
9.2. Based on the feedback received from the branches and the initiatives,
some changes in the processes have been brought out to improve efficiency.
9.3. Our Centralized Clearing Processing Centres (CCPCs) at Bangalore.,
Mysore and Chennai undertake entire clearing work of all the linked
branches. All the branches at Mysore have been linked to CCPC Mysore during
the year. Service branch, Chennai and Bangalore were integrated with CCPC,
Chennai and Bangalore respectively during the year.
9.4. Cheque Truncation System has been implemented during the year at
Chennai and is working successfully. The process of implementing the Cheque
Truncation System at Bangalore is in progress and it will be extended to
other centers in a phased manner as the Reserve Bank of India will direct
from time to time.
9.5. 33 new branches have been opened at Bangalore, Mysore Zone, Hubli
Zone, Chennai Zone, and Delhi Region as per BPR design principles. 59
branches have been redesigned during renovation/shifting to new premises as
per BPR design principles at Bangalore, Mysore, Chennai, Hyderabad, Mumbai,
Delhi and Kolkata.
9.6. Mid Corporate Central processing Centre (MCCPC)
9.6.1. As part of the Bank`s BPR initiative, a Mid Corporate Central
Processing Centre (MCCPC) was set up during February 2010 in our Bank for
Bangalore centre, with a view to pool specialized credit skills, to
standardize the credit processes, to improve the quality of assets and to
provide speedy credit delivery and reduction in turn around time (TAT).
9.6.2. Initially 25 branches of Bangalore Zone I which were having Medium
Enterprises (ME) and mid-corporate accounts were linked to MCCPC. During FY
2011-12 a further 10 branches of Bangalore Zone II have been added.
Currently there are 67 mid-corporate accounts with aggregate sanctioned
limit of Rs. 1243.38 crores and outstanding of Rs. 1,125.16 crores as on
9.6.3. MCCPC is engaged in the credit appraisal, sanction, supervision and
follow-up of corporate and mid-corporate advance accounts of Bangalore.
MCCPC is extending support to branches in the adjoining district of Tumkur
in the above matters.
10. ASSET LIABILITY MANAGEMENT
10.1. The Asset Liability Management System has been functioning as per the
guidelines prescribed by RBI. The Asset Liability Management Committee
(ALCO) of the Bank is entrusted with the task of managing Liquidity and
Interest rate risk. The Committee meets regularly to monitor the risks and
Net Interest Margin (NIM) on an ongoing basis. The tolerance limits for
liquidity mismatches and interest rate risks are fixed in accordance with
RBI guidelines and Bank`s ALM Policy and these are reviewed by ALCO at
regular intervals. Various interest rate revisions including the revision
of BPLR/Base Rate are thoroughly discussed and decided by ALCO duly
considering all the relevant factors. Possible mismatches in the Structural
Liquidity projections of the Bank are also discussed with regard to long
term asset exposures and appropriate decisions are taken.
11. AUDIT AND INSPECTION
11.1.1. As against a target of 545 branches/BPR entities envisaged in the
annual audit plan, 586 branches/BPR entities were subjected to Internal
Audit and IS Audit during the year under reference. That apart, 17 newly
opened branches were subjected to Spot Audit, 7 Head Office Departments and
2 Staff Training Centres were also subjected to Internal Audit.
11.1.2. 73 branches (Scale IV & above) were subjected to Expenditure Audit
during the year. 423 branches selected, with advance levels of more than
Rs. 10.00 Crores and income leakage of Rs. 1.00 lakhs & above were
subjected to Special Revenue Audit to ensure that there is no income
leakage (as against 388 branches during previous year).
11.1.3. 140 branches/offices covering 55.66% of deposits and 72.59% of
advances and 7 Head Office Departments were subjected to concurrent audit
for bringing improvement in functioning, compliance with the laid down
systems and procedures. The findings enumerated in these audit reports are
appraised to the Audit Committee of the Board and follow-up actions are
11.1.4. Structured meetings were held at quarterly intervals at Zonal
Centres and half-yearly intervals at Regions headed by Deputy General
Managers during 2011-12, to follow up pending compliances and bring about
qualitative improvement in compliances at all levels. Workshops were
conducted at various centres (Bangalore, Hyderabad, Chennai, Mumbai, Mysore
& Delhi covering all the Modules) during 2011-12 for concurrent auditors to
update their knowledge and skills. Also, two training programmes were
conducted for RFIA (Risk Focussed Internal Audit) auditors during 2011-12
11.2. Credit Audit
The audit of loan appraisal and amount management for high value credit
accounts with the aim of improving the asset quality of the Bank is
undertaken by the Credit Audit Department. Accounts with total exposure of
Rs. 2 crore and above are covered under Credit Audit. During the financial
year 1135 loan accounts in 173 branches were covered under Credit Audit.
Out of 1135 accounts 1019 accounts (90%) were rated as Low and Very Low
11.3.1. Vigilance administration as an important aspect of management
function is carried out as per the directives of the Central Vigilance
Commission so as to achieve good Corporate Governance for the overall
growth of the bank.
11.3.2. To create better preventive vigilance awareness and to prevent
incidence of frauds, various preventive vigilance activities like surprise
visit to branches, formation of preventive vigilance committees at all
major branches and BPR entities, sessions in the staff training centers,
surprise verification of cash etc., are being undertaken by the Vigilance
11.3.3. The Fraud Monitoring and Investigation Cell (FMIC) under the
Vigilance Department monitors certain critical areas of branch functioning
on regular basis as part of surveillance responsibilities. Besides, to
speed up and monitor disciplinary proceedings, the Chief Managers, General
Banking/ Administration at the Zonal/Regional Office level are designated
as Zonal Vigilance Officers as an extension of the Vigilance structure at
11.3.4. The officers from Vigilance Department conducted surprise
inspections of 53 offices/branches during the year under report. The main
areas of scrutiny are adherence to systems and procedures, rotation of
staff and deficiencies in fraud-prone areas. The deviations and other
irregularities are brought to the notice of the Module/Regional Heads for
taking corrective actions. Vigilance Department is bringing out a Quarterly
House Magazine, which contains vital information on vigilance related
matters useful to the operating staff.
11.3.5. In accordance with the guidelines of the Central Vigilance
Commission, the `Vigilance Awareness Week` was observed at all the offices
of the Bank from 31st October 2011 to 5th November 2011. The focus of
observing the Vigilance Awareness Week was oriented towards evolving and
effectively implementing preventive techniques in vigilance administration,
which includes transparency, accountability and fair play, objectivity and
timely response in dealing with matters relating to public administration.
Besides, the role of leveraging of technology in respect of all systems and
processes for deliverance of services, which has to be synchronized through
use of technology was strongly emphasized.
11.3.6. The Vigilance Department is maintaining liaison with outside
agencies like the Central Vigilance Commission and Central Bureau of
Investigation and also effectively coordinating with various departments
within the bank so that vigilance cases are disposed of speedily.
11.3.7. As per the directions of Government of India, a Vigilance set up
has been established in Cauvery Kalpatharu Grameena Bank sponsored by the
bank and the Chief Vigilance Officer of the bank is overseeing the
vigilance administration in that Bank.
12. OTHER ASPECTS
12.1. Customer Service
12.1.1. The Bank continues to accord highest priority to Customer Service.
The Bank is a member of Banking Code and Standards Board of India (BCSBI)
and is committed to provide service of a high order in a transparent
manner. Bank has adopted the BCSBI Code of Commitment to Customers and
placed the same in the Bank`s website. The Policy guidelines relating to
Collection of Cheques, Grievance Redressal Mechanism and Compensation were
placed on the Bank`s website for the use of the customers.
12.1.2. Right to Information
The Right to Information Act 2005 - The required authority structure for
implementation of the Act has been put in place for prompt disposal of RTI
requests for Information within the time frame period as prescribed under
the Act. The Bank`s website also carries all the relevant information on
the implementation of the Act.
Business per employee increased from Rs. 7.95 crores as at the end of March
2011 to Rs. 8.81 crores as at the end of March 2012. The Business per
branch increased from Rs. 109.86 crores in March 2011 to Rs. 124.27 crores
in March 2012.
12.3. Public Relations
12.3.1. Effective publicity of the Bank`s schemes and services was carried
out through the medium of captivating hoardings at important vantage
points, advertisements in print and electronic media, glow sign displays at
railway and bus stations in important cities/ towns and advertisements on
modern bus shelters and police kiosks.
12.3.2. Special media campaigns covering the various loan schemes, special
offer in housing, vehicle, gold loans, MSE loans under CGTMSE scheme, other
retail loans and new deposit schemes like My Bank Suraksha Savings Bank,
Savings Bank Plus and Term Deposit account were carried out in the print
and electronic media and through hoardings.
12.3.3. The Bank has sponsored various State level seminars, District
ustavas, Fruit and Flower show at various districts/taluks, musical,
cultural and sporting events. Besides the Bank also sponsored Mysore Dasara
festivitites-2011 in a big way, India Finance Conference -2011 organized by
Indian Institute of Management and a Bus Shelter and drinking water
facility at World Heritage site, Hampi, The Bank extended financial aid to
Sankalpa a unique theatre festival enacted by prison inmates and supported
the 12th Convocation organized by Karnataka State Open University etc.
These activities have resulted in good publicity besides further enhancing
the bank`s image.
12.3.4. Bank`s performance highlights, launching of new products and
services, opening of branches, ATMs, BPR initiatives and technological
achievements were extensively covered in print and electronic media.
12.4. Organizational Development
12.4.1. Branch Expansion: The Bank has opened 33 new branches during the
year 2011-12. With this, the Bank`s network of branches stands at 737
spread over 15 states. As at the end of March,2012, the branch network
comprised of 197 Metro, 156 Urban, 159 semi- urban and 225 rural branches.
12.4.2. Branches in Minority Concentrated Districts- Centers (MCDs)/Under
Banked Districts: During the year, the Bank has opened 2 branches and 4
branches in Minority Concentrated Districts/Centers and Under-Banked
Districts respectively. As on 31st March 2012, out of 737 branches, the
Bank has 70 branches in MCDs constituting 9.50% of the branch network and
83 branches in Under-banked Districts constituting 10.85% of the branch
12.5. Implementation of Official Language Policy:
12.5.1. In pursuance of constitutional provisions, Bank is making all
efforts for the propagation of the Official Language, Hindi, and its
progressive use in day-to-day official work. Bank is progressively
improving the usage of Hindi and the Regional Language to serve customers
to their satisfaction bringing transparency in administration.
12.5.2. To ensure the usage of Hindi in official correspondence, routine
forms used on computers were identified and converted in
bilingual/trilingual form and were made available to the staff members,
providing Script Magic Hindi Software in our CBS and Unicode Mangal fonts
for word processing. Our Bank`s website is made available in Hindi and
Kannada also and being updated simultaneously. Operating option of Hindi &
Regional Language is provided in all the ATMs of our Bank.
12.5.3. Apart from publishing Hindi Articles in the House Magazine
"Sambrama", a separate Quarterly Hindi Magazine "Mybank Bhashadarshini" is
being published for enriching the Hindi knowledge of our staff. Hindi
version of Fire and Pension Manuals were issued during the year under
review besides publishing Bank address book in bilingual form.
12.5.4. 24 Functional/Computer Workshops/On the Desk Training were
organized at different places and imparted functional knowledge of Hindi to
the 289 Staff Members and organized All India Official Language Conference
at Pondicherry inviting local dignitaries to create favorable atmosphere
for implementing Official Language Policy of Government of India. Our
efforts in this regard are appreciated by various Town Official Language
12.5.5. Kannada being the Official Language of Karnataka , occupies the
place of prominence in the Bank, as more than 80% of our branches are in
12.5.6. Account opening forms, pay in slips, withdrawal forms, DD and pay
order challans, all Agricultural and SHG loan applications and other
important forms are in Kannada/trilingual form. All our ATMs display
operational instructions in Kannada also. Correspondence with the State
Government and its departments is done in Kannada. Bank has Kannada version
for its website.
12.5.7. All press releases of the Bank, including quarterly and annual
financial results are being simultaneously published in Kannada. Reports of
community services and cultural programmes at Branches are published in
Kannada in the Bank`s house magazines "Sambhrama" and "Mybank Bhasha
12.5.8. Kannada Rajyotsava is celebrated every year at Head Office, Zonal
Offices and Regional Offices during the month of November. Renowned Kannada
writers and aged artists are felicitated on the occasion.
12.5.9. Our Kannada Department conducts Kannada language classes for the
Probationary Officers who do not know Kannada.
12.6. Community Services Banking
12.6.1. As a committed and responsible Corporate Citizen, the Bank
effectively associated with various community development activities
pertaining to education, health, social, art, culture and sports. The Bank
has sponsored 130 programmes during the year with a financial outgo of
Rs.130.02 lakhs including contributions for purchase of utility assets by
various social and charitable institutions.
12.6.2. The other activities/programmes include conduct of various health
camps like eye camp, asthma camp, animal health check up camp, general
check up camp, conducting Tree Planting Programme, honoring meritorious
students in SSLC, sponsoring Taluk and District level sports tournament,
donating text books, utensils, blankets to orphanages, supported the Care
Earth Trust engaged in conserving biodiversity, Sponsored prevention of
cancer awareness programme and SHG awareness programmes like health, girl
child education programme etc.
12.6.3. The Bank had, among others, made a donation to `Ekal Vidyalaya
Movement for Elementary Education of Tribals` in Chamrajnagar and Mysore
District by adopting schools in 10 villages and an Ambulance to SDS
Tuberculosis Research Centre and Rajiv Gandhi Institute of Chest Diseases.
The Bank made a donation to Tumkur University to construct a building for
their Fine Arts College. It donated a Corpus Fund for instituting a Chair
at Visvesvaraya Technological University (VTU), and to Mysore University
for installing statues of Sir M.Visvesvaraya and Nalwadi Krishnaraja
13. BOARD OF DIRECTORS 2011-12
13.1. Shri Pratip Chaudhuri, Chairman, SBI was appointed as Chairman on the
Board of the Bank under Clause (a) of Section 19 & sub-section (1) of
Section 20 of the State Bank of India Act, 1955 (23 of 1955), with effect
from 07.04.2011, in place of Shri O.P.Bhatt who retired on 31.03.2011.
13.2. Shri Shyamal Acharya, Deputy Managing Director and Group Executive
(A&S), SBI was nominated as Director on the Board of the Bank representing
SBI, under Section 25(1)(c) of SBI (Subsidiary Banks) Act 1959, with effect
13.3 Shri Dilip Mavinkurve, Managing Director, ceased to be a Director on
the Board of the Bank on attaining superannuation on 31.3.2012
13.4. Shri A.K.Deb. Chief General Manager (A&S), SBI was nominated as a
Director on the Board of the Bank representing SBI under Section 25(1)(c)
of SBI (Subsidiary Banks) Act 1959, with effect from 05.09.2011 in place of
Shri B.S.Gopalakrishna who tendered his resignation on 04.09.2011 from the
Board of the Bank.
13.5. Shri K.N.Nayak, Deputy General Manager (A&S), SBI was nominated as
Director on the Board of the Bank representing SBI, under Section 25(1)(c)
of SBI (Subsidiary Banks) Act 1959, with effect from 30.09.2011 in place of
Shri. B.Ramesh Babu , Deputy General Manager (A&S), SBI who tendered his
resignation on 29.09.2011 from the Board of the Bank.
13.6. Shri K.Anand, Director nominated by SBI in consultation with GOI &
RBI, ceased to be a Director on the Board of the Bank on completion of his
tenure of 3 years on 15.09.2011.
13.7. The Board places on record its appreciation of the invaluable
services rendered by Shri O.P.Bhatt, Shri.Dilip Mavinkurve, Shri
B.S.Gopalakrishna, Shri B.Ramesh Babu and Shri K.Anand. The Board welcomes
the new Directors.
M/s. Bhasin Raghavan & Co., M/s. K. P. Rao & Co., M/s. B. L Ajmera & Co.,
M/s. M K P S & Associates, M/s. S. K. Basu & Co., and M/s. Maharaja N. R.
Suresh & Co., have been appointed as the Statutory Central Auditors of the
Bank for the accounting period ended 31st March, 2012 by State Bank of
India, with the approval of Reserve Bank of India. 654 branches of the Bank
were subjected to Statutory Branch Audit as against 670 branches audited
The Board wishes to place on record its sincere appreciation of the
patronage and support of the customers, shareholders, members of staff,
Employees` Union and Officers` Association for their contribution to the
overall development of the Bank.
By the Order of the Board
Date : 19.04.2012.