SBI - Annual Report - 2008-2009

STATE BANK OF INDIA

ANNUAL REPORT 2008-2009

DIRECTOR'S REPORT

Economic Backdrop and Banking Environment The Indian economy, which is one
of the fastest growing economies in the world, is poised to maintain its
leading position, despite the global financial crisis and economic
slowdown. India has managed to beat the global financial turmoil due to
sound regulation, prudent financial supervision and proactive policies.

India's growth is driven predominantly by domestic consumption and
investment and the Indian banking system has no direct exposure to the US
sub-prime mortgage assets or to the failed institutions. Thus, as also
projected by the IMF, India will remain among the fastest growing economies
in the world. In the first half of the year, high inflation and spiralling
crude oil prices were the major concerns, but the focus in the second half
shifted to sustaining growth and maintaining stability.

Real GDP growth is expected to moderate from 9.0% in 2007-08 to 6.5% - 6.7%
in 2008-09. Agriculture and allied sectors are likely to grow by around
2.6% in 2008-09, which is only marginally lower than the average growth of
2.9% during 2000-01 to 2007-08, mainly due to stagnant foodgrains
production.

Industrial production was marked by a slowdown in the manufacturing sector.
During 2008-09 the Index of Industrial Production decelerated to 2.4%
against 8.5% in 2007-08. The deceleration in capital goods reflects the
slowdown in industry.

The rebound in consumer durables during 2008- 09 at 4.4% against decline of
1.0% in 2007-08, however, reflects a measured pick up in consumption and
investment.

The slowdown in industry and agriculture was partially offset by a
reasonable 9.7% growth in services sector in 2008-09 (April-Dec) with
community, social and personal services showing a higher growth of 11.2% in
2008-09 (April-Dec) than the 5.7% growth posted in 2007-08 (April- Dec). To
mitigate the impact of the current slowdown, Government launched three
fiscal stimulus packages in the form of cut in indirect taxes, higher
Government spending and support for exports, along with easing of monetary
policy by RBI.

Inflation based on WPI rose from 7.7% at end- March 2008 to a high of 12.9%
on 2nd August 2008, reflecting high international crude oil and commodity
prices coupled with increase in price of manufactured products and primary
articles. After remaining in the range of 10-12% between June and October
2008, inflation began to ease from November 2008 onwards to touch 0.26% by
28th March 2009, mainly reflecting the decline in prices of crude oil,
metals, minerals and manufactured goods.

The deceleration in economic growth globally was reflected in weakness in
external demand for goods and services, besides decline in forex reserves
and depreciation of the rupee against major currencies. The fall in exports
began in October 2008 and every month since then, export growth has been
negative with the biggest decline of 33.3% in March 2009. Consequently,
growth in exports during 2008-09 was lower at 3.4% than 28.9% in 2007-08.
Imports also registered a lower growth of 14.3% in 2008-09 as against 35.4%
in 2007-08, mainly due to fall in international crude oil prices. The risk
aversion in the global financial markets resulted in a sharp reversal in
capital inflows into India, with net outflow by foreign institutional
investors (FIIs) of around US$15.0bn in 2008-09 compared with an inflow of
US$20.3bn in 2007-08. As a result of decline in exports and capital
outflows from the domestic stock market, forex reserves fell by US$57.70 bn
YoY to US$252.00 bn as at end March 2009. The Rupee depreciated to Rs.50.95
per dollar at end-March 2009 from Rs.39.99 per dollar at end-March 2008.

The focus of RBI's monetary and credit policy during the year was to
control inflation, support growth, maintain financial market stability,
ensure comfortable liquidity in the system to meet the required credit
demand and limit the contagion from the ongoing global turmoil. During
2008-09, while the Bank Rate was kept unchanged at 6%, Reverse Repo and
more particularly the Repo rate and CRR were changed on a number of
occasions. When inflation started rising due to increase in international
commodity and oil prices, the Repo rate was hiked from 7.75% in April 2008
to a high of 9% in July 2008 and CRR was hiked from 7.50% in March 2008 to
9% in August 2008. Subsequently, when growth stalled and inflation started
coming down due to drop in crude oil and commodity prices, the Repo rate
was cut five times to 5%, the Reverse Repo rate was reduced three times to
3.50% and CRR was cut four times to 5.0%, between October 2008 and March
2009.

Deposit and lending rates of banks also moved more or less in tandem with
key policy rates as interest rates initially firmed up during 2008-09 up to
October 2008, and subsequently started declining after November 2008. The
capital outflows and slowdown in economic activity, particularly in the
second half of the year, impacted money supply growth in the system (M3)
and saw moderation in the business of all scheduled commercial banks
(ASCB). While growth in money supply (M3) moderated to 18.6% in 2008-09
from 21.1% a year ago, deposit and credit growth of ASCB moderated to 19.8%
and 17.3% respectively in 2008-09 from 22.4% and 22.3% in 2007-08.

The coming year will continue to be marked with uncertainty as the impact
of the global crisis has been deeper and wider than earlier anticipated.
However, a stable banking and financial sector, falling inflation and
prompt co-ordinated policy action have helped India weather the crisis. On
the upside, domestic demand especially from rural areas, and Government
investment activity in the economy will help keep up the growth momentum,
making India the second fastest growing economy in the world.

Financial Performance

Profit:

The Operating Profit of the Bank for 2008-09 stood at Rs. 17,915.23 crores
as compared to Rs. 13,107.55 crores in 2007-08 registering a growth of
36.68%. The Bank has posted a Net Profit of Rs. 9,121.23 crores for 2008-09
as compared to Rs. 6,729.12 crores in 2007-08 registering a growth of
35.55%.

While Net Interest Income recorded a growth of 22.63% and Other Income
increased by 45.96%, Operating Expenses increased by 24.11% attributable to
higher staff cost and other overhead expenses.

Dividend

The Bank has increased dividend to Rs. 29.00 per share (290%) from Rs.
21.50 per share (215%) in the last year.

Net Interest Income

The Net Interest Income of the Bank registered a growth of 22.63% from
Rs.17,021.23 crores in 2007-08 to Rs. 20,873.14 crores in 2008-09. This was
due to growth in interest income on advances.

The gross interest income from global operations rose from Rs. 48,950.31
crores to Rs. 63,788.43 crores during the year. This was mainly due to
higher interest income on advances.

Interest income on advances in India registered an increase from Rs.
32,162.68 crores in 2007-08 to Rs. 42,989.36 crores in 2008-09 due to
higher volumes. Also average yield on advances in India increased from
9.90% in 2007-08 to 10.15% in 2008-09. Interest income on advances at
foreign offices also increased due to higher volumes.


Income from resources deployed in Treasury operations in India increased by
28.60% mainly due to higher average resources deployed. The average yield,
which was 6.92 % in 2007-08, has increased to 7.10% in 2008-09.

Total interest expenses of global operations increased from Rs. 31,929.08
crores in 2007-08 to Rs. 42,915.29 crores in 2008-09. Interest expenses on
deposits during 2008-09 recorded an increase of 40.74% compared to the
previous year, whereas the average level of deposits grew by 24.85%. This
resulted in an increase in the average cost of deposits from 5.59% in 2007-
08 to 6.30% in 2008-09. However, as substantial high cost deposits are
maturing and present level of deposit rate being lower, it is expected that
there will be a fall in the average cost of deposits.

Non-Interest Income

Non-interest income stood at Rs. 12,690.79 crores in 2008-09 as against
Rs.8,694.93 crores in 2007-08.

During the year, the Bank received an income of Rs. 409.60 crores (Rs.
197.41 crores in the previous year) by way of dividends from Associate
Banks/subsidiaries and joint ventures in India and abroad.

Operating Expenses

There was an increase of 25.19% in the Staff Cost from Rs. 7,785.87 crores
in 2007-08 to Rs. 9,747.31 crores in 2008-09 attributable to higher pension
provisioning and increased staff strength. Staff Cost included an amount of
Rs.1,414 crores towards wage revision provision as compared to Rs. 575
crores in the previous year.

Other Overhead Expenses have also registered an increase of 22.36% mainly
due to increase in expenses on rent, taxes and lighting as a result of
opening of new branches, advertising & publicity, printing & stationary,
postage and telephones and miscellaneous expenditure.

Operating Expenses, comprising both staff cost and other overhead expenses,
have registered an increase of 24.11% over the previous year. Provisions
and Contingencies Major amounts of provisions made in 2008-09 were as
under:

* Rs. 707.16 crores towards provision for depreciation on investments,
excluding amortization of premium on Held to Maturity' category (as
against write back Rs. 88.68 crores in 2007-08).

* Rs. 5,971.52 crores towards Provision for Tax (as against Rs. 3,823.50
crores in 2007-08).

Table: 1 Key Performance Indicators

Indicators SBI SBI Group
2007-08 2008-09 2007-08 2008-09

Return on Average Assets (%) 1.01 1.04 0.99 0.94
Return on Equity (%) 17.82 15.73 17.93 16.30
Expenses to Income (%)(Operating
Expenses to Total Net Income) 49.03 46.62 56.64 52.65
Basic Earnings Per Share (Rs.) 126.62 143.77 168.61 172.68
Diluted Earnings Per Share (Rs.) 126.50 143.77 168.45 172.68
Capital Adequacy Ratio (%)
(Basel-I) 13.54 12.97 13.49 12.90
Tier I 9.14 8.53 8.95 8.21
Tier II 4.40 4.44 4.54 4.69
Capital Adequacy Ratio (%)
(Basel-II) - 14.25 - 14.17
Tier I - 9.38 - 9.03
Tier II - 4.87 - 5.14
Net NPAs to Net Advances 1.78 1.76 1.43 1.49

* Rs. 142.00 crores towards Fringe Benefit Tax (as against Rs. 105.00
crores in 2007-08).

* Rs. 2,474.96 crores (net of write-back) for nonperforming assets (as
against Rs. 2,000.94 crores in 2007-08).

Reserves and Surplus

* An amount of Rs. 5,291.79 crores (as against Rs. 4,839.07 crores in 2007-
08) was transferred to Statutory Reserves.

* An amount of Rs. 826.56 crores (as against Rs. 4.44 crores in 2007-08)
was transferred to Capital Reserve Fund.

* An amount of Rs. 306.89 crores (as against Rs. 362.09 crores in 2007-08)
was transferred to Other Reserve Funds.

Assets

The total assets of the Bank increased by 33.66% from Rs. 7,21,526.31
crores at the end of March 2008 to Rs. 9,64,432.08 crores as at end March
2009. During the period, the loan portfolio increased by 30.17% from Rs.
4,16,768.20 crores to Rs. 5,42,503.20 crores. Investments increased by
45.62% from Rs. 1,89,501.27 crores to Rs. 2,75,953.96 crores as at the end
of March 2009. A major portion of the investment was in the domestic market
in government and other approved securities. The Bank's market share in
domestic advances was 16.03% as of March 2009.

Liabilities

The Bank's aggregate liabilities (excluding capital and reserves) rose by
34.79% from Rs. 6,72,493.65 crores on 31st March 2008 to Rs. 9,06,484.38
crores on 31st March 2009. The increase in liabilities was mainly
contributed by increase in deposits and Other Liabilities & Provisions. The
Global deposits stood at Rs. 7,42,073.13 crores as on 31st March 2009,
representing an increase of 38.08 % over the level on 31st March 2008. The
Bank's market share in domestic deposits was 17.72% as of March 2009.

Performance Highlights

Consequent upon acquisition of State Bank of Saurashtra by State Bank of
India in 2008-09, as also migration of branches to and from within the
various business groups, the base business figures of previous year (2007-
08) in respect of the various business groups have been amended with
regrouping, wherever necessary and determinable, to make them comparable
with the current year's figures and arrive at growth figures during the
year 2008-09.

Core Operations

A Global Markets Department
B Corporate Banking Group
C Mid Corporate Group
D National Banking Group
E Rural Business Group
F Marketing & Cross Selling Department
G Corporate Strategy & New Business
H International Banking Group
I Associates & Subsidiaries
J Asset Quality
K Information Technology

A. GLOBAL MARKETS DEPARTMENT

Global Markets Department at the Corporate Centre handles the Bank's
Treasury Operations across all time zones and covers activities in various
markets i.e., Forex, Interest Rates, Bullion, Equity and Alternative
Assets.

* The year witnessed heightened volatility in the bond market. Adverse
market conditions, mainly on account of higher inflation and commodity
prices, resulted in higher yields which led to mark-tomarket provisions on
our portfolio in the first two quarters. During the second half of the
financial year, interest rates stabilized and headed downwards on account
of reduction in CRR, SLR and buy back of securities by RBI prompted by the
sudden slow down in our economy. The benchmark 10 year yields saw a sharp
fall to 4.85% in January 09, the lowest on record, from a high of 9.53% in
July 08 and finally closed at 7.01% on 31st March 2009. Increased
requirement of CRR and SLR, a consequence of the unprecedented deposit
growth, resulted in an increase in the overall domestic investment
portfolio by Rs.64,724 crores over 31st March 2008. Liquidity position
eased in the second half of the financial year and remained comfortable
thereafter. The series of proactive measures taken by RBI and the resulting
fall in bond yields provided us with an opportunity to book profit on sale
of investments from our bond portfolio.

* Performance of Global Markets department during the year is summarised in
the table below.

(Amount in Rs. Crores)
2007-08 2008-09 % Growth
Interest Income
on Investments 11,887 15,750 32.50
Other Income -
Profit on Sale
of Investments
and Forex Income 1,987 3,125 57.27
Trading Volume
Forex Operations 11,74,029 18,11,194 54.27
Average Yield on
Domestic Treasury
Operations 7.49 8.02 0.53

B. CORPORATE BANKING GROUP

B.1 The Bank's Corporate Banking Group consists of three Strategic Business
Units viz., Corporate Accounts Group, Project Finance & Leasing SBU and

Stressed Assets Management Group.

B.2 Corporate Accounts Group (CAG) Corporate Accounts Group, with addition
of CAG, Ahmedabad Branch during the year, has five branches which cater to
489 Corporate clients.

During the year, 42 new corporate clients were brought into the CAG fold.

* CAG's advances portfolio of Rs. 68,866 crores is 29 % of the C&I (Non-
Food) credit of the Bank and constitutes 15 % of the total domestic credit
portfolio of the Bank.

Table : 2 CAG - Highlights

(Amount in Rs. crores)
Particulars As on As on Growth
31.03.2008 31.03.2009 %

Deposits 9,843 19,702 100
Advances 46,708 68,866 47

* CAG continues to be on the high growth trajectory in forex business
registering a YoY growth of 68%. CAG's forex business constituted 53 % of
the total domestic forex turnover of the Bank.

* Yield on advances has improved from 8.57% in 2007-08 to 9.98% in 2008-09.

* Account Planning initiative was launched during the year to align better,
the Group's marketing to the Business Plans of the corporate clients and to
provide customised solutions.

* Focus on fee-based services saw the fee income of CAG registering an
impressive 66% growth during the year.

* By leveraging Bank's balance sheet strength, substantial underwriting
business was booked from large corporates.

Transaction Banking Unit

The Transaction Banking Unit has been created in CBG with the Cash
Management Product and Trade Finance wings under its fold to boost fee
based income through Group Synergy.

CASH MANAGEMENT PRODUCT

Cash Management Product with its brand name SBIFAST has migrated to a
centralized solution covering 379 branches and handles paper and e-
collections as well as paper and e-payments for Corporate clients. CMP also
has a liquidity management module, which aims to enhance profitability to
Corporates by facilitating better liquidity management and reducing
interest costs.

B.3 Project Finance & Leasing SBU

The Project finance-SBU focusses on funding projects in infrastructure
sectors like power, telecom, roads, ports, airports, logistics and others.
It also handles non-infrastructure projects with certain ceilings on
minimum project cost. During the year, the focus was on syndication and
underwriting of project loans.

During 2008-09, Project Finance-SBU participated in funding of numerous
projects and took up syndication of debt with other banks / institutions as
given in the chart:

(Amount in Rs. crores)
Particulars FY FY Growth
2008 2009 (%)
Aggregate Project
Cost of projects
sanctioned 1,45,045 1,93,595 N.A.
Aggregate Debt
requirement 92,558 1,33,894 N.A.
Of the above,
Debt sanctioned
by SBI 20,195 25,854 28.02
Debt syndication 54,951 64,069 16.59

Besides other major projects, SBI is also the Lead Bank for the two Ultra
Mega Power Projects in the country which have achieved financial closure
and are presently under implementation. Analysts tracking project finance
deals have been consistently rankingthe Bank in leading positions in the
Asia Pacific Region/globally.

B.4 Stressed Assets Management Group (SAMG)

The performance of SAMG during the year 2008-09 is given in the table
below.

Table : 3 SAMG - Highlights

(Amount in Rs. crores)

1 Cash Recovery in NPA 354
2 Upgradation to Standard Assets 245
3 Write Offs 588
4 Gross reduction in NPAs (1+2+3) 1187
5 Recovery in written off accounts 418

* Stressed Assets Management Group (SAMG), originally set up to take over
all NPAs with outstandings of Rs.5 crores and above, has expanded its role
to resolve all NPAs of Rs.1 crore and above across the country with a view
to provide focussed efforts in resolution ofNPAs.

* 106 Stressed Assets Resolution Centres (SARCs) have been opened across
the country for focussed resolution of NPAs with outstandings upto Rs.1
crore in SME and Personal segments. Out of these, 45 independent SARCs were
brought under SAMG in a phased manner to give further fillip to the Bank's
recovery efforts. The performance of SARCs is encouraging and substantial
progress in the Management of NPAs has been achieved. Proactive steps have
also been taken for prevention of NPAs by making demands on customers
BEFORE DEFAULT and on FIRST DEFAULT.

C. MID-CORPORATE GROUP (MCG)

Table : 4 MCG - Highlights
(Amount in Rs. crores)
Particulars As on As on growth
31.03.2008 31.03.2009 %

Deposits 15,428 19,169 24.25
Advances
(Excluding
off-site) 85,887 1,06,466 23.96
Advances
(Including
off-site) 1,02,052 1,25,951 23.41

* The Group handles about 42% of the total C&I non-food advances of the
Bank. It operates through 8 Regional Offices and 53 branches.

* 540 new mid-corporate clients were added by the MCG during the current
year.

* To ensure focussed service to MCG customers in upcoming towns and 'Tier
II' cities, 23 new off-site branches and 4 erstwhile SBS branches have been
added to MCG.

* The average yield on advances went up from 9.73% in March 2008 to 11.62%
in March, 2009.

Initiatives taken

* e-Trade sbi has been launched with marketing under the ownership of MCG.
The product enables customers to handle their transactions from their
office or any other place 24x7 and keep track of the transactions through
web based software.

* 5 Mid-Corporate Loan Administration Units, Which provide centralized
processing, servicing & documentation facilities to MCG customers, Mainly
at Off-site Centres, were brought under MCG's control during the year.

New Products

* Import factoring, a new product, was launched in association with SBI
Factors & Commercial Services Ltd.

C.1 Gold Banking

* The Bank has taken several initiatives to undertake bullion business in a
big way.

* The number of branches for retail sale of gold coins has increased from
250 in 2008 to 518 in 2009. The Scheme will be extended to cover all
important centres of the country in 2009-10 by increasing the number of
branches selling gold coins to about 1100. The Bank also undertakes supply
of customised gold coins to corporates.

* The Bank has re-launched Gold Deposit Scheme at 50 branches to mobilise
gold from domestic market for deployment as metal loans to jewellers.

* The Bank is in the process of setting up a dedicated Bullion branch at
Mumbai to undertake bullion business in a focussed manner.

D. NATIONAL BANKING GROUP (NBG)

* National Banking Group consists of three Business Groups viz., Personal
Banking, Small & Medium Enterprise (SME), and Government Banking and
handles 34.41% of the total domestic credit and 59.21% of the total
domestic deposit business (excluding inter bank deposits) of the Bank as on
31.03.2009.

* During the year, the Bank achieved another milestone by opening its
11,111th Branch at Sonapur (Kamrup District) in Assam, which was
inaugurated in Jan 09 by the Hon. Home Minister Shri P. Chidambaram.

* During the year, apart from an addition of 461 branches on account of SBS
merger, 807 new domestic branches were also opened (under NBG and RBG), and
the Bank had a vast network of 11,448 domestic branches at the end of March
2009.

Table : 5 NBG - Highlights

(Amount in Rs. crores)
Particulars As on As on growth
31.03.2008 31.03.2009 %
Deposits
(excluding
inter bank) 2,99,644 4,12,329 37.61
Advances
(excluding
food and
inter bank) 1,32,545 1,53,814 16.05

D.1 Personal Banking Business Unit (PBBU)

PBBU handles about 23.66 % of the total domestic segmental advances and
51.44% of the total domestic deposits of the Bank as on 31.03.09 through
11,448 branches spread throughout India. Performance of PBBU during 2008-09
is given in the following table :

(Amount in Rs. crores)
Particulars As on As on growth
31.03.2008 31.03.2009 %

Deposits 2,43,814 3,39,326 39.17
Advances 90,473 1,06,954 18.22

* SBI once again emerged as a leader among Scheduled Commercial Banks
(SCBs) and Housing Finance Companies (HFCs) this year in terms of
Individual Home Loans disbursements as on 31.03.2009.

* During the year, SBI introduced three new products viz., SBI Special Home
Loan, SBI Happy Home Loan and SBI Lifestyle in response to the stimulus
package announced by the Government of India. These initiatives have
resulted in stimulating supply in low cost and affordable housing segment,
which in turn has rejuvenated customers' interestin new housing. SBI Green
Home has been introduced to encourage developers to come out with
environment friendly residential projects.

* SBI is the market leader in Education Loans and maintaining its market
share of 24% amongst PSU banks. The growth in Education Loans during the
year is Rs. 2,203.33 crores. SBI Scholar Loan limit is extended to students
joining 59 elite institutions like IIMs / IITs/ AIIMS / Management
Institutions etc. at concessional interest rates and terms. The limit for
the loans has been increased to Rs.15 lacs.

* SBI became the largest financier of Maruti and Hyundai cars with
penetration of more than 13% since October 2008.

* The Bank was voted, for the third year in a row, as the 'Most Preferred
Housing Loan' and 'Most Preferred Bank' in the CNBC AWAAZ Consumer Awards
in a survey conducted by CNBC TV18 in association with AG Nielsen &
Company.

* The Bank was also awarded the 'Best Home Loan Provider' as well as 'The
Best Bank' by Outlook Money Awards, 2008.

* During the year, the Bank also entered into an exclusive arrangement with
TATA Motors for handling the booking process of TATA 'Nano' cars.

* SBI has launched on its web-site an on-line application form for
registering Auto Loan enquiries and expeditiously monitoring and converting
these leads into Auto Loans.

* A special deposit product namely SBI-1000 was introduced to mop up
deposits for 1000 days which was a huge success and resulted in mopping up
around Rs.40,000 crores.

* During the year, the Bank also launched 'e-invest' for the ASBA
(applications supported by blocked accounts) to aid investors for their
equity subscriptions, IPO and Rights applications.

* The Bank opened over 174 lacs of new Savings Bank accounts during the
year as against 78 lacs in the previous year.

D.2 SME Business Unit (SMEBU)

The Bank continues to retain its premier position as a lender to the SME
sector. The Bank has been implementing multiple strategies to attract
business from the SME segment offering them a slew of products and
services. Advances to SMEs constitute 20.66% of Bank's total domestic
advances. The business performance of the Bank under SME is as under:

(Amount in Rs. crores)
Particulars As on As on Growth
31.03.2008 31.03.2009 %

Deposits 1,67,426 2,20,468 33.48
Advances 79,717 95,893 20.29

Achievements/Initiatives during the year

* With the downturn in the economy, a slew of reliefs and concessions have
been offered to SMEs banking with SBI. Two new schemes viz. SME CARE and
SME Help were launched to meet the urgent fund requirements of SME units.
Under these schemes, finance is being sanctioned on liberalised terms and
at a concessional rate of interest of 8% p.a.

* A Centralised Unit for Supply Chain Finance was operationalised during
the year to finance vendors of industry majors and their dealers.

* Web based registration of loan applications through SBI website was
launched for Traders Easy Loan, SME Smart Score and SME Credit Card
Schemes.

* A Special Capital Market Branch was opened at Mumbai which has started
clearing and settlement operations for various exchanges like Power
Exchanges, Currency Exchanges.

* Bank has adopted the Code of Bank's commitment to Micro and Small
Enterprise customers under the Banking Codes & Standards Board of India
(BCSBI).

* Bank has established Regional MSME Care Centres at all Local Head Offices
across the country to facilitate MSME customers for quick redressal of
their grievances at the network level of a circle.

* The Bank was conferred the following National awards by the Government of
India (GOI), Ministry of Micro Small and Medium Enterprises for the FY
2007-08:

(i) First under 'National Awards for excellence in lending to Micro
Enterprises'.

(ii) Second under 'National Awards for Excellence in MSE Lending'.

(iii) The Bank was also presented an award for outstanding performance in
the area of finance to SMEs by Dun & Bradstreet.

* To empower the emerging SME entrepreneurs by discussing specific industry
problems, best practices etc., the Bank has sponsored 13 episodes in Zee
Business channel.

D.3 Government Business Unit (GBU)

* In order to provide timely and accurate credit of Pension as well as its
arrears to Pensioners, 14 Centralised Pension Processing Centres (CPPCs)
have been established and 27.38 lakh Pension Accounts have been migrated
from 9116 branches to the 14 CPPCs.

* Facility for e-payment of Railway Freight has been provided to 143
Corporates and more and more Corporates are adopting this new convenient
24x7 automated payment system.

* Internet Banking facility has been popularized for payment of taxes as a
result of which 59.96% of CBDT receipts and 60.44% of CBEC receipts of the
Bank are now through e- mode.

* Refund Banker Scheme for electronic refund of Income Tax is now
operational at 6 centres viz. Delhi, Mumbai, Kolkata, Chennai, Bangalore
and Patna and will be extended to other centres in a phased manner.

* Cyber Treasury for online collection of State Govt. receipts has been
implemented in 14 States and remaining States are in the process of being
covered.

* Bank is partnering State Government of Delhi for their e-governance
project for collection of taxes and utility payments from citizens through
Citizen Service Centres (CSCs).

E. RURAL BUSINESS GROUP

Rural Business Group, which deals with the business of the Bank at all
rural and semi urban centres, now handles a deposit portfolio of Rs.
2,15,931 crores and a credit portfolio of Rs. 1,20,617 crores, which is 32%
and 26% ofthe Bank's total domestic deposit and credit portfolio
respectively as on 31.03.2009.

(Amount in Rs. crores)
Particulars As on As on Growth
31.03.2008 31.03.2009 %

Deposits 1,65,852 2,15,931 30.19
Advances 1,01,850 1,20,617 18.46

Highlights/Initiatives during the year

* The rate of growth, both in deposits and advances, has been better than
the growth rate of ASCB rural and semi urban branches. As a result, the
Bank's market share in rural and semi urban areas improved by 1.35% in
deposits and 1.27% in advances between March and December 2008.

* High proportion (54% of total deposits) of Current Account & Savings
Account (CASA) deposits in the group contributes to its lower cost of
deposits at 5.23%, which is significantly lower than the Whole Bank average
of 6.03%.

* The business strategy envisaged setting up of multi pronged sourcing
agents coupled with improved back end processing capacity.

* Front end sourcing force comprises, besides branches, alternate channels
like Officers Marketing and Recovery (OMR) and Business Facilitators (BFs)
and Business Correspondents (BCs).

* OMRs numbering around 4800 now source not only high value Agriculture
segment loans but all types of deposits, loans and cross-selling products
across all the segments.

* The Bank has appointed about 18,000 Customer Service Point (CSP)/outlets
of Business Correspondents/Business Facilitators (BC/BFs). Some of the
national level BC/BFs are India Post and ITC. During the year, the alliance
with India Post has been scaled up nation wide and now covers more than
5,200 Post Offices across all States.

* To increase its outreach, the Bank has opened about 481 new branches in
rural and semi urban areas during FY-09.

* To improve the processing capacity, 158 Rural Central Processing Centres
(RCPCs) have been opened during FY-09.

E.1 Agri Business:

Table : 6 Agriculture - Highlights

(Amount in Rs. crores)
Particulars As on As on Growth
31.03.2008 31.03.2009 %

Deposits 8,777 12,407 41%
Advances 45,797 54,678 19%

Achievements during the year

* The Bank has consecutively for the second time crossed the 18% Benchmark
in Agri Priority Sector Advances with achievement of 18.46% in FY '09.

* The Bank has surpassed the GOI target for credit flow to Agriculture by
achieving Agri. disbursements of Rs. 28,442 crores in 2008-09 against the
target of Rs. 28,000 crores and financed 10.68 lac new farmers against the
target of 7.40 lac during the year.

* The Bank achieved more than 50% absolute reduction in Agri NPAs (NPAs
reduced to Rs. 1,454 crores from Rs 3,079 crores) in FY '09.

* To improve quality of lendings and diversification of portfolio, Area
Development Schemes have been prepared under National Business Plan,
covering thrust areas viz. Horticulture, Dairy, Fisheries, Food Processing,
Biotechnology, etc.

* Thrust continues to be laid on Contract Farming and Value Chain
Financing.

* Bonding with Farmers: To enhance customer awareness and ensure continued
relationship with the farming community, various initiatives have been
taken under 'Bonding with Farmers'. Achievements during FY '09 are given in
the table.

Initiative Achievement

Villages adopted
(SBI ka Apna Gaon) 209
Farmers' Clubs formed 1968
Farmers' Meets conducted 29653
Kisan Manch established 28

* The Bank has successfully implemented Agricultural Debt Waiver & Debt
Relief Scheme, 2008 of GOI in more than 6,550 Agri lending branches,
covering 42 lac farmers. The Bank has submitted Agri. Debt Waiver claim of
Rs. 5,287 crores to RBI and received first instalment of Rs. 2,168 crores
(41% of the claim).

Micro Finance and Financial Inclusion:

* The Bank is the market leader in SHG-Bank credit linkage programme having
credit linked so far 13.73 lakh SHGs and disbursed loans to the extent of
Rs. 8,050 crores. Bank has rolled out several unique products like SHG
Credit card and SHG Gold Card.

* A new scheme for financing NGOs/MFIs for onlending to SHGs has been
introduced.

* A Micro Insurance product - Grameen Shakti has been rolled out.

* SBI has been rated as the Best Public Sector Bank for Rural Reach by Dun
& Bradstreet.

* The Bank has won awards for topping SHG-Bank Credit linkage in Orissa,
Jharkhand, Maharashtra, Uttarakhand, Tamil Nadu and Uttar Pradesh.

* Coverage of unbanked village increased from 12,515 in March 2008 to
about 53,000 upto March 2009.

* The Bank is the major player in Electronic Benefit Transfer (EBT)
projects of Government benefit payments, with participation in 5 States.

Multiple IT enabled channels for Financial Inclusion:

* The Bank has gone beyond the usual domains of technology in terms of
platform, solution, operational details and service contents in a very
aggressive manner to serve the excluded common citizen with minimal costs.
Some of these channels are:

a) SBI Tiny - Smart Card based accounts: This is a secure account working
on biometric validation of the customer and RFID technology. Around 19.11
lakh customers have been enrolled with one technology partner. To broad
base the outreach, cards of a different technology have been introduced and
about 4.5 lakh customers enrolled.

b) Internet based kiosk channel: This PC based solution launched in August
2008 leverages existing kiosk infrastructure in villages. Transactions are
equally secure as this channel also works on biometric validation of the
customer.

c) Mobile based accounts: These accounts work with mobile phone based low
cost technical solution. A pilot project is currently being implemented in
Uttam Nagar, New Delhi.

d) Low cost biometric ATMs: Low cost biometric ATMs have been deployed
starting with Cuddalore district of Tamil Nadu. This platform will be
expanded significantly.

E.2 Regional Rural Banks (RRBs)

* Post amalgamation, the Bank has got 17 RRBs with a network of 2557
branches spread over 122 districts and 17 states in the country. The
aggregate deposits and advances of the sponsored RRBs stood at Rs.17,273
crores and Rs.10,242 crores respectively as on 31st March 2009. The profits
increased from Rs.115.68 crores as on March 2008 to Rs.203.31 crores as on
March 2009.

* Recommendations of the Committee to formulate a comprehensive Human
Resources Policy for RRBs (Dr. Thorat Committee) regarding categorisation
of RRBs and their branches, organisational structuring etc. and accepted by
the Government have been implemented in all our sponsored RRBs.

E.3 Credit Assistance provided to Scheduled Castes and Scheduled Tribes

The credit assistance provided by the Bank to Scheduled Castes and
Scheduled Tribes stands at Rs.12,939 crores and forms 7.9 % of total
Priority Sector advances of the Bank as on the 31st March 2009.

Table : 7 Recovery position of SC/ST borrowers (scheme-wise)

SCHEME Recovery %
Prime Minister's
Rozgar Yojana (PMRY) 34.62
Swarnajayanti Gram
Swarozgar Yojana (SGSY) 43.14
Swarna Jayanti Shahari
Rozgar Yojana (SJSRY) 36.73
Scheme for Liberation &
Rehabilitation of Scavengers
(SLRS) 28.08
Differential Rate of
Interest (DRI) 42.39

E.4 Prime Minister's New 15 Point Programme for the welfare of Minorities
And Implementation of Sachar Committee recommendations.

* Our Bank has implemented Prime Minister's New 15 Point Programme for the
welfare of Minorities, whose important objective is to ensure that an
appropriate percentage of the Priority Sector Lendings is targeted for the
minority communities and that the benefits of various Government sponsored
schemes reach the under-privileged, particularly the disadvantaged section
of minority communities (Christians, Muslims, Buddhists, Sikhs and
Zoroastrians).

The year wise position in respect of our financial assistance to minority
communities in the identified Minority Concentration Districts (MCDs) is
given below:

Table : 8 Credit Assistance to Minorities

Period No. of districts No. of Amount
as on identified by A/cs (Rs. in
GOI (MCDs) crores)

March 2007 44 7.94 lacs 2106
March 2008 121 9.88 lacs 3516
March 2009 121 9.91 lacs 5091

* Minority cells for co-ordination have already been created at Local Head
Office level and Nodal Officers have been designated to monitor the
progress in lendings to minority communities as well as to redress the
grievances of minority communities.

* As per Sachar Committee recommendations, our bank has opened 177 new
branches in underbanked / unbanked areas in MCDs during the financial year
2008-09.

* All the lead district managers have been advised to monitor applications
received from minority committees and their disposal. Also, quarterly
information regarding Minority Lendings is loaded on the Bank's Website.

F. MARKETING & CROSS SELLING DEPARTMENT

* Consistent efforts by the Bank have resulted in emergence of Cross
Selling as an important source of income. Initiatives taken by the
Marketing- Cross Selling Dept. has earned the Bank an income of Rs.166.45
crores during the financial year ending March 2009 despite the adverse
economic scenario.

Highlights of Initiatives Taken Life Insurance:

a) Cross Selling of Life Insurance products was actively carried out by
branches in Rural Banking Group and Corporate Banking Group and
International Banking Group also, resulting in YoY growth of :

i) Income : 34.17%
ii) Rated premium : 27%
iii) Renewal Business : 82%
iv) Number of lives : 48% (12.52 lacs -
covered New Business)

b) A Micro Insurance Product 'Grameen Shakti scheme for SHGs' was
introduced in Andhra Pradesh, Maharashtra, Orissa, Tamil Nadu and West
Bengal. Total lives covered: 8.25 lacs.

c) The Bank introduced an omnibus credit protection product 'Dhanraksha
Plus' covering all personal loans including Home Loans and Auto Loans.

d) Health insurance product covering nine critical illnesses named 'Criti
9' was introduced in Bangalore Circle on a pilot basis.

Mutual Funds:

An amount of Rs.23,628.31 crores was mobilised through our branches for
investment in mutual funds, recording a YoY growth of 66%.

Mutual Funds - Miscellaneous

MF-Training Initiatives:

There has been a significant increase in the number of AMFI certified
employees and Certified Insurance Facilitators as a result of training and
skill upgradation initiatives undertaken by the Bank.

G. CORPORATE STRATEGIES & NEW BUSINESS

The New Businesses Department was created to formulate strategies for new
businesses, incubate new business initiatives, pilot the same and on
stabilization, handover to the concerned Business Group. Various new
businesses like Pension Fund Management, General Insurance, Private Equity,
Financial Planning & Advisory Services (FP&AS), Custodial Services, Payment
Solutions, Depository Participant Services and Online trading have been
initiated by the department. The status of initiatives is as follows:

Financial Planning & Advisory Services (FP&AS)

* Financial Planning and Advisory Services initiative is focussed on
strengthening the relationship of the Bank with Vishesh and High Net-worth
Individual (HNI) customers (existing as well as new) by providing a range
of services for managing and growing their wealth.

* 1135 Relationship Managers (RMs/CREs-PB) have been provided basic
training in Financial Planning and second level of training has been
imparted for 181 RMs PB.

* The Financial Planning and Wealth Management software has gone live on
02/03/2009 and the FP&AS have been rolled out in 502 branches as on
31/03/2009. The RMs PB and the Customer Relation Executives (CREs-PB) in
these branches will not only help the Vishesh and HNI Customers in managing
their assets through a mix of products and strategies but will also advise
them for optimally meeting their needs of protection, investment in various
classes of assets through investment planning, tax planning, retirement and
real estate plans. This initiative will add enormous value to our offerings
and increase customer stickiness, especially in the retail segment.

* Demat Services and eZ-trade@sbi (Online Trading) services are now
available at more than 1500 branches across India. In FY 2008-09, the Bank
has introduced several customer friendly features in our demat accounts
like digitally signed email statements and SMS alerts on select demat
account transactions. Features such as Online instructions for securities
transfer and pledge/unpledge, search ISINs, view Transaction Status, view
Settlement Calendar and order delivery instruction booklet online are
available through www.onlinesbi.com. Our objective for the next financial
year is to extend our reach to as many centres as possible while
continuously honing our products by adding more value added features.

Custodial Services

* India's attractiveness as a destination for investments is continuously
on the increase and handling securities and providing full range of
custodial services to the Foreign Institutional Investors as well as to the
domestic investors offers great potential.

* The Bank has entered into a Joint Venture (JV) Agreement with Societe
Generale Securities Services (SGSS) on June 05, 2008 for starting the
Custodial Services business. SBI Custodial Services Pvt. Ltd. has been
incorporated initially as a 100% subsidiary of the Bank and RBI approval
for inducting SGSS as a JV partner has been obtained. After receipt of
approval from SEBI, the company would be converted into a JV Company with
SBI holding 65% of the equity and the balance held by SGSS.

* The Clients of our JV would mainly comprise FIIs, Domestic FIs, Mutual
Funds, Pension Funds etc. The Business plan envisages a 8-10 % market share
in domestic and global custody in 3 years. The Company is expected to
commence its operations early in the financial year 2009-10.

General Insurance

* While SBI Life is meeting a part of the requirements under Protection
Services, the insurance offering bouquet will be complete with the
inclusion of General Insurance products, greatly enhancing the customer
value proposition at our vast branch network and enhancing the brand value
of the Bank.

* With this end in view, the Bank has decided to enter into the General
Insurance business through the joint venture route. The main reason for the
Bank's foray into General Insurance business is to leverage the
Bancassurance channel. We aim to capture and leverage the value of in-house
business, and establish State Bank Group as a leading player in the arena
of General Insurance.

* The J.V. Agreement has been signed with Insurance Australia Group (IAG)
on the 24th November 2008. We have incorporated a subsidiary under the name
SBI General Insurance Co. Ltd. after receiving approval from the RBI. The
Company is currently in the process of obtaining necessary regulatory
approvals for commencement of Insurance business. We anticipate the start
of the business for the new subsidiary in the third quarter of 2009-10.

Private Equity

* In view of the growing importance of private equity as an alternate asset
class and the attractive returns it offers, the Bank has decided to enter
this area and made substantial progress in this regard.

* An infrastructure fund has been set up in collaboration with Macquarie of
Australia and IFC Washington, primarily aimed at investing in the Indian
Infrastructure space. All necessary regulatory approvals have been received
for operationalisation of the fund. Over US $ 1 billion has been mobilized
from large and well known International Investors including the sponsors.

* The Bank is at an advanced stage in setting up a general purpose Private
Equity Fund jointly with sovereign entities in Oman. Government of India
has designated the Bank as the operationalising agency for a similar
sovereign fund with Qatar. Several other Funds are at various stages of
formation.

* As some of the funds initiated by the Bank are on the verge of
operationalisation, the Bank is poised to play a leading role in this
promising sector in the coming years.

Payment Solutions Business Group Mobile Banking Services

Mobile Banking Services (MBS) offers scope for convenient, user friendly,
secured and cost effective alternate channel of banking. MBS has been
launched after RBI approval. Application based service using SMS and GPRS
facilities has been made available to the customers. The service is also
available over WAP for all mobiles having GPRS connectivity. MBS has been
rolled out to all our non-rural branches. The product is comparable to the
best available in the market.

Real Time Gross Settlement (RTGS) & National Electronic Fund Transfer
(NEFT)

The Bank has been promoting Inter-Bank payments through RTGS and NEFT
channels. Due to our sustained efforts, the Bank has witnessed substantial
growth in both inward and outward RTGS/NEFT remittances. Both RTGS/NEFT
remittance facilities are available through internet banking and NEFT is
also available over Mobile Banking. We are making efforts for migration of
more corporates / Govt. Departments to NEFT for effecting their payments to
employees/vendors.

Debit Cards

The Bank has been encouraging the usage of debit cards at Point of Sale
(POS) terminals. The daily average number of transactions at POS has
increased manifold. Various offerings such as tie ups, loyalty programmes
etc. are being developed to improve the Banks' footprint in this area.

Consolidation of Payment Solution Business

The Bank has embarked on an ambitious plan to restructure the
organizational and, if necessary, IT set up for its various payment related
businesses. This is being done to achieve efficiency in operations, avoid
duplication, optimal utilization of resources, cost effectiveness and
bringing about reduction in development efforts. The Bank has appointed an
outside Consultant for undertaking the above study and to advise the Bank
in the matter. The exercise, when completed, is expected to yield
substantial benefits.

H. INTERNATIONAL BANKING GROUP

H.1 Operation of Foreign Offices

The Bank at the year end had a network of 92 overseas offices spread over
32 countries covering all time zones. The 92 offices comprised 37 Branches,
5 Sub Offices, 8 Representative Offices, 35 Branches of Subsidiaries, 3
Managed Exchange Companies and 4 Joint Ventures. The asset level of Foreign
offices and subsidiaries was US$ 23.73 billion registering a growth of 20%
over last year. Foreign Offices earned a net profit of US $ 151 million
during the year.

Overseas Expansion

Consequent upon receipt of Qualifying Full Bank licence, the Bank started
retail operations in Singapore during the year. Three new Branches and
seven ATMs were set up to boost retail operations. One branch and a sub
office were added to the network in Male and a Representative Office in
Tianjin in China was operationalised. SBI California, the Bank's wholly
owned subsidiary in USA, opened its seventh Branch at Bakersfield. PT Bank
Indomonex, a partly owned subsidiary in Indonesia, opened 2 branches during
the year. Nepal SBI Bank Ltd., a Joint Venture, opened 16 new branches. The
Bank's two partly owned subsidiaries in Mauritius viz. Indian Ocean
International Bank Ltd. and SBI International (Mauritius) Ltd. were merged
during the year to create a new entity titled SBI (Mauritius) Ltd.
Significant addition to the overseas network is planned for the current
year.

Resource Management

Despite turmoil in global financial market conditions, the Bank's foreign
offices maintained comfortable liquidity position. During the year 2008-09,
US$ 686 million (approximately Rs. 3,480 crores) was raised by the foreign
offices under Bank's MTN Programme and bilateral loans of different
maturities.

NRI Business

The Bank's NRI deposits grew by Rs. 8,948 crores during the year to reach a
level of Rs. 48,950 crores by the year end. Similarly, advances to NRIs
increased by Rs. 197 crores and now stand at Rs. 1,218 crores. Six new tie-
ups with Exchange Companies were concluded taking the total such tie-ups to
20. Rapid Remittance, a faster version of remittance product, was
introduced for the USA customers. A number of campaigns across various
media were undertaken during the year to publicize the Bank's products and
services.

H.2 DOMESTIC OPERATIONS

Export Credit

The Bank's outstanding export credit stood at Rs. 26,732 crores as on
31.03.2009. State Bank of India's active participation in financing project
export activities resulted in the Bank supporting 22 project export
proposals with contract value aggregating Rs. 12,460 crores. The Bank's own
exposure as at the year end to these projects was Rs. 1,492 crores.

Merchant Banking

Despite the slowdown in the economy and tight liquidity conditions, the
Bank retained its leadership as Mandated Lead Arranger and Book Runner for
syndicated loans in Asia Pacific (excluding Japan but including Australia)
for the year 2008. 15 syndication deals aggregating US$ 8,297 million and
13 bilateral facilities aggregating US$ 285 million were concluded in 2008-
09. 22 Mergers and Acquisitions (M&A) deals aggregating US$ 7,300 million
with Bank's participation level of US$ 2, 269 million fructified during the
year.

Global Link Services (GLS)

GLS, the Bank's specialized outfit, caters to speedier settlement of
remittances. In the year 2008-09, GLS, on behalf of domestic branches,
handled 139,788 export bills and 193,286 foreign currency cheques
aggregating US$ 17.45 billion. In addition, it handled 2,196,447 inward
remittance transactions amounting to US$ 2.39 billion from various centres
in the Middle East, UK and USA.

Correspondent Relations

The Bank has entered into correspondent banking arrangement with 527
reputed international banks to extend seamless services to varied clients.

These correspondent Banks are located in 124 countries. The Bank also has
1626 Bilateral Key Exchange (BKE) arrangements for SWIFT facilitating
speedier flow of financial messages.

Country Risk & Bank Exposures

The Bank has a Country Risk Management Policy in tune with RBI guidelines.
The policy outlines robust risk management models with prescriptions for
Country, Bank, Product and Counterparty exposure limits. Considering the
global economic turmoil, both Country wise and Bank wise exposure limits
are monitored and reviewed on a regular basis. The exposure ceilings and
classifications are moderated in line with the dynamics of their risk
profiles. Periodical corrective steps are initiated to safeguard the Bank's
interests.

I. ASSOCIATES AND SUBSIDIARIES

I.1 The State Bank Group with a network of 16055 branches including 4607
branches of its six Associate Banks dominates the banking industry in
India. In addition to banking, the Group, through its various subsidiaries,
provides a whole range of financial services, which include Life Insurance,
Merchant Banking, Mutual Funds, Credit Card, Factoring, Security trading,
Pension Fund Management and Primary Dealership in the Money Market.

I.2 Associate Banks

SBI's six Associate Banks had a market share of 6.74% in deposits and 6.95%
in advances as on last Friday of March 2009.

Table : 9 Performance Highlights of Associate Banks (ABs)

(Amounts in Rs. crores)
As on As on Change
31.03.2008 31.03.2009

Agg. Assets 263221 313099 18.95%
Agg. Deposits 218199 264779 21.35%
Agg. Advances 166050 198583 19.59%
Operating Profit 4160 5495 32.11%
Net Profit 2225 2774 24.71%
Credit Deposit
Ratio 76.10 75.00 -1.10
Capital Adequacy
Ratio 12.52 13.01 +0.49
Gross NPA 2465.41 2763.56 12.09%
Net NPA 972.36 1191.26 22.51%
Return on Equity 18.50% 19.83% 1.33

I.3 SBI Commercial & International Bank Ltd. (SBICI)

As at the end of March 2009, the aggregate deposits and total advances of
SBICI stood at Rs.538.33 crores and Rs.315.34 crores respectively. The Bank
recorded an operating and net profit of Rs.11.52 crores and Rs.11.07 crores
respectively. The net NPAs as at the end of March 2009 was Rs.0.23 crores.

Performance Highlights of Non-Banking Subsidiaries/Joint Ventures:

I.4 SBI Capital Markets Limited (SBICAP) SBICAP is a full service
investment banking outfit offering Project Advisory Services, arrangement
of Structured Finance, Capital Market Services like Equity Issuances,
Mergers & Acquisitions and arrangement of Private Equity, etc. The company,
during the year, has further consolidated its dominant position as
arrangers of debt for the corporate sector both in the infrastructure as
well as non-infrastructure sectors.

The following achievements are some of the many recognitions won by the
Company during the year:

* Ranked 3rd globally as Mandated Lead Arranger by Thompson Reuters PFI for
2008 as against 9th globally in 2007. Ranked No.2 globally and No.1 in Asia
Pacific by Dealogic.

* Ranked 1st as India Syndicated Loan Mandated Arranger and as India
Syndicated Loans Book runner by Bloomberg.

* The Company has been awarded 'Bank of the year' award in 2008 by Thompson
Reuters.

* The project relating to Coastal Gujarat Power Ltd. (Tata Ultra Mega Power
Plant) has been recognised by Project Finance International as 'Power Deal
of the Year' and as 'Best Power Project Deal of the Year' by Euromoney.

* Awarded Silver Shield under the category Finance sector' of ICAI Awards
for Excellence in Financial Reporting for the year ended March 2008.

* The company has posted a PAT of Rs.150.07 crores registering YoY growth
of 5.55% upto March 2009.

* Declared a dividend of 120% as against 100% for the FY2007-08.

I.5 SBICAP Securities Limited (SSL)

SSL, which commenced its operations in June 2006, is a broking company
offering equity broking services to retail and institutional clients both
in the Cash as well as in the Futures and Options segments. It is also
engaged in sales & distribution of other financial products like


Mutual Funds, etc. The Company has launched e-broking services to the
clients of SBI and Associate Banks. SSL has 48 branches and 18 franchisees
and offers Demat, e-broking, e-IPO and e-MF services to both retail and
institutional clients.

I.6 SBICAPS Ventures Limited (SVL)

SBICAPS Ventures Limited (SVL), a USD 100 million Venture Capital Fund,
jointly with SBI Holdings Inc. (Softbank), Japan has invested USD 8 mio in
two companies and a number of investment proposals are being examined. The
scope of the fund covers all sectors except real estate and financial
services.

I.7 SBICAP (UK) Ltd.

SBICAP (UK) Ltd., which is only in its second full year's operation, has
booked a revenue of Rs. 2.14 crores upto March 2009 as against Rs. 1.51
crores as on March 2008. The company has posted a net profit of Rs.0.44
crores in March 2009, as against a loss of Rs.0.36 crores last year due to
diversification of income streams.

I.8 SBICAP TRUSTEE Co Ltd. (STCL)

SBICAP TRUSTEE Co Ltd. (STCL) has commenced security trustee business with
effect from1st August 2008. The company's gross income upto 31.03.2009 is
Rs. 0.44 crores and net profit is Rs.0.14 crores.

I.9 SBI DFHI LTD.

* SBI group holds 67.01% share in the Company, which is a primary dealer.

* For the period ended 31st March 2009, the Company's PBT was Rs.101.76
crores as against Rs.95.89 crores during 2007-08.

* The market turnover for G-Sec and Treasury bills during 2008-09 was
Rs.57,922 crores as against Rs.54,919 crores recorded during 2007-08.

* Declared a dividend of 12.50% as against 10.00% for the FY2007-08.

I.10 SBI Cards & Payments Services Pvt. Ltd. (SBICSPL)

* SBI Cards, the only stand-alone credit card issuing company in India, is
a joint venture by State Bank of India and GE Capital Services, wherein SBI
holds 60% stake.

* The 'Cards in Force' (CIF) of the Company stands at 27.24 lacs and the
receivables are at Rs.1,804 crores at the end of March 2009.

* The Company has posted a loss before tax of Rs. 185.12 crores during the
year as against a loss before tax of Rs. 230.02 crores as on 31.03.08.

I.11 SBI Life Insurance Company Limited (SBILife)

* SBI Life has a unique multi-distribution model comprising Bancassurance,
Retail Agency & Institutional Alliances and Group Corporate Channels for
distribution of insurance products.

* SBI Life has bagged the coveted personal finance award-Outlook Money and
NDTV profit 'Best Life Insurer 2008'.

* Ranked among global top three in terms of number of Million Dollar Round
Table (MDRT) members.

Table : 10 Performance Highlights of the Associate Banks as at March 2009:

(Rs. in crores)
Name of the Bank SBI's share Deposits Advances Operating Net Profit
in the Profit
capital(%)
State Bank of

Bikaner & Jaipur 75 38762 30088 892.84 403.45
Hyderabad 100 64686 43952 1302.96 615.81
Indore 98.05 27693 21739 624.01 278.92
Mysore 92.33 32388 25878 653.52 336.91
Patiala 100 59580 43954 965.45 531.54
Travancore 75 41670 32972 1056.27 607.84
All 6 Banks - 264779 198583 5495.05 2774.47


* ICRA has assigned iAAA rating to the company indicating highest claim
paying ability.

* The company continued to be ranked 2nd among private insurers, for new
business growth.

* Gross Premium of the Company was Rs.7,212 crores with YoY growth of 28%.

* The market share of SBI Life in the total industry improved to 6.0% as
against 5.15% in March 2008 and to 16% amongst private insurers from 14% as
at March 08.

* Recorded a loss of Rs.26 crores as on 31.03.2009 as against a profit of
Rs.34 crores as on 31.03.2008 due to dimunition in the value of equity
investments.

* The Assets Under Management' of SBI Life recorded a growth of 43% YoY to
reach Rs.14964 crores.

* Portfolio lives has increased to 131.2 lacs from 70 lacs as on March
2008.

* Opened 246 new sales offices during the current year taking the total
number of offices to 489 as on 31.03.2009.

I.12 SBI Funds Management (P) Ltd. (SBIFMPL)

* SBIFMPL, the Mutual Fund arm of SBI, is the 6th largest Fund House in
terms of 'Assets Under Management' and a leading player in the market with
5.5 million investors.

* The schemes of the Fund House have performed consistently over the years
and have emerged as the preferred investment for investors.

* The company has posted a PAT of Rs.68.95 crores as on 31.03.2009
registering a decline of 2.0% Y-o-Y.

* As against net outflows experienced by many of the Mutual Funds across
the industry, SBIFMPL registered a net inflow of Rs.2,315 crores during the
year upto March 2009. The average 'Assets Under Management' (AUM) of the
company as at March 2009 stood at Rs.27,846 crores.

* Declared a dividend of 40% as against 33.60% for 2007-08.

* The company's average AUM market share at the end of March 2009 stood at
5.52%.

* 'SBI Magnum Balance Fund'' and 'SBI Magnum Sector Umbrella-Contra Fund'
were adjudged the best funds in their respective categories in Lipper India
Fund award in 2008.

* 'SBI Magnum Taxgain Scheme-93' was rated a Five Star Fund in 3 year
performance category in ICRA Mutual Fund Awards 2009.

I.13 SBI Factors and Commercial Services Pvt. Ltd. (SBIFACTORS)

* SBI Factors provides domestic factoring services to Small and Medium
Enterprises (SMEs).

* The turnover recorded by SBI Factors at the end of March 2009 stood at
Rs.5,979 crores as against Rs.6,479 crores at the end of March 2008.

* While total income of the company increased by 13% YoY and stood at
Rs.164.25 crores as at March 2009, the company earned PAT of Rs.42.79
crores as at March 2009 registering a YoY growth of 50.78%.

* Declared a dividend of 30% as against 16% for 2007-08.

I.14 Global Trade Finance Ltd. (GTFL)

* GTFL is one of the leading factoring companies in India which has the
highest market share (85%) in export & import factoring.

* During the year ended 31st March 2009, the turnover of the company
increased by 10.60% YoY, reaching Rs.12,303 crores. The total income of the
company as at March 2009 was Rs.505.48 crores as against Rs.353.76 crores
in March 2008. The company earned a PAT of Rs.74.10 crores as on March 2009
as against Rs.73.57 crores last year.

* Declared a dividend of 20% as against 12% for 2007-08.

I.15 SBI Pension Funds Pvt. Ltd. (SBIPF)

* SBIPF is one of the three Fund Managers appointed by the Pension Fund
Regulatory & Development Authority (PFRDA) for management of Pension Funds
under the New Pension System for Central Government (except Armed Forces)
and State Government Employees. SBIPF, wholly owned subsidiary of the State
Bank Group, commenced its operations from April 2008. SBIPF has got the
mandate to manage 55% of the total corpus of pension funds received under
the New Pension System during 2008-09. The total 'Assets Under Management''
of the company as on 31st March 2009 was Rs.1,173.23 crores on which a
management fee of Rs. 26.32 lacs was received. The Company recorded a net
profit of Rs. 0.04 crores.

Important Developments during the year in Associates & Subsidiaries:

* State Bank of Saurashtra, a wholly-owned Associate Bank having major
presence in the state of Gujarat, was acquired by SBI during the year with
the approval of RBI and Govt. of India. The Associate Bank had 461 branches
with an asset base of more than Rs.21,000 crores at the time of
acquisition.

* The Bank has also decided to merge SBICI Bank Ltd. , a whol ly owned
domest ic banking subsidiary, with itself to bring about further synergy
and efficiency. Necessary approval is awaited from the Government of India.

* SBI Cap Securities Ltd. (SSL)., which is a wholly owned subsidiary of SBI
Capital Markets Ltd., is proposed to be taken over by SBI as a direct
subsidiary in order to impart greater synergy by undertaking besides
broking activities, marketing of other wealth management products through
State Bank Group channels. The proposal is awaiting necessary regulatory
approvals.

* With a view to improving the market share in domestic and international
factoring business as also to have synergy in operations and optimising
efficiency, the Bank has proposed to merge SBI Factors and GTFL, two of its
own subsidiaries. The proposal is awaiting necessary regulatory approvals.

J. ASSET QUALITY

NPA Management

The position of NPA reduction as on 31.03.2009 is given hereunder.

Table : 11 Asset Quality (Rs. in crores)

1 Gross NPAs 15589
Gross NPA Percentage 2.84%
2 Net NPAs 9552
Net NPA Percentage 1.76%
3 Cash Recovery in NPA 2966
4 Upgradation to Standard 3402
Assets
5 Write offs 1896
6 Gross reduction in 8264
NPAs (3+4+5)
7 Fresh slippages of Standard 11015
Assets to NPA category
8 Recovery in written 888
off accounts

* Restructuring of impaired Standard Assets as well as viable non-
performing assets, both under CDR mechanism as well as under Bank's own
scheme, have been given top priority for arresting new additions and
reducing the existing level of NPAs.

* The machinery for identification and monitoring of Special Mention
Accounts by making prompt review and taking quick corrective action has
also been geared up for the purpose.

* The Bank referred 9 cases with aggregate exposure of Rs. 883 crores to
CDR mechanism this year out of a total of 20 cases with aggregate exposure
of Rs. 1,235 crores referred to CDR by the whole Banking system. Our share
in the debt in the cases referred was 72% by value. In all cases, timely
intervention enabled the accounts to retain their Standard Asset status.

* Five financial assets involving principal outstandings of Rs. 289 crores
have been sold to other banks/ARCIL during the year.

K. INFORMATION TECHNOLOGY

The Bank has been proactive in responding to the opportunities thrown open
by evolving technology and increasing technology penetration. Technology
has been used innovatively for achieving financial inclusion and
technology driven banking solutions have been implemented to achieve
enhanced customer satisfaction.

Networking: More than 2000 branches were added to our wide area network
during the year. Presently all the branches and ATMs of the Bank are
networked. The network plays a major role in supporting the Bank's business
applications and is capable of carrying data voice and video in a secure
manner.

Core Banking: The Bank achieved full Core Banking status on
23.07.2008 when all the branches of the Bank were made functional on
CBS. This is one of the most important achievements of the Bank as
our network along with Associate Banks is one of the largest banking
network in the world to have gone on centralised data base (Core Banking)
system. Core Banking has not only enhanced our transaction processing
capabilities but has also empowered our customers to transact their
banking business from any of the 11448 branches of the Bank. Our 506
branches have been enabled for Core Integrated Trade Finance also.

Internet Banking: With enabling of over 2100 branches for internet
banking, all the branches of the Bank are now internet banking enabled.
Apart from enabling Anywhere Anytime banking, our Internet Banking offers
a host of value added services like funds transfer through RTGS/NEFT,
Payment of Taxes, SMS Alerts, Bills Payments, Fee Payments, Mutual Fund
Investments, Subscription to IPOs, Temple/Trust Donations etc. For
Corporate customers, additional facilities like CBEC Payment, Customs
Payment, Fee collections for DGFT, Freight collection for Railways
etc. have been provided. A number of e-Governance initiatives have also
been enabled through Internet Banking.

ATMs: The Bank, along with its Associate banks have a common ATM network
which is the largest in the country. It crossed the milestone of 10,000
ATMs in December 2008 and with an addition of 2911 ATMs during the year,
the Bank has now a network of more than 11300 ATMs. The Bank also has 33
Multi Currency Module enabled ATMs at 19 foreign centres in 6 countries.
Functionalities available at our ATMs include Card to Card Transfer,
Fee Payments, Utility Bill Payments, Donations to Temples/Trusts etc. The
Bank is also in the process of installing Biometric and low cost rural
ATMs.

Payment Systems Group: All the branches of the Bank have been enabled
for RTGS and NEFT transactions. Further, the Bank has also enabled State
Bank Group Payment Scheme (for instant funds transfer among State Bank
Group Banks), Rupee Remittance Scheme from our foreign offices for
direct credit to accounts in our Bank as well as with other banks through
NEFT.

Mobile Banking: The Bank has launched its mobile banking facility
which offers various features like Funds Transfer using NEFT, Enquiry
Services (balance enquiry / mini statement), Request Services (cheque
book request), m-commerce (Mobile Top Up, merchant payments, SBI Life
Insurance premium) and bill payment (utility bills, credit cards).

Data Warehouse Project: Implementation of Enterprise Data Warehouse is
under progress. Its implementation will provide critical tools necessary
to help the Bank strengthen itself as an 'intelligent organisation', to
improve processes, delivery of information for Decision Support System
(DSS) consisting of analytics on product performance, channel management,
customer relationship management, concurrent audit, Inspection and Audit,
budgeting and monitoring and self service for internal users.

Information Security: The Bank has a robust IT policy and Information
System (IS) Security policy which has been benchmarked against global
best practices. To ensure business continuity and to guard against any
disaster, the Bank has put in place a disaster recovery and business
continuity plan. The Bank's Information Systems Security is
regularly reviewed to ensure that the Bank's information systems remain
safe and banking operations are conducted in a secure way.

Miscellaneous Operations

L Risk Management & Internal controls

M Business Intelligence Department

N Customer Service & Community
Services Banking

L. RISK MANAGEMENT & INTERNAL CONTROLS

RISK MANAGEMENT IN SBI

L.1 Risk Management Structure

* An independent Risk Governance structure is in place for Integrated
Risk Management covering Credit, Market, Operational and Group Risks. This
framework visualises empowerment of Business Units at the operating level,
with technology being the key driver, enabling identification and
management of risk at the place of origination.

* Being alive to this imperative, efforts are on hand to enhance the
degree of awareness at the operating level in alignment with better
risk management practices, Basel II requirements and the overarching aim
of the conservation and optimum use of capital.

* Keeping in view the changes which the Bank's portfolios may undergo
in stressed situations, the Bank has in place a policy which provides
a framework for conducting Stress Tests at periodic intervals and
initiating remedial measures wherever warranted. The scope of the tests
is constantly reviewed to include more stringent scenarios.

* Risk Management is perceived as an enabler for business growth and in
strategic business planning, by aligning business strategy to the
underlying risks. This is achieved by constantly reassessing the
interdependencies / interfaces amongst each silo of Risk and business
functions.

L.2 Basel II Implementation

* The Bank, as per RBI Guidelines, has migrated to Basel II as on 31st

March 2008. Simultaneously, processes have been set in train for fine-
tuning systems & procedures, IT capabilities and Risk Governance
structure to meet the requirements of the Advanced Approaches.

* Various initiatives such as migration to new Credit Risk Assessment
Models, independent validation of internal ratings and improvement in Loan
Data Quality would not only enable conservation of capital but also
facilitate smooth migration to Advanced Approaches.

L.3 Credit Risk Management

* Credit Risk Management process encompasses identification, assessment,
measurement, monitoring and control of credit exposures. Well defined
basic risk measures such as CRA Models, Industry Exposure Norms,
Counterparty Exposure Limits, Substantial Exposure Limits, etc. have been
put in place.

L.4 Market Risk Management

* Market Risk Management is governed by the Board approved Policies
for Investment and Trading in Bonds, Equities and Foreign Exchange.

* Exposure, Stop Loss, Duration Limits and Derivative Limits have been
prescribed. These limits along with other Management Action Triggers, are
tracked daily and necessary action initiated as required to control and
manage Market Risk.

L.5 Operational Risk Management

* The Bank manages Operational risks by ensuring maintenance of a
comprehensive system of Internal Controls and Policies .

* The objective of the Bank's Operational Risk Management is to
continuously review systems and control mechanisms, create awareness
of Operational Risk throughout the Bank, assign risk ownership, alignment
of risk management activities with business strategy and ensuring
compliance with regulatory requirements.

* The Policy applies to all business and functional areas within the Bank,
and is supplemented by operational systems, procedures and guidelines
which are periodically updated.

L.6 Group Risk Management

* The State Bank Group is recognised as a major Financial Conglomerate
and as a systemically important financial intermediary with significant
presence in various financial markets.

* Accordingly, it has become imperative, both from the regulatory point of
view as well as from the Group's own internal control and risk
management point of view, to oversee the functioning of individual
entities in the Group and periodically assess the overall level of
risk in the Group so as to facilitate optimal utilisation of capital
resources and adoption of a uniform set of risk practices across the
Group Entities.

* The Group Risk Management Policy applies to all Associate banks,
Banking and Non-banking Subsidiaries and Joint Ventures of the State Bank
Group under the jurisdiction of specified regulators and complying with
the relevant Accounting Standards.

* With a view to enabling the Group Entities to assess their
material risks and adequacy of the risk management processes and
capital, all Group members, including Non-banking Subsidiaries are
encouraged to align their policies & operations with the Group, vide
Basel prescriptions and international best practices.

* Further, a Group Risk Management Committee has also been constituted
to oversee the matters relating to Group Risk by creating risk awareness
across all Group entities, ensuring periodic review of the policy and its
compliance etc.

L.7 Asset Liability Management

* The Asset Liability Management Committee (ALCO) of the Bank is
entrusted with the evolvement of appropriate systems and procedures in
order to identify and analyse balance sheet risks and setting of bench mark
parameters for efficient management of these risks.

* ALM Department, being the support group to ALCO, monitors the
Bank's market risk such as the liquidity risk, interest rate risk
etc. by analyzing various ALM reports/ returns. The ALM department reviews
the Bank's ALM policy and complies with the Bank's/ RBI's policy guidelines
on an ongoing basis.

* The Bank has successfully implemented Market Related Funds Transfer
Pricing (MRFTP) in all its business units for effective performance
management and Interest Rate Risk Management through execution of state-of-
the-art ALM Tools.

L.8 Internal Controls

L.8.1 The Bank has in-built internal control systems with well-
defined responsibilities at each level. Inspection & Management Audit
(I&MA) Department of the Bank carries out four streams of audits- Risk
Focussed Internal Audit (RFIA), Credit Audit, Information Systems Audit
and Management Audit - covering different facets of the Bank's
activities. I&MA Department also prescribes the processes, guidelines,
manual of operations and formats for the conduct of Concurrent Audit which
is administered by the Circles and carried out at branches with large
deposits, advances and other risk exposures and credit oriented BPR
entities. The department , headed by the Dy. Managing Director (I&MA),
is functionally independent and reports to the Audi t Committee of
the Bank's Board (ACB).

L.8.2 Risk Focussed Internal Audit

The Inspection system plays an important and critical role in
introducing international best practices in the internal audit function
which is regarded as a critical component of Corporate Governance.
Risk Focussed Internal Audit, an adjunct to risk based supervision
as per RBI directives, has been introduced in the Bank's audit system
from April 2003. The audit of branches and BPR entities is conducted
as per the periodicity approved by ACB and RBI guidelines. During the
year, audit of 6136 branches and 171 BPR entities was conducted.

L.8.3 Credit Audit

Credit Audit aims at achieving continuous improvement in the quality
of the credit portfolio of the Bank by critically examining
individual large advances with exposures of Rs.10 crores and above. The
audit examines the probability of default, identifies risks and
suggests risk mitigation measures. The overall risk perception is also
arrived at to initiate early remedial action to improve the quality of
credit portfolio. During the year, on-site Credit Audit was conducted in
289 branches, covering 4624 accounts wi th aggregate exposures of
Rs.2,64,854 crores.

L.8.4 Management Audit

The Management Audit focusses on the effectiveness of risk management
in the processes and the procedures followed in the Bank and uses RBI Risk
Profile Templates as the basis. The Management Audi t universe
comprises Corporate Centres Establishments; Circles/Zonal Offices/On
Locale Regional Offices/Regional Business Offices; Associate Banks;
Subsidiaries (Domestic/Foreign); Joint Ventures (Domestic/ Foreign) ,
Regional Rural Banks (RRBs) sponsored by the Bank; Representative
Offices abroad and Exchange companies managed by Bank. During the year,
Management Audit was conducted at 25 offices /establishments.

L.8.5 Foreign Offices Audit

I&MA Department supervises internal audit of all foreign offices of the
Bank, namely:

(a) Home Office Audit carried out by officials identified by I&MA
Department.

(b) Internal Audit conducted either by an official of the Bank or by an
outsourced firm of that country, where foreign office is located.

(c) Management Audit of Representative Offices, Joint Ventures and
Subsidiaries.

During the year, 23 Foreign Offices/Representative Offices / Subsidiaries
were subjected to audit.

L.9 Vigilance

The Vigilance Department in the Bank is headed by the Chief Vigilance
Officer appointed with the concurrence of the Ministry of Finance and
Central Vigilance Commission. At each Local Head Office, the Vigilance
Department is headed by a senior official of the rank of Deputy General
Manager. The Department is manned by officers having knowledge/background
of investigation, disciplinary action matters and extensive experience
in banking operations. The Department oversees three primary aspects
of vigilance viz. prevention, detection and punishment. The Bank has a
zero tolerance policy for fraud, corruption and financial irregularities
and encourages 'Whistle blowing' as a matter of corporate culture.

M. BUSINESS INTELLIGENCE DEPARTMENT

* The Business Intelligence Department in the Bank constantly
assesses, upgrades and fine tunes the growing information requirements
of various user departments and business units. The information
takes care of both decision support as well as statutory requirements.
The Data Warehousing Project, designed to be a single source for all
data requirements, is also progressing satisfactorily.

N. CUSTOMER SERVICE & COMMUNITY SERVICES BANKING

N.1CUSTOMER SERVICE

* On July 01 2008, the Bank unveiled its new Vision statement which
contains the distilled essence of the views of over 1,40,000 staff who
participated in a unique exercise conceptualized and conducted by Human
Resource Management Department to re- define the Bank's Mission, Vision
and Values. The staff, who displayed understanding of the challenges of
achieving excellent customer service which alone will enable the Bank to
continue to maintain its leadership position in future, were
overwhelmingly of the opinion that the Bank's vision should focus
primarily on customer service. The Vision statement-

My SBI,

My Customer first.

My SBI: First in customer satisfaction.'

appropriately reflects this view of our staff and shall be the guiding
principle for the Bank's plans, activities and strategies.

* The Bank has a well established grievances redressal mechanism.
Toll-free helpline numbers are available at all LHO centres. For
product enquiries and technology related issues, a dedicated 24x7
helpline is available to customers. As a part of BPR initiatives, a Contact
Centre has been established with toll free number for providing
information on products and account enquiries to customers on 24x7
basis.

A comprehensive analysis of customer grievances is done every quarter to
identify common systemic issues that need rectification.

* The Customer Service Committee of the Board reviewed the Bank's
Grievances Redressal Policy in March 2009 and approved revised policy
incorporating the Bank's new organizational structure and instructions
on grievances redressal.

N.2COMMUNITY SERVICES BANKING

* Apart from the normal banking operations, the Bank, as a responsible
and responsive corporate citizen, seeks to reinvest part of its
profit in various community welfare projects to improve the quality of
the life of the poor, neglected, weaker and downtrodden sections of
society.

* In the financial year 2008-09, the Bank sanctioned donations amounting to
Rs.8.76 crores to various NGOs/Trusts/Societies for their projects with
social orientation and also to Relief Funds including the Bihar Flood
tragedy.

* Under a novel scheme of Adoption of Girl Children designed by the
SBI Ladies Club, over 15,300 poor and destitute girl children were
adopted by various branches throughout the country to meet their
education expenses. The Club members also personally mentor the
children adopted.

* It was a matter of pride that during the current year, the Bank was
awarded Reader's Digest 'Pegasus Corporate Social Responsibility Award
2007' in recognition of its contribution towards Rural Community
Development.

* From the Research & Development Fund, the Bank extended 100000 Pound
Sterling towards the functioning of an India Observatory and I.G.Patel
Chair at the Asia Research Centre of London School of Economics, in
participation with RBI.

* The Bank also approved setting up of a special cell named 'SBI Cell for
Public Leadership' in the prestigious Indian School of Business,
Hyderabad - which is currently ranked 15th among Global B Schools. The
Cell proposes to undertake research in the area of Leadership in Public
Sector with special reference to PSUs functioning in India. The
proposed project will not only add to the prestige of the Bank but also set
the standards for holistic leadership and effective change for public
sector organizations.

Miscellaneous

O Corporate Communication & Change
P Organisational Planning
Q Right to Information Act (RTI Act 2005)
R Human Resources
S Business Process Re-engineering
T Official Language Department
U Banking Operations Department

O. CORPORATE COMMUNICATION & CHANGE

* During the current year, the Mass Internal Communication Programme
named 'Parivartan' - which was rolled out to over 130,000 officers and
clerks last year - was modified, specially re-designed, and rolled
out across the Bank as 'Parivartan II' to cover 44,000 subordinate staff
including drivers, guards, liftmen, messengers, etc. spreading the
message of change, inclusiveness and empowerment. Over 1000 workshops
were held in a record 50 days.

* Meanwhile, Parivartan-I was simultaneously rolled out in all Associate
Banks after modifying the design to make it Associate Bank specific. In
all, over 53000 employees from clerks to senior management were
covered in all Associate Banks in about 1400 two day workshops. Special two
day workshops were held for the Top Management as well as the Top Union and
Association leaders of all Associate Banks creating an awareness of their
respective banks vis-a-vis the market and also sensitizing them on the
need for change.

* A series of non business HR initiatives were introduced and
monitored in the Bank to bring about an open, inclusive work culture
such as introduction of rolling shields, recognition dinners, Best
Employee of the Month, Best RM, monetary incentives, inclusive Town
Hall meetings with Union and Association leaders, Open House hours for
all staff with Circle Management Committee (CMC), etc.

* As a part of the Transformation process, special five day intense brain
storming Conclaves were held for the newly promoted Deputy General Managers
of the Bank.

* Internal communication in the Bank was enhanced by sharing Corporate
Video Clips with all Circles and sharing of best practices among all
Circles. With a view to change work culture, placard campaigns and video
campaigns through strategically placed plasma TVs were run.

* An ambitious new Parivartan' programme titled 'Citizen SBI', envisaging
deep rooted, multilevel attitudinal change and transformation in the
Organization, consisting of waves of HR interventions to be rolled out over
the next two years was also initiated during the year.

P. ORGANISATIONAL PLANNING

Organisational Changes: The under noted important organisational changes
were made during the year:

* Upgradation of the post of DMD & GE (A&S) to MD & GE (Associates and
Subsidiaries).

* During the year, with a view to bringing about greater speed and
efficiency and improving customer service, the organisational structure has
been delayered by dismantling of Modules. A few posts in keeping with new
structure have been created.

Q. RIGHT TO INFORMATION ACT 2005 (RTI ACT 2005)

Suitable structure has been put in place at Branches/Administrative
Offices/Regional Business Offices/Local Head Offices for handling requests
and appeals under RTI Act 2005. Further, an exclusive RTI Department' has
been created in Corporate Centre to handle and co-ordinate various issues
under the Act. For convenience of the public, the Bank has also created an
RTI link in its website.

R. HUMAN RESOURCES

Learning & Development

* Several key initiatives have been taken by the Bank to enthuse and
motivate the employees to perform better so as to achieve the Bank's growth
plans.

* A Leadership pipeline' initiative has been taken on hand with the
objective of grooming the officials from the level of Scale-IV upto GM for
future leadership positions. Services of reputed institutions like ISB/Duke
University/IIMs have been engaged for the purpose.

* As the accreditation process is mandatory for the recovery agents, the
Bank has gone in for accreditation of one of the training institutions for
training of debt recovery agents to facilitate the future appointments of
recovery agents.

Personnel Management:

* The Performance Linked Incentive Scheme of the Bank has been broad-based
with an aim to foster team spirit amongst the employees and to motivate
them to excel in customer service. This also helped the Bank in exploiting
the new emerging business opportunities to achieve the Bank's growth plans.

* The Bank has gone for contract employment, on cost to company basis, of
specialists like Chartered Accountants, Law Officers, Statisticians,
Economists, Customer Relation Executives, Credit Analysts etc. to take care
of Bank's growing needs to face competition.

* The Bank revised the Family Pension Scheme for the family pensioners of
the Bank retrospectively from the 1st May 2005.

* The pension fund has been separated from the Banks' liability after
obtaining necessary approval from the Board of Trustees. The fund will be
managed by the Treasury Dept. of SBI for better returns.

HRMS Project

* For leveraging Technology in employee management area, the Bank has
implemented automation of its HR process through SAP-ERP- HRMS software. A
centralized database of all employees across SBI is now available.

* Salary processing for 2.05 lakh employees across SBI and pension
processing of approximately 1 lakh SBI/IBI pensioners have been
centralized.

* Besides the above, HRMS will make available a variety of services like
online request submission and viewing of data etc. to all the employees of
the Bank on an online real time' basis. This will increase efficiency in
HR operations and help the management in making employee related decisions
faster.

Recruitment

* Massive recruitment exercises were undertaken during the year by
recruiting 30231 clerical staff and 3472 Officers, out of which 25735
clerical staff and 3286 Officers had already joined.

* This recruitment drive, which is the largest recruitment exercise
undertaken in the banking sector, was made to augment the staff strength in
tandem with the Bank's branch expansion drive. This will not only help in
reducing the age profile of staff but will also provide an opportunity for
greater mobility and marketing thrust across the Bank to achieve its growth
plans.

Industrial Relations:

* Excellence in relationship with the members of both the Staff and
Officers Federations was achieved by sorting out various industrial
relations issues through their consistent support and healthy
dialogue/discussions during the year.

* Enhancement in limits under various staff loan schemes and other
initiatives have been taken up during the year, which, besides providing
better facilities / incentives to the employees, helped in creating better
industrial relations environment in the Bank.

Staff Strength:

The Bank had a total strength of 205896 as on the 31st March 2009. Of this,
31.42% were officers; 47.10% were clerks and the remaining 21.48% were sub-
ordinate staff.

Implementation of Persons With Disabilities (PWD) Act, 1995

Our Bank provides reservation to Persons with Disabilities (PWDs) as per
the guidelines of the Government of India and Section 33 of the PWD Act,
1995. The total number of Persons with Disabilities, employed as on
31.03.2009, were 1767 (details given as under).

Table : 12

Category Total No. of Persons
with Disabilities

Officers 64685 351
Clerical 96974 1168
Sub-staff 44237 248
TOTAL 205896 1767

Representation of Scheduled Castes and Scheduled Tribes

* As on 31st March 2009, 19.20% of the Bank's total staff strength belonged
to Scheduled Castes and 6.52% belonged to Scheduled Tribes.

* In order to discuss issues relating to Reservation Policy and effectively
redress the grievances of SC/ST employees, Liaison Officers have been
designated at all the Local Head Offices of the Bank as also at the
Corporate Centre in Mumbai.

* Senior officials of the Bank hold regular meetings at periodic intervals
with the representatives of the National Federation of State Bank of India
SC/ST Employees at Corporate Centre level as also with the representatives
of Circle SC/ST Welfare Associations at the Local Head Office and
Administrative Office levels where issues pertaining to implementation of
Reservation Policy and other points are discussed. This has ensured

redressal of grievances of these communities to a large extent.

* The Bank has been conducting workshops for SCs/STs/OBCs to impart up- to-
date knowledge/latest operat ives about the Reservation Policy and related
areas to the Liaison officers for SCs/STs, in-charge of SC/ST cells at
LHOs, and the representatives of SC/ST Welfare Associations.

* Pre-recruitment and pre-promotion training programmes are being conducted
to enable SC/ST candidates to achieve the prescribed standards to ef fect
ively compete wi th other candidates.

S. BUSINESS PROCESS RE-ENGINEERING (BPR)

Bank has redesigned the business processes to leverage the Core Banking
platform to improve performance in key business areas and quality of
customer service. The BPR Project undertaken by the Bank is working to
transform it into a world class institution by proactively reaching out to
acquire new customers, buildingdeep and lasting relationships with
existing customers and providing all customers with the best quality
of service across multiple channels. Various BPR initiatives undertaken
are detailed below:

* Centralised Processing Centres for Retail loans, Small & Medium
enterprise loans, and Trade Finance were set up, wherein the end to
end processes have been taken over from branches.

* Relationship Managers have been positioned at strategic centres to
extend personalized service to mass affluent and HNI clients, and
also for Medium Enterprises clients.

* Dedicated Sales Teams like Home Loans Sales Team and Multi Product Sales
Team have been set-up to target niche markets and to up-sell and cross-sell
various products.

* Assured Standard Turn Around Times for various sanction processes have
been fixed for Asset CPCs.

* Quality of Assets and Documentation has improved.

* All branches in trade finance intensive centres have been made capable
to handle non-fund based business like LCs/BGs and Bills with speed and
ease.

* Capability has been provided to branches for speedy opening of
new accounts and issue of personalised cheque books.

* Clearing CPCs have been established to centralise clearing related
activities and free up branches to focus on customer service.

* Pensions are being paid to pensioners through Centralised Pension
Processing Centres accurately and in time.

* Document Archival Centres have been designed to free up valuable space in
branches.

* Inward Remittance Cell has been opened to handle all retail
remittances received through SWIFT at a single point.

* For increasing speed and efficiency and to improve customer
service, the organizational structure has been delayered.

* A 24x7 contact centre has been established with toll-free number for
providing information on products and services as well as account
and balance queries to the customers. This service is being extended to
NRIs in 17 countries shortly.

During the year, top 113 business centres of the country have been fully
covered by the above BPR initiatives which have stabilised very well and
have enabled branches to serve customers better, with speed and accuracy.

All these initiatives have helped the Bank in creating a new
operating architecture capable of meeting global competition.

T. OFFICIAL LANGUAGE DEPARTMENT

The Bank complied with the statutory requirements relating to the
Official Language policy and made several efforts to deliver its
products and services to the masses in Hindi and other Indian languages.
These include installation of bilingual software in its 11448 Core
Banking branches during the year which enabled customers to get their
pass books, statements of account and other reports in Hindi. In addition
to this, the number of hits on ATMs in Hindi reached 46 lakhs and in
other Indian languages, 39 lakhs per month as a result of efforts made by
the Bank to provide its services in Hindi and other Indian languages to its
customers.

U. BANKING OPERATIONS DEPARTMENT

* The Bank has put in place, a Board approved revised policy on Know
Your Customer (KYC)/ Anti Money Laundering (AML)/Combating the Financing
of Terrorism (CFT) measures in line with the guidelines issued by
Reserve Bank of India on the subject.

* Monitoring of Transactions is done with a view to submit the required
reports to Financial Intelligence Unit-India mandated by rules of
Prevention of Money Laundering Act, 2002.

* With a view to implementing and supporting monitoring of
transactions, the Bank has acquired appropriate software which is
processing all transactions handled by all domestic branches of the Bank,
on a day to day basis and monthly Cash Transaction Reports (CTRs) are
being generated along with Suspicious Transaction Report (STR) alerts daily
in offline mode, for analysis by the dedicated KYC/AML Cell.

* Training on KYC/AML is being imparted on an ongoing basis in the Bank.
In addition to exclusive KYC/AML programmes, all training programmes/
seminars/workshops have a KYC/AML session included in the programme.

Responsibility Statement

The Board of Directors hereby states:

i. that in the preparation of the Annual Accounts, the applicable
accounting standards have been followed along with proper explanation
relating to material departures;

ii. that they have selected such accounting policies and applied them
consistently and made judgements and estimates as are reasonable and
prudent, so as to give a true and fair view of the state of affairs of the
Bank as on the 31st March 2009, and of the profit and loss of the Bank for
the year ended on that date;

iii. that they have taken proper and sufficient care for the maintenance
of adequate accounting records in accordance with the provisions of the
Banking Regulation Act, 1949 and State Bank of India Act, 1955 for
safeguarding the assets of the Bank and preventing and detecting
frauds and other irregularities; and

iv. that they have prepared the annual accounts on a going concern basis.

Acknowledgement

During the year, Shri R. Sridharan was appointed as Managing Director with
effect from the 5th December 2008, in place of Shri T.S.
Bhattacharya, who retired on the 31st January 2008. Shri Suman Kumar
Bery and Shri Ashok Jhunjhunwala, Directors, resigned from the Board
and were re-elected under Section 19(c) of the SBI Act., by the
Shareholders along with Shri Dileep C. Choksi and Shri S. Venkatachalam for
a period of 3 years with effect from the 24th June 2008.

Dr. Rajiv Kumar was nominated to the Central Board with effect from 8th
September 2008 by the Government of India. Shri D. Sundaram was elected by
the Shareholders under Section 19(c) with effect from the 13th January
2009, in place of Shri Suman Kumar Bery, who resigned from the Central
Board on the 18th September 2008, for the residual period upto the 23rd
June 2011.

Consequent to his superannuation on 30th April 2009, Shri Arun
Ramanathan, GOI Nominee Director [under Section 19(e)], ceased to be
a Director on the Bank's Board. The Directors place on record their
appreciation of the contribution made by Shri Arun Ramanathan and
Shri Suman Kumar Bery to the deliberations of the Board.

For and on behalf of the
Central Board of Directors

O.P. Bhatt
Date : 9th May, 2009 Chairman