Annual Report - State Bank of Bikaner and Jaipur - 2009-2010

STATE BANK OF BIKANER AND JAIPUR

ANNUAL REPORT 2009-2010

DIRECTOR'S REPORT

REPORT OF THE BOARD OF DIRECTORS TO THE STATE BANK OF INDIA, THE RESERVE
BANK OF INDIA AND THE GOVERNMENT OF INDIA IN TERMS OF SECTION 43(1) OF THE
STATE BANK OF INDIA (SUBSIDIARY BANKS) ACT 1959.



The Board of Directors of State Bank of Bikaner and Jaipur have pleasure in
presenting this Annual Report together with the audited Balance Sheet and
Profit and Loss Account of the Bank for the year ended 31st March 2010.

MANAGEMENT DISCUSSION AND ANALYSIS

ECONOMIC ENVIRONMENT

WORLD ECONOMY

The year 2009-10 has witnessed some recovery in the global economy
signalling the end of the most severe recession since the Second World War.
The International Monetary Fund (IMF), in its April 2010 issue of the World
Economic Outlook, has revised the global growth outlook for the year 2010
to 4.2%, compared to a decline of 0.6% in the year 2009. The global
recovery has evolved better than expected but the strength of recovery
varies from country to country. Recovery in the advanced economies is
expected to remain sluggish, while economic activity in the developing
economies is expected to expand vigorously, driven by the domestic demand.
However, a major concern remains about the sustainability of growth once
the stimulus packages and monetary accommodation are withdrawn.

INDIAN ECONOMY

The Indian economy has exhibited strong resilience notwithstanding the
global economic crisis. As per the advance estimates made by the Central
Statistical Organisation, India's GDP at 2004-05 prices is expected to
record a growth of 7.2% during 2009-10 compared to the growth of 6.7%
recorded during 2008-09. The Index of Industrial Production (IIP) has
recorded a growth of 10.1 % during April-February 2009-10 compared to a
growth of 3.0% in the corresponding period last year. Growth of core
infrastructure industries has also improved to 5.5% during 2009-10, as
against 3.0% during the previous year.

There has been a sharp slowdown in international trade during 2009-10.
India's exports have declined by 4.7% in US$ terms during 2009-10 while
imports have declined by 8.2%. Encouraged by global recovery prospects and
India emerging as a major attractive destination, foreign institutional
investors have invested a net amount of US$ 30.2 billion in Indian equity
and Debt markets during 2009-10 compared to an outflow of US$ 9.8 billion
in 2008-09. This, together with foreign direct investment inflows, has
resulted in India's foreign exchange reserves rising by US$ 27.1 billion to
reach a level of US$ 279.1 billion as at end-March 2010.

Since October 2009, Government of India has commenced releasing Wholesale
Price Index (WPI) inflation figures on a monthly basis. Weekly inflation
now covers only primary articles and fuel products. During 2009-10, WPI
inflation remained in the range of -1.0% to 1.5% between March and October
2009. However, with global rise in commodity and fuel prices coupled with
the worst monsoon since 1972 which impacted food prices, inflation rose to
touch a 17 month high level of 9.9% in March 2010. In order to revert to
the path of fiscal consolidation, Government of India has commenced
withdrawal of the fiscal stimulus by increasing the central excise (Cenvat)
rate from 8% to 10% in the Union budget 2010-11.

RAJASTHAN ECONOMY

Rajasthan is the largest State in the country geographically, covering
10.4% of the total area and 5.5% of the total population in the country.
Agriculture plays an important role in the State's economy since about
76.6% people live in rural and semi-urban areas and twothirds of the State
population depend upon agriculture and allied activities for their
livelihood. During 2009-10, the State has received deficient monsoons to
the extent of 33.6%, as a result of which agriculture production is
expected to decline by 35.8%. Nevertheless, with the help of better growth
in industries and services sector, the State GDP at constant prices is
expected to record a growth of 2.5% during 2009-10, as against the growth
of 6.6% during 2008-09.

DEVELOPMENTS IN THE FINANCIAL SECTOR

The year 2009-10 witnessed a slowdown in the deposits and advances growth
of scheduled commercial banks. The aggregate deposits and advances growth
of scheduled commercial banks stood at 17.0% and 16.7% respectively during
2009-10, as against 19.9% and 17.5% respectively during the previous year.

During the first half of the financial year, RBI continued with its
accommodative monetary stance to support growth and a large government
borrowing programme to finance the fiscal stimulus packages. Reverse repo
and repo rates were cut by 25 by each in April 2009 to 3.25% and 4.75%
respectively. However, with economic recovery gaining momentum coupled with
a sharp rise in inflation towards the last quarter of the financial year,
RBI commenced monetary tightening measures. Accordingly, Cash Reserve Ratio
was hiked by 75 by to 5.75% in February 2010 while the reverse repo and
repo rates were hiked by 25 by each in March 2010 to 3.5% and 5.0%,
respectively.

With continued significant liquidity in the financial system, interest
rates generally softened during 2009-10. The interest rates on deposits of
major banks above one year maturity declined from 7.5-9.25% as at end-March
2009 to 6.0-7.5% by end-March 2010, while the benchmark prime lending rates
declined from 11.5-14.0% in end-March 2009 to 11.0-12.0% by end-March 2010.
Equity markets bounced back sharply in line with the global trend. As at
endMarch 2010, BSE Sensex closed at 17,528, recording a growth of 80.5%
over end-March 2009 level. During the year, Indian Rupee appreciated by
11.4% against US$, 6.6% against British Pound/ Japanese Yen and 10.3%
against Euro.

Some of the important policy pronouncements of the year 2009-10 included
(a) liberalisation of branch authorisation policy by RBI to allow setting
up offsite ATMs without prior approval; (b) application of interest on
savings bank accounts on a daily product basis with effect from April 1,
2010; (c) providing flexibility to domestic scheduled commercial banks to
open branches in Tier 3 to 6 centres (with population up to 50,000) without
prior authorisation; (d) expanding the list of entities eligible to be
appointed as banking correspondents; (e) increase in provisioning
requirement for advances to commercial real estate sector classified as
standard assets' from 0.40% to 1 %; and (f) advising banks to augment
their NPA provisioning cushions so as to ensure that the total provisioning
coverage ratio, including floating provisions, is not less than 70%, to be
achieved by end-September 2010.

OPPORTUNITIES, CHALLENGES AND OUTLOOK

The year 2010-11 is expected to be a more promising year for the banking
industry compared to the year 2009-10. Subject to normal monsoons, the
overall

GDP growth is likely to be in the range of 8.0-8.5% and the endeavour of
the Government of India is to find the means to cross the double digit
growth barrier'. The recently released Financial Stability Report by RBI
has indicated that the banking sector remains healthy with higher
capitalization and financial leverage. Credit quality remains robust and
the share of low cost current and savings deposits in total deposits is
also high. Stress tests also indicate that banking sector is comfortably
resilient. However, mark-to-market impact on the investment portfolio,
increased provisioning requirement and calculation of interest on savings
bank deposits on a daily basis from April 1, 2010 are likely to put some
pressure on the margins of banks.

The Government of Rajasthan has proposed an increase of 27.8% in the Annual
Plan Outlay for the year 2010-11 compared to modified Annual Plan Outlay
for the previous year, which is expected to improve demand. During 2009-10,
commercial production of crude oil has commenced at Mangla oilfield in
Barmer district and the recent announcements indicate likelihood of much
larger oil reserves. The State continues to attract large scale investments
in power (both conventional and non-conventional), roads, information
technology, oil & gas, textiles, cement and hospitality sectors. The recent
implementation of farm debt waiver/ NREGA schemes and Pay Commission awards
has provided more incomes in the hands of people particularly in the rural
areas. Besides, with good possibility of normal monsoons in 2010, it is
expected that the State economy would bounce back strongly and provide much
better opportunities for the Bank in the year 2010-11.

The major challenges before the Bank shall be to continue improving its
market share, maintain asset quality, optimally utilize advanced technology
for increase in business and profitability, develop sophisticated risk
management systems, maintain net interest margin, increase non-fund based
business, achieve further improvement in customer services and adopt best
Corporate Governance practices.

CORPORATE OPERATIONS

BUSINESS PERFORMANCE

The overall business of the Bank (deposits plus gross advances) reached a
level of Rs.81,622 crore as at endMarch 2010 as against Rs.69,312 crore as
at end-March 2009, recording a growth of Rs.12,310 crore (17.8%). The total
deposits increased by Rs.6,835 crore (17.4%) to reach a level of Rs.46,059
crore while gross advances increased by Rs.5,475 crore (18.2%) to reach a
level of Rs.35,563 crore by endMarch 2010. Due to general softening of
interest rates, the cost of deposits of the Bank declined from 6.72% in
2008-09 to 6.20% in 2009-10 while the yield on advances declined from
10.98% to 10.14%.

TREASURY AND INVESTMENTS

As a consequence of the significant liquidity infusion by RBI in the
previous year, the systemic liquidity remained comfortable during 2009-10
and accordingly the money market rates remained soft. The Bank utilized the
call money, Collateralized Borrowing and Lending Obligation (CBLO) and
Reverse Repo platforms for liquidity management during the year. Shortterm
surplus funds were also deployed in the liquid mutual funds and
certificates of deposits to improve the overall yield.

The sentiments in the Government securities markets remained bearish during
the year on account of a record Government borrowing programme and rising
inflation during the second half. The yield on 10 year benchmark government
securities moved up from 7.01% as at end-March 2009 to 7.87% as at end-
March 2010. With the equity market rallying strongly in 2009-10, the Bank
invested in the primary issuances and bonds of select companies with sound
fundamentals and undertook trading in the secondary market.

The Bank's net investments increased from Rs.10,999 crore as at end-March
2009 to Rs.13,601 crore as at end-March 2010, recording a growth of 23.7%.
The yield on investments declined from 6.90% in 2008-09 to 6.25% in 2009-
10, in line with the market trend.

FINANCIAL HIGHLIGHTS

NET INTEREST INCOME

The Bank's gross interest income increased from Rs.3810.28 crore during
2008-09 to Rs.3977.22 crore during 2009-10, recording a growth of 4.4%.
Interest expenditure increased by 2.2% to Rs.2765.69 crore, as against Rs.
2707.06 crore in the previous year. The net interest income recorded a
growth of 9.8% from Rs.1103.22 crore in 2008-09 to Rs.1211.53 crore during
2009-10. Due to higher decline in yield on advances relative to cost of
deposits, the net interest margin declined from 2.81% in 2008-09 to 2.70%
in 2009-10

NON INTEREST INCOME

The non-interest income of the Bank recorded a growth of 1.0% from
Rs.577.05 crore in 2008-09 to Rs.582.67 crore during 2009-10. The growth
was lower on account of 67.2% decline in profit on foreign exchange
transactions from Rs.69.74 crore in 2008-09 to Rs.22.88 crore in 2009-10.
The Government Commission income and profit on sales of investments
recorded a growth of 15.0% and 20.9% respectively during the year under
review.

OPERATING EXPENSES

During 2009-10, the operating expenditure increased to Rs.890.47 crore,
recording a growth of 13.1% from Rs.787.43 crore during 2008-09. Of this,
employee costs increased by 8.9% to Rs.501.82 crore, while other operating
expenditure increased by 19.0% to Rs.388.65 crore.

PROFIT

The operating profit of the Bank increased to Rs.903.73 crore during 2009-
10, recording a growth of 1.2% compared to Rs.892.84 crore in the previous
year. The net profit recorded a growth of 12.8% from Rs.403.45 crore in
2008-09 to Rs.455.16 crore in 2009-10.

KEY FINANCIAL INDICATORS

The return on assets improved to 0.93% during 2009-10 as against 0.92% in
the previous year. The return on equity stood at 18.83% as against 19.71 %
in the previous year. The earnings per share increased from Rs.80.69 in
2008-09 to Rs.91.03 in 2009-10 while the bookvalue per share improved from
Rs.409.29 in 2008-09 to Rs.483.48 in 2009-10. As at end-March 2010, the
capital adequacy ratio of the Bank stood at 11.94% and 13.30% as per Basel
I and II norms, respectively as against 13.18% and 14.52% as per Basel I
and II norms, respectively as at end-March 2009. This was well above the
RBI benchmark of 9%. Due to rise in NPAs on account of continued stress
faced by the industrial sector, the Bank's Gross NPA ratio increased from
1.63% as at end-March 2009 to 1.72% as at end-March 2010 while Net NPA
ratio improved from 0.85% to 0.77%. The average business per employee
increased to Rs.628 lakh during 2009-10 as against Rs.555 lakh in the
previous year. The net profit per employee improved to Rs.3.96 lakh during
2009-10, compared to Rs.3.55 lakh during 2008-09. The average business per
branch increased to Rs.83.89 crore during 2009-10, as against Rs.74.34
crore in the previous year.

DIVIDEND

The Bank has declared a dividend of 144% (Rs.14.40 per share of face value
Rs.10) for the year 2009-10, which is higher than the dividend of 120% paid
for the year 2008-09.

CREDIT MANAGEMENT

The overall credit demand remained subdued during the first three quarters
of 2009-10 and signs of improved growth became more evident during the
fourth quarter. While the Bank continued to target large corporates for
qualitative volume growth, the thrust of the year remained on retail
advances particularly agriculture, personal segment and Micro, Small &
Medium Enterprises (MSMEs).

The Bank's retail advances comprising personal segment, small business and
agriculture advances increased by Rs.2,798 crore, registering a growth of
19.9% which was better than the growth of 8.7% recorded in the previous
year. The Commercial & Institutional (C&I) segment advances (other than
food credit) registered a growth of Rs.3,066 crore i.e. 20.4%, compared to
the growth of 27.5% in the previous year. Under the C&I segment, the Bank
continued to lay emphasis on financing infrastructure projects including
power and road, besides steel, cement, textiles and construction sectors.

In order to further improve the turnaround time for credit delivery, a
Centralized Processing Cell (CPC) has been set up during 2009-10 for high
value advances on the lines of similar initiatives for retail advances
under the Business Process Re-engineering initiatives. Further, the Project
Finance Cell set up at the Head Office in July 2008, continued focused
attention on appraisal of projects involving cost upto Rs.100 crore. A
total of 35 projects, with an outlay of Rs.2,092 crore were appraised by
the Cell during the year. The CPC sanctioned credit facilities aggregating
Rs.6,390 crore to high value new customers under the C&I/ mid-corporate
segment besides increasing credit limits of the existing customers based on
assessment. In view of slowdown in demand, a total of 28 large accounts
were re-structured upto 31-03-2010 involving an exposure of Rs.1,097 crore.

REPLACING HIGH COST BULK DEPOSITS

In line with the efforts initiated in the previous year, the Bank continued
to replace high cost bulk deposits by a relatively more stable personal
segment deposits. The ratio of high cost (over card rate) bulk deposits and
Certificates of Deposits to total deposits, which was brought down from
29.5% in end-March 2008 to 18.4% as at end-March 2009, declined further to
14.2% as at endMarch 2010.

PERSONAL BANKING

The growth in personal segment deposits during 2009-10 stood at Rs.4,585
crore (22.7%) which was better than the Bank's overall deposit growth of
17.4%. In order to increase new customer acquisition, special campaigns
were launched for opening of savings and current accounts with the Bank.
During the year, the Bank opened 9.66 lakh new savings accounts including
1.53 lakh no-frills accounts (Saral Bachat Khata) launched for the purpose
of financial inclusion.

With aggressive marketing, the personal segment advances recorded a growth
of Rs.956 crore (17.6%), which was better than the growth of Rs.563 crore
(11.4%) recorded in the previous year. The Bank launched an 'Interest
Subsidy Scheme for Housing the Urban Poor' and 'Pension Plus Loan' schemes
during the year. Besides, existing schemes such as car, housing, education,
mortgage, two-wheeler, rentplus, gold loan and personal loan schemes were
modified in view of the market dynamics. 'My Home Loan' and 'Easy Car Loan'
campaigns were also launched during the year. With special efforts,
outstanding car loans and housing loans recorded a growth of 75.2% and 18.1
%, respectively during 2009-10, as against a growth of 53.8% and 8.9%
respectively in the previous year. During the year the Bank booked around
1.29 lakh new advances accounts and disbursed Rs.2,497 crore under various
loan schemes under the personal banking segment.

PRIORITY SECTOR LENDING

Priority sector advances remain a major thrust area of the Bank's
operations. As at end-March 2010, the Bank's priority sector advances
increased to a level of Rs.13,560 crore, as against Rs.11,758 crore in the
previous year. This constituted 45.06% of the Adjusted Net Bank Credit,
which was above the RBI benchmark of 40%. Priority sector advances in
Rajasthan stood higher at 70.77%.

AGRICULTURE

The Bank accords high priority towards lending to agricultural sector. The
flow of credit to agriculture increased from Rs.2,855 crore in 2008-09 to
Rs.3,315 crore in 2009-10, recording a growth of 16.1 %. The outstanding
level of advances to agriculture, including the amount receivable from
Government on account of Agriculture Debt Waiver Scheme, increased by
18.7%, from Rs.5,134 crore as at end-March 2009 to Rs.6,092 crore as at
end-March 2010. Agriculture credit (including investments in RIDF)
constituted 20.35% of the Adjusted Net Bank Credit, which was above the RBI
benchmark of 18.0%. In the State of Rajasthan, the agricultural advances
stood even higher at 38.27% of the Adjusted Net Bank Credit. As against the
stipulated target of adding 100 new farmers on an average by each rural and
semi-urban branch, the Bank added 191 new farmers per rural and semi-urban
branch during the year. The Bank issued 1.35 lakh Kisan Credit Cards (KCCs)
during the year, taking the total number of KCCs to 6.98 lakh as at end-
March 2010.

In order to bring the farmers out of the clutches of the money lenders, the
Bank had introduced a Debt Swap Scheme in the previous year. During 2009-
10, assistance disbursed under the Debt Swap Scheme stood at Rs.71.52 crore
benefiting 17,273 farmers. The outstanding assistance under the Scheme more
than doubled from Rs.65.69 crore as at end-March 2009 to Rs.134.67 crore as
at end-March 2010. The number of beneficiaries under the Scheme also
increased from 17,127 in the previous year to 33,376 farmers in March 2010,
recording a growth of 94.9%.

Under Agriculture Debt Waiver and Debt Relief Scheme, 2008, the focus has
now shifted towards maximizing the recovery in respect of cases where the
25% relief is to be provided subject to recovery of balance amount within
the stated period. A special scheme of OneTime Settlement (OTS within OTS)
was launched by the Bank during the year so as to provide some additional
relief to the distressed farmers. Out of the total recoverable amount of
Rs.636 crore under this category, an amount of Rs.557 crore (87.6%) has
been recovered up to end-March 2010. In the Union Budget 2010-11, the
Government of India has extended the due date of repayment by these farmers
from December 31, 2009 to June 30, 2010, which has provided some more time
to the Bank for recovery of these dues.

FINANCIAL INCLUSION

Following successful implementation of financial inclusion in 6 districts
of Rajasthan, the Bank has commenced IT enabled Financial Inclusion scheme
viz.'SBBJ Tiny' which entails opening of no-frills' accounts and providing
biometrically enabled smart cards to population living in the unbanked
areas of the State. Initially, the scheme covers savings account facility,
but gradually other products like recurring deposits, fixed deposits,
investments, insurance, remittances, loans, etc. are proposed to be added
in a phased manner. The technology platform for the same has been finalized
during the year 2009-10 conforming to the Open Standards for Smart Card
Based Financial Inclusion solutions prescribed by Indian Banks' Association
and Institute for Development and Research in Banking Technology (IDRBT).

In line with RBI / Government of India directives, the Bank is expected to
provide banking facilities in the identified 906 villages of Rajasthan
having a population of over 2000 each, with the help of biometrically
configured smart cards and by engaging business correspondents, by March
2011. During 2009-10, the Bank commenced the pilot phase of financial
inclusion initiatives in three villages viz. Boore Khurd in Alwar District,
Ranchorpur in Udaipur District and Bhairwa in Jaisalmer District and opened
450 smart card based no-frills' savings accounts. With the help of
experience gained, the Bank plans to open 3 lakh such accounts during 2010-
11.

FINANCIAL LITERACY AND CREDIT COUNSELLING CENTRES

The Bank believes that the financial education is an integral part of
financial inclusion. Accordingly, in order to educate farmers and other
people in rural/ urban areas with regard to various financial products and
services available from the formal financial sector, the Bank plans to set
up Financial Literacy and Credit Counselling Centres (FLCCs) in 9 districts
of Rajasthan where the Bank has the lead bank responsibility. These FLCCs
are expected to become operational during 2010-11 and such services would
be provided free of charge.

MICRO CREDIT

In another initiative in the pursuit of financial inclusion, the Bank has
been consistently ranked number one in credit linking Self Help Groups in
the State since 2004-05. As at end-March 2010, the Bank has credit linked a
total of 27,019 Self Help Groups with disbursements of Rs.142.32 crore, out
of which 24,580 accounts are of women beneficiaries with disbursements of
Rs.122.63 crore.

MICRO, SMALL AND MEDIUM ENTERPRISES (MSMEs)

The main growth driver of the Indian economy, MSME sector accounts for 45%
of manufacturing sector output, 40% of India's exports and provides
employment to about 6 crore persons spread over 2.6 crore enterprises.

With the help of renewed emphasis on financing this sector, the outstanding
credit to MSME sector increased by 46.8% from Rs.4,015 crore as at endMarch
2009 to Rs.5,896 crore as at endMarch 2010. This includes retail trade
advances amounting to Rs.803 crore, which were included in the definition
of MSME sector by Government of India during the year 2009-10. As against
the target of doubling the credit flow to SME sector between 2005-06 and
2009-10 in terms of the policy package of Government of India, the Bank has
tripled the credit flow to this sector during the five year period.

As at end-March 2010 the outstanding assistance to micro and small
enterprises increased by 50.5% to reach a level of Rs.4,652 crore, as
against Rs.3,092 crore as at end-March 2009. As against the target of
financing 2805 new SME accounts (5 new accounts per urban/ semi-urban
branch), the Bank has assisted 25,730 new MSME units during the year 2009-
10. Since August 2008, the MSME units have been facing major constraints on
account of slowdown of demand from domestic and export sectors. In order to
help these units, the Bank has continued providing relief and concessions,
including relaxation in the lending rates, so as to enable them to revert
to the growth trajectory at the earliest. The benefit of SME Help Scheme
was extended to the new customers during the year. Besides, in order to
benefit the small borrowers, the maximum eligible loan under Laghu Udyami
Credit Card (LUCC) scheme was increased from Rs.10 lakh to Rs.20 lakh
during the year.

The Bank attaches high importance to providing collateral free loans to
Micro and Small Enterprises (MSEs) under the Credit Guarantee Scheme of
Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE).
During the year, the Bank provided new collateral free loans under the
Credit Guarantee scheme to 5,080 MSEs amounting to Rs.70.34 crore, taking
the level of these loans to Rs.105.56 crore to 8,403 units as at end-March
2010.

GOVERNMENT SPONSORED SCHEMES

Providing assistance to entrepreneurs under the Government sponsored
schemes has been one of the key strategies of the Bank in pursuit of
financial inclusion. The position under various Government sponsored
schemes as at end-March 2010 is as under:-

Scheme Number of Amount
Beneficiaries sanctioned
during the
financial year
(Rs. crore)

Prime Minister's 836 44.43
Employment Generation
Programme (PMEGP)

Swam Jayanti Gram 22079 43.83
Swarojgar Yojana (SGSY)

Swam Jayanti 4403 13.11
Shahri Rojgar
Yojana (SJSRY)

LOANS TO WOMEN BENEFICIARIES

As at end-March 2010,1.61 lakh women have benefited from financial
assistance under different schemes of the Bankwith total outstanding of
Rs.1628.29 crore, equivalent to 5.41% of the Adjusted Net Bank Credit,
which is above the 5% benchmark prescribed by RBI.

GOVERNMENT BUSINESS

The Bank conducts Government business on behalf of the State/ Central
Government departments through the authorised branches. Collection of
income tax, central excise, service tax, value added tax, etc. is also done
through the electronic mode. The Bank has established a Centralized Pension
Processing Centre (CPPC) which calculates as well as credits the accounts
of pensioners across all the branches. During 2009-10, commission income
from Government business increased by 15.0% to Rs.150.87 crore, as against
Rs.131.19 crore in the previous year.

INTERNATIONAL BANKING

The Bank has a wide network of 73 Authorized Category B' branches and 180
Category C' branches, equipped with the state of the art technology to
cater to the needs of exporters, importers and Non-Resident Indians (NRIs).
The Bank maintains 20 NOSTRO accounts in all major currencies and non-
account correspondent banking relationship with all major banking groups in
the world. Online remittance facility has been made available for NRIs and
the inward remittances are also facilitated through tie-ups with Gulf based
Exchange Houses. During 2009-10, the total number of Exchange Houses with
which the Bank has such arrangement, increased to 8. Besides, proprietary
forex trading has continued during the year to take the advantage of the
market movements.

During 2009-2010, the Bank's NRI deposits increased to Rs.816 crore,
recording a growth of 6.9% over the previous year. Despite steep fall in
country's exports and imports, the Bank's merchant turnover increased from
Rs.14,818 crore during 2008-09 to Rs.14,863 crore during 2009-10. Export
credit outstanding declined marginally from Rs.1,738 crore as at end-March
2009 to Rs.1,735 crore as at end-March 2010.

INDUSTRIAL REHABILITATION

In the area of Industrial Rehabilitation, the Bank continued to emphasize
on timely placing the potentially viable units under rehabilitation /
restructuring packages drawn under the aegis of BIFR/Corporate Debt
Restructuring (CDR) system. The Bank has its own Industrial Rehabilitation
Policy and Policy for Sale of NPAs which are reviewed and updated from time
to time. For recovery of Bank's dues in hard core stressed cases where
rehabilitation/ restructuring is not feasible, other measures including
action under SARFAESI Act, legal recourse, compromise settlements,
assignment of debt, are being adopted.

As at end-March 2010, the Bank had 27 large sick/weak units on its books
with aggregate outstanding of Rs.224.88 crore. There were 16 CDR cases with
aggregate exposure of Rs.423.75 crore and 23 BIFR cases with exposure of
Rs.200.58 crore. The Bank has been acting as BIFR's operating agency in 9
cases. During the year under review, 8 accounts with the exposure of
Rs.215.65 crore have been restructured under the CDR mechanism as required
by the economic crisis.

NPA MANAGEMENT

In order to control the Non-Performing Assets (NPAs), the Bank has been
intensively monitoring large value accounts, following closely with DRT/
BIFR and undertaking restructuring of viable accounts besides utilizing the
remedies available under the SARFAESI Act. Wherever desirable, the outright
sale of un-productive assets to Asset Reconstruction Companies is also
considered by the Bank. The progress in respect of current and potential
NPAs is monitored on a daily basis by providing separate templates on the
Bank's Intranet site, and also discussed with regional and zonal offices
through periodical videoconferencing. The total number of NPA free branches
stood at 83 as at end-March 2010, unchanged from the previous year.

Total reduction in NPAs during the year

2009-10 was Rs.395.18 crore. However, due to continued stress faced by many
sectors of the economy, new additions to NPAs stood at Rs.516.70 crore. As
a consequence, the gross and Net NPAs increased to Rs.611.85 crore and
Rs.271.25 crore respectively as at endMarch 2010, compared to Rs.490.33
crore and Rs.252.94 crore respectively as at end-March 2009. The Gross NPA
ratio increased from 1.63% as at endMarch 2009 to 1.72% as at end-March
2010, while the net NPA ratio improved from 0.85% as at end-March 2009 to
0.77% as at end-March 2010. The Bank is putting in place a multi-pronged
strategy to reduce NPAs during the year 2010-11.

RISK MANAGEMENT

The Bank has an integrated Risk Management System to deal with the credit,
market and operational risks. Risk management function is undertaken with
the help of well-designed organizational structure consisting of different
Committees atvarious tiers of administration. At the apex level, there is a
Risk Management Committee of the Board (RMCB) which is responsible for
policy and strategy for integrated risk management in the Bank. Besides,
there are Credit Risk Management Committee (CRMC), Asset Liability
Management Committee (ALCO), Market Risk Management Committee (MRMC) and
Operational Risk Management Committee (ORMC) for formulating and reviewing
the risk management policies and monitoring their implementation. Zonal
Risk Management Committees (ZRMCs) constituted at the Zonal Offices manage
operational risk at branches under their control. The Bank is Basel-II
compliant and the Capital to Risk Weighted Assets Ratio (CRAB) is also
being worked out as per the guidelines of Basel-II.

The risk management policies covering credit, market and operational risks
envisage identification, measurement and management of major risks faced by
the Bank. These policies are reviewed and updated from time to time keeping
in view the dynamic business environment. During 2009-10, the third phase
(Part-I) of Risk & Control Self Assessment (RCSA) workshop was completed at
350 branches. Phase-III (Part-II) of RCSA has also been rolled out at the
remaining 348 branches, BPR Processing centres and HO Departments. The
Operational Risk Management Manual is also in place for the help of the
operating staff.

In terms of RBI guidelines, the Bank is endeavouring to get the corporate
customers rated by external agencies for which the tie-ups have been made
with CRISIL, ICRA, CARE and Fitch (India) Ltd. Stress testing is being done
regularly for both credit and market risks and the policies relating to
such stress are updated annually. The Bank is in the process of migrating
to advanced approaches and the creation of a historical data base for the
purpose of computing Probability of Default (PD), Exposure at Default (EAD)
and Loss Given Default (LGD).

During the year, mid-office (domestic and forex) has been shifted from
Treasury and brought under the control of Integrated Risk Management
Department for effective monitoring of Market Risk, independent of treasury
operations. To monitor the resilience of the Investment Portfolio of the
Bank, stress tests and scenario analysis on market risk covering events
such as decline in stock indices, rise in bond yields and adverse movement
in foreign exchange rates have been conducted regularly during the year as
per the Stress Testing Policy of the Bank.

The Bank has a comprehensive Asset Liability Management (ALM) system in
place for effective management of liquidity position. The Asset Liability
Management Committee (ALCO) oversees and gives guidance for managing
liquidity mismatches in line with the prudential guidelines of RBI and
Bank's internal policies.

INTERNAL CONTROL, INSPECTION AND AUDIT

A well-established independent audit system and structure is functioning in
the Bank to ensure adequate internal control for safe and sound operations.
Internal Audit is carried out under Risk Focused Internal Audit (RFIA) as
envisaged under Risk Based Supervision of RBI with focus on assessment of
risk and internal control mechanism.

The branches have been categorized into three groups as per risk perception
and are subject to varying degrees of audit. During 2009-10, 606 branches
and 55 Cells under Business Process Re-engineering (BPR) initiatives have
been subjected to internal audit. No branch of the Bank remained overdue
for audit as on 31.03.2010. 124 branches, covering 66.8% of advances, 50.8%
of deposits and 95.0% of the nonfund based business have been placed under
continuous surveillance through the concurrent audit. Besides, 12 Head
Office Departments and 25 BPR entities are also subjected to concurrent
audit system. IS audit cell is in place to conduct IS audit of major IT
establishments including Core Banking project, Zonal Computer Centers, etc.
in accordance with RBI directives and Bank's IT Security Policy.

As at end March 2010, 98.9% of total branches of the Bank were rated
'Efficiently Run' or 'Well Run.'

RECONCILIATION OF INTER OFFICE TRANSACTIONS

As per RBI guidelines, all the entries need to be reconciled within a
period of six months from the date of their origin. By end-March 2010, the
Bank had reconciled inter-branch transactions originated upto 31.12.2009
i.e. well before the time limit prescribed. The Bank is committed to
perform better than the target set by RBI and shall aim at reconciling all
entries within two months of their origin.

INFORMATION TECHNOLOGY MOBILE BANKING

After successful implementation of core banking solution, the Bank has
taken technology to the next level by providing mobile banking facility for
the customers during the year. This new product viz. State Bank Freedom'
provides mobile banking facility to customers having savings or current
account with the Bank with an upper ceiling of Rs.50000 for funds transfer
and for purchase of goods/ services per day within overall calendar month
limit of Rs.2.501akh.

AUTOMATED TELLER MACHINES (ATMS)

During 2009-10, the Bank launched an aggressive drive to expand its ATM
network. A total of 455 new ATMs were installed during the year as against
89 ATMs installed in the previous year, taking the total number of ATMs to
950 including 3 Mobile and 5 Biometric ATMs. With this the number of ATMs
has surpassed the number of branches of the Bank. All the ATMs are
connected to the network of State Bank Group ATMs, thereby enabling more
than 28.9 lakh cardholders of the Bank to have access to over 21,465 ATMs
of the State Bank Group all over the country. The customers can also access
ATMs of other Banks free of charge upto five transactions per month subject
to a maximum of Rs.10,000 per transaction.

INTERNET BANKING

Internet banking facility for personal and corporate customers is available
at all the branches of the Bankwhich enables the customers to undertake
banking transactions from the comfort of their homes or offices. Various
facilities available through internet banking include on-line funds
transfer, payment of certain direct and indirect taxes of Central and State
Government, on-line application of Initial Public Offers (IPOs), booking of
railway tickets, payment of railway freight and utility bills of more than
130 billers.

In order to enhance the awareness about internet banking amongst customers
as well as staff members, the Bank has organized various seminars and
workshops besides releasing advertisements in the prominent newspapers.
Internet banking kiosks have been installed at 77 branches. With special
emphasis, the total number of internet banking users has nearly doubled
during the year to 3.52 lakh, including 3.241akh retail customers and
28,430 corporate customers. The Bank has launched a Loyalty Rewards
Programme for retail internet banking customers w.e.f. March 1, 2010 to
further popularize the product.

E - TRADE FACILITY

The Bank had launched an E-Trade facility during 2008-09 in association
with SBI Cap Securities Ltd., with the help of which, the customers can
trade on-line in stock markets, invest in IPOs or mutual funds. Encouraged
with the response, all the branches of the Bank have been authorised to
source the applications for Demat and E-trade accounts.

ELECTRONIC PAYMENT SYSTEMS

The Bank has continued to take measures to popularize Real Time Gross
Settlement (RTGS) and National Electronic Fund Transfer (NEFT) which enable
the customers to make their inter-bank remittances in a cost effective,
faster and secure manner through any branch or the internet banking mode.
Besides, State Bank Group Payment' functionality for electronic funds
transfer within the State Bank Group is also available to the customers of
the Bank.

IT SECURITY

The Bank has a comprehensive IT and Information Systems (IS) Security
Policy that addresses the threats and risks associated with IT enabled
services including addressing concerns of maintaining customers'
confidentiality, security and integrity of data. The Banking applications
have built-in security features like access control, data encryption and
transmission through secured channels as per the requirement of the
application. The threat of virus is minimized by having a centralized anti-
virus solution. Adequate Firewalls and Intrusion Detection Systems are in
place so as to prevent unauthorized access to the network. The security of
the network is being managed by Network Management Consultants of the Bank.
The Disaster Recovery Plan (DRP) and Business Continuity Plan (BCP) for all
the branches are in place. During the year, a Disaster Recovery site for
Head Office applications has been activated at the Zonal office, Udaipur,
which initially covers service tax, debt relief and pension applications.

Steps have been taken to increase security awareness amongst the staff as
well as the customers. An E-bulletin on IS Security and IT Governance has
been made available at the Bank's intranet site w.e.f. August 2009. A
handbook viz. 'Tips on Information Systems Security' has also been brought
out. Besides, sessions on information Security have been made a regular
feature in the training programmes conducted at the staff training centers.

In order to identify and examine suspicious transactions, the Bank has
installed the AMLOCK software besides setting up an Anti Money Laundering
Cell at the Head Office. The customers' accounts have been divided into
different risk categories and alerts are generated once any transaction
exceeds a pre-defined threshold limit. These alerts help in identification
of suspicious transactions, which are further reported to Financial
Intelligence Unit, Government of India, in appropriate cases.

CUSTOMER SERVICE

The primacy of the customer is the cornerstone of the Bank's policy.
Accordingly, providing value added services and upgradation of key
processes is a continuous feature in the Bank which has vastly helped in
providing customers a highly satisfying banking experience.

A robust grievances redressal mechanism is in place in the Bank to address
the problems faced by the customers and take proactive steps to mitigate
them. The standards of customer services are periodically reviewed by the
Customer Service Committee of the Board and Standing Committee on Customer
Service. Besides, meetings of the Customer Service Committee at the Head
Office, Zonal Office & branches are regularly held to oversee the customer
service standards. Customers are invited to attend the customer relations
programmes to review the quality of services rendered and to initiate
measures for bringing about on-going improvement in the service quality.
The Bank abides by the Code of Bank's Commitment to Customers' instituted
by the Banking Codes and Standards Board of India and is committed to
provide quality services to its esteemed customers.

DISCLOSURE OF COMPLAINTS/ UNIMPLEMENTED AWARDS OF BANKING OMBUDSMEN

In terms of RBI circular DBOD. No. Leg BC.60/09.07.005/2006-07 dated
22.02.2007, the information in respect of customer complaints and awards
passed by Banking Ombudsmen is given in the Table below:-

A. Customer Complaints

(a) No.of Complaints pending at : 31
the beginning of the year

(b) No. of Complaints received : 3703
during the year(*)

(c) No. of Complaints redressed : 3677
during the year(*)

(d) No. of Complaints pending : 57
at the end of the year

(*) Excluding 1660 complaints
found non-maintainable.

B. Awards passed by the Banking
Ombudsmen

(a) No. of unimplemented Awards : -
at the beginning of the year

(b) No. of Awards passed by the : 1
Banking Ombudsmen during the year

(c) No. of Awards implemented : 1
during the year

(d) No. of unimplemented Awards : -
at the end of the year

BUSINESS PROCESS RE-ENGINEERING

The Business Process Re-engineering (BPR) initiatives at select centers
have gathered further momentum during 2009-10 with the loan Central
Processing Cells (CPCs) migrating to end-state, thereby empowering the
linked branches to concentrate on sales and service and optimize
transaction costs. As at end-March 2010, 15 loan CPCs at 14 centres
including Retail Assets Central Processing Centre (RACPC) / Small and
Medium Enterprises City Credit Centre (SMECCC) / Retail Assets and Small
and Medium Enterprises City Credit Centres (RASMECCCs) are handling
appraisal as well as maintenance of retail and SME loans for 238 linked
branches. 8 Relationship Managers-Medium Enterprises (RM-MEs) are pro-
actively mobilizing asset business from new and existing customers by
providing them single-point contact at 5 centres. Rural Central Processing
Centres (RCPCs) are operating at 11 centres catering to loan products in
rural and semi-urban branches on proto-type basis. Stressed Assets
Resolution Centres (SARCs) operating at 14 centres have helped in reducing
workload of recovery from the linked branches with minimum time and costs.
As at end-March 2010, 3 Trade Finance Central Processing Centres (TFCPCs)
are operating at Jaipur, Delhi and Udaipur, handling trade finance related
back office operations covering Inland and Foreign Trade transactions,
including issuance of Bank Guarantees and Letters of Credit.

The Bank has positioned 19 Relationship Managers-Personal Banking (RM-PBs),
providing relationship-based services to High Networth Individuals at 15
centres. Multi Product Sales Teams (MPSTs) are operating at 13 centres for
doorstep marketing of retail loans, small enterprise business loans as also
liability products. These teams also canvass cross-selling products of non-
banking subsidiaries of SBI viz. SBI Life and SBI Mutual Funds.

Centralised Clearing Processing Centres (CCPCs) are operational at 9
centres & handle both inward and outward clearing instruments of linked
branches. The Centralized Pension Processing Centre (CPPC) located at
Jaipur has relieved the 731 pension paying branches, of back office
functions related to pension payments and provides on-line credits to
pensioners' accounts. 9 Currency Administration Cells (CACs) at 8 centres
are managing remittance & transport of cash across Currency Chest branches,
linked branches and Off-site ATMs to help reduce hand balances.

The Liability Central Processing Centre (LCPC) located at Jaipur functions
as a centralized, computerized, coreenabled back office, for opening and
maintenance of liability accounts and related KYC compliances. The LCPC
manages the providing of Welcome Kit, personalized cheque books, scanning
and linking of signatures and centralized storage of account opening forms
& related documents. Currently 281 branches are linked to LCPC with the
coverage proposed to be extended to all branches in due course.

Keeping in view the centrality of customers, the Bank has taken up
redesigning of branches in an aggressive manner. As at end-March 2010,114
branches at BPR centres have been re-designed as per the requirements of
BPR initiatives of the Bank.

CROSS-SELLING

Cross-selling of life and non-life insurance, mutual funds and credit card
products has emerged as an important avenue to augment the non-interest
income of the Bank. For the purpose, the Bank has in place tie up
arrangements with SBI Life Insurance Co. Ltd., National Insurance Co. Ltd.,
SBI Mutual Funds, Birla Sun Life Mutual Fund and SBI Cards & Payments
Services Pvt. Ltd. During 2009-10, the Bank launched several campaigns for
marketing of these products which helped in increasing the total income
from cross selling activities from Rs.12.02 crore in 2008-09 to Rs.19.24
crore in 2009-10, recording a growth of 60.1 %.

APPLICATIONS SUPPORTED BY BLOCKED AMOUNT (ASBA)

In order to impart greater efficiency in public issuances, a supplementary
process of applying in the public issues has been introduced by the
Securities and Exchange Board of India (SEBI) viz. Applications Supported
by Blocked Amount (ASBA). The Bank has been authorised by SEBI as Self
Certified Syndicate Bank, eligible to accept applications under the ASBA
process. Upon stabilization of the Scheme, the Bank has designated 8 more
branches during 2009-10, which can acceptthese applications, taking the
total number of designated branches to 15. A total business of Rs.22.91
crore has been handled under theASBA process during the year under review.

COMMUNITY SERVICES BANKING

As a responsible Corporate citizen, the Bankcontinues to undertake
community based social activities such as tree plantation, free medical
camps, blood donation camps, establishing water huts, sports competitions,
etc. During 2009-10, the Bank provided two delivery vans to the Akshaya
Patra Foundation, Jaipur, for transportation of mid-day meals to the under-
privileged children in the Government schools. Assistance was provided to
Life Line Foundation engaged in the security, help and welfare of people
suffering from accidents on the National Highways. The Bank honoured widows
of exservicemen/ martyred soldiers in a rally organised for the welfare of
war-widows at Sikar and Churu. Every branch of the Bank continued to adopt
one girl child each from a poor family with an objective of providing
financial assistance for pursuing studies in Government/Municipal schools.
During the year, 'Jaipur Foot' were distributed to physically challenged
persons while blankets/ quilts/ sweaters were distributed to the needy
people. Assistance was also provided for development of a public park at
Barmer.

Besides, State Sports Council was provided assistance for organizing summer
sports camp for grooming junior sportspersons and the meritorious students
of the State were honoured with cash rewards and SBBJ Trophy.

ASSISTANCE TO MINORITY COMMUNITIES, WEAKER SECTIONS AND SCHEDULEDCASTES/
SCHEDULED TRIBES

The Bank continuously endeavours to reach out to the minority communities
particularly in the minority concentration districts/ towns identified by
RBI. As at end-March 2010, assistance to these communities stood at
Rs.843.60 crore spread over 71,428 accounts, while the financing to weaker
sections stood at Rs.5083.66 crore benefiting 6,71,802 persons. The ratio
of assistance to weaker sections as a percentage of Adjusted Net Bank
Credit stood at 16.89%, as at end-March 2010, which was above the benchmark
of 10% prescribed by RBI.

As at end-March 2010, the outstanding assistance towards Scheduled Castes
(SCs)/ Scheduled Tribes (STs) stood at Rs.1518.77 crore in 1,89,452
accounts. Advances under Differential Interest Rate (DIR) Scheme stood at
Rs.35.84 crore benefiting 35,143 persons. The Bank has disbursed 5,956 new
loans under the DIR Scheme during 2009-10 with credit limits of Rs.7.89
crore.

Under Government sponsored schemes viz. Swam Jayanti Gram Swarojgar Yojana
(SGSY), Swam Jayanti Shahri Rojgar Yojana (SJSRY), Scheme for Liberation
and Rehabilitation of Scavengers (SLRS) and Differential Interest Rate
(DIR) Schemes, the total demands for recoveries from SC/ ST borrowers was
made at Rs.14.53 crore during the year. Against this, the actual recoveries
stood at Rs.8.23 crore, i.e.56.6% of the demand made.

LEAD BANK SCHEME

The Bank continues to have lead bank responsibility in nine districts of
Rajasthan viz. Barmer, Bikaner, Hanumangarh, Jaisalmer, Jalore, Pali,
Rajsamand, Sirohi and Udaipur. The Bank has been implementing and
monitoring the annual credit plan and other developmental and poverty
eradication schemes launched by Government of India, Rajasthan Government,
NABARD and other developmental agencies in these districts. Out of the
total Annual Credit Plan of Rs.5,010 crore for the year 2009-10 set for all
banks operating in these nine lead districts, the Bank's share was
envisaged at Rs.1,195 crore, against which the Bank's performance stood at
Rs.1,793 crore as on 31.3.2010 recording an achievement of 150.1%.

RURAL SELF EMPLOYMENT TRAINING INSTITUTE (RSETI)

In order to address the problem of unemployment amongst youth, the Bank has
set up a 'Skill & Entrepreneurship Development Institute (SEDI)' in Pali
district and seven 'Rural Self Employment Training Institutes (RSETIs)' at
Bikaner, Sirohi, Jaisalmer, Jalore, Barmer, Rajsamand and Hanumangarh
districts. Of these, two RSETIs at Jalore and Barmer were setup during
2009-10. By end-March 2010, 7836 candidates have been trained at these
institutes and with the help of this training, 2051 candidates have been
engaged in various jobs.

KISAN CLUBS AND TRAINING TO FARMERS

The bank has formed 472 Kisan Clubs as at end-March 2010. The 9 Lead
District Offices conducted 374 training programmes for farmers for
providing awareness on latest technological developments in agriculture,
horticulture, dairy andvermiculture, etc. A total of 16,116 farmers have
benefited from these training programmes.

REGIONAL RURAL BANK

The Bank has sponsored one Regional Rural Bank (RRB) viz.MGB Gramin Bank,
which has a network of 216 branches spread over six districts viz. Pali,
Jalore, Sirohi, Sriganganagar, Hanumangarh and Bikaner. The Bank continues
to provide managerial support and financial assistance to MGB Gramin Bank.
During 2009-10, the Bank enhanced the refinance limit for this RRB from
Rs.212.62 crore to Rs.301.50 crore.

The Bank is in the process of providing technical assistance to MGB Gramin
Bankfor implementation of core banking solution and 10 branches have been
brought under CBS on a pilot basis. As at end March 2010, MGB Gramin Bank
had deposits of Rs.1,787 crore, advances of Rs.1,433 crore and recorded a
profit before tax of Rs.22.63 crore during 2009-10.

BRANCH EXPANSION

During 2009-10, the Bank opened 10 new fully computerized branches. In an
important restructuring exercise, the Bank converted 3 service branches
into Centralised Clearing Processing Centres (CCPCs) while 5 service
branches were closed down and their operations were shifted to CCPCs.
Besides, two branches at Kolkatawere merged into one branch. As at endMarch
2010, the total number of branches stood at 861, comprising 858 business
branches, 2 asset recovery branches and 1 treasury branch. Of these, there
are 297 rural branches, 242 semi-urban branches, 157 urban branches and 165
metro branches. The number of branches in Rajasthan increased to 703, which
is the largest among all banks. Out of these, 532 branches are located in
rural and semiurban areas, which play an important role in rural
development and poverty alleviation in the State.

BRANCH AMBIENCE

During the year 2009-10, the Bank continued the exercise for face-lifting
of branches so that the customers get adequate space and comfort while
transacting their business. A total of 34 branches were renovated during
the year.

HUMAN RESOURCES DEVELOPMENT

The Bank's staff strength as on 31.03.2010 was 12,356 employees. Of these,
2,581 (20.9%) belong to Scheduled Caste (SC) and 995 (8.1%) belong to
Scheduled Tribe (ST) categories. The reservation policy of the Government
is being implemented scrupulously in the Bank. The Bank promoted 201
clerical staff to supervising cadre and recruited 137 Probationary Officers
in addition to 613 clerical cadre employees during 2009-10.

The Bank believes that its human resources are the most important
constituents and their development is necessary for growth of the Bank. In
the dynamic business environment, it is necessary that adequate training
and sensitization is provided to the staff members on an on-going basis.
During 2009-10, a total of 6,047 employees, including 228 employees of the
sponsored RRB, were provided training on various subjects related to
banking and technology at the three Staff Training Centres of the Bank.
Prerecruitment training was provided to 484 SC/ST candidates appearing in
the written test for recruitment of officer cadres during the year.
Besides, 45 seminars / workshops were conducted to update the skills of the
employees on contemporary issues. During the year 2009-10, 760 officials
were deputed to apex training institutions within the country while 6
officials were deputed to prestigious foreign training institutes for
specialized training.

ORGANISATIONAL PLANNING

With a view to facilitating improved supervision, organizational
effectiveness and customer services, 9 branches were reallocated during

Category of Staff Break up of Employees Out of which

SC ST General Total Women Minority

Officers 845 426 3299 4570 251 75
Clerical 613 331 3886 4830 588 116
Sub-Staff 396 238 1595 2229 309 79
Part-time 727 - - 727 - -
TOTAL 2581 995 8780 12356 1148 270

2009-10 from Region-III (Pali district) to Region-IV (Nagaur district) in
the Jodhpur Zone. Reorganization of Credit Department at Head Office was
undertaken and the roles and responsibilities of Central Processing Cells
were clarified. In order to improve operational control and exploit
business potential, the incumbency of Clearing CPC (Jaipur), RASMECCC
(Kolkata) and N.S. Road (Kolkata) were upgraded to Senior Management Grade
Scale (SMGS)-V during the year.

STAFF WELFARE

During 2009-10, the insurance cover for employees under the group insurance
scheme of SBI Life was increased from Rs.5 lakh to Rs.6 lakh (Rs.10 lakh to
Rs.12 lakh in the case of accidental death) besides waiver of housing loan
of the deceased employees to the extent of Rs.2 lakh. Two new holiday homes
were set up at Chandigarh and Mussorie apart from the existing holiday
homes at Jaipur, Mt. Abu, Manali, Mumbai, Goa, Delhi, Haridwar, Nainital,
Katra, Bengaluru and Udaipur. Other staff welfare activities like granting
scholarship to meritorious wards of employees and providing free medical
consultancy services at various hospitals were continued. The Jodhpur Zone
also organized an All India Kabaddi Tournament during the year.

INDUSTRIAL RELATIONS

The industrial relations in the Bank continued to remain cordial during the
year under review. The Employees' Union and Officers' Association have
extended their wholehearted cooperation for the all-round growth of the
Bank. A well-established and consultative mechanism is available in the
Bank, for resolution of various issues emerging from time to time.

VIGILANCE ADMINISTRATION

The Bank considers the Vigilance Administration as an integral part of the
Management. Particularly, preventive vigilance activities are being
accorded high priority in the Bank rather than detective and punitive
aspects of vigilance. The Vigilance Department conducts Preventive
Vigilance Inspections that help in timely detection of frauds and in
plugging the loopholes in the systems and procedures. They also create
awareness among the staff members about certain vital systems and
procedures at the branches. Complaints received in the Vigilance Department
are dealtwith expeditiously and in a professional manner. In order to
decide vigilance angle, complaints received in the Vigilance Department are
put up to the Internal Advisory Committee, consisting of two General
Managers and one Dy. General Manager. Significant emphasis is laid on the
transparency in the tendering process (procurements of goods and services,
auctions, etc.) by the Bank. The tenders issued by the Bank are uploaded on
the Bank's website as well as Government of India's (NIC's) website. The
Bank has also issued guidelines for lodging complaints under the 'Whistle
Blower Policy'. A special appeal on the subject of 'Whistle Blower Policy'
was uploaded on the intranet website of the Bank for motivating the staff
to make use of the policy. As in previous years, the Bank celebrated
Vigilance Awareness Week' in the month of November 2009, as per the
guidelines issued by the Central Vigilance Commission.

USE OF HINDI

The Official Language Implementation Committee at Head Office held 8
meetings during the year to discuss the progressive use of Hindi in the
Bank. 849 branches/ offices of the Bank have been notified under rule 10
(4) of the Official Language Rules 1976. Out of these, 702 branches /
offices are specified under rule 8(4), which constitute 82% of total
notified branches/ offices of the Bank.

Section 3 (3) of Official Languages Act, 1963 is being meticulously
followed in the Bank. Facility of Hindi version has also been made
available in the Core Banking Software. In compliance of the orders of the
Hon'ble President of India, 'Unicode' system has been implemented in the
Bank and all the ATMs are operated in bilingual/ trilingual manner.

Hindi Fortnight' was observed during September 1-14, 2009, during which
various competitions were held and prizes awarded to the winners. To impart
the knowledge of Official Language Policy and job oriented Hindi, 37
workshops/ training programmes were organized. During the year, 901
branches / offices were inspected for implementation of the Official
Language. To increase progressive use of Hindi, competitions for Head
Office Raj BhashaTrophy and Zonal Raj Bhasha Trophy were organised during
the year. In compliance of the directions given by Third sub-Committee of
the Sansadiya Rajbhasha Samiti, 17 Departments at Head Office and 8
Departments of each Zone are working completely in Hindi.

ELECTRONIC CLEARING SERVICE

Electronic Clearing Service (ECS) facility for payment of dividend is being
extended in 24 centres to shareholders who have opted for the same. These
centres are Agra, Ahmedabad, Bengaluru, Chandigarh, Chennai, Coimbatore,
Ghaziabad, Hyderabad, Indore, Jaipur, Jodhpur, Kanpur, Kolkata, Lucknow,
Ludhiana, Mumbai, Nagpur, New Delhi, Patna, Pune, Surat, Udaipur, Vadodara
and Varanasi.

AUDIT

State Bankof India, with the concurrence of the Reserve Bank of India,
approved the appointment of five firms of Chartered Accountants viz. M/s
Vyas & Vyas of Mumbai, M/s L.U. Krishnan & Co. of Chennai, M/s B.
Khosla&Co. of Jaipur, M/s S.L. Chhajed & Co. of Jaipur and M/s S.C.J.
Associates of Agra as the Bank's Statutory Central Auditors for the year
2009-10. The scope of audit covered 829 branches/ central processing cells
as against 854 branches/ central processing cells covered in 2008-09.

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 judgments and estimates that 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 2010, and of the profit or 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 (Subsidiary Banks)
Act, 1959 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.

CORPORATE GOVERNANCE

The Details on Corporate Governance are annexed.

ACKNOWLEDGMENTS

The Board of Directors is grateful to the valued customers, esteemed
shareholders and the public at large for their patronage and confidence
reposed in the Bank and places on record its deep appreciation. The Board
of Directors thanks the Government of India, State Bankof India, Reserve
Bank of India and other regulatory agencies for their valuable support and
guidance throughout the year.

The Board of Directors places on record its deep appreciation of the
commitment, sense of involvement and dedication exhibited by each staff
member and constructive role played by the Employees' Union and Officers
Association in the overall development, growth and prosperity of the Bank.

For and on behalf of the Board of

Directors

Managing Director

Place: Mumbai
Dated: 22.04.2010