Company History

The origin of the State Bank of India (NSE:SBIN) (known as SBI) goes back to the first decade of the nineteenth century with the establishment of the Bank of Calcutta in Calcutta on 2 June 1806. Three years later the bank received its charter and was re-designed as the Bank of Bengal (2 January 1809). A unique institution, it was the first joint-stock bank of British India sponsored by the Government of Bengal. The Bank of Bombay (15 April 1840) and the Bank of Madras (1 July 1843) followed the Bank of Bengal. These three banks remained at the apex of modern banking in India till their amalgamation as the Imperial Bank of India on 27 January 1921.1

Primarily Anglo-Indian creations, the three presidency banks came into existence either as a result of the compulsions of imperial finance or by the felt needs of local European commerce and were not imposed from outside in an arbitrary manner to modernise India's economy. Their evolution was, however, shaped by ideas culled from similar developments in Europe and England, and was influenced by changes occurring in the structure of both the local trading environment and those in the relations of the Indian economy to the economy of Europe and the global economic framework.

The business of the banks was initially confined to discounting of bills of exchange or other negotiable private securities, keeping cash accounts and receiving deposits and issuing and circulating cash notes. Loans were restricted to Rs.one lakh and the period of accommodation confined to three months only. The security for such loans was public securities, commonly called Company's Paper, bullion, treasure, plate, jewels, or goods 'not of a perishable nature' and no interest could be charged beyond a rate of twelve per cent. Loans against goods like opium, indigo, salt woollens, cotton, cotton piece goods, mule twist and silk goods were also granted but such finance by way of cash credits gained momentum only from the third decade of the nineteenth century. All commodities, including tea, sugar and jute, which began to be financed later, were either pledged or hypothecated to the bank. Demand promissory notes were signed by the borrower in favour of the guarantor, which was in turn endorsed to the bank. Lending against shares of the banks or on the mortgage of houses, land or other real property was, however, forbidden.

Indians were the principal borrowers against deposit of Company's paper, while the business of discounts on private as well as salary bills was almost the exclusive monopoly of individuals Europeans and their partnership firms. But the main function of the three banks, as far as the government was concerned, was to help the latter raise loans from time to time and also provide a degree of stability to the prices of government securities.

A major change in the conditions of operation of the Banks of Bengal, Bombay and Madras occurred after 1860. With the passing of the Paper Currency Act of 1861, the right of note issue of the presidency banks was abolished and the Government of India assumed from 1 March 1862 the sole power of issuing paper currency within British India. The task of management and circulation of the new currency notes was conferred on the presidency banks and the Government undertook to transfer the Treasury balances to the banks at places where the banks would open branches. None of the three banks had till then any branches (except the sole attempt and that too a short-lived one by the Bank of Bengal at Mirzapore in 1839) although the charters had given them such authority. But as soon as the three presidency bands were assured of the free use of government Treasury balances at places where they would open branches, they embarked on branch expansion at a rapid pace. By 1876, the branches, agencies and sub agencies of the three presidency banks covered most of the major parts and many of the inland trade centres in India. While the Bank of Bengal had eighteen branches including its head office, seasonal branches and sub agencies, the Banks of Bombay and Madras had fifteen each.

The presidency Banks Act, which came into operation on 1 May 1876, brought the three presidency banks under a common statute with similar restrictions on business. The proprietary connection of the Government was, however, terminated, though the banks continued to hold charge of the public debt offices in the three presidency towns, and the custody of a part of the government balances. The Act also stipulated the creation of Reserve Treasuries at Calcutta, Bombay and Madras into which sums above the specified minimum balances promised to the presidency banks at only their head offices were to be lodged. The Government could lend to the presidency banks from such Reserve Treasuries but the latter could look upon them more as a favour than as a right.

The presidency Banks of Bengal, Bombay and Madras with their 70 branches were merged in 1921 to form the Imperial Bank of India. The triad had been transformed into a monolith and a giant among Indian commercial banks had emerged. The new bank took on the triple role of a commercial bank, a banker's bank and a banker to the government.

But this creation was preceded by years of deliberations on the need for a 'State Bank of India'. What eventually emerged was a 'half-way house' combining the functions of a commercial bank and a quasi-central bank.

The establishment of the Reserve Bank of India as the central bank of the country in 1935 ended the quasi-central banking role of the Imperial Bank. The latter ceased to be bankers to the Government of India and instead became agent of the Reserve Bank for the transaction of government business at centres at which the central bank was not established. But it continued to maintain currency chests and small coin depots and operate the remittance facilities scheme for other banks and the public on terms stipulated by the Reserve Bank. It also acted as a bankers' bank by holding their surplus cash and granting them advances against authorised securities. The management of the bank clearing houses also continued with it at many places where the Reserve Bank did not have offices. The bank was also the biggest tenderer at the Treasury bill auctions conducted by the Reserve Bank on behalf of the Government.

The establishment of the Reserve Bank simultaneously saw important amendments being made to the constitution of the Imperial Bank converting it into a purely commercial bank. The earlier restrictions on its business were removed and the bank was permitted to undertake foreign exchange business and executor and trustee business for the first time.

The Imperial Bank during the three and a half decades of its existence recorded an impressive growth in terms of offices, reserves, deposits, investments and advances, the increases in some cases amounting to more than six-fold. The financial status and security inherited from its forerunners no doubt provided a firm and durable platform. But the lofty traditions of banking which the Imperial Bank consistently maintained and the high standard of integrity it observed in its operations inspired confidence in its depositors that no other bank in India could perhaps then equal. All these enabled the Imperial Bank to acquire a pre-eminent position in the Indian banking industry and also secure a vital place in the country's economic life.

When India attained freedom, the Imperial Bank had a capital base (including reserves) of Rs.11.85 crores, deposits and advances of Rs.275.14 crores and Rs.72.94 crores respectively and a network of 172 branches and more than 200 sub offices extending all over the country.

In 1951, when the First Five Year Plan was launched, the development of rural India was given the highest priority. The commercial banks of the country including the Imperial Bank of India had till then confined their operations to the urban sector and were not equipped to respond to the emergent needs of economic regeneration of the rural areas. In order, therefore, to serve the economy in general and the rural sector in particular, the All India Rural Credit Survey Committee recommended the creation of a state-partnered and state-sponsored bank by taking over the Imperial Bank of India, and integrating with it, the former state-owned or state-associate banks. An act was accordingly passed in Parliament in May 1955 and the State Bank of India was constituted on 1 July 1955. More than a quarter of the resources of the Indian banking system thus passed under the direct control of the State. Later, the State Bank of India (Subsidiary Banks) Act was passed in 1959, enabling the State Bank of India to take over eight former State-associated banks as its subsidiaries (later named Associates).

The State Bank of India was thus born with a new sense of social purpose aided by the 480 offices comprising branches, sub offices and three Local Head Offices inherited from the Imperial Bank. The concept of banking as mere repositories of the community's savings and lenders to creditworthy parties was soon to give way to the concept of purposeful banking subserving the growing and diversified financial needs of planned economic development. The State Bank of India was destined to act as the pacesetter in this respect and lead the Indian banking system into the exciting field of national development.

Core Operation

Retail & Digital Banking Group

The Retail and Digital Banking Group is the largest business vertical of the Bank, constituting 94.31% of total Domestic Deposits and 58.14% of total Domestic Advances, as on 31st March, 2020. The Group comprises of eight strategic business units, which drive the largest branch network across the country. Your Bank is making continuous efforts in providing a pleasing ambience with clean and uncluttered surroundings, along with a courteous and smartly attired staff at all its branches. The ever-evolving customer preferences, especially of the younger population, coupled with an increased focus on enhanced customer convenience, are transforming the retail banking landscape.2

  • Home Loans
  • Auto Loans
  • Education Loans
  • Personal Loans
  • Liability And Investment Products
  • Corporate And Institutional Tie-Ups For Salary Package
  • Digital Personal Loan Offerings
  • Nri Business
  • Precious Metals
  • Wealth Management Business

Anytime Channels

  • Atms/ Adwms
  • Swayams: Barcode Based Passbook Printing Kiosks
  • Green Channel Counter (Gcc)
  • Green Remit Card (Grc)
  • Banking On Mobile
  • Sbi Pay (Bhim)
  • Digital Banking
  • Internet Banking And E-Commerce

Small And Medium Enterprises

  • Customer Convenience
  • Digital Offerings
  • Business Partnerships And Tie-Ups
  • Risk Mitigation

Rural Banking

  • Agri Business
  • Micro Credit
  • Other Initiatives
  • Financial Inclusion (Fi)

Government Business

  • Gem (Govt. E-Marketplace)
  • E-Tendering
  • Indian Railways
  • Department Of Post
  • Educational Consultants India Limited (Edcil)
  • Direct Benefit Transfer (Dbt)
  • Auction Of Items Gifted To Honourable Prime Minister Of India
  • Pension Payments
  • Pm Kisan Samman Nidhi Yojana
  • Small Savings Schemes

Transaction Banking Unit

  • Global Banking
  • Interest Rate Movements And Slr And Nonslr Portfolio Of Your Bank
  • Equity Markets
  • Private Equity/ Venture Capital Fund
  • Forex Markets

Indian Banking Environment

During the year, the aggregate deposits growth has remained in the range of 9% to 11%, before ending at 7.9% in FY20. The low growth is aided by last year’s high base and COVID crisis. The credit offtake during 2019-20 was also muted with credit growth at 6.1% being less than half the growth of 13.3% in 2018-19, due to low momentum and unfavourable base effects. The seasonal decline in Q3 credit growth in 2019-20 was more pronounced than a year ago, while the offtake during Q4:2019-20 has been subdued as compared with the corresponding quarters of previous two years. The slowdown in credit growth was spread across all bank groups, especially private sector banks. Credit growth of public sector and foreign banks remained modest, even as there has been some uptick in credit by public sector banks in Q4. With credit offtake remaining muted and non-SLR investments declining, banks augmented their SLR portfolios. Banks held excess SLR of around 7.5% of net demand and time liabilities (NDTL) in FY2020 as compared with 6.3% of NDTL in FY2019.

While, the sector-wise credit data for March 2020, indicates that the incremental credit has increased only in Agri. & Allied sectors and all other sectors have shown a deceleration. Credit to Industry declined to 1.4%in FY2020 (6.9% in FY2019), services by 8.5% (17.8% in FY2019). While, personal loans declined marginally to 15.7% in FY2020 from 16.4% in FY2019, credit to MSE and NBFC has increased substantially, due to the enhanced support by Banks in the form of increase in working capital limits.

In FY2020, monetary policy transmission to banks’ term deposit and lending interest rates has improved, with the improvement in transmission during H2:2019-20 to banks’ deposit and lending interest rates reflecting the lagged impact of the previous rate cuts (110 bps during February–September 2019) as also the introduction of the external benchmark system from October 1, 2019 for the pricing of new floating rate loans to select sectors, viz., retail loans and loans to Micro and Small Enterprises (MSEs). Further, the data indicates that the public sector banks, while transmitting the repo rate cut, have tried to minimize the cut in term deposit rates to have minimal impact on the depositor. Meanwhile, for private sector banks & foreign banks the deposits rate cuts have been more aggressive than the MCLR cuts.

Outlook

The last financial year was a mixed bag from the point of view of the Banks. The first half of the financial year saw good progress in resolution of the stress assets. The general budget was supportive of growth. However, in the backdrop of slowdown in private consumption, financial instability in Indian private banking and delays in resolution of NPAs in NBFC, the third quarter saw shift in the outlook.

The last financial year was a mixed bag from the point of view of the Banks. The first half of the financial year saw good progress in resolution of the stress assets. The general budget was supportive of growth. However, in the backdrop of slowdown in private consumption, financial instability in Indian private banking and delays in resolution of NPAs in NBFC, the third quarter saw shift in the outlook.

The impact of COVID-19 outbreak on economy and financial markets has been dramatic and severe. The commodities price deflated sharply with oil dropping over 70%. Equity markets also corrected sharply across emerging markets, including in India. Although forecast on GDP India’s GDP growth differ widely, with deep negative to just positive growth in FY2021, demand inoperability due to lockdown measure has led to considerable loss of income in the poor sections of the society.

In this context, the future outlook for Bank’s business needs a careful revision. The loss in output due to demand inoperability in sectors such as transport has cascading impact on other sectors. The elongation of the working capital cycle due to delay in realisation of sales have increased demand for working capital loans and the possibility of slippages. Loss in income may adversely impact the Bank’s deposit mobilisation strategy in future.

However, the COVID-19 pandemic has also opened opportunities for the banks. Reordering of global supply chains presents unique opportunity to India to position itself as manufacturing hub to meet global demand. To the extent state governments are able to secure such relocation of businesses from China; banks will see opportunities to expand business. Rapid adoption of digital technology in response to the COVID-19 also augurs well from point of view of the banks as it may accelerate the adoption of digital offerings by the banks.

In a nutshell, the outlook on Bank’s business and the economy will be conditional on time frame by which the virus is completely eliminated, and normalcy restored. The recently released fiscal stimulus package, its priorities and funding strategy will decide how banks will respond in the post-COVID scenario. Bank will also have to revisit its risk management framework, its internal models of risk assessment and capital planning and business procedures to better adapt to new operating environment.

Financial Highlights

Net Interest Income

Net interest income increased by 11.02% fromRs88,348.87 crore in FY2019 toRs98,084.83 crore in FY2020. Total interest income increased fromRs2,42,868.65 crore in FY2019 toRs2,57,323.59 crore in FY2020 registering a growth of 5.95%.

Total interest expenses increased fromRs1,54,519.78 crore in FY2019 toRs1,59,238.77 crore in FY2020. Interest expenses on deposits during FY2020 recorded an increase of 5.08%, compared to the previous year.

Non Interest Income And Expenses

Non-interest income increased by 22.97% toRs45,221.48 crore in FY2020 as againstRs36,774.89 crore in FY2019. During the year, the Bank received an income ofRs212.03 crore (`348.01 crore in FY2019) by way of dividends from subsidiaries and joint ventures in India and abroad, andRs8,575.65 crore (`3,146.86 crore in FY2019) by way of profit on sale of investments.

Operating Profit

The Operating Profit of the Bank for FY2020 was atRs68,132.61 crore as compared toRs55,436.03 crore in FY2019 (including exceptional item ofRs6,215.64 crore in the FY2020 andRs1,560.55 crore in FY2019). Your Bank posted a Net Profit ofRs14,488.11 crore for FY2020, as compared to a Net Profit ofRs862.23 crore in FY2019.

Assets And Liabilities

Total assets of the Bank have increased by 7.35% fromRs36,80,914.25 crore at the end of March 2019 toRs39,51,393.92 crore as at the end of March 2020. During the period, the loan portfolio increased by 6.38% fromRs21,85,876.92 crore, toRs23,25,289.56 crore. Investments increased by 8.27% fromRs9,67,021.95 crore toRs10,46,954.52 crore as at the end of March 2020. A major portion of the investment was in the domestic market in government securities.

Your Bank’s aggregate liabilities (excluding capital and reserves) rose by 7.50% fromRs34,60,000.42 crore as on 31st March 2019 toRs37,19,386.49 crore as on 31st March 2020. The deposits rose by 11.34% and stood atRs32,41,620.73 crore as on 31st March 2020 againstRs29,11,386.01 crore as on 31st March 2019. The borrowings decreased by 21.92% fromRs4,03,017.12 crore at the end of March 2019 toRs3,14,655.65 crore as at the end of March 2020.

References

  1. ^ https://www.sbi.co.in/web/about-us
  2. ^ https://www.bseindia.com/bseplus/AnnualReport/500112/5001120320.pdf
Tags: IN:SBIN
Created by Asif Farooqui on 2020/09/14 19:20
     
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