Professional Documents
Culture Documents
11 - Chapter 3 PDF
11 - Chapter 3 PDF
11 - Chapter 3 PDF
MUTUAL FUND
34 N P A MANAGEMENT
The orig~nof State Bank of 1r:dia goes back to the first decade of the
second June 1806 Three years late, the bank received its charter and was
redesigned as the Bank of Bengal (2"" :anuary 1809). A unique institution, it was
the first jolnt stock bank of B-itish lnd~asponsored by the Government of Bengal
The Bank of Bombay (15"' April 1840! and the Bank of Madras (lS'
July 1843;
followed the Bank of Bengal These three banks remalned at the apex of modern
branches were merged in 27Ih January i921 to form the imperial Bank of lndia.
The new bank took on the triple role of a Commercial bank, a banker's bank and a
deliberations on the need for 'State Bank of lndia.' lmperial Bank was a halfway
house combining the functions of a commercial bank and a quasi central bank.
the country in 1935 ended th'e quasi-central banking role of the Imperial Bank.
The latter ceased to be banker to the Government of lndia and instead became
agent of the Reserve Bank for the transaction of government busmess at centres
at which the central bank was not established. But it continued to maintain
currency chests and small coiri depots and operate the remittance facilities
scheme for other banks and the public on terms stipulated by the Reserve Bank.
It also acted as a banker's bank by holdlng their surplus cash and granting them
have offices The bank was also the b#ggesttenderer at the Treasury b ~ lauction
l
undertake foreign exchange business and executor and trustee bus~nessfor the
first time The lnlperlal Bank during the three and a half decades of its existence
economic life.
When lndia attamed freedom, the Imperial Bank had a capital base
(including reserves) of Rs. 11.85 crores, deposits and advances of Rs. 275.14
crores and 72.94 crores respectively and a net work of 172 branches and more
In 1951. when the Frrst Five Year Plan was launched, the development of
rural lndia was glven the highest priority The commercial banks of the country
including lmper~alBank of lndia had till then confined their operations to the urban
sector and were not equrpped to respond to the emergent needs of economic
regeneration of the rural areas. Therefore to serve the economy in general and
the rural sector in part~cular,the All lndia Rural Credit Survey Committee
taking over the Imperial Bank ol' India, integrating with it, the former state owned
or state assoc~atebanks. ,4ccordingl! an Act was passed in Parliament in May
1955 and the State Bank crf lndia was constituted on 1'' July 1955. Later. the
State Bank of lifaia to take over sewn former State assoc~atedbanks as its
subsidiaries (late: (lamed Assc~ciatesj S.B.I. holds not less than 55 per cent of
The State Bank of lndia was thus born with a new sense of social purpose
aided by 480 offices compri:;ing branches, sub-offices and three Local Head
Ofices inherited from the !rnperial Bank. The concept of banking as mere
soon to give way to the concept of purposeful banking by serving the growing and
The State Barik of lndia has art authorized capital of Hs.1000 crores,
which has been dlvlded ~nto100 'roles shares of Rs. 10 each. The issued capital
of State Bank of lndia 1s Rs.526.30 crores The shares are held by the Reserve
Bank, Insurance Companies anli the general public. At the end of March 2000, the
paid up capital and resewes of the Bank were Rs. 12,147 crores
The management of the SBI 15 under the control of a Central Board of
with approval of the (;entral Governnif:rlt SIX directors are to be elected by the
profits, assets, aeposits. branches aria employees. On March 31st 2001, the
Bank had total assets ot Rs 3,15,644 crore, total deposits of Rs. 2,42,828 crore,
total advances of Rs 1 13.590 crore total net profit of Rs. 1,604 crore through a
network of 9,026 branches The Bank commanded about one-fifth of deposits and
S.B.I. for the years 1999-2000 and 2000-2001 is illustrated in Table 3.1.
The bank had total staff strength of 2,14,845 on 31st March 2001. Of this,
52,459 (24.4%) were officers, 1,06.731 (49.7%) belonged to the Award staff
have been set up for iocused attentior to very large corporate customers, lease
finance and project flnance. all re:)ortlng directly to the corporate oftice.
operations w ~ t h ~each
n SBU, a 'focused delivery system with appropriate specialist
been adopted, both at the Apex and Clrcle levels, for sanction of large advances
For this purpose, Central Off~ceCredit (Committee and Circle Credit Committees
The RBI required that S.H.I. and other Indian banks having foreign ofices
maintain a total adequacy ratlo of eight per cent by March 31sr 1994 and nine per
cent by May 31st, 2000 Subsequently SBI was the first public sector bank to
shore up its capital base and its capital adequacy ratio has consistently remained
above the minimum eight per cent. In Fiscal Year 1994, the Bank raised Rs.
22,104 million through the issue of shares and Rs.10,000 mrllion through the issue
Bank successfully floated the G'DR issue as the 'Asian Equity issue of the year' for
its being a well planned, well priced and well executed issue that continued to
Reserve Bank of lndla is the stngle largest shareholder c~fthe Bank. SBl's
shares and bonds are ltsted for tradlng on all the major Indian Stock exchanges
namely, Bombay Stock Exchange and Stock Exchanges at New Delhl, Kolkotta,
Chennai and Ahemedabad; at the National Stock exchanges only the Bank':;
shares are llsted S B I has one ot the largest market capltallzation of a.1
31st March 2001 was 7 37 lakh The ownership pattern of shares and the Market
Table 3.2
Ownership pattern of SBl's Shares
I
1 1.
I
1 Reserve Bank of India I 59.73
Others
- .~ lnclud~ngResident
- lndivlduals
- -
-~ -
2.84 ~ ~.
Number of ShareholdersJmJakh)
~- 7.37
October-
'00
-
November '00
December '00
Market prlce at closlng values ot SBI share price at high level of 267 45 on
March 2001 and low level of 155-95 on October 2000 recorded Market prlce data
at BSE sensex, hlgh value recorded at 5,541.54 on April 2000 and low value at
services and prlrrlary deal~ngin govel ment securities. SBICAPS, the Bank's
3 2 . 2 DOMESTIC BRANCH ~ E T W O R K
approximately 14 per cent of all bank branches in India. About 46 per cent of the
Bank's branches are located i~ urbar ,iid metropolitan areas respectively. This
wide spread branch network er~ablesthe Bank to raise a substantial and stable
deposit base, to prov~dea wide range of lending products and other financial
risk and customer The Bank's ability to diversify and enhance the quality of
service related to its deposit taking as well as its lending activities and other
The NBG commands dbout 59 per cerlt ~f the domest~cdeposlts and 84 per cent
spread over the country through two networks, namely, Development and
to as the bank's 'retail banking' business subgroup. The network represents the
backbone of the Bank and encompasses the vast majority of the Bank's assets,
loans, deposits branches and employees. The D&PB network focuses on the
Government ent~tlesand per:;onal bank rig customers. It also services the needs
finance. The branches iri the D&PB ne1"uork generally provide lending facilities of
less than Rs. 2 5 rnlll~onas well as other services such as cash management and
corporations and services the large accri~ntsamong Bank's small industries, high
The NBG glve high prionty to personal banklng The Bank's sixty Personal
Banking Branches targets h ~ g hnet worth lndlvlduals for the personal segment
Units (SBUs) created to service's the Bank's top 150 to 200 corporate customers.
SBUs are the Corporate Accounts Grc~lp.Leasing Group and Project Finance
Grou~.
The Corporate Account Group IS an exclusive unit for top corporate and is
able to access their accour~tsat the dank via computer. The total number of
corporate customers served by the Corporate Banking Group and the National
customer
fifth of all domestlc deposits. About three-fourth of the Bank's deposits are from
its retail customers, reflecting its large customer base. Around 14 per cent of its
domestic deposits are in the form of interest free current accounts and about 25
per cent are in the form of low interest savings account. This access to millions of
small deposits throughout the country provides SBI with a stable funding base for
The Bank makes to a ,wide range of public sector and private sector
working capital facilities and short-term ioans. Loans of medium to long maturity
the end of March 2000 the Bank's priority sector lending accourlted for 40.42 per
where in it will offel 26 per cent equit) to the foreign partner The Bank has
Bank expects the overseas partner to make important contributron in the areas of
Bank, the Dun and Bradstreet and the Trans Union for setting up a world-class
credit information Bureau in India. The main objective of the Bureau will be to
institute an effective mechanism for mitigating credit risks and enhance the quality
a) Deposit Schemes
ii) Savings Bank Accounts designed for depositor of savings 1 surpluses. Cheque
book facility available to the customers. Interest allowed at 4.5 per cent p.a.
iii) Term Deposrts deslgrlecl for fixed periods. Accepted term deposits for any
(monthly ! quarterly etc I for deposits of 1 year and above. Earns higher Interest
at rates rangrng from 5 per cent to 10.75 per cent. Automatic renewal facility
allowed.
b) Advance Schemes
setting up of clin~csetc Both term loan and working capital facilities available.
iv) Car Loan Scheme for pl~rchaseoi' new cars Ijeeps Isecond hand cars not
more than 3 years old rriaxim8Jrnloan LC to 8 lakhs. Third party guarantee not
allowed by bank
vi) Gold Loan Scheme aga~nctpledge of gold ornaments. Low marglns and
vii) Demand Loan Scheme against bank's own fixed deposits 1 NSCS 1 KVPS I
IVPS and other acceptable securities. Low rate of interest - 2% above the rate
V~II) Personal Loan Scheme to meet personal expenses for travel, marriage,
(Rs. in Crores)
. -~ - . .
1
~~~ ~p~~
~
I
i -
1999-00
2000-01
,
I
I
,
8,996
9 326
.
1,916,821
--
:!,42,828
~~~
98,102
~
1,13,590
- i
'
92.000
1,22,876
i
!
.
1,604
i
(
2,051 i
I
i
C.
- 1 ,i ~ - -- L
Source : A r ~ r ? ~ Reoort
ia/ of SBI 1:996-97to 2000-01
The deposits and loans Increase from year to year. The Net Profit varied. Last
retirement scheme in the Bank. The Table 3.4 shows a satisfactory growth in the
business.
The Bank IS also engaged In international banking principally for its Indian
customers. The International Banking Group services the needs of the Bank's
international funds through SBl's international branch network as well as its 720
also provides shoit-term finarlces through buyer and supplier's credit. The Bank
Hong Ken!; and Tokyc. With the introduction of Euro in January 1999, the Bank's
institutions Including the World Baslk, the Common Wealth Fund for Technical Co-
operation C I K , The Food and Agriculture Organization, the European Bank for
Reconstruction and Development, the Asian Development Bank and the African
Development Bank
The Bank's new Ilnk office, Global Link Service was set up in 1997 to
well as to other banks it alms to provide an efficient system for realizing the
"To retain the Bank s ~ositionas the premier Indian Financial Services
Group, with the world class standards and significant global business, committed
iv) Institution with a culture of mutual care and commitment, a satisfying and
The Bank's effort to Improve efficiency and customer service through use
the end of March 2001, the Bank had 2555 fully computerized branches, covering
71 per cent of the Banks businc?ss. The Bank has 139 ATMs, in 52 cities. The
the Bank handling 85 per cent of the Bank's forex remittances, cover 146
branches and the SBI Data net (a PC-Modem telex network) covers 1,120
branches. With a view to helping the customers to have access to the information
introduced 'Online SBI' from the 1st August. This is initially being introduced in
eight branches, three in Mumbai, two iri New Delhi, and one each in Bangalore,
Both the projects were conceived, developed and implemented with in-house
expertise and success was widely acc.lairned ELENOR dealing with on-line
electronic transfer of funds at 326 branches. During the year, the project
the lnternet.
Banking.
'or Corporate Customers Implemented in over 70
Remote login fac~lit~es
of the Bank
up by RBI were merged with 1 l i ' ' i s k l s of the Bank under its Corporate
Banking Group Network The Bank now has a network covering 161
VSATs in 130 cltles extending the coverage to almost the entire country.
During the year, the Bank established 'SBI HELPLINE' at LHO centres,
equipped with Toll-Free Telephone Lines, Fax and E-Mail for providing
mail.
The SBI Home Page was thoroughly redesigned and revamped during the
year. The site facilities attracted a large number of visitors to the site.
problem loans, effective response to early warning signals adherence to the time
norms for corrective action and recovery including one-time settlements. Under
the RBI guidelines, the Bank approved one-t~mesettlement for Rs. 718 crore in
respect of 1 95 lakh accounts with NPAs uoto Rs 5 crore and made cash
At the end of March 2001 the Banks gross and net NPA stood at 12 53
per cent and 6 03 per cent respectivrly as aga~nst14 25 per cent and 6 41 per
potential for turnaround as also approved by the BlFR The BlFR has identified
512 units (including 59 Public Sector Undertakings) financed by the Bank as sick.
Out of these, the BlFR approved rehabilitation packages for 96 units, involving an
amount of Rs 763 crore Table 3 5 explains the Net NPA Ratio of SBI for last
three years.
Table 3.5
Net Non-Performin@sset
- ~-
~~~ - iiatio of 1999 to 2001 March
-- Year
-- - -~~-
I
~~
t
1
I
31st March 1999 - 7.25
L- 31st March
-- - . 2001
_ _ _- _ _ _ 6.03 __I
Source : SB1 Annual Report 200 1
Figure 3.1
'T
7.6
The State Bank of India has, over the years, richly merlted its status as
the flagship of Indian banking and continues with its endeavour to achieve its
Mission objective. It has been in the forefront in all areas of banking - traditional,
economy, improving its own profitability over the years and operating efficiently.
1, .,
I-
3.5 SBI MUTUAL FUND --AN OVERVIEW
.',,
's. '
- nd:.;/.-
The State Bank of India is the first public sector bank to start mutual fu
business. Till 1987 Unit Trust of lnd~aNas the only Mutual Fund operating in the
country. In 1987 SBI uec~declto prov~dean alternative for investors and SBI
Mutual Fund was horrt SBI Capita! Markets Ltd., a wholly owned subsidiary of
State Bank of lnd~awas appoir~tedas Trustees and Managers to the fund. SBI
Mutual Fund was the f~rst bank spor.,sored Mutual Fund, the pioneer in an
The SBI Mutual Furid !aunched !ts first scheme- 'Magnum Regular Income
2000, the Fund with an investor base of over 2.8 million spread over 23 schemes
Till 1992, SBI Capital Markets Ltd operated as Trustees and Managers to
the Fund The mantle of management has now passed on to SBI Fund
Management Ltd., another wholly owned subsidiary of the State Bank of lndia,
which was incorporated on 7tP February 1992. This company took over the
management of the Fund witn effect from 14th May 1993. State Bank of lndia
Dr. A.M. Khusro. Edltor of Financial Express and former Member of the Planning
Magnum Regular lncorne Scbe,*~i87 iMRlS 1987) was the first scheme ,
launched by the fund ano it comnie~>i+dfrom 1st January 1988. This was
followed b y three others h4agnurr regular lncome Scheme 1989, which
commenced from 1st Aprll 1989. Magnor, Regular lncome Scheme 1990 which
commenced from 1st August 1990 and MRlS 1993 launched on 15th February
combination of income and growth and to provide a regular income to the investor.
The target return spec~fiedIS a mlnimum of 12 per cent along with some capital
There are four schemes wl-rlch fall under thls head, namely, Magnum
Monthly lncome Scheme 89 (MMlS 89) whlch commenced from 1st September,
1989, MMlS 91, wh~chcommenced from 1st July 1991. MMlS 98(1) whlch
commenced from 3rd February 1 498 and MMlS 98(11)whlch commenced from
31st October 1998 The investnient objective of the scheme as the name
offered a target return of a mlnlmurn of 12 per cent per annum monthly pay out
Scheme, whlch was to be redeemed c n 31st March 1993, has been extended up
- to 31st December 1996 at a h~gherrnonthly pay out of 15 per cent per annum for
those investors who have ex~srcisedthii option of extension. MMlS 91 targets at a
return of 13 per cent per al?n!Jm with monthly pay out. MMlS 98(i) assured a
monthly income of 12 5 per cent per ai-num MMlS 98(1i)offered monthly income
combining the safety of higt- quality aebt instrument and return on equity. The
securities
3.6.3 80 CC Schemes
Magnum Tax Saving C;cheme 8889 MTSS 88-89 which commenced from
1st April 1989, and MTSS 90 are the schemes falling into this category. MTSS
88-89 were redeemed on 31s:: Marcn 1954 at Rs. 2221- with a capital appreciation
of 122 per cent and MTSS 90. redeemed on 31st March 95 at Rs. 1721- with a
was to enable subscribers to benefit urtder Sec 80 CC of the lncome Tax Act
1961. The policy followed was to invest in eligible issues of the capital under
act 1961
: B Schemes
3.6.4 80 CC
(MELS 91), which commenced from ';st Apr11 1991 and Magnum Growing
Investment from Tax Sav~ngS'zherne Plan A, 1992 (Magnum GIFTS-92 Plan A).
which commenced from 1st April 1992, offer benefits to investors under Sec 80
CC €3 of lncome Tax Act Magnum GIFTS Plan 0, 1992 launched in 1992 also
offer benefits to Investors urder Sec YO CCB of Income Tax Act. MELS-95
launched in 1st April 1995 and MELS-96 launched in 1996 offer benefits under
under Sec 80CC I3 and 88 of lnco.n+, tax Act 1961 and aims at achieving
objective, investments are niainly rriade if! equltles and equity related instruments
January 1991, Magnum Express (MEX-9' which commenced from 1st April 1991,
Scheme, 1994 (MGF-94) which was launched onlst October 1994 are the growth
schemes of the fund. These four schemes aim at providing long-term capital
related instruments.
commenced from 20th November 199: ihe investment objective of the scheme
is that the investor recelves a surn equal to thrice the amount initially invested or
more at the end of 90 months from the date of allotment To achieve the
objective, the funds are malnly ~nvestediri equlties and equ~tyrelated instruments
Magnum Equlty Fuqd was converted into open-end scheme with effect
fromlst January 1998 The illrrl of this fund 1s to provlde capital appreciation
80 per cent of the investments are made in Government Securities and Triple-A
rated papers. Maximum market liquidity !s the objective of the fund. This fund
MTGS-93 IS a tax saving scheme whlch was launched to offer tax benefits
to Investors under Sec 88 of the lr~comeTax Act This was converted Into open-
MBALF-95 was launched on 31st August 1995. The main objective 3f the
Contra fund. Investors will have the option of choosing one or more sector for
investing and will be able to freely switch across sectors, without any load.
A sector comprises of companies that manufacture or offer products of a
such a sector which has high growth potential It provrdes an opportunity to the
an?ountwithin his range The four important funds under MSFU are-
sertor
1) Pharma fund IS the part 01 the sector fund umbrella whlch alms at long
1.il FMCG Fund is a part of sector fund umbrella launched with the objective to
iii) Contra Fund is the part of sector fund umbrella, with a view to providing
investors with long-term gains in stocks, which are currently out of favour but are
Magnum lnsta Cash Fund 'was launcned onl3th May 1999. The main
superior returns consistent with a high degree of liquidity. This fund offers two
Instruments.
Dividend Plan, the average maturltv of assets IS longer than that of cash
to provide the Investors regular income through dividend. MRIS-89 and MRIS-90
were also regular Income schemes but these schemes redeemed on 30th June
Table 3.6
Table 3 6
MMPS-93
MGLF-94
4"
' "
~
~~
01104/98
01I10194
10
10
MGIFTS-92-A.- 1 ''
~
01/01/92 100
rlE:rwthl Monthly ~~
I Quarterl'r
.
- .
. .
4
,L
ID
I
ebt
,I ~
~ ~-
~
~ 22/02/2001
-.
10
t -
annual -
.
,
~~
~ ~ - .
~
~ -
- ~- ~- ~ I
Tt-~eTable shows that there are three Regular Income Schemes, five