Dear Shareholders,
 
 It is my privilege to place before you highlights of your Bank’s
 performance during the financial year 2010-11. Details of the
 achievements and initiatives taken by your Bank are provided in the
 enclosed Annual Report for the year 2010-11.
 
 Outlook for global growth has improved, but risks remain. While growth
 in the United States is gaining traction, recovery in the Euro Area is
 uneven and fragile.  In contrast, many emerging and developing
 economies are seeing robust growth.  The major concern, however, is
 rising global oil and commodity prices that are fanning inflation and
 inflation expectations.
 
 India remains one of the fastest growing major economies in the world,
 with GDP growth at 8.5% in 2010-11. Growth has been broad based with a
 rebound in the agriculture sector and impressive gains in services.
 Even as the Index of Industrial Production continues to be volatile,
 other indicators such as expansionary Purchasing Managers’ Index (PMI),
 higher tax collections, buoyant exports and bank credit suggest that
 the growth momentum persists. The downside risk is continuing pressure
 on energy and commodity prices that may undermine the investment
 climate, posing a threat to the current growth trajectory. Therefore,
 keeping a check on inflation remains a great challenge for the economy.
 
 Against this background, in the year gone by, the State Bank Group’s
 operating profit rose by 34.04% to Rs. 33,240 crores in FY’11 from Rs.
 24,799 crores in FY’10, showing that core operations remain robust.
 
 However, your Bank had to make substantially higher provisions during
 the year, on account of higher regulatory requirements in respect of
 special home loans as well as for higher provision coverage ratio on
 loans, in excess of prudential requirements. In regard to special home
 loans, which carry lower interest in the initial years, RBI required
 banks to provide higher provision of 2% (as against the usual rate of
 0.4%), as these loans are considered riskier.  Your Bank has adhered to
 very conservative underwriting policies in respect of such loans, which
 are all Standard. As such, the additional provision would, therefore,
 be written back in the Banks books, when these loans revert to the
 usual card rates of interest. Similarly, the additional provision for
 enhancing the provision coverage ratio (so as to reach a coverage of
 70%, as against the specific asset-wise coverage of around 59% for SBI)
 is also in the nature of additional comfort in the balance sheet and is
 expected to be written back when the underlying exposures are resolved.
 
 Your Bank has also been required to make substantial provisions towards
 additional liability for enhanced superannuation benefits, arising out
 of wage revision and increase in the ceiling of gratuity. These, along
 with higher tax provisions, have led to a decrease of 9.84% in net
 profit, at Rs. 8,265 crores, compared to Rs. 9,166 crores in 2009-10.
 
 Provision for an amount of Rs. 7,927 crores was also made by directly
 charging to reserves, on account of the additional pension cost in
 respect of earlier years (2007-10), due to wage revision. I am happy to
 share with you that despite this drawdown from reserves, your Banks
 capital adequacy remains well above the 9% norm stipulated by RBI. As
 per Basel II, the capital adequacy ratio of the Bank was 11.98% (Tier I
 : 7.77%) at the end of March’11 (against 13.39% at the end of).
 
 Net profit of Associate Banks increased by 21.62% to reach a level of
 Rs. 3,598 crores in FY’11 from Rs. 2,959 crores in FY’10.
 
 In an increasingly competitive scenario, your Bank’s focus on
 efficiency has paid off. Net Interest Margin (NIM) rose by 66 bps to
 3.32% in FY’11 from 2.66% in FY’10, due to faster increase in interest
 income (14.65%) than interest expenses (3.27%). Driven by loan growth
 of 20.32%, interest income on advances has increased by 18.45% yoy in
 FY’11 against a growth of 9.11% in FY’10. Growth in interest expenses
 was contained mainly due to CASA deposits growth of 22.14%.
 Consequently, net interest income increased by 37.41% to Rs. 32,526
 crores against 13.41% rise recorded in FY’10. Fee income also recorded
 a handsome rise of 20% in FY’11. Non interest income rose by 5.72%
 despite profit on sale of investments declining by Rs. 1,196 crores in
 a rising interest rate scenario. Excluding profit on sale of
 investments, non interest income is up by 15.97%.
 
 With lower growth in operating expenses at 13.27% in FY’11 against
 growth of 29.84% in FY’10, your Bank’s cost–income ratio fell below the
 psychological threshold of 50% to 47.60% in FY’11 from 52.59% in FY’10.
 Average cost of deposits has come down by 54 bps to 5.26% in March’11
 from 5.80% in March’10, though sequentially it is up from 5.20% in
 December’10. In the same period, the yield on advances at 9.56% was 10
 bps lower than 9.66% and 2 bps lower than 9.58% in December’10.
 
 Deposits of your Bank rose to 16.14% yoy from Rs. 8,04,116 crores in
 March’10 to Rs. 9,33,933 crores in March’11, driven by CASA growth of
 22.14%. With sustained 26.20% rise in Savings Bank deposits, CASA ratio
 improved from 46.67% in March’10 to 48.66% in March’11, an increase of
 199 bps. You will be happy to see that in an increasingly competitive
 environment, your Bank’s market share in total deposits at 16.40% in
 March’11 was 11 bps higher than 16.29% in March’10. In the same period,
 your Bank’s market share in low cost demand deposits at 18.23% was 90
 bps higher than 17.33%.
 
 Gross Advances of your Bank recorded a yoy growth of 20.32% from Rs.
 6,41,480 crores in March’10 to Rs. 7,71, 802 crores in March’11. Credit
 Deposit Ratio (Domestic) at 76.32% as at the end of March’11 was 276
 bps higher than 73.56% at the end of March’10; sequentially, however,
 it has declined from 77.22% at the end of December’10 due to higher
 growth in deposits in Q4FY’11.
 
 Your Bank’s advances remain well distributed across all verticals.
 Large Corporate advances have grown from Rs. 88,137 crores in March’10
 to Rs. 1,08,741 crores in March’11, registering a growth of 23.38%.
 Mid-Corporate Advances increased from Rs. 1,31,939 crores to Rs.
 1,57,565 crores thereby registering a yoy growth of 19.42%. Retail
 advances grew 22.04% from Rs. 1,34,849 crores in March’10 to Rs.
 1,64,576 crores in March’11, mainly driven by 21.88% rise in Home
 loans, 48.01% in Auto Loans and 23.27% in Education Loans.
 
 SME Advances of the Bank rose by 22.80% from Rs. 97,459 crores in
 March’10 to Rs. 1,19,676 crores as at the end of March’11, while Agri
 advances rose 21.18% from Rs. 78,250 crores to Rs. 94,826 crores.
 International advances went up by 12.66% from Rs. 97,072 crores in
 March’10 to Rs. 1,09,358 crores in March’11.
 
 Along with increase in credit, your Bank is conscious about asset
 quality. Though gross NPAs stood at 3.28% in March’11 against 3.05% in
 March’10, increased provisioning saw net NPAs move down from 1.72% to
 1.63% in the same period.  To comply with the 70 per cent provision
 coverage as of September 2010, SBI had to create a Rs. 3,430 crores of
 counter cyclical buffer. Of this, the Bank has set aside Rs. 2,330
 crores by March 2011.
 
 Reaffirming its commitment to the customer, your Bank has taken several
 new initiatives to expand the bouquet of choices for its customers. A
 host of Mobile Banking services such as Fund Transfers, Enquiry
 Services, Demat Account Enquiry, Cheque book request, Bill payment,
 Mobile top up, DTH recharge, SBI Life Premium Payment, E-tag recharge
 to pay toll tax, Merchant payments and Inter Bank Mobile Payment
 Services (IMPS) are currently being offered. SMS Banking was introduced
 during the last quarter of the year. The Mobile Banking user base has
 crossed one million by the end of the year.
 
 Two new lines of business viz. Custodial Services and General Insurance
 have been successfully set up and are in the process of stabilization.
 Seven niche areas viz. Mobile Banking, Merchant Acquisition Business,
 SME Current account and Supply Chain Finance, Savings Bank, Cash
 Management Product, NRI remittances and Government business have been
 identified for strategising aggressive business plans, improving
 processes and matching organizational structures.
 
 Your Bank has leveraged technology to expand financial inclusion with
 minimal costs and offers SBI Tiny Card, Kiosk Banking operated at
 internet enabled PC (Kiosk) with bio-metric validation at select
 centres, appointing Business Correspondents / Business Facilitators,
 etc. The Bank is the market leader (market share around 29.88% as on
 31.03.2010) in SHG-Bank Credit Linkage programme having credit linked
 so far 18.90 lac SHGs (1.78 lac SHGs credit linked during FY11) and
 disbursed loans to the extent of Rs. 14,500 crores (cumulative) up to
 31.03.2011. Several unique products like SHG Credit Card, SHG Sahayog
 Niwas and SHG Gold Card have been rolled out. Coverage of Micro
 Insurance product - Grameen Shakti has been extended and so far 1.14
 million lives have been covered.  To expand its outreach, your Bank has
 covered 6,599 allocated unbanked villages with population more than
 2000 as at 31st March 2011 as against the target of 5,261 villages for
 the year. Your Bank is a major player in Electronic Benefit Transfer
 (EBT) project of Government benefit payments, with participation in six
 States and about 24 lac beneficiaries have been serviced through the BC
 channel.
 
 I am happy to place on record that SBI is the first Bank to sign MoU
 with UIDAI to become a Registrar. The enrolment data will be used for
 opening ‘UID enabled’ accounts. After State Governments, SBI is the top
 enroller with more than 9.50 lac enrollments done up to 31.03.2011.
 
 Your Bank has been steadily expanding its global footprints. The number
 of foreign offices increased from 142 as on 31st March 2010 to 156 as
 on 31st March 2011 spread across 32 countries. The asset level of
 foreign branches (excluding subsidiaries) rose by 15%, from USD 27.78
 billion in March 2010 to USD 31.87 billion in March 2011. During FY’11,
 net customer credit grew by 13% from USD 21,561 million to USD 24,371
 million, customer deposits grew by
 
 15%, from USD 9,568 million to USD 11,030 million and net profit rose
 by 50%, to USD 330 million.
 
 In accordance with RBI guidelines, the Bank has migrated to the Basel
 II framework, with the Standardised Approach for Credit Risk and Basic
 Indicator approach for Operational Risk w.e.f. March 31, 2008, having
 already implemented the Standardised Duration Method for Market Risk
 w.e.f. March 31, 2006.
 
 In the realm of Information Technology, your Bank has implemented a
 secure, robust scalable WAN architecture network built with equipments
 owned by SBI, connecting 19,347 Branches/Offices and 25,005 ATMs of
 State Bank Group through leased lines, VSATs and CDMA technology. The
 State Bank Group crossed an important milestone of rolling out 25,000th
 ATM during the year.  CBS roll out across the domestic branches is
 supported with a state-of-the-art centralized infrastructural setup,
 providing uninterrupted continuity of the Bank’s operations. It
 facilitates the scalability for future growth, interfacing with
 multiple alternate channels, reduction in transaction costs, improved
 operating efficiency. Milestones of 52 million peak transactions in a
 day, 1,861 transactions per second and managing 258 million accounts
 have been achieved in recent months. Operatives have been provided with
 tools for on-line real time transaction verification. E-Trade –
 internet based front end application have been rolled out for corporate
 customers for processing various trade finance transactions.
 
 Your Bank has been supporting sustainable growth through its Green
 Banking initiatives. Your Bank launched its ‘Green Channel Counter’ on
 the 1st July 2010, at select branches across the country, for reduction
 in paper usage as well as saving of transaction time. Windmills have
 been successfully commissioned in Maharashtra, Tamil Nadu and Gujarat
 and power thus generated is being wheeled to our branches/offices.
 Other energy efficient measures include installation of Solar ATMs. To
 encourage customers to reduce emission of Green House Gases your Bank
 has been extending project loans on concessionary interest rates,
 encouraging them to adopt efficient manufacturing practices through
 acquisition of latest technology. A pilot project to map its Carbon
 footprint levels has been launched by your Bank which will help in
 sustainable usage of energy in a cost effective way.
 
 Your Bank’s Associates and Subsidiaries continued to show robust
 growth. During the year, gross premium of SBI Life crossed the Rs.
 12,000 crores mark and the company recorded a profit of Rs. 366 crores
 in FY’11, clocking an impressive yoy growth of 33% and raising its
 market share to 19.22% from 18% in FY’10. SBI Life received the NDTV
 Profit Business Leadership 2010-11 award for organisational excellence.
 SBI Capital Markets Ltd. posted a PAT of Rs. 374.72 crores during FY’11
 against Rs. 137.12 crores in FY’10, a yoy growth of
 
 172%, driven by an increase of 81% in fee income, and 85% yoy growth in
 revenue for infrastructure Group. I am happy to announce that SBI Caps
 was ranked No. 1 Mandated Lead Arranger for Global PF Loan for the
 second successive year by Thomson Reuters, Mandated Lead Arranger
 Global PF Loans for second consecutive year by Dealogic, Bank of the
 Year award for Asia Pacific for third consecutive year by Thomson
 Reuters and Loan House of the Year Award for the second consecutive
 year by IFR Asia.
 
 After recording continuous losses for preceding three years, SBI Cards
 has scripted an impressive turnaround and posted a net profit of Rs.
 7.10 crores in FY’11. The company remained the most trusted credit card
 brand by being the undisputed Gold Award winner in the Reader’s Digest
 Trusted Brands Survey 2010. SBI Pension Fund recorded AUM of Rs. 3,764
 crores as on 31st March 2011 and remained the leader in both Government
 and unorganised sector in respect of AUM with a share of 44% and 64%
 respectively.
 
 Your Bank has received several awards. To name a few, SBI Home Loan has
 maintained its position as India’s Most Preferred Home Loan brand in
 CNBC-Awaaz consumer awards continuously for five years since 2006. In
 the Mobile Banking space, in June 2010 your Bank received the
 Prestigious IDRBT award for ‘Best use of technology for mobile banking
 and payment application.’ Other awards include The Banker - Innovation
 in Banking Technology Award 2010 for GREEN ATM installation, the
 NASSCOM CNBC IT User Award 2010, VISA 2009 Global Service Award under
 which the Bank’s ATM cum debit card was declared to have the lowest
 transaction response time, and IBA Technology Award: Best Customer
 Initiative and Best Online Banking.
 
 I am happy to announce that the Board of Directors of your Bank has
 declared a dividend @ Rs. 30 per share (300%) for the year ended 31st
 March 2011 also.
 
 Going forward, the Indian economy is seen as one of the engines
 powering growth and reshaping the global landscape. Your Bank will
 remain alert to the new opportunities for financing this growth both in
 India and abroad, while at the same time continuing to consolidate and
 build on its core competencies.
 
                                                With warm regards, 
 
                                                  Yours sincerely,
 
                                                 (PRATIP CHAUDHURI)