Term Paper Review of Financial Management

8/9/2019 Term Paper Review of Financial Management

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TERM PAPER OF FINANCIALMANAGEMENT

NAME-ROHAN KUMAR CLASS-: BBA-MBA(DUAL INT) 5th semROLL NO-321

SUBMITTED TO

Mrs tulip joshi

TOPIC-SBI( its background, history, management; Capital Structure last 3 year Liquidity Position of the company ,Dividend Policy for last 2 years;

Analyse Financial Credibility through balance sheet, Profit and loss A/C,IPO issues made by company during last 5 year ,Track and report newsrelevant to company chronologically (date wise) and its impact on share price of company)

History of SBI -:


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The evolution of State Bank of India can be traced back to the firstdecade of the 19th century. It began with the establishment of theBank of Calcutta in Calcutta, on 2 June 1806. The bank wasredesigned as the Bank of Bengal, three years later, on 2 January1809.

It was the first ever joint-stock bank of the British India,established under the sponsorship of the Government of Bengal.Subsequently, the Bank of Bombay (established on 15 April 1840)and the Bank of Madras (established on 1 July 1843) followed theBank of Bengal. These three banks dominated the modern bankingscenario in India, until when they were amalgamated to form the

Imperial Bank of India, on 27 January 1921.An important turning point in the history of State Bank of India isthe launch of the first Five Year Plan of independent India, in1951. The Plan aimed at serving the Indian economy in generaland the rural sector of the country, in particular. Until the Plan, thecommercial banks of the country, including the Imperial Bank of India

This resulted in making the State Bank of India more powerful, because as much as a quarter of the resources of the Indian bankingsystem were controlled directly by the State. Later on, the StateBank of India (Subsidiary Banks) Act was passed in 1959. The Actenabled the State Bank of India to make the eight former State-associated banks as its subsidiaries

The State Bank of India emerged as a pacesetter, with itsoperations carried out by the 480 offices comprising branches, suboffices and three Local Head Offices, inherited from the ImperialBank. Instead of serving as mere repositories of the community'ssavings and lending to creditworthy parties, the State Bank of Indiacatered to the needs of the customers, by banking purposefully.


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The bank served the heterogeneous financial needs of the plannedeconomic development

The Banks Corporate Office is located at Mumbai. Its domestic

operational area is divided into 14 Circles, each with one LocalHead Office and a few Zonal and Regional Offices. The Bank is present not just in the major metropolises of India but has widereach in the villages of India. The Bank's top management consistsof the Chairman, group executives for National Banking Group,Corporate Banking Group, International Banking Group andAssociates & Subsidiaries, and four staff functionaries in charge of finance, credit, human resources & technology management and

inspection & audit.Three Strategic Business Units (SBUs) under the CorporateBanking Group have been set up by SBI to pay attention to bigcorporate customers. Distinguishing features of the SBUs areassimilation of operational planning with operations within eachSBU, an alert delivery system with suitable specialist inputs andfocused attention on profitability

The first phases of fianacial reform resulted in to thenationalnizationl of 14 major banks in 1969 and resulted shifted into from class banking in to mass banking this is the turn in thesignificant growth in to the geographical coverage of bank every banks had remark n min percentage of the loan protofolio to sector indentified after the second phases of fianacial sector reform thelibralization of the sector in the early in to the ninteen the psbfound it is very difficult to complete with new private sector andforiegn banks


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Transformation In SBI:

The SBI has undergone major transformation in the recent years.The bank has ventured into new areas of business like PensionFunds, General Insurance, Custodial Services, Private Equity,Mobile Banking, Point Of Sale, Merchant Acquisition, AdvisoryServices, and Structured Products etc. The bank forseestremendous growth potential in all these areas.

The bank has made forays into the rural banking with state of theart technology. The bank has outlaid an ambitious plan to expandrural banking to 100,000 villages in the next few years.

The bank has ambitious plans to focus on the high end market tosupport India's increasing mid/large Corporate with a wide rangeof products and services. The bank is consolidating its globaltreasury operations and diversifying into structured products andderivative instruments. At present SBI provides the largest amountof infrastructure debt and the bank is the largest provider of commercial borrowings in the country.SBI is a Fortune 500

company.

STATE BANK OF INDIA /CAPITAL STRUCTURE :-

CAPITAL STRUCTURE OF SBI -:

Period Instrument Authorized Cap Issued Cap P A I D U P


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From To (Rs. Cr ) (Rs. Cr ) Shares (nos) F.V CAP

2008 2009 Equity Share 214.75 214.75 634880222 10 214.752007 2008 Equity Share 214.75 214.75 631470376 10 214.752006 2007 Equity Share 214.75 214.75 526298878 10 214.75

2005 2006 Equity Share 214.75 214.75 526298878 10 214.752004 2005 Equity Share 214.75 214.75 526298878 10 214.752003 2004 Equity Share 214.75 214.75 526298878 10 214.752002 2003 Equity Share 214.75 214.75 526298878 10 214.752001 2002 Equity Share 214.75 214.75 526298878 10 214.752000 2001 Equity Share 214.75 214.75 526298878 10 214.751999 2000 Equity Share 214.75 214.75 526298878 10 214.751996 2000 Equity Share 214.75 214.75 526298878 10 214.751995 1996 Equity Share 214.75 214.75 474009872 10 214.751994 1995 Equity Share 214.75 214.75 474009189 10 214.751993 1994 Equity Share 214.75 214.75 473828726 10 214.75

1991 1993 Equity Share 214.75 200 20000000 100 200

Lquidity of SBI:-Resource-raising capabilities

SBIs funding profile is strong, underpinned by its strong retaildeposit base. The bank is facing increasing competition in itsmetropolitan and urban franchise. SBIs strong franchise gives itaccess to a steady source of stable retail funds, which constitute

around 59% of the total resources as on March 31, 2005 (56% as atMarch 31, 2004).

Savings deposits have shown a strong three-year growth of 19%.Thus, despite a reduction in the proportion of current accountdeposits, low-cost deposits have continued to constitute over 40%


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of total deposits as at March 31, 2005. The banks cost of deposits(excluding IMD) has significantly reduced to 4.70% for the 2004-05 (refers to financial year from April 1 to March 31), comparedwith 5.48% in 2003-04. The banks liquidity position is very strongdue to healthy accretion to deposits, large limits in the call market,and significant surplus SLR investments. SBI will maintain itsstrong funding profile and a low cost resource position in view of its strong retail base and wide geographical reach.

Earnings profile to remain good :-

SBI will maintain a good earnings profile in themedium term despite high pressure on yields due to the increasingcompetition in the banking sector. SBIs earning profile ischaracterized by consistency in the return on assets (PAT/AverageAssets), at around 1% per annum for the past three years, anddiverse income streams. To maintain yields and pursue creditgrowth, the bank is aggressively targeting retail finance and smalland medium enterprises (SMEs). The banks core fee income of 1% of average funds deployed bolsters its revenue profile.However, with the opening of government business like taxcollection to other banks and increased competition, the growth infee income is expected to slow down. The banks operatingexpense at 2.44% of average funds deployed in 2004-05 is in linewith other public sector banks. The banks cost structure is rigid asfixed employee cost accounted for 74% of the operating

expenditure in 2004-05. Thus, despite good asset growth andtechnology efficiency gains, the banks operating costs will remainhigh in the medium term.


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SBIs FY2008 was quite difficult, but what is thestate of your financial condition:-

FY2008 market conditions were adversely affected by

the effects of the financial crisis, and since theSeptember 2008 the corporate financing environmentsuddenly deteriorated with many companies forced intoliquidation. At the SBI Group, although a total of approximately 105.9 billion worth of corporate bonds(including those of SBI SECURITIES) was to be redeemedduring FY2008, the entire amount was paid through theuse of our own capital, including the utilization of temporary bridge loans from banks. Even after this

redemption, our cash and cash equivalent balance wasat 127.1 billion (on a consolidated basis as of March 31,2009), attesting to the soundness of our financialcondition

Owing to subsidiary SBI SECURITIES, our consolidatedbalance sheet includes assets held in customersecurities accounts, which is inflated owing to theinclusion of margin transaction assets and deposits of current assets. Also included are margin transactionliabilities and customers security deposits for currentliabilities, all of which will distort the usual measures of analyzing a companys true present underlying financialcondition .

With reference to financing needs, we completed thesetup of our Euro Medium Term Note (Euro MTN)Program on March 19, 2009, which allows the issuanceof bonds with a 50 billion limit, as needed. Based onthis program, from April 2009 SBI initiated the issuanceof yen-denominated bonds (SBI Bonds) to individualinvestors and institutional investors alike. As of June 30,2009, five separate issuances have been effectuated


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resulting in a total of 29 billion raised. Going forward,issuances will be considered according to need, such asfor the redemption of 30 billion worth of SBIsUnsecured Straight Bonds coming redemption in

September 2009

Excess liquidity to remain a concern:The countrys largest lender State Bank of India (SBI)

sees excess liquidity to be a concern for the bank over the next twoquarters, a top official. Every month we receive Rs.12,000 croreof deposits, of which Rs.7,000 crore comes as fixed deposit andRs.5,000 crore as savings and our monthly credit growth is notupto that level, SBI chairman O.P. Bhatt said at a pressconference at Baharampur in West Bengals Murshidabad district.

Hence, every month the bank receives more money asdeposits than it gives out as credit, which adds to its idlefund. The bank had surplus liquidity of Rs.75,000 crore tillDecember and by March it plans to bring it down by aboutRs.20,000 crore by shedding some bulk deposits.

SBI to mark its coverage of the 100,000th un-banked village atSannyasidanga and inauguration of the groups 20,000th ATM atBarala.. Interest rates of most of our schemes are fixed till March31 and we would make a review in the middle of that month, SBI plans to recruit 22,000-23,000 staff in 2010-11 compared to 27,000taken in 2009-10.

Sitting on huge liquidity, SBI sees downward correction:-

Interest rates for both advances and deposits are headed southward,according to State Bank of India (SBI) chairman OP Bhatt. At theend of XLRIs convocation. The current demand for credit doesnot seem to be very good, but you never know whether it is owing


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to lack of demand or because people are waiting for prices andinterest rates to change.

On whether interest rates would soften in the near future, It there

will be some downward correction, adding that it would beapplicable both for deposits as well as loans. Asset-liabilitycommittee (ALCO), which meets once every week, would decideon interest rate cuts in the new financial year ahead. there is some pressure on the banks margins as it has been receiving hugedeposits, particularly since the global financial meltdown, not onlyin India but at all its overseas centers too as people are shiftingaccounts from other banks to SBI, which has now earned the

sobriquet Safe Bank of India.The banks liquidity in the fourth quarter of the fiscal has beenhuge, thousands of crores. However, SBIs credit growth duringQ4 has not been as good as expected, he said.

The chairman said the banks 8%-scheme is picking up slowly as itwas finding more takers every month. SBI has since Februarylaunched a series of products on which the interest rate is 8% for

the first one year while normal rates are to be charged thereafter.These are all efforts at bringing down the interest rates at thelowest possible. the current economic deceleration has put strainon several industries including airlines, automobiles, textiles, steel,real estate, etc, but the bank is lending to almost all of them SBI isgoing to charge an interest rate of 10% for the first year for a loantaken to buy Nano, Tata Motors Rs 1-lakh car. The interest rate onthe loan would thereafter be as per the banks normal auto loans.

Divident policy of SBI:-


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SBI Q4 net jumps 46%; declares dividend of Rs 29 per share :- The country's largest lender the State Bank of Indiaon Saturday announced its results for fourth quarter ended March31, 2009 The Bank has posted a net profit of Rs 2742.31 crore for the quarter ended March 31, 2009, up 45.61% against Rs 1883.25crore for the quarter ended March 31, 2008. Further, lender's totalIncome has also increased from Rs 16393.93 crore for the quarter ended March 31, 2008 to Rs 22060.61 crore for the quarter endedMarch 31, 2009. For the year ended March 31, 2009, the bank has posted a net profit of Rs 9121.24 crore, registering a growth of 35.54%, as compared to Rs 6729.12 crore for the year endedMarch 31, 2008.

The lender also witnessed a surge in its total Income, whichincreased from Rs 57645.24 crore for the year ended March 31,2008 to Rs 76479.22 crore for the year ended March 31, 2009.Apart from announcement of results, the Central Board of theBank at its meeting held on May 09, 2009, inter alia, has declared adividend of Rs 29 per share (290%) for the year ended March 31,

2009. The scrip of the lender settled on at Rs 1325 on BSE, down3% compared to previous close year

State bank of India /Results and Dividend Policy:-

State Bank of India (SBI) announced itsresults today. SBI posted a 75% spurt in net profit to Rs. 1932crores in the fourth quarter ended March 2008 (Q4 2008) compared with Rs. 853 crores in the fourth quarter endedMarch 2009(Q4 2009). State Bank of India (SBI) gave more loansto companies, individuals and farmers. Markets, especially the banking stocks, surged today as SBIs results were much better


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than what the analysts expected.State Bank of India (SBI) hasalso declared adividend of 140% which works out to Rs. 14 per share of face value Rs.10 eac

SBI Magnum taxgain scheme 1996 dividend for 2009 hasannounced by SBI:-

SBI Magnum Taxgain Scheme 1996 dividend for 2009 has beenannounced by SBI MF. With over 17 lakh investors and a stabletrack-record of over 13-years SBI Magnum TaxGain ELSSScheme 1996 has proved to be one of the most consistent

performer amongst the tax saving schemes category in the IndianMutual Fund Industry.

Dividend for 2009

Magnum Tax Gain ELSS Scheme : 28%

Magnum Tax Gain ELSS has generated excellent returns over past13 years and continues to provide retail investors a profitableavenue with constant stream of fat dividends. The SBI TaxGainEquity Linked Savings Scheme is also one of the largest equityscheme in India with corpus of over 3,262. SBI Mutual Fund isIndias largest bank sponsored mutual fund and has an enviabletrack record in judicious investments and consistent wealthcreation.

After an long delay(and nil dividend in the previous financial year)it had become almost imperative for the fund manager/investmentmanagers at SBI MF to declared a dividend no matter how smallthe dividend amount be. The scheme's rivals like HDFC TaxSaver and HDFC Long Term Advantage Fund had already declared


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decent and timely dividend income in the past. Irony of dividendsin falling markets is that, it lowers already low NAV.

Dividend Income Bigger than Annual Bonus/Increment:

In fact, for many Salaried Investors of this scheme, due toeconomic downturn the Dividend Income received from SBIMagnum Taxgain has ironically outstripped their annual bonus/incentive and annual increment incomes in their current profession. The record date for dividend is 29-May-2009. Postdeclaration of the dividend the NAV of the scheme will fall to theextent of the dividend payout.

SBI Mutual Declares 33% Dividend For Contra Fund:-

SBI Mutual Fund has declared a 33 per cent dividend for its contrafund, payable to holders of record date October 23, 2003, which isthe second dividend announced by the scheme during the last twomonths. The scheme had declared a 12 per cent dividend lastmonth, SBI Mutual Fund said in a release here today.

The company has declared a 14 per cent dividend for MagnumEquity Fund and Magnum Balanced Fund, payable to holders withrecord date October 23 and October 27, respectively. SBI MutualFund has also declared a 12.5 per cent dividend for its MagnumEquity-Linked Scheme 1995, for holders of record date October 23, it added

Financial Credibility through balancesheet, Profit and loss A/c:-


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Profit & Loss account of State Bank of India:

Profit & Loss account of State Bank of India

------------------- in Rs. Cr. -------------------

Mar '05 Mar '06 Mar '07 Mar '0812 mths 12 mths 12 mths 12 mths

IncomeInterest Earned 32,428.00 35,794.93 39,491.03 48,950.31Other Income 7,119.90 7,388.69 7,446.76 9,398.43Total Income 39,547.90 43,183.62 46,937.79 58,348.74ExpenditureInterest expended 18,483.38 20,159.29 23,436.82 31,929.08

Employee Cost 6,907.35 8,123.04 7,932.58 7,785.87Selling and Admin Expenses 2,634.64 1,853.32 3,251.14 4,165.94Depreciation 752.21 729.13 602.39 679.98Miscellaneous Expenses 6,465.82 7,912.15 7,173.55 7,058.75Preoperative Exp Capitalised 0.00 0.00 0.00 0.00Operating Expenses 11,278.18 11,872.89 13,251.78 14,609.55Provisions & Contingencies 5,481.84 6,744.75 5,707.88 5,080.99Total Expenses 35,243.40 38,776.93 42,396.48 51,619.62

Mar '5 Mar '06 Mar '07 Mar '08

12 mths 12 mths 12 mths 12 mths Net Profit for the Year 4,304.52 4,406.67 4,541.31 6,729.12Extraordionary Items 0.00 0.00 0.00 0.00Profit brought forward 0.34 0.34 0.34 0.34Total 4,304.86 4,407.01 4,541.65 6,729.46Preference Dividend 0.00 0.00 0.00 0.00Equity Dividend 657.87 736.82 736.82 1,357.66Corporate Dividend Tax 93.75 103.34 125.22 165.87Per share data (annualised)Earning Per Share (Rs) 81.79 83.73 86.29 106.56Equity Dividend (%) 125.00 140.00 140.00 215.00Book Value (Rs) 457.39 525.25 594.69 776.48AppropriationsTransfer to Statutory Reserves 3,552.89 3,566.51 3,682.15 5,205.69Transfer to Other Reserves 0.01 0.00 -2.88 -0.10Proposed Dividend/Transfer to Govt 751.62 840.16 862.04 1,523.53


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Balance c/f to Balance Sheet 0.34 0.34 0.34 0.34Total 4,304.86 4,407.01 4,541.65 6,729.46

State bank of India - Emerging has Global Bank:-

SBI - Top tax payer:-According to Economictimes.com, for

the first time in the history of corporate India, a bankbecame the countrys highest tax-payer , leaving behindnumero uno ONGC. According to the advance tax data forthe first quarter April-June 2009, the countrys largest bank

State Bank of India , while expecting a handsome growth inprofit, deposited Rs 1,068 crore in the tax kitty against Rs890 crore deposited by the oil behemoth for the sameperiod. In Q1 of last financial year, SBI paid an advance taxof Rs 663 crore.

While all the results of advance tax payments for Q1 are yetto be compiled by the Central Board of Direct Taxes (CBDT),the available data reveal that among the top 25 companies,

11 are from the banking and financial sector and each of them paid the government between Rs 100 crore and Rs1,000 crore for the April-June 2009 period. While the profitmargins of government banks range between 45% and90%, private sector banks too have posted hefty growth butnot in that degree.

SBI - Global reach:-With that encouraging news, few

info to share about SBI. SBI is spreading wings all over theworld, opening local operations in many countries. In last 2years or so, they have made strides in launching operations


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in America, to support the needs of NRI's. Currently inUSA, they operate at 4 major metro's, Newyork,Washington DC, Los Angeles and Chicago. Each of

them operates distinctly with their own licensing termsunder one umberalla.

SBI US branches for reason. Because they operate under FDIC regulations and licensing rules not under Reserve bank of India. They are like any other US bank with foreign bank foothold. For that reason, they are not actually the point of contact for SBI India operations. They won't be

able to help with SBI India NRI account issues but theywill be happy to point you to the right contacts if needed.

Tata Motors appoints SBI as lead manager toraise $3 billion acquisition corpus:-

Tata Group's automobile arm, Tata Motors has appointed

India's No.1 bank, State Bank of India (SBI) as the solelead manager to raise $3 billion, a part of which will be

used to fund the acquisition of Ford Motor Co.'s Britishluxury brands, Jaguar and Land Rover."For Tata Motors' acquisition corpus, we have alreadyinitiated the process for raising debt worth $3 billion in theoverseas market through a syndicated approach," FinancialExpress cited a senior SBI official as saying


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Tata Motors, which earlier in the week said it planned toraise additional long-term funds of up to $1 billion by wayof securities in overseas and/or domestic markets, wants theacquisition corpus to be in place

State Bank and CRISIL tie up for rating SSIs:-State Bank of India (SBI) and CRISIL signed a Memorandum

of Understanding (MOU), under which CRISIL will assign ratingsto small scale industries (SSIs) that are borrowers of SBI. Theseratings will be carried out under the NSIC-CRISIL Performanceand Credit Rating Scheme for SSIs. To assist potential and existingSSI customers of SBI in obtaining ratings, CRISIL is offering aspecial incentive by discounting its standard fee structure for therating scheme.

The benefits of the MOU are numerous. The bank's SSI customers

can get a CRISIL rating at a very low cost. They can use this ratingto build credibility with SBI, and also with customers, suppliersand collaborators. Rated SSIs will find it easier to obtain fundsfrom SBI at appropriate terms. Additionally, the rating report prepared by CRISIL can be used as a self-improvement tool.

For SBI, the rating will be an additional input to objectively andscientifically make lending decisions, and determine terms likeinterest rates, margins, and collateral requirements for SSI borrowers


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IPO issues made by company during last5 year:-

State bank of India info/info allotment:-State Bank of India is a public sector banking institution with branches in 28 States and in 4 Union Territories in India. The Bank is currently wholly-owned by the Government of India. As of December 18, 2009, they had 1,484 branches, 265 ATMs, 28regional offices and 11 extension counters As of December 18,2009, company had a workforce of 15,813 employees (including

part-time employees). State Bank of India is one of the 14 bankswhich were nationalized on July 19, 1969.

State bank's business is principally divided into retail banking,corporate / wholesale banking, priority sector banking, treasuryoperations and other banking services such as agency functions for insurance and mutual fund distribution, pension and tax collectionservices. Their retail banking business provides financial productsand services to retail customers. State Bank provide loans andadvances for housing, trade, automobiles, consumer durables,education, personal loans and other retail products. Also they provide commercial banking products and services to corporatecustomers, including mid-sized and small businesses andgovernment entities. They offer direct financing to farmers for production and investment, as well as indirect financing for infrastructure development and credit to suppliers of agriculturalinputs.

In Fiscal 2009, company made a net profit of Rs. 358.55 crore andhad net assets of Rs. 61,500.78 crore and net worth of Rs. 2,537.83crore. As of September 30, 2009, they made a net profit of Rs.231.10 crore and had net assets of Rs. 71,952.25 crore and networth of Rs. 2,769.87 crore. They have experienced growth in


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deposits and advances, with deposits growing at a compoundedannual rate of 21.1% during the last five fiscal years and netadvances growing at a compounded annual rate of 32.8% duringthe same period.

State bank Financials:

Particulars For the year/period ended (Rs.in Crore)30-Sep-09 31-Mar-09 31-Mar-08 31-Mar-07 31-Mar-06

Total Income 2,775.63 4,802.73 4,022.80 3,172.77 2,796.99Profit After Tax (PAT) 231.10 358.55 145.11 267.28 204.56

Objects of the Issue:The objects of the Issue are:

1. To augment capital base to meet the future capital requirementsarising out of the growth in their assets due to the growth of theIndian economy; and2. For meeting the expenses of the Issue.

The Real clinchers for SBI Life have been customer loyalty and performance:- The performance of the insurance sector in financial year 2008-09 was largely influenced by the sub-prime crisis. The sub- prime crisis which started in the United States in late 2007,evolved as a financial crisis in the US and later engulfed Europeand UK. By late 2008, it seeped into Asia as well. As a result, thefinancial meltdown deepened in many countries of the world, thusforcing the respective governments to take necessary steps to comeout of the catastrophe. Besides increased unemployment in variouscountries, economic growth was also hampered. Even IMF and


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World Bank lowered the world economic contraction for 2008-09to 1.1%, lower than what was projected earlier.

The fall of financial institutions and lack of confidence in the

banking system impacted the financial markets. Money and capitalmarkets fell to their lowest levels across the world. As a result,many investors lost their wealth. Internationally, except for a fewlarge companies, insurance companies were fairly insulated,though for the first time since 1980, insurance premiums fell inreal terms with non-life premiums falling by 0.8% and life premiums falling at a much higher rate of 3.5%.

Further, because of higher volatility in the financial markets,insurance companies lost heavily on investment income. As suchthe profitability of insurance companies deteriorated in 2008 notonly because of low investment yields but also because of highcost of guarantees and lower revenues from management fees.

As a consequence of the impairment of the value of their investments, both banks and insurance companies were forced torecapitalize to meet regulatory requirements. This has thrown a big

challenge as investors lost substantial wealth and were reluctant aswell as unable to make further investments and there was scarcityof capital. Governments across the world have started infusingcapital into the financial system to bring back stability into thesystemthough well insulated; India could not totally escape the tide of thecrisis. Due to its higher levels of income growth in the past fiveyears as also because of prudent financial managementunderpinned by sound and solid banking system supporting the payment and settlement procedures, India had limited thecontagion effect

The Indian economy which had grown at an average of 8.8% before 2008-09 could grow only at 6.7%. While the first half of 2009-10 has seen a substantial mitigation of the financial effects of


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new system of IPO applications will come into place from earlynext month, or by the end of this month. The new system ensuresthat no money will flow out of an investors' account untill sharesare allotted to him.

The new system is being brought in following complaints fromvarious investor bodies that there were big delays by companies torefund the application money even months and years after the closeof an IPO. The Sebi official said only four or five banks will beselected for the ASBA process in the first stage. Other banks will be roped into the new system at different stages. The banksselected will be known as Self Certified Syndicate Bank (SCSB).

These banks will offer the facility of applying through the ASBA process. A bank desirous of offering ASBA facility should submita certificate to Sebi as per a format provided by the regulator According to Sebi, an SCSB should identify its designated branches at which an ASBAinvestor should submit the application.The banks should also identify the controlling branch (CB), whichshould act as a coordinating branch for the registrar to the issue,stock exchanges and merchant bankers.

Track and report news relevant to SBIchronologically and its impact on share price of SBI:-

SBI on fast track :-In an endeavour to make the Initial Public Offer

(IPO) more efficient, the Securities and Exchange Board of India(SEBI) issued a circular which called for, from May 2010, a


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reduction in the time gap between the closure of the IPO andlisting to 12 days. Hence, from the effective date all companiesmaking an Initial Public Offer (IPO) will have to list their shareswithin 12 days from the date of subscription closure. Currentlycompanies have 22 days to list their shares after the issue closes.According to investment bankers, such a move will make thelisting process tough, especially if there are holidays in between.They also expressed that the circular is silent on whether it is "12days" or "12 working days". A senior banker also commentedsaying "unless more retail investors use the ASBA (ApplicationSupported by Blocked Amount) route, it will not be possible toshorten the time period between the issue (IPO) closure and

listing". sbi believe that its a good move overall since:

A shorter timeline will mean reduction in market risk It will curtail the speculation emanating from the grey market

for IPOs Investors will be able to "unlock" their funds faster It will benefit companies since they will receive the IPO funds

in their account sooner

SBI turns biggest mutual fund marketing machine :-

State Bank of India (SBI), Indias largestprivate sector bank has trained a veritable army to sellmutual funds to its customers, in a year-long programmedthat could change the face of the country's mutual funddistribution business.

According to an official from SBI, under a programmenamed ACE (AMFI Certified Employee) around 18,000employees of SBI have passed the mandatory AMFI'sdistributors module, which makes them eligible to sell allmutual funds. However, the sales force is expected to focuson products of the banks subsidiary - SBI Fund


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Management Pvt. Ltd. Presently SBI serves its investorsthrough a network of 260 centres of sales and service. Theparent bank also has 12,207 branches, 8,500 automatedteller machines and electronic channels such as internet banking.

According to the SBI official, the bank has motivated itsemployees to appear for the test by giving them a one- timecash award of Rs 5,000 - 10,000, depending on theirposition in the hierarchy and performance in the test.Interestingly, the Reserve Bank of India's (RBI's) rules donot allow banks to give cash incentives to staff for sellingmutual funds.

.

Growing loan book expected to boost margins: Sbi:-

To the State Bank of India, Reserve Bank of India and the CentralGovernment, in terms of Section 43(1) of State Bank of India(Subsidiary Banks) Act, 1959.Macro Economic Scenario and Banking Environment

. The global economy which was continuously on an expansionmode for the four year period ended 2007, slowed downsignificantly in 2008. Many advanced economies experiencedrecessionary conditions, while the growth in emerging economiesweakened. The global financial crisis that first erupted with thecollapse of the US sub prime mortgage market deepened further and entered a new turbulent phase in September 2008 affecting theconfidence of global financial institutions and markets. Accordingto IMF projections, global economic activity is estimated to softento 3.4% in 2008 and decline to 0.5% in 2009. The emergingeconomies have not decoupled from this downturn. China & India


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which lead the emerging markets in Asia have seen moderation inthe growth momentum.

. The GDP growth rate averaged 8.8% during the five year period

ended 2007-08, making the Indian economy as one of the worldsfastest growing economies. The growth momentum however hasseen moderation in the recent past on account of the impact of theglobal financial meltdown and the growth rate for the year 2008-09is estimated to be around 7%.

. The business confidence index has fallen to a 5 year low duringthe year reflecting the dent in optimism because of the financialmarket volatility. The index which stood at 154 in January 2008has seen deterioration since then. Mid 2008 also witnessedsignificant increase in the WPI resulting in a high rate of inflation,touching almost 13% in August 2008. The front line inflationhowever is on a downward trend since September 2008 and hasreached near zero position.

. In response to global hardening of interest rates and increasinginflationary pressure till August 2008, the Reserve Bank of India

resorted to tight monetary policy and gradually increased the policy rates. The reverse repo (borrowing) rate had increased to6% and the repo (lending) rate was raised to 9%. The cash reserveratio was also raised to a high of 9% effective 30th August 2008.In response to higher credit growth in select sectors, the ReserveBank of India tightened prudential norms including increase in provisioning requirement along with increased risk weights inselect sectors.

. The global crisis impacted the Capital inflows leading to liquidityshortage in the economy. In response, the RBI facilitated flow of funds in to market by reducing the key rates from October 2008.By January 2009, the CRR was reduced to 5%, repo to 5.5% andreverse repo rates to 4%. SLR was also reduced to 24%. Repo and


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reverse repo rates were further revised down wards to 5% and3.5% respectively.

The merchandise exports from India have been growing in the

recent years and the ratio of exports to GDP more than doubled to13.5% in 2007-08 as compared to less than 6% in 1990-91. But theglobal slow down and a severe demand contraction in developedeconomies adversely impacted the exports from India during theyear 2008-09. Exports figures have been contracting since October 2008 forcing the Government to revise the target for 2008-09 to$175 billion from $200 billion following fall in overseas demand.

Cumulative value of exports for the period April-February, 2008-09 was US$ 1,56,597 million(Rs.7,05,231 crores) as against US$ 145878 million(Rs. 5,86,233 Crores) registering a growth of 7.3per cent in Dollar terms and 20.3 per cent in Rupeeterms over the same period last year. Imports havereflected a relatively higher growth, although therehas been a dip in imports in the recent past.Cumulative value of imports for the period April-February, 2008-09 was US$ 2,71,687 million (Rs.12,23,213 crores) as against US$ 2,28,081 million(Rs. 9,17,179 crores) registering a growth of 19.1per cent in Dollar terms and 33.4 per cent in Rupeeterms over the same period last year. The tradedeficit for April-February, 2008-09 was estimated

at US $ 1, 15,090 million which was higher than thedeficit at US $ 82,203 million during April-February, 2007-08.

Market Share and Business Growth:


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A performing and growing organization is identified by thegrowth in its market share on a continuous and sustained basis. The business levels of the Bank, both under deposits

and advances and consequently the market share have beenregistering impressive growth as under :(Rs. in Crores)

Year 2005 2006 2007 2008Aggregate Deposits 13,343 16,179 21,395 26,781Percentage of growth 22.86 21.25 32.25 25.17Market share % 0.76 0.77 0.82 0.84Total Advances 9,125 12,063 16,772 21,315Percentage of growth 37.58 32.21 39.03 27.09Market share % 0.80 0.81 0.87 0.90

.

The continuity in growth is ensured during the current year also and the aggregate deposits reached Rs.32,388 Croreswith a growth of Rs.5,607 Crores at 20.94%. Totaladvances are at Rs.25,880 Crores recording a growth of Rs.4,565 Crores at 21.42%. Going by the trends in ASCBgrowth up to 27th March 09 during the current year, thelevels of business are expected to result in a market share

of 0.84% in deposits and 0.92 % in advances as of 31stMarch, 2009.

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Term Paper Review of Financial Management

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