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State Bank of India
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« Mar 12
Notes to Accounts Year End : Mar '13
A.  Basis of Preparation
 
 The Banks financial statements are prepared under the historical cost
 convention, on the accrual basis of accounting, unless otherwise stated
 and conform in all material aspects to Generally Accepted Accounting
 Principles (GAAP) in India, which comprise applicable statutory
 provisions, regulatory norms/guidelines prescribed by Reserve Bank of
 India (RBI), Accounting Standards issued by the Institute of Chartered
 Accountants of India (ICAI), and the practices prevalent in the banking
 industry in India.
 
 B.  Use of Estimates
 
 The preparation of financial statements requires the management to make
 estimates and assumptions considered in the reported amount of assets
 and liabilities (including contingent liabilities) as of the date of
 the financial statements and the reported income and expenses during
 the reporting period. Management believes that the estimates used in
 the preparation of the financial statements are prudent and reasonable.
 Future results could differ from these estimates.
 
 1.  Share Capital
 
 a) During the year , the Bank has allotted 129,88,697 shares of Rs.
 10/- each for cash at a premium of Rs. 2,302.78 per equity share
 aggregating to Rs. 3004 crore under Preferential Allotment to GOI. Out
 of the total subscription of Rs. 3004 crore received from GOI, an
 amount of Rs. 12.99 crore was transferred to Share Capital Account and
 Rs. 2991.01 crore to Share Premium Account.
 
 b) The Bank has allotted 436 equity shares of Rs. 10/- each for cash at
 a premium of Rs. 1,580/- per equity share aggregating to Rs. 6,93,240/-
 out of shares kept in abeyance under Right Issue - 2008. Out of the
 total subscription of Rs. 6,93,240/- received, Rs. 4360/- was
 transferred to Share Capital Account and Rs. 6,88,880/- to Share
 Premium Account.
 
 c) The Bank has kept in abeyance the allotment of 83,075 (Previous Year
 83,511) Equity Shares of Rs. 10/- each issued as a part of Rights
 issue, since they are subject to title disputes or are subjudice.
 
 d) Expenses in relation to the issue of shares: Rs. 3.73 crore debited
 to Share Premium Account.
 
 * If the Bank does not exercise call option by 15th May 2017, the
 interest rate will be raised and fixed rate will be converted to
 floating rate.
 
 # If the Bank does not exercise call option by 27th June 2017, the
 interest rate will be raised and fixed rate will be converted to
 floating rate.
 
 b. Investments amounting to Rs. 6,070.97 crore (Previous Year Rs.
 5520.21 Crore) are kept as margin with Clearing Corporation of India
 Limited/NSCCL/ MCX/ USEIL towards Securities Settlement.
 
 d. During the year, GE Capital Business Process Management Services
 Private Limited bought back 13,59,598 shares from the Bank at Rs. 141
 per share , the Bank continues to hold 40% (previous year 40 %) stake
 in the joint venture. The Bank exited from two RRBs as per details
 given below
 
 * Investment in Equity, Equity Oriented Mutual Funds, Venture Capital,
 Rated Assets Backed Securities, Central Government Securities and ARCIL
 are not segregated under these categories as these are exempt from
 rating/listing guidelines.
 
 ** Investments in Subsidiaries/Joint Ventures have not been segregated
 into various categories as these are not covered under relevant RBI
 Guidelines.  Others include an amount of Rs. 13,330.20 crore (Previous
 Year Rs. 15,942.94) under RIDF Scheme of NABARD.
 
 C. Disclosures on Risk Exposure in Derivatives (A) Qualitative
 Disclosure
 
 i.  The Bank currently deals in over-the-counter (OTC) interest rate
 and currency derivatives as also in Interest Rate and Currency Futures.
 Interest Rate Derivatives dealt by the Bank are rupee interest rate
 swaps, foreign currency interest rate swaps and forward rate
 agreements. Currency derivatives dealt by the Bank are currency swaps,
 rupee dollar options, exchange traded options and cross- currency
 options. The products are offered to the Banks customers to hedge
 their exposures and the Bank enters into derivatives contracts to cover
 such exposures. Derivatives are used by the Bank both for trading as
 well as hedging on balance sheet items. The Bank also deals in a mix of
 these generic instruments. The Bank has done Option deals and
 Structured Products with customers.
 
 ii.  Derivative transactions carry market risk i.e. the probable loss
 the Bank may incur as a result of adverse movements in interest
 rates/exchange rates/equity prices and credit risk i.e. the probable
 loss the Bank may incur if the counterparties fail to meet their
 obligations. The Banks Policy for Derivatives approved by the Board
 prescribes the market risk parameters (cut-loss triggers, open position
 limits, duration, modified duration, PV01 etc.) as well as customer
 eligibility criteria (credit rating, tenure of relationship etc.) for
 entering into derivative transactions. Credit risk is controlled by
 entering into derivative transactions only with counterparties
 satisfying the criteria prescribed in the Policy. Appropriate limits
 are set for the counterparties taking into account their ability to
 honour obligations and the Bank enters into ISDA agreement with each
 counterparty.
 
 iii. The Asset Liability Management Committee (ALCO) of the Bank
 oversees efficient management of these risks. The Banks Market Risk
 Management Department (MRMD) identifies, measures, monitors market risk
 associated with derivative transactions, assists ALCO in controlling
 and managing these risks and reports compliance with policy
 prescriptions to the Risk Management Committee of the Board (RMCB) at
 regular intervals.
 
 iv.  The accounting policy for derivatives has been drawn-up in
 accordance with RBI guidelines, the details of which are presented
 under Schedule 17: Significant Accounting Policies (SAP) for the
 financial year 2012-13.
 
 v.  Interest Rate Swaps are mainly used at Foreign Offices for hedging
 of the assets and liabilities.
 
 vi.  Apart from hedging swaps, swaps at Foreign Offices consist of back
 to back swaps done at our Foreign Offices which are done mainly for
 hedging of FCNR deposits at Global Markets, Kolkata.
 
 vii. Majority of the swaps were done with First class counterparty
 banks.
 
 $ The swaps amounting to Rs. 6,574.73 crore (Previous Year Rs. 7,276.19
 crore) entered with the Banks own foreign offices are not shown here
 as they are for hedging of FCNB corpus and hence not marked to market.
 
 # IRS/FRA amounting to Rs. 10,338.05 crore(Previous Year Rs. 7,600.95
 crore) entered with the Banks own Foreign offices are not shown here
 as they are for hedging of FCNB corpus and hence not marked to market.
 
 * The forward contract deals with our own Foreign Offices are not
 included. Currency Derivatives - Rs. 4,349.04 crore ( Previous Year Rs.
 1,260.56 crore) and Interest Rate Derivatives - Rs. 167.53 crore
 (Previous Year Rs. 159.56 crore)
 
 1.  The outstanding notional amount of derivatives done between Global
 Markets department and International Banking Group department as on
 31st March 2013 amounted to Rs. 21,429.35 crore (Previous Year Rs.
 16,297.26 crore) and the derivatives done between SBI Foreign Offices
 as on 31st March 2013 amounted to Rs. 35,082.63 crore ( Previous Year
 Rs. 30,663.90 crore).
 
 2.  The outstanding notional amount of interest rate derivatives which
 are not marked to market where the underlying Assets/Liabilities are
 not marked to market as on 31st March 2013 amounted to Rs. 80,144.28
 crore ( Rs. 57,756.33 crore).
 
 3.  Credit Default Swap : Outstanding as on 31st March 2013 amounted to
 Rs. 54.29 crore (Previous Year Rs. 546.90 crore).
 
 2.1.  Miscellaneous
 
 a) Disclosure of Penalties imposed by RBI
 
 Nil (Previous year Rs. 0.10 crore)
 
 b) Penalty for Bouncing of SGL forms
 
 No penalty has been levied on the Bank for bouncing of SGL Forms.
 
 2.2.  Disclosure Requirements as per Accounting Standards
 
 a) Employee Benefits
 
 i.  Defined Benefit Plans
 
 1.  Employees Pension Plan and Gratuity Plan
 
 The following table sets out the status of the Defined Benefit Pension
 Plan and Gratuity Plan as per the actuarial valuation by the
 independent Actuary appointed by the Bank:-
 
 The estimates of future salary growth, factored in actuarial valuation,
 take account of inflation, seniority, promotion and other relevant
 factors such as supply and demand in the employment market.  Such
 estimates are very long term and are not based on limited past
 experience / immediate future. Empirical evidence also suggests that in
 very long term, consistent high salary growth rates are not possible,
 which has been relied upon by the auditors.
 
 2.  Employees Provident Fund
 
 Actuarial valuation carried out in respect of interest shortfall in the
 Provident Fund Trust of the Bank, as per Deterministic Approach shows
 Nil liability, hence no provision is made in F.Y.  2012-13.
 
 The following table sets out the status of Provident Fund as per the
 actuarial valuation by the independent Actuary appointed by the Bank:-
 
 ii.  Defined Contribution Plan:
 
 The Bank has a Defined Contribution Pension Scheme (DCPS) applicable to
 all categories of officers and employees joining the Bank on or after
 August 1, 2010. The Scheme is managed by NPS Trust under the aegis of
 the Pension Fund Regulatory and Development Authority. National
 Securities Depository Limited has been appointed as the Central Record
 Keeping Agency for the NPS. During F.Y.2012-13, the Bank has
 contributed Rs. 67.73 crore (Previous Year Rs. 52.47crore).
 
 iii. Other Long Term Employee Benefits
 
 Amount of Rs. 502.25 Crore (Previous Year Rs. 531.33 Crore) is provided
 towards Long Term Employee Benefits as per the actuarial valuation by
 the independent Actuary appointed by the Bank and is included under the
 head Payments to and Provisions for Employees in Profit and Loss
 Account.
 
 b) Segment Reporting:
 
 1.  Segment Identification
 
 I.  Primary (Business Segment)
 
 The following are the primary segments of the Bank:- - Treasury
 
 - Corporate / Wholesale Banking
 
 - Retail Banking
 
 - Other Banking Business
 
 The present accounting and information system of the Bank does not
 support capturing and extraction of the data in respect of the above
 segments separately.  However, based on the present internal,
 organisational and management reporting structure and the nature of
 their risk and returns, the data on the primary segments have been
 computed as under:
 
 i.  Treasury - The Treasury Segment includes the entire investment
 portfolio and trading in foreign exchange contracts and derivative
 contracts. The revenue of the treasury segment primarily consists of
 fees and gains or losses from trading operations and interest income on
 the investment portfolio.
 
 ii.  Corporate / Wholesale Banking - The Corporate / Wholesale Banking
 segment comprises the lending activities of Corporate Accounts Group,
 Mid Corporate Accounts Group and Stressed Assets Management Group.
 These include providing loans and transaction services to corporate and
 institutional clients and further include non-treasury operations of
 foreign offices.
 
 iii. Retail Banking - The Retail Banking Segment comprises of branches
 in National Banking Group, which primarily includes Personal Banking
 activities including lending activities to corporate customers having
 banking relations with branches in the National Banking Group. This
 segment also includes agency business and ATMs.
 
 iv.  Other Banking business - Segments not classified under (i) to
 (iii) above are classified under this primary segment.
 
 II.  Secondary (Geographical Segment)
 
 i) Domestic Operations - Branches/Offices having operations in India
 
 ii) Foreign Operations - Branches/Offices having operations outside
 India and offshore Banking units having operations in India
 
 III. Pricing of Inter-segmental Transfers
 
 The Retail Banking segment is the primary resource mobilising unit. The
 Corporate/Wholesale Banking and Treasury segments are recipient of
 funds from Retail Banking. Market related Funds Transfer Pricing
 (MRFTP) is followed under which a separate unit called Funding Centre
 has been created. The Funding Centre notionally buys funds that the
 business units raise in the form of deposits or borrowings and
 notionally sell funds to business units engaged in creating assets.
 
 IV.  Allocation of Expenses, Assets and Liabilities
 
 Expenses incurred at Corporate Centre establishments directly
 attributable either to Corporate / Wholesale and Retail Banking
 Operations or to Treasury Operations segment, are allocated
 accordingly. Expenses not directly attributable are allocated on the
 basis of the ratio of number of employees in each segment/ratio of
 directly attributable expenses.
 
 The Bank has certain common assets and liabilities, which cannot be
 attributed to any segment , and the same are treated as unallocated.
 
 During the year, the Bank has further refined the segmental transfer
 pricing mechanism in order to report more relevant segment results.
 This change effects the segment results inter se and has no impact on
 the financials of the bank. The effect of the change on the segment
 results is not fairly determined.
 
 c) Related Party Disclosures:
 
 1. Related Parties
 
 A.  SUBSIDIARIES
 
 i.  DOMESTIC BANKING SUBSIDIARIES
 
 1.  State Bank of Bikaner & Jaipur
 
 2.  State Bank of Hyderabad
 
 3.  State Bank of Mysore
 
 4.  State Bank of Patiala
 
 5.  State Bank of Travancore
 
 ii.  FOREIGN BANKING SUBSIDIARIES
 
 1.  SBI (Mauritius) Ltd.
 
 2.  State Bank of India (Canada)
 
 3.  State Bank of India (California)
 
 4.  Commercial Bank of India LLC, Moscow
 
 5.  PT Bank SBI Indonesia
 
 6.  Nepal SBI Bank Ltd.
 
 iii. DOMESTIC NON-BANKING SUBSIDIARIES
 
 1.  SBI Capital Markets Ltd.
 
 2.  SBI DFHI Ltd.
 
 3.  SBI Mutual Funds Trustee Company Pvt. Ltd.
 
 4.  SBICAP Securities Ltd.
 
 5.  SBICAPS Ventures Ltd.
 
 6.  SBICAP Trustees Company Ltd.
 
 7.  SBI Cards and Payment Services Pvt. Ltd.
 
 8.  SBI Funds Management Pvt. Ltd.
 
 9.  SBI Life Insurance Company Ltd.
 
 10.  SBI Pension Funds Pvt. Ltd.
 
 11.  SBI - SG Global Securities Services Pvt. Ltd.
 
 12.  SBI Global Factors Ltd.
 
 13.  SBI General Insurance Company Ltd
 
 14.  SBI Payment Services Pvt. Ltd.
 
 iv.  FOREIGN NON-BANKING SUBSIDIARIES
 
 1.  SBICAP (UK) Ltd.
 
 2.  SBI Funds Management (International) Pvt. Ltd.
 
 3.  SBICAP (Singapore) Ltd.
 
 B.  JOINTLY CONTROLLED ENTITIES
 
 1.  GE Capital Business Process Management Services Pvt. Ltd
 
 2.  C-Edge Technologies Ltd.
 
 3.  Macquarie SBI Infrastructure Management Pte. Ltd.
 
 4.  Macquarie SBI Infrastructure Trustees Ltd.
 
 5.  SBI Macquarie Infrastructure Management Pvt. Ltd.
 
 6.  SBI Macquarie Infrastructure Trustees Pvt. Ltd.
 
 7.  Oman India Joint Investment Fund - Management Company Pvt.  Ltd.
 
 8.  Oman India Joint Investment Fund - Trustee Company Pvt. Ltd.
 
 C.  ASSOCIATES
 
 i.  Regional Rural Banks
 
 1.  Andhra Pradesh Grameena Vikas Bank
 
 2.  Arunachal Pradesh Rural Bank
 
 3.  Kaveri Grameena Bank
 
 4.  Chhattisgarh Gramin Bank
 
 5.  Deccan Grameena Bank
 
 6.  Ellaquai Dehati Bank
 
 7.  Meghalaya Rural Bank
 
 8.  Krishna Grameena Bank
 
 9.  Langpi Dehangi Rural Bank
 
 10.  Madhyanchal Gramin Bank
 
 11.  Malwa Gramin Bank
 
 12.  Mizoram Rural Bank
 
 13.  Marudhara Gramin Bank
 
 14.  Nagaland Rural Bank
 
 15.  Parvatiya Gramin Bank (upto 14.02.2013)
 
 16.  Purvanchal Gramin Bank
 
 17.  Samastipur Kshetriya Gramin Bank (upto 14.10.2012)
 
 18.  Saurashtra Gramin Bank
 
 19.  Utkal Grameen Bank
 
 20.  Uttarakhand Gramin Bank
 
 21.  Vananchal Gramin Bank
 
 22.  Vidisha Bhopal Kshetriya Gramin Bank (upto 07.10.2012)
 
 ii.  Others
 
 1.  SBI Home Finance Ltd.
 
 2.  The Clearing Corporation of India Ltd.
 
 3.  Bank of Bhutan Ltd.
 
 D.  Key Management Personnel of the Bank
 
 1.  Shri Pratip Chaudhuri, Chairman
 
 2.  Shri Hemant G. Contractor Managing Director & Group Executive
 (International Banking)
 
 3.  Shri A. Krishna Kumar, Managing Director & Group Executive
 (National Banking)
 
 4.  Shri Diwakar Gupta, Managing Director & Chief Financial Officer
 
 5.  Shri S. Vishvanathan, Managing Director & Group Executive
 (Associates & Subsidiaries) (from 9.10.2012)
 
 2.  Parties with whom transactions were entered into during the year
 
 No disclosure is required in respect of related parties, which are
 State-controlled Enterprises as per paragraph 9 of Accounting
 Standard (AS) 18. Further, in terms of paragraph 5 of AS 18,
 transactions in the nature of Banker-Customer relationship have not
 been disclosed including those with Key Management Personnel and
 relatives of Key Management Personnel.
 
 e) Earnings per Share
 
 The Bank reports basic and diluted earnings per equity share in
 accordance with Accounting Standard 20 - Earnings per Share.
 Basic earnings per share is computed by dividing net profit after
 tax by the weighted average number of equity shares outstanding during
 the year.
 
 f) Accounting for Taxes on Income
 
 i.  Deferred Tax :-
 
 a.  During the year, Rs. 107.97 crore [Previous Year Rs. 455.93 crore
 debited] has been credited to Profit and Loss Account on account of
 deferred tax.
 
 b.  During the year, the Bank has recognised deferred tax asset on
 provision for leave encashment, which was hitherto not being done.
 Accordingly, an amount of Rs. 922.15 crore ( including Rs. 783.62 crore
 relating to period upto 31.03.2012) has been accounted for in the
 current year.
 
 ii.  The Bank has net deferred tax liability of Rs. 628.92 crore
 (Previous Year net deferred tax asset of Rs. 180.63 crore), which is
 included under Other Liabilities and Provisions (Previous Year Other
 Assets). The breakup of deferred tax assets and liabilities into major
 items is given below:
 
 # Includes tax credit arising out of provision for leave encashment for
 employees of Rs. 922.15 crore.
 
 * Includes Rs. 917.04 crore (Previous Year Rs. 536.56 Crore)
 transferred from Income Tax Account.
 
 h) Impairment of Assets
 
 In the opinion of the Banks Management, there is no impairment to the
 assets during the year to which Accounting Standard 28 - Impairment of
 Assets applies.
 
 3.  With regard to disclosures relating to Micro, Small & Medium
 Enterprises under the Micro, Small & Medium Enterprises Development
 Act, 2006, there have been no reported cases of delayed payments or of
 interest payments due to delay in such payments to Micro, Small &
 Medium Enterprises.
 
 4.  Letter of Comfort issued for Subsidiaries
 
 The Bank has issued letters of comfort on behalf of its subsidiaries.
 Outstanding letters of comfort as on 31st March 2013 aggregate to Rs.
 477.19 Crore (Previous Year: Rs. 2086.56 Crore). In the Banks
 assessment no financial impact is likely to arise.
 
 5.  Provisioning Coverage Ratio:
 
 The Provisioning to Gross Non-Performing Assets ratio of the Bank as on
 31st March 2013 is 66.58% (Previous Year 68.10%).
 
 6.  Unamortised Gratuity Liabilities
 
 In accordance with RBI circular no. DBOD.BP.BC.80/21.04.018/2010-11
 dated February 9, 2011 the Bank has opted to amortise the additional
 liability on account of enhancement in Gratuity limit over a period of
 5 years beginning with the financial year ended March 31, 2011.
 Accordingly, the Bank has charged a sum of Rs. 100 crore to the Profit
 and Loss Account, being the proportionate amount for the financial year
 ended March 31, 2013. The unrecognised liability of Rs. 200 crore as on
 March 31, 2013 will be amortised proportionately in accordance with the
 above circular.
 
 7.  Inter Office Accounts
 
 Inter Office Accounts between branches, controlling offices and local
 head offices and corporate centre establishments are being reconciled
 on an ongoing basis and no material effect is expected on the profit
 and loss account of the current year.
 
 8.  Specific Provision for NPAs
 
 During the year, the Bank has made specific provisions of Rs. 706.26
 crore (previous year Rs. 1350 crore) for certain Non- performing
 domestic advances to provide for estimated actual loss in collectible
 amounts.
 
 9.  Pending Wage Agreement
 
 The Ninth Bipartite Settlement entered into by the Indian Banks
 Association on behalf of the member Banks with the All India Unions of
 Workmen expired on 31st October 2012. Pending execution of agreement
 for wage revision, to be effective from 1st November 2012, a provision
 of Rs. 720 Crore has been made during the year.
 
 Further, the Bank has made an adhoc additional provision of Rs. 225
 crore towards Superannuation Schemes and other long term employee
 benefits, over and above the actuarial valuations.
 
 10.  Previous year figures have been regrouped/reclassified, wherever
 necessary, to conform to current year classification. In cases where
 disclosures have been made for the first time in terms of RBI
 guidelines / Accounting Standards, previous years figures have not
 been mentioned.
Source : Dion Global Solutions Limited
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