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State Bank of Mysore

BSE: 532200 | NSE: MYSOREBANK | Series: NA | ISIN: INE651A01020 | SECTOR: Banks - Public Sector

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Annual Report

For Year :
2016 2015 2014 2013 2012 2011 2010 2009 2008

Director’s Report

Macro Economic Scenario and
Banking Environment.

  1. Growth

  • The global economic activity has been characterised by varying perceptions of downside risks to recovery in some advanced economies (AEs) with weak growth and elevated inflation amidst tighter financial conditions in Emerging Market Economy (EME). Across EMEs, weak
    domestic fundamentals, lacklustre external demand and country- specific constraints continue to restrain growth. The uneasy calm
    that prevails in financial markets could be dispelled by return of risk-off investor sentiment on account of data pertaining to China or to
    US inflation.

On the domestic front, unseasonal

rains and hail have damaged some winter crops though agricultural activities have remained resilient, suggesting that implicit estimate of GVA is likely to be achieved. With improved perceptions on overall economic conditions, manufacturing purchasing managers' index (PMI) suggests business expectations for Q1 of 2016-17 to be positive. Services sector activity expanded steadily turning out to be the main drivers
in H2. The services PMI remained in expansion mode during H2 on new business and expectations. The outlook for services in surveys
is upbeat for Q1 of 2016-17.

  1. Inflation

  • Retail inflation measured by the consumer price index (CPI) dropped due to a larger than anticipated decline in vegetable prices. Inflation
    in the fuel group moderated across electricity, kerosene, cooking gas and firewood, easing pressures on rural inflation. However, CPI inflation edged up under several sectors suggesting capacity constraints and is unlikely to be helped by the 7
    th Pay Commission award, one-rank-one-pension (OROP) award and cost-push effect of the increase in the service tax rate.

  • However there will be some offsetting downside pressures from tepid demand in the global economy, Government's effective supply side measure and commendable commitment to fiscal consolidation. The uneven recovery in growth in 2015-16 is likely to strengthen,
    assuming a normal monsoon, likely boost to consumption, 7th Pay Commission recommendations and OROP. The GVA growth projection
    for 2016-17 is accordingly retained at 7.6 per cent.

  1. Liquidity framework for Monetary Policy Operations

  • Liquidity conditions tightened since mid-December with pick-up in bank credit and flatter deposit mobilisation. The Reserve Bank undertook liquidity operations through fine-tuning variable rate repo auctions beside reducing Statutory liquidity ratio (SLR) by 25 basis points from 21.5 per cent to 21.25 per cent.

Net inflows in the form were robust in Q4. Foreign portfolio investors (FPIs), became net buyers in March in both equity and debt segments.

  • The reduction in small savings rates in March 2016, refinements in the liquidity management framework and introduction of the marginal cost of funds based lending rate (MCLR) magnify the effects of the policy rate cut.

    1. Monetary and Liquidity Measures

On the basis of an assessment of the current and evolving macroeconomic situation RBI has decided to: reduce the policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points from 6.75 per cent to 6.5 per cent;

  • reduce the minimum daily maintenance of the cash reserve ratio (CRR) from 95 per cent of the requirement to 90 per cent

continue to provide liquidity as required but progressively lower the average ex ante liquidity to a position closer to neutrality;

narrow the policy rate corridor from +/-100 basis points (bps) to +/- 50 bps by reducing the MSF rate by 75 basis points and increasing the reverse repo rate by 25 basis points, with a view to ensuring finer alignment of the weighted average call rate (WACR) with the repo rate; Consequently, reverse repo rate under the LAF stands adjusted to 6.0 per cent, and the marginal standing facility (MSF) rate to 7.0 per cent.

    1. economy of karnataka

  1. Karnataka's economy is largely service-oriented, with 64% of the State revenue coming from services sector, 26% from industrial sector and only 8% coming from agricultural sector. The decline of agriculture sector is attributed to the drought or near drought like situation prevailing for the last 3 years causing distress to the farming community besides affecting their produce.

Karnataka is referred to as 'Knowledge & Innovation Capital', 'Silicon Valley', 'R&D Hub' and 'Startup Hub'. It is the state with most peaceful labour relations, boasts of highest number of international schools, most number of industrial training institutes and the 2nd highest engineering & medical colleges in the country. Karnataka's state contribution to the country's GDP has gone up from 5.5% to 7% after incorporating correction in the estimation methodology taking into considering generous contribution by IT sector. Karnataka is the Largest
Biotech hub (28% All India's Biotech companies), largest exporter of software 40% Country's software exports, largest number of startups (36% 5 out of 8 Indian Unicorns), largest number of R&D centers (44%), largest producer of Coffee (71% National output). Bengaluru ranked “Best place to live and work for Expats” in India with outstanding social infrastructure and cosmopolitan culture.

* Due to compliance with RBI guidelines on Asset Quality Review, the Bank had to make substantially much higher provision on Standard/Restructured advances, thereby adversely impacting the Asset Quality and profitability parameters.

2.3. Income

Total Income of the Bank increased by 3%, from '7,708 crs as at March 2015 to '7,938 crs in March 2016. Interest Income increased from '6,940 crs to '7,128 crs (2.7%). Average Yield on Advances declined from 11.11% during 2014-15 to 10.49% during 2015-16, while Average Yield on Investments decreased from 7.74% in March 2015 to 7.72% during the same period. Non-Interest Income increased marginally by 5% from '767 crs to '810 crs. The ratio of Non-Interest Income to Total Income, therefore, stood at 10.20% (9.96% last year).

    1. The rate of growth of Karnataka's economy has slowed down from 7.8 per cent during 2014-15 to 6.2 per cent during 2015-16, attributed to drought in 137 taluks during kharif and 62 taluks during the rabi crop seasons resulting in fall in foodgrains production by 16 lac tonnes. The service sector is growing at per cent while the industrial sector is expected to register a growth of 4.5 percent.

The business growth of our Bank depends to a large extent on the Karnataka economy, since 82% of branches (850 out of 1,037 branches, as on 31.03.2016) are located in Karnataka. The budget size and State plan 2016- 17 envisages a total expenditure of '1,63,419 crs on various developmental activities and regulatory functions of the Government, which includes Revenue Expenditure of '1,30,236 crs, Capital
Expenditure of '26,371 crs. GoK plan to set up 2 industrial township/smart cities at Davanagere and Belgaum besides SEZ already planned at Tumkur, which will provide increased growth opportunities for the economy and more particularly Banking Sector. The commissioning of Mumbai-Bangalore gas pipeline will provide further boost to the effort.


  1. Market Share and Business Growth: The business levels of the Bank and the position of market share in recent years are furnished hereunder:-

(' in crores)

Year ended 31st March







Aggregate Deposits
(Percentage of growth)















§ R

T-~ t





Of which Non-Bulk
Deposits (%)













Growth in Non-Bulk
Deposits (%)







Deposits Market share %







Total Advances
(% of growth)




® GO








Advances Market share %







* ASCB as on 18.03.2016

  1. The growth in Deposits have been quite impressive, with aggregate deposits reaching a level of '70,244 crs, a growth of '5,186 crs over the previous year at a rate of 8%. The growth in Non Bulk deposit at 16.4% is in tune with the past trend and in accordance with our conscious policy of shedding high cost/bulk deposits.

However, growth in Advances have been sluggish due to subdued investment climate resulting in lower off take of advances particularly in Corporate Sector. The total advances have reached a level of '55,418 crs, recording a growth of '2,122 crs over the previous year at a growth rate of 4.0%. As on 18.03.2016 the Bank's market share of Deposits declined to 0.73% along with Bank's market share of Advances which
has decreased to 0.74% from 0.78%.

  1. Key Performance Indicators

Sl. No.

Key Indicators






Net Profit ('. in crs)






Return on Assets (%)






Return on Equity (%)






Expenses - Income Ratio (%)*






Earnings per Share (in '.)*






Gross NPA to Gross
Advances (%)*






Net NPA to Net Advance (%)*






Cost of Deposit (%)*






Yield on Advances (%)*






NIM (%)*





2.6. Dividend


Interest from Adv.

Interest from Others

Treasury Income

(incl. Govt. Comm)


  1. Expenses

The Total Expenditure (before
provisions and contingencies)
increased by '310 crs, from
'6,376 crs in 2014-15 to
'6,686 crs in 2015-16. While Interest
Expenses increased by '159 crs
(3.3%), the Operating Expenses
increased by '150 crs (9.9%) during
the current year. The Average Cost of
Deposits however declined from 7.25%
in March,2015 to 6.87% in March,2016
owing to cut in Policy/Bank rate and its
transmission to customer, increase in
CASA share from 33.73% (31.03.15)
to 34.6% (31.03.16) beside decrease
in higher cost bulk deposits.

  1. Profit

The Operating Profit declined from
'1,331 crs in 2014-15 to '1,252
crs in 2015-16 , the Net Profit
declined from '409 crs to '358
crs .The decline in Operating
Profit has been moderate @ 6%
with Interest expenses increasing
by only 3%, despite increase in
deposit base and consequently
rise in cost of servicing in the form
of Staff and Overheads. However
decline in Net Profit has been
steeper by 12% over previous
year, consequent upon additional
provisioning warranted by AQR.

Keeping in mind the need to strengthen
Tier I capital of the Bank in the current
economicscenario,the BoardofDirectors
has declared a dividend of 60% ('6 per
Equity share of '10/-) for the year 2015-
16. This involved a pay-out of '28.80
crs, excluding the tax component.
The pay-out ratio for dividend works
out to 8.05%, as against 7.05% for



    1. Deposits :

Total Deposits of the Bank grew by
'4,505 crs, to reach the level
of '70,569 crs. Aggregate
Deposits (total deposits excl.
inter Bank deposits) stood at
'70,244 crs as at March 2016,
recording a growth of '5,186 crs
(8%) during the year. The share
of CASA deposits to Aggregate
Deposits increased from 33.73%
in March 2015 to 34.6% in March

  1. Personal Segment Deposits

Personal segment deposits grew by
'5,164 crs, registering a growth of
13.5% to reach a level of '43,507
crs as on 31st March 2016 and now
account for 62% of total deposit.
NRE deposit registered a growth of
17%, SB by 16% and Term Deposit
by 13%. The number of deposit
accounts under Personal segment
have increased by 8,92,123 during
the year.

  1. To further boost deposits
    growth under Personal segment,
    two new deposit products were
    introduced viz. Vidyarthi Sanchay”

  • a Savings Bank account Scheme
    targeting students in the age
    group of 10-18 years and “Mybank
    Sudhan” - a Non-callable Term
    Deposit scheme in the range of '15
    lac to '10 cr with additional interest
    incentive for foregoing the option of
    premature payment of deposits.


    (DEAF) SCHEME 2014

Pursuant to the amendment of the
Banking Regulation Act, 1949, and under
the provision of section 26A inserted, the
amount to the credit of any account in
India with any Bank, which has not been
operated upon for a period of 10 years
and more shall be credited to the Fund
within a period of three months from
the expiry of said period of ten years.
The amount due under the Scheme is
to be transferred to DEAF account with
Reserve Bank of India before closing of
the banking hours of the last working day
of every month”.

'The Bank has so far transferred a sum
of '57.95 crs to DEAF account from June


  1. to December 2015 and submitted
    claims to the extent of '28.75 lac in
    respect of 75 accounts.’

    1. Credit Expansion

  1. The total advances of the
    Bank increased from '53,296 crs to
    '55,418 crs, thus registering a growth of
    '2,122 crs (4.0%) during the year. Net
    advances (i.e. net of NPA related/floating
    Provisions, and outstanding under Staff
    Festival Advance) of the Bank increased
    from '52,025 crs in March 2015 to
    '53,954 crs. Credit Deposit Ratio of the
    Bank decreased from 81.9% in March

  1. to 79.67% in March 2016 due to our
    highly selective approach in taking further
    exposure in the Corporate sector which
    has registered a decline of 3%.However
    other retail Segments have registered
    overall 11.3% growth.

  1. Corporate Network:

Our Bank has a Corporate Network
consisting of 11 large branches spread
over Metro and other big centers of
the country, for catering to the needs
of large Corporates.

The Corporate Network of the Bank
has achieved a business level of
'29,949.96 crs, comprising '3,156.72
crs of deposits & '26,793.24 crs of
advances, as on 31.03.2016. The
credit by CNW branches account for
48% of the total advance and 89% of


















the C&I advance of our Bank.

The prolonged sluggishness in the
economy has impacted growth of
Corporate advances portfolio. To
counter the growth of impaired assets,
the Bank has been consciously moving
its portfolio to investment grade and
above [BBB or above], which accounts
for 64% of total advances. This strategy
has started yielding desired results.

The present high incidence of NPAs
particularly in the Corporate sector
can be attributed to RBI guidelines on
Asset Quality Review, necessitating
reclassification of restructured
advances as NPA. The guidelines has
impacted the bottom line of all the
Banks with varying degree of severity.

Bank has undertaken a slew
of measures like recoveries &
rectifications under JLF, sale of assets
and prudential write offs to offset the
rising NPA due to market / industry/
economic scenario.

  • Total Forex Turnover of CNW was
    at '59,688.57 crs, accounting for
    91% of the total Bank's Forex
    Turnover and contributes 88% of
    total Forex earnings of the Bank.


  1. The growth in AAA to A grade of advances [ECR] is 41%.

  2. Credit Committees :

of FY16 stood at '5,973 crs as against '5,100 crs during the year ended March, 2015 registering Y-o-
growth of 17%.

Personal & Services Banking (P&SB): The Bank's advance to the P&SB segment under priority sector stood at '3,901 CRS as on 31.03.2016 as against '3,491 crs during the year ended March, 2015
registering Y-o-Y growth of 12.9%.

3.5. Agriculture Finance:

Total agricultural advances went up from
'9124 crs to '9463 crs during FY 2015-
16 registering a growth of 3.7% over the
previous year. Bank has surpassed the
benchmark of 18% stipulated for agriculture
advances by reaching a level 22% of the
Adjusted Net Bank Credit (ANBC), besides
7.61% for small & marginal farmers against
the benchmark of 7%.

  1. The Bank adopted a credit
    saturation approach so as to cover all
    eligible uncovered farmers for financing
    their agricultural needs. The Bank in
    consultation with NABARD collated the
    data relating to emerging trends under
    agriculture segment in all the 30 districts of
    Karnataka State and accordingly, district
    wise potential available for financing
    under various activities were made
    available to the branches. The Bank also
    actively participated in various Agri Expo/
    Mela to spread the message. Publicity
    materials like banners and pamphlets with
    special focus on revised KCC schemes &
    Greenhouse/Polyhouse/Nethouse were
    displayed/provided to the farmers.

  2. Special Agricultural Credit Plan.

The position of disbursements under
SACP vis-a-vis targets is furnished as

the PMAY, a Govt. Sponsored Scheme
which is a Priority Sector Loan.

A new Gold Loan Product My Bank
Flexi Gold Loan Scheme” an all purpose
overdraft scheme for individual customers •
was introduced beside “Combo Car Loan”
for the existing Housing loan borrowers
with concession in interest rate.

Rajiv Gandhi Scholarship scheme” to
provide education loans to the students
belonging to economically backward
sections to pursue Higher Studies (other
than Technical courses) promoted by
Government of Karnataka, was also

3.4. Priority Sector Lending and
Social Banking:

Total Priority Sector Lending of our
Bank stood at '22,388 crs as at March,
2016, including Inter Bank Participation
Certificate (IBPC) of '525 crs. issued
by Kaveri Grameena Bank, as against
'19,401 crs,( including IBPC of '485
Crs) during the previous year ended
March 2015 thereby registering a YoY
growth of 15.4%. This works out to 40%
of the Adjusted Net Bank Credit (ANBC
of '55,796 crs).

Segment-wise status of these advances
is as under:

Agriculture: The Total Agricultural
advances increased by 14.8% from
'10,643 crs (including IBP of '485
crs and RIDF investments of '2,263
crs) to '12,216 crs (including IBP of
'525 crs and RIDF investments of
'2,228 crs) during the year. Fresh
agricultural advances to the tune of
'3,040 crs were sanctioned to 1.82
lakh farmers during FY 15-16.

Micro, Small and Medium
Enterprises (MSME):
The Bank's

advances to Micro, Small and

Credit Committees were first established
in May 2002, in order to facilitate taking
decisions through committee approach
to provide more professional touch
to credit appraisal, by thread-bare
discussion on the risk factors. Two
committees have been constituted
at Head office viz. HOCC-I chaired
by Managing Director and HOCC-II
chaired by Chief General Manager
(CB) with CGM/GMs as members of
the committee.

The Bank has held 48 HOCC-I and
43 HOCC-II Meetings, respectively,
during 2015-16, to facilitate growth in

Besides the above HOCCs, in
order to provide speedier credit and
consequence to devolution of wider
powers to the Networks, 4 Network
Credit Committees with Network
General Managers as Chairmen were
constituted and 191 meetings were
held in aggregate.

Similar Committees are also constituted
at Zonal & Regional office levels viz.
ZOCC & ROCC respectively.

  1. Personal Segment Advances:

Personal segment advances registered
a record growth of '1,675 crs (15.95%)
to reach a level of '12,175 crs with
Housing loans alone recording a
growth of '1,078 crs (20.07%) to reach
a level of '6,450 crs beside increase
in Car loans by '143 crs (17.31%) and
Personal loans by '249 crs (17.56%).
Share of Personal segment advances
to total advances has increased from
19.69% as at Mar'15 to 21.95% as at
Mar'16 and contributed 78% of total
advance growth during the year.

A new Housing Loan Scheme, Namma •
Mane” was introduced to cater to
Economically Weaker Sections (EWS)

and Lower Income Groups (LIG) under Medium Enterprises as at the end under.

(' in crores)









The following initiatives were taken
to increase the flow of credit to the
Agriculture Segment.

  • During the FY 2015-16,
    Government of Karnataka declared
    136 talukas as drought hit. All
    branches in Karnataka considered
    rephasement /restructuring of
    dues from farmers who were in
    distress. Additional financing by
    way of production and investment
    credit was also extended to such

  • The Bank has sanctioned Gold
    Loans amounting to '628 crores
    under Multipurpose Gold Loans to
    cater to the immediate & diverse
    needs of the farmers.

Interest Subvention of 2% upfront
aggregating to '22.72 crs & 3%
additional subvention for prompt
repaying farmers aggregating to
'23.29 crs has been passed on to
farmers during the FY 2015-16.

In order to provide succour to the
distressed farmers reeling under drought,
OTS scheme was launched with sizeable
benefits to the farmers for squaring
off their dues beside provision of fresh
advance. 1,819 accounts amounting to
'26 crs were settled.


Under Corporate Social Responsibility,
we have setup an Agricultural Knowledge
Dissemination Centre (AKDC) at our ADB,
Mandya, which imparts knowledge about
the latest trends in Agricultural sector.

As a part of compliance to the directives
of the Government of India, the Bank has
issued around 11,026 Rupay Kisan ATM
cards to eligible KCC account holders
during the year & has achieved 57.53%

        1. Micro, Small and Medium
          Enterprises (Manufacturing) :

The total credit to Micro, Small and
Medium Enterprises (Manufacturing)
of our Bank stood at '2,511 crs as for
the year ended March, 2016 as against
'2,781 crs as on March 2015, registering
a decline of '270 crs (YoY 9.7%) due
to re classification and shifting of Food
& Agro based industries amounting to
'966 crs to Agri. Sector

        1. Micro, Small and Medium
          Enterprises (Services) :

Total credit to Micro, Small and Medium
Enterprises (Services) of our Bank as
on March 2016 stood at '3,362 crs as
against '2,468 crs as on March 2015,
registering an increase of '576 crs (YoY
35%) during the year.

      1. During the year ended March
        2016, the Bank has undertaken various
        initiatives to increase the flow of credit
        to MSME sector. The major products
        under the MSME segment have been
        reviewed and made more attractive to
        the customers. The interest rates have
        also been revised downwards and the
        substantial benefit of the reduction in
        the Base Rate has been passed on
        to the borrowers Customer Relations
        Programmes and Customer Meets to
        strengthen the relationship with MSME
        clients were arranged at various centres
        like Bengaluru, Mysuru, Hosur, Tirupur
        etc. A One-day 'SME Knowledge Series'
        workshop was organised at Bengaluru
        on 22nd December, 2015, in association
        with Dun & Bradstreet, for the MSME
        entrepreneurs to explain to them the
        various products offered by us besides
        making a sincere attempt towards
        better appreciation of their needs and
        difficulties faced by them in general.

The Bank has participated
in various exhibitions organised by
Industries Associations like ASSOCHAM,
FKCCI etc, to increase our visibility and
also to market our MSME products
beside organizing Udyog Mitra MSME
loans campaign resulting in in fresh
sanctions to the tune of '657.51 crs
spread over 5,473 MSME beneficiaries.

      1. During FY16, the Bank has entered
        into an MOU with Industrial Finance
        Corporation of India Limited (IFCI) and
        rolled out the new “Credit Enhancement
        Guarantee Scheme for Schedule
        Caste” (CEGSSC) scheme extending
        guarantee cover for loans exclusively
        provided to entrepreneurs belonging to
        the Schedule Castes to the extent of '5

  1. Lendings under MUDRA

The Government of India has launched
Pradhan Mantri MUDRA Yojana (PMMY)
to fund the unfunded and financial
exclusion group belonging to weaker
section of the society and to assist
Non-farm enterprises in manufacturing,
trading and services with credit needs
upto '10.00 lacs.

The Bank has been pro- active in
dispensing credit under the scheme and
as against the target of '415 crores, our
Bank has disbursed '813 crs. (196% of
the target) covering 37,680 beneficiaries.
On account of the good performance in
MUDRA loan disbursement, our Bank
has been conferred the Best Bank Award
under MUDRA Yojna for Emerging Bank-
Runner Up by CIMMSE, New Delhi.

  1. CGTMSE Credit Guarantee

We are continuously offering collateral
free financial assistance to all eligible
MSME sector. All loans to eligible
MSME units upto '100.00 lacs are being
sanctioned without any collateral
security by covering them under the
guarantee scheme of CGTMSE. The
Bank is presently absorbing the guarantee
fee and annual service fee in respect of
all loan limits upto '10 lacs. We have
covered 11,041 accounts amounting
to '734.15 crs.under the CGTMSE
guarantee as on March, 2016.

  1. Assistance to Weaker Sections
    of the Society:

The Bank continued to extend financial

assistance to Weaker Sections of the
Society comprising of small & marginal
farmers with land holdings of 5 acres
or less, landless labourers, tenant
farmers etc., village & cottage industries
whose individual limits does not exceed
'50,000/-, SJSRY, SLRS, DRI, Self-
Help Groups and advances to SC/ST
beneficiaries. The outstanding amount
under lendings to Weaker Sections stood
at '6,417 crores as at the end of March
2016, which constitutes 11.5% of ANBC,
as against stipulated benchmark of 10%.

  1. Assistance to Women

We have been continuously laying
emphasis on extending hassle-free credit
facilities to MSME units being exclusively
run by women entrepreneurs. The Bank's
total credit to women entrepreneurs as at
the end of March 2016 stood at '4,481
crores, covering 2,43,119 beneficiaries,
which works out to 8%

  1. Measures to improve the
    economic conditions of SCs/

Bank has been extending all support
for the development of SCs/STs to
ensure that adequate credit is made
available to members of the SCs/STs
engaged in various professions. Credit
is made available to this section of the
society in tie-up with the State level
development departments of SCs/STs.
The Bank's assistance to the SCs/STs
under various schemes as at the end
of March 2016 stood at '884 crores
covering 1,10,327 beneficiaries, which
forms 4% of Priority Sector Advances.

  1. Finance to Minority

For promoting economic activities
amongst the eligible beneficiaries
belonging to the minority communities,
Bank has been actively participating
in this national priority for promoting
self-employment activities. The Bank's
assistance to the notified minorities under
various schemes as at the end of March

  1. stood at '2,117 crores covering
    42,011beneficiaries, which forms 9.5% of
    Priority Sector Advances.

  1. Government Sponsored

The position of assistance rendered
under various Government sponsored
schemes by our Bank as at the end of
March 2016 is as detailed below:

      1. Prime Minister's Employment
        Generation Programme
        (PMEGP) :

The Government of India had launched
the scheme “Prime Minister's Employment
Generation Programme (PMEGP)” by
merging the earlier Prime Minister's
Rozgar Yojana (PMRY) and Khadi &
Village Industries Commission's Rural
Employment Generation Programme
(REGP) to empower first generation
entrepreneurs to set up micro enterprises
across the country. The Bank's total credit
under PMEGP Scheme as at the end of
March '16 stood at '68.6 crores covering

  1. 752 beneficiaries..

        1. National Urban Livelihood
          Mission (NULM) Scheme

The Bank has extended financial
assistance of '16.1 crores under
NULM scheme (previously known a
SJSRY scheme) during the year to 798
beneficiaries. Total amount outstanding
under NULM scheme as at the end of
March 2016 is '36.1 crores covering
4,458 beneficiaries.

        1. Differential Rate of Interest
          (DRI) Scheme

The Loans under DRI scheme of our
Bank stood at '12.4 crores as at the
end of March 2016 covering 11,125
beneficiaries with a share of advances
to SC/ST beneficiaries amounting to '5.3
crores @ 44%.

        1. Investments

      1. The total investments of the Bank
        in Government securities, other approved
        securities and Non-SLR securities
        increased from '18,166 crs as at March
        2015 to '20,229 crs as at March 2016.

      2. Profit on sale of investments
        increased from '125.33 crs in 2014-

  1. to '131.18 crs in 2015-16. During
    the year, interest and dividend income
    from investments, net of amortization
    charges, registered a growth of '169.38
    crs (13%) over March, 2015 level of
    '1,302.89 crs and stands at '1,472.27

      1. Yield on investments including
        profit on sale of securities, decreased
        from 8.00% (2014-15) to 7.91% (2015-
        16), due to 125 bps reduction in Repo
        rate by RBI between Jan 2015 and Sep

  1. Yield on investments, excluding
    profit, decreased from 7.73% to 7.72%
    during the same period.

      1. Foreign Exchange Turnover of
        the Bank in 2015-16 increased to a level
        of '582,755 crs (Merchant Turnover-
        '65,555 crs and Trading Turnover-
        '517,200 crs) against previous year's
        level of '403,102 crs (Merchant
        Turnover- '51,904 crs and Trading
        Turnover- '351,198 crs) generating a
        profit of '59.27 crs.

        1. International Banking

  1. The level of Export Credit as on 31st
    March 2016 stood at '1,569 crs ('1,617
    crs as on 31st March 2015) constituting
    3% of ANBC. With a view to encouraging
    export business, seminars of exporters/
    importers were conducted in Tirupur and
    Mysuru during the financial year 2015-16
    besides offering Exporters Gold Cards
    to eligible export units. The Bank has
    entered into an arrangement with two
    foreign banks for availing Buyer's credit
    for our customers at affordable rates.

  2. NRI Deposits as on 31.03.2016
    stood at '1,785 crs as against
    '1,526 crs, as on 31.03.2015 comprising
    of FCNR (B)/RFC deposits of '309.66 crs
    and NRE/NRO deposits of '1,475 crs.

  3. As per Bank's BPR objectives,
    the Bank had set up five TFCPCs at
    Bangalore, Chennai, Hyderabad, Mumbai
    and New Delhi. During FY 2013-14, 19
    more branches, including CAB branches
    have been linked to TFCPCs, in order to

  4. consolidate the front-line processing and
    extending quality service to Exporters.

  5. The Bank has also been offering
    Foreign Currency Demand/Term Loans
    (FCNR loans) to its customers which
    showed marginal growth and stood at
    $46.65 mio as at Mar'16 against $44.37
    mio in the previous year.

        1. Cross Selling

During the year over 23,474 lives were
insured through various products of
SBI Life Insurance Company Ltd with a
premium collection of '89 crs. The Bank
has collected a premium of '24 crs while
marketing General Insurance Products.
In the area of Investment, the Bank is also
offering SBI Mutual Funds products with
Assets Under Management aggregating to
'112 crs. Bank also sources applications
for issue of SBI Credit Cards. The
Bank has earned a income of '14.18
crs from Cross Selling Business during
FY 2015-16.

3.17 Government Business:

  1. State Government

The bank has been handling a major share
of Government of Karnataka transactions
for past six decades. Around 88% of
our total Government business comes
from State Govt. transactions and the
turnover is directly linked to the budget
of the State Government. A turnover of
'78,266 crs has been achieved during
the year 2015-16 as against '69,569 crs
in 2014-15 with a net accretion of '66.52
crs Commission representing 92% of
income from Government business.

SBM, being the premier banker of the
Government of Karnataka are also
proud to be associated with Khajane II,
an ambitious project of the Government
of Karnataka aimed at integrating all
stake holders viz. GoK, RBI, Accountant
General and Agency Bank thereby
facilitating transaction on real time basis.

    1. Central Government

During the year 2015-16, business from
Central Government Departments like
Postal, Defence, CBDT, CBEC and
business from various Central Government
Schemes like Public Provident Fund,
Senior Citizen Savings Scheme, Sukhanya
Samridhi Accounts, New Pension Scheme
etc constitutes approximately 12.46% of
the Bank's total Government Business
Turnover. Our business turnover from
Central Government Departments during the
year 2015-16 is placed at '11,133 crs with a
commission earning of '5.78 crs. During the
year all our branches have been authorized to
open PPF and Sukhanya Samridhi accounts.
During 2015-16, our Bank has earned a
commission of '72.30 cr as against '67.98 cr
for the year 2014-15.

3.18. NPA Management

Pressure on asset quality of banks under
the sustained economic downturn, was
a major concern during the FY15-16 for


































the Banking Industry as a whole. The
process of cleaning up of bank balance
sheets by the Regulator is underway and
all the Banks in the country underwent a
thorough asset quality review during the
last two quarters of the FY 16. It had had
severe impact on the profitability of the
banks. The major sectors like iron and
steel, infrastructure, aviation, mining,
etc., continued to be major contributors
towards increasing NPA portfolio of the
banks. Added to this, the continued
problem of drought in many parts of the
State of Karnataka, where our majority of
the branches are located, further added
to the NPA portfolio of Bank.

However, Bank has been taking steps
to recognize the weaknesses in the loan
accounts at the incipient stage so that
corrective measures can be initiated
before an account turns NPA. Bank
has well defined system to monitor all
such accounts. Even after an account
turns NPA, recovery process is initiated
immediately. The provisions of SARFAESI
Act have been enforced in all the eligible
collateralized advances to ensure early
recoveries. During the second half, Bank
held three Bank level Mega e-auctions of
properties and also participated in SBI
Mega e-auction, in which 442 properties
properties valued at '348.95 Crs were
put on sale through e-auction. Of this, 69
accounts amounting to '5.13 Crs were
upgraded, 24 accounts with balance
outstanding '3.17 accounts were closed
and 15 properties were sold in e-auctions
resulting in a recovery of '8.44 Crs.

Bank has taken other steps also to
recover the dues by way of strategic
sale of assets to ARCs, vigorous follow-
up of DRT cases, OTS Schemes for
eligible MSME and AGRI borrowers
and compromise settlements wherever

Under the RBI's Framework for
Revitalising Distressed Assets in the
Economy, our Bank has been participating
actively in the meetings of JLFs and
implementing the decisions taken thereat
within prescribed timelines. In respect of
those corporates, where performance is

not as per laid down benchmarks, steps
are taken for change of Management
by invoking RBI Guidelines on Strategic
Debt Restructuring. Our Bank has
already taken action in 6 accounts under
these guidelines.

All these measures have helped the
Bank to keep the increasing trend under
control. Accordingly, the GNPA and
NNPA levels stood at '3635.56 Crs
(6.56%) and '2257.18 Crs (4.18%)
respectively as on 31st March 2016
compared to the levels of GNPA
and NNPA as on 31st March 2015 at
'2136.425 Crs (4%) and '1121.58
Crs (2.16%) respectively. However,
the position of GNPA and NNPA as on

  1. without considering the
    AQR accounts amounting to '1213.37
    Crs (Provision added '384.10 Crs)
    works out to '2422.19 (4.37%) and
    '1427.92 Crs (2.63%) respectively.


The Bank has been discharging lead
Bank responsibilities in 3 districts viz.
Mysore, Charmarajnagar and Tumkur.
The Annual Credit Plan for 2016-17
has been launched with the combined
annual credit plan target for all Banks in
3 districts going up from '11,600 crs to
'14,624 crs, at a growth rate of 26%.

The Block Level Bankers' Committee
(BLBC), District Consultative Committee
(DCC), District Level Review Committee
(DLRC), Standing Committee (SC)
meetings are regularly conducted as per
Reserve Bank guidelines in all the three
Lead Districts.

All our Lead District Managers are
actively monitoring implementation
of Annual Action Plan in close liaison
with all the Banks in districts. They are
also coordinating for implementation of
drought relief measures as per latest
RBI guidelines in close coordination with
SLBC and branches.

3.20.1Rural Self Employment
Training Institute (RSETI)/

Rural Development and Self
Employment Training Institute

The Bank has established RUDSETI type
of training centres viz. MyBank Institute
for Promotion of Self Employment and
Development (MIPSED) at Tumkur.
Similar Institute called JSS RUDSETI
is established at Chamarajnagar in
association with JSS Mahavidyapeetha.
These Institutes have been established to
impart entrepreneurial skill development
and guidance to unemployed rural youth,
to become gainfully self employed.

We have also constructed our own
building at MIPSED, Tumkur with
financial grant from National institute of
Rural Development (NIRD).Total number
of 1,851 participants have been trained
during 2015-16 with 67% settlement rate
through financial assistance from Bank
loans and their own resources. The
participants have been trained under
various Government sponsored schemes
such as PMEGP, RGCY, DTP, Mobile
servicing, Tailoring, Beautician courses,
etc. Our RSETI has been awarded AA”
as per the latest rating released by Mo

3.20.2Regional Rural Bank - Kaveri
Grameena Bank

Our Bank has sponsored Kaveri
Grameena Bank (KGB) which is
headquartered at Mysore. The Bank is
operating in 10 districts of Karnataka
viz. Mysore, Hassan, Chamrajanagar,
Tumkur, Bangalore-Urban, Bangalore-
Rural, Ramangar, Chikmagalore,
Kodagu and Mandya and crossed a land
mark figure of 480 branches. Bank has
opened 37 branches during 2015-16.
All the branches are on CBS mode. The
total business (deposits and advances)
of KGB as at Mar'16 stood at '12,973
crs as compared to '10,556 crs as at
Mar'15 registering a growth of '2,417 crs


The Bank has credit linked 18936 groups
with an advance of '501.67 cr during
the current year. Taking the cumulative
total of such credit linkage programme to

  1. 83,552 groups with a financial outlay
    of '3,122.04 cr up to 31.03.2016. As on

  1. there are 35,279 SHGs with
    an outstanding balance of '810.81 cr.

The Ministry of Rural Development,
Government of India has launched
National Rural Livelihood Mission by
replacing SGSY scheme with effect
from 01.04.2013. We have financed
17,042 women SHGs under National
Rural Livelihood Mission (NRLM) with an
advance amount of '451.50 crs during
FY 2015-16 and as on 31.03.2016, there
are around 31,751 women SHGs with
an outstanding balance of '729.72 cr.
Necessary benefits have been passed
on to all eligible women SHGs and claims
for interest subvention have been lodged
with NRLM Department of Ministry of
Rural Development, Government of

The Bank has credit linked 916 Joint
Liability Groups with an advance
amount of '11.97 crs during FY 2015-16
and as on 31.03.2016, there are 2,650
JLGs with an outstanding balance of
'33.69 crs

3.21. Financial Inclusion

  1. Coverage Sub-Service Areas /
    Providing Banking outlet:

Bank has drawn Comprehensive
Financial Inclusion Plan for 2013-16
covering 745 Sub-Service Areas (SSAs),
spread over 3,740 villages for providing
banking outlets. Of the allotted 745 SSA's,
the Bank has already covered 216 SSA's
by Brick & Mortar branches and 529
SSA's through Business Correspondent
Agents. BCAs are extending the banking
services to these villages and working as
an extended arm of the Bank.

  1. Implementation of Pradhan
    Mantri Jan Dhan Yojana:

The Bank has opened 9,38,000 BSBD
accounts under PMJDY up to Mar'16 with
a balance outstanding of '82.22 crs. The
total number of accounts opened since
the inception of FI programme stood
at 16.22 lacs with balance of '128.77
crs. The Bank has successfully seeded
59.13% Aadhaar numbers in PMJDY
accounts besides issuing 8,67,919 Rupay
Cards to the PMJDY account holders..

  1. Other Financial Inclusion
    initiatives :

  1. The Bank is actively participating
    in Modified Direct Benefit Transfer
    Scheme for LPG (MDBTL) wherein
    the LPG subsidy is directly being
    credited to the Savings Bank
    account of the customers.

The Bank is the sponsoring Bank
for credit of MGNREG wages to
the accounts of beneficiaries in
Karnataka State.

Bank is distributing Social Security
Pensions to more than 62,000
beneficiaries under Electronic
Benefit Transfer Programme
of Govt.of Karnataka, with
'One District-One Bank' Model
in Chamarajanagara district
and 'One District-Many Banks'
Model in the districts of Bellalry
and Chitradurga. An amount of
'46.36 crs was disbursed to SSP
beneficiaries through BC Agents
during the FY 16.

Bank has also actively participated in all
3 Social Security Schemes viz., PMSBY,
PMJJBY and APY launched by Govt.of
India, aimed at providing micro insurance
coverage and pension to unorganized/
rural sectors through bank accounts.
Bank has opened 3.64 lac accounts
under PMSBY, 1.99 lac accounts under
PMJJBY besides large number of
accounts under APY.

3.21.4Financial Literacy :

Bank has opened 22 Financial Literacy
Centres across Karnataka. The
Counsellors working in these centres
are conducting regular camps in
villages spreading Financial literacy to
various target groups like farmers, SHG
members, students etc. Our Counsellors
also visit 115 skill centres (ITI s) mapped
to these FLCs with the aim of spreading
financial Literacy amongst the students
of ITIs.


Manpower Profile:

The total manpower strength of the Bank
as at March 2016 stood at 10,650, as
against 10,193 in the previous year. The
staff strength comprised 3,742 officers,
4,972 clerical staff and 1,936 subordinate
staff. Of these, 874 are Ex-defense
personnel, 167 belong to physically
handicapped category and 556 belong to
the Minority community.

    1. Women's Representation:

As at March 2016, there were 3,029
Women employees (comprising 669
Officers and 2,560 Other Employees) in
the Bank, compared to 2,891 as at March

  1. (comprising 543 Officers and 2,348
    Other Employees). The share of women
    employees stood at 28.4% as at March
    2016. The Bank continued to provide
    equal opportunity to women in their
    career progression.

      1. Scheduled Castes/Scheduled
        Tribes - Representation:

As at March 2016, there were 1,877
Scheduled Caste employees, comprising
633 Officers, 786 Clerical Staff and
458 Subordinate staff. There were 682
Scheduled Tribe employees comprising
267 Officers, 299 Clerical staff and 116
Subordinate staff as at March 2016. All
the guidelines of the Government of India
for safeguarding the interests of SC/ST
employees have been complied with.

      1. Human Resources Management
        Solutions (HRMS):

Bank has implemented Human Resources
Management Solutions (HRMS) on 1st
April 2010, to handle all HR activities
in a phased manner. HRMS Cell was
formed to integrate salary, perquisites,
reimbursement and leave details of the
employees. The cell has implemented
salary, reimbursement of Annual Medical
expenses, furniture supplied to officers,
furniture maintenance charges, monthly
reimbursements of perks, reimbursement
of brief case expenses, besides sanction
of increment through HRMS portal.
Asset & Liability Statement and Annual

Appraisal Report are also implemented
through HRMS.

HRMS portal facilitates uploading of
Annual Appraisal Report of officers which
are reviewed and noted by respective
authorities online. It is planned to
integrate e-learning portal 'Gnanodaya'
with HRMS site from FY17 onwards, so
that lessons which are to be mandatorily
attended gets automatically reflected in
their Annual Appraisal Report.

      1. Training:

      2. Training Activities and

The Bank regards its employees as
its critical & valuable assets. To make
the employees more competitive and
knowledgeable in banking field, honing
their skills is one of its priorities.

With a view to achieve the desired goals
and to establish highly professional work
culture, Bank's staff college at Jakkur and
3 learning centers at Bengaluru, Mysuru
& Hubballi are imparting training on wide
spectrum of subjects viz. Advances and
Deposits and knowledge about their
various products, communication &
leadership skills, marketing, behavioral
science, etc. Also to gain competitive
edge in new technology being adopted
by the Bank, several programmes on
latest technology developments like
Internet Banking, Mobile Banking and
other alternate delivery channels are
conducted regularly.

  1. The training methodology of
    the Bank constantly aims at keeping
    its workforce pro-active and customer
    centric, so that they can discharge their
    duties effectively in the challenging
    Banking scenario. Bank continues to
    focus on imparting training to maximum
    number of employees to update their
    skills & knowledge periodically.

Our staff college at Jakkur and Learning
Centers at Bengaluru, Mysuru & Hubballi
have conducted in all 237 training/
workshops both functional and computer
based programmes. During the year total
4,805 staff got trained at our Learning

    1. The Bank regularly deputes officers,
      based on the job profiles, for training to
      Apex Training Institutes of SBI and other
      training institutes like NIBM, IIBF, College of
      Agricultural Banking- RBI (Pune), CAFRAL
      (Centre for Advanced Financial Research &
      Learning), IDRBT, CRISIL etc. to hone their
      skills and update their knowledge. During the
      year, 1,026 officials were deputed to
      the Apex Institutes and external training

Keeping in view the need for
imparting training in specialized areas,
the Bank has also conducted several
specialized training programmes/
workshops on MSME business, KYC/
ALM compliance, workshop for NPA
training, Risk Management Awareness
Workshop, Leadership Development
Programme for Branch Managers, Skill
Development Programme for Officers,
Training for Retiring Staff, programme for
1st time Branch Managers, Stress Asset
Management programme, Programme
on agri credit, ADC programme, etc.

    1. e-learning (Gyanodaya):

In addition to the class-room training
provided to employees at our Staff
Learning Centres and ATIs, Bank had
also launched an e-learning portal
“Gyanodaya” with the objective of
imparting on-line learning and training
to all the employees of our Bank. SBM
e-Learning portal is available 24X7 and
all 365 days on internet system and also
on intranet system.

The portal is made available to all our
employees. The users can access/
read more than 300 lessons /topics
covering general banking, Alternate
Delivery channels, credit management,
agriculture, foreign exchange, behavioral
science, etc., by which they can enrich
their knowledge in all aspects of banking
and can also do self-evaluation by
attending online tests.

      1. Pre-promotional training:

Pre-Promotion training programmes
for SC/ST/OBC were conducted at the
Learning Centers at Bengaluru & Mysuru
during the year, for eligible and aspiring
candidates from Clerical to Officer cadre.

During the year 112 employees belonging
to SC/ST/OBC category were given
training. Based on the feedback received
the programmes were well appreciated
by the participants.

      1. Training to subordinate staff:

To bring about awareness among the
subordinate staff and to make them
realize their potential & importance in
the organization, Bank has conducted
exclusive training programme for 313
subordinate staff at our Learning Centres,
Bengaluru, Mysuru & Hubballi.

      1. Training to retiring officers/

To enable our retiring officers / staff to
lead a happy and peaceful retired life with
inputs on financial planning matters, our
Learning Center, Mysuru had conducted
12 special training programmes for
retiring employees during the year 2015-

  1. covering 452 employees.

      1. Other Training Programmes:

Training programmes were also
conducted for newly promoted CMs/
AGMs, Specialized credit training
programme for officials of HOCC/NWCC/
ZOCC/RO & Specialized Training to
officials of CPPC, Mangalore.

4.2.10 Roll out of new initiative-
Mentoring of branches:

Mentoring initiative is a process by which
one person guides the development of
individuals, seen as protege/mentee. It is
a part of a leader's role that has growth
as its primary outcome. It enables to
establish a partnership that helps the
protege / mentee to grow and deliver
better results, through the process of
collaboration, discussion and support.
The mentor is to act as counselor,
encourager, supporter, information
provider but not the solution provider.

With a view of improving the performance
of the branches, more specifically the
very old branches, this new initiative -
mentoring of branches is rolled out in our
Bank with 18 top executives (DGMs and
GMs) as mentors. Initially, it is rolled out
in 36 select branches at Bengaluru city
on pilot basis.


  1. Terminal Benefits to Retired

The Bank gives due importance to the
timely settlement of terminal benefits to
staff comprising of Gratuity, PF, Pension,
either on reaching superannuation or on
any other grounds. During the FY 2015-

  1. as many as 570 members of staff
    have retired from the services of the

    1. New Pension Scheme (NPS)

Now known as National Pension System:
Employees who have joined the services
of the Bank w.e.f. 01.04.2010 are
covered under the above scheme, which
is governed by the provisions of the NPS
introduced for employees of Central
Government w.e.f. 01.04.2004 and

modified from time to time. As at March

  1. as many as 3,570 employees have
    been covered under NPS.

    1. Retired Employees Medical
      Benefit Scheme - II (REMBS-II):

REMBS-II, a scheme for reimbursement
of medical expenses to employees
retiring / retired under superannuation
was implemented w.e.f 15.12.2012, with
an upper limit for claims ranging from
'2 lacs to '20 lacs, based on eligibility
criteria. This scheme is in addition to the
already existing SBMREMB scheme with
a ceiling of '2 lacs. During 2015-16, the
Bank has received 1,212 applications
and disbursed amount of '271.66 lacs.


Central Staff Welfare Committee allocates
funds for various staff welfare activities.
The welfare measures provided to the
members of the staff are : Holiday Homes,
Group Insurance Cover, Scholarship
Scheme, Farewell Scheme for the
retiring employees, financial assistance
to the employees with physically/mentally
challenged children, Medical Expenses
Reimbursement Scheme, Birthday
Memento & recurring expenses for Staff
Welfare Activities.

    1. Technology Up-gradation &
      Support Functions

  1. ATM Rollout and performance:

During FY16 we have installed 82 ATMs
including 13 Brown Label ATMs taking
the total number of ATM installed to

  1. 416 as part of State Bank Group's
    56000+ networked ATMs. In addition to
    basic services, value added services like
    Aadhar registration, LPG registration,
    Mobile Banking Registration, card
    to account/card to card transfer and
    payment of donations are also made

    1. Internet Banking:

The number of registrations and volume
of transactions through internet banking
has seen a growth of 22% and 29%
respectively during the year. The facility
is available for visually challenged
customers also.

    1. Mobile Banking:

Bank is offering Mobile Banking Services
under the name State Bank Freedom
to all its retail customers. The service
includes enquiry, mini statements, top
up and recharge, interbank fund transfer
through NEFT and IMPS and bill payment
facilities. There is a steady growth in the
number of registrations and transactions
by 192% and 28% respectively during
FY16. The customers having Internet
Banking connection can also transact
from their mobile phone through a
separate Mobile App - State Bank
Associate. In FY16 Bank also launched a
separate Mobile App named SBM Virtual
under which all Banking transactions and
information available through different
sites can be accessed at a single point.

    1. Electronic Payment System:

All branches of the Bank are enabled for
RTGS/NEFT/GRPT remittance facility
besides Electronic Clearing Service
(ECS) and IMPS over Mobile Banking
Platform. Percentage of all electronic
transactions to Total transactions of the
Bank is 48.95% as on 31.03.2016.

    1. Bank's Website :

The Bank's website http://wwwhttp://www . a repository of
information about the Bank, its products
and schemes. Information on Schemes
and products for various segments,
besides online loan applications for
Education, Housing, Car, Gold loan
are available. Special links have been
provided to access other relevant sites.
A separate text version of the website is
available for the benefit of the visually
challenged customers in English.

    1. Social Networking:

Bank has uploaded the features of
Bank's products and technological
initiatives on face book.

    1. Digital Signage Solution:

Digital Signage Solution is a method
of providing information to our branch
customers on various products and
services displayed on LED screen at the
branches. We have installed a centrally
controlled online Digital Signage Solution
at 999 branches and propose to extend
the solution at the remaining branches
during the FY 2016-17.

    1. Cheque Truncation System

Cheque Truncation System (CTS)
is basically an online image-based
cheque clearing system where cheque
image are transmitted for effecting
transaction obviating the need for
physical movement of instrument. Bank
has implemented CTS in MICR centers/
Branches located at Southern, Western
and Northern grid.

    1. Merchant Acquiring Business:

Our Bank has started MAB - sourcing
and installing POS machines during
March 2013. As on 31.03.2016 we have
installed 5,021 POS machine across
India and routed 25.23 lakhs in the FY
2015-16. We have also installed 440
Mobile type of POS machines (m-POS)
during 2015-16.

    1. Cash Recycler / Cash Deposit

Cash Recycler is designed to accept
deposits and dispense cash with dual
functionality. We have installed 74 Cash
Recyclers and 9 Cash Deposit Machines.

    1. Barcode Based Passbook
      Printing Kiosk (BBPPK):

We have rolled out a new product called
as BBPPK. It is Passbook Printing self
service machine working on Barcode

    1. e-Touch:

As part of our endeavor to deliver a wide
array of financial services and products
to our customers, a state of the art outlet,
named as “e Touch” was opened at
Avenue Road, adjoining our Head Office
during May 2015. 15 e-Touch outlets have
been installed by the Bank during FY16.

  1. Information Security, Business
    Continuity and Disaster

  1. In the backdrop of growing
    complexity of financial products and
    the increased leveraging of technology,
    operational risks have assumed critical
    importance in recent times. The treatment
    of technology risk/operational risk as part
    of the movement towards Advanced/
    Management approach is a manifestation
    of the significance of the risks in impacting
    the risk profile of a Bank. Keeping this in
    mind our Bank has adopted:

  • a well-defined IT Policy and IS
    Security Policy, which is being
    periodically reviewed and updated.

  • become a part of well-established
    (common for State Bank Group)
    state-of-the art IT infrastructure
    which is certified as ISO 22301.

is part of the Security Operations
Centre for online monitoring of

  1. Our Bank has taken proactive
    measures to respond to business
    discontinuities and ensure uninterrupted
    availability of all key business resources
    that support critical Banking functions.


The Bank has adopted a well defined
Business Continuity Plan and Disaster
Recovery Plan Policy. Our Bank is part
of a well established high-end Business
Continuity and Disaster Recovery
infrastructure which ensures seamless
continuity in case of need. The Disaster
Recovery drill is being conducted on
a half-yearly basis, during which the
transactions of our branches are routed
through the DR site. In addition to this,
the Bank has a nearby site to ensure
zero data loss in the event of a disaster.
The Bank has implemented Business
Continuity Plan in all the branches and
also in the administrative offices together
with periodic reviews and updates. The
Bank has also introduced Electronic
Document Management System for safe
keeping of documents in electronic form.

  1. Management Information
    System (MIS):

The MIS Department consolidates and
maintains the Credit Information System
(CIS) database apart from collating
information from branches and Head
Office Departments for submission of
various statements to Reserve Bank
of India like Basic Statistical Returns,
Sectoral Deployment of Funds etc,. The
Department also provides information
to the Top Management and other user
Departments in Head Office.

  1. The scope of CIS has also been
    extended to submission of data to Credit
    Information Companies to whom the
    Department is submitting individual
    borrower-wise credit information every
    month after due processing. In turn,
    the Credit Information Reports (CIRs),
    drawn from the CICs database, serve
    as important fraud prevention tool to the
    credit appraisal/sanction functionaries.

The Department coordinates with
SBI-EDWP for submission of various
reports validated from User Departments
to RBI under Automated Data Flow (ADF)
apart from collating logic information
from Head Office User Departments and
providing logic, source system to SBI-
EDWP for generating various reports.

  1. The Department coordinates with

CDC and the Centralized Credit Data
Processing (CCDP) for facilitating data
correction and improvement in data


Systems and Procedures Department
is a special resource available at Head
office for effective management of
work organization by laying down and
also framing suitable Systems and
Procedures. The Department also vets
process changes and reviews charges
on the general service provided and
modifies the same in accordance with the
changing environment and aspirations of
customers. The last such change was
effected in Nov'15.

  1. The Department also undertakes
    revision of Delegation of Financial
    Powers to various functionaries and
    effect changes, with the approval of Top
    Management for effective supervision and
    smooth functioning of the organization.



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

  1. BASEL Implementation :

The Bank has migrated to the Basel

  1. framework, with the Standardized
    Approach for Credit Risk, Basic Indicator
    approach for Operational Risk and
    Standardized Measurement Method for
    Market Risk.

Capital regulations under Basel III have
come into effect in India w.e.f 01.04.2013.
Bank has complied with both the norms
and has maintained its capital adequacy
above the RBI mandated level of 9%
along with Tier-I at 7%. The Capital
Adequacy Ratio computed as per Basel

  1. guidelines effective from 1st April 2013
    stands at 12.43% as at March 2016,
    against 11.42% as at March 2015. The
    CRAR of 12.43% consists of CET - I of
    9.01%, AT-I of 0.27% both forming TIER-I
    Capital besides 3.15% of TIER-II Capital.
    The CRAR under Basel II guidelines as at
    March 2016 stood at 12.93% as against
    12.02% in the previous year. The Capital
    Adequacy ratio of the Bank increased
    mainly due to raising of Tier-II capital of
    Rs. 500 crs during the year and change
    in treatment of Deferred Tax Assets as
    per the recently revised RBI guidelines.


Reserve Bank of India has issued
guidelines on implementation of Internal
Ratings Based Approach for calculation
of capital charge for Credit Risk in Dec
2011 and our Bank has accordingly
applied for permission to RBI for migrating
to Advanced Approach for Credit Risk
under Basel II. The Bank has submitted
Letter of Intent to RBI in terms of the
guidelines detailing therein the models
for developed for risk assessment and
computation for different components viz.
Probability of Default Estimation (PD),
Loss Given Default (LGD) & Exposure
at Default (EAD) besides adoption of
Basel II compliant policies approved
by the Board of Directors. The Bank
has received a response from RBI in
July 2013, advising the Bank to further
strengthen the areas of IRB framework
before the commencement of parallel
run process for Foundation IRB (FIRB)

As part of group synergy, State Bank
Group is in the process of implementing
the latest version of Oracle Financial
Service Analytical Applications (OFSAA)
with enhanced functionality, which will
enable the Bank to have an enterprise
wide, integrated view of risk and finance
under various areas including the
technology for risk engine.


Bank is using Standardized Measurement
Method (SMM) for computation of capital

charge and the necessary systems for
migration to IMA are in place. The Bank
has submitted Letter of Intent to RBI in
Oct 2013 for migration to IMA. The Bank
would be on parallel run for computation
of capital charge under both SMM & IMA,
after the approval from RBI.


Reserve Bank of India has prescribed
three approaches for computing capital
charge for Operational Risk, viz.

  1. Basic Indicator Approach (BIA)

  2. The Standardized Approach

  3. Advanced Measurement
    Approach (AMA)

Currently the Bank is following the
Basic Indicator Approach. As per AMA
guidelines, Banks are allowed to switch
over from BIA to AMA directly. Bank
is endeavoring to move directly to the
Advanced Measurement Approach in
view of the minimal changes in capital
requirement under TSA, as compared
to BIA. All the policies and documents
have been reviewed, as suggested
by our consultants, to meet minimum
required standards. A Letter of Intent
(LOI) was submitted to Reserve Bank
of India in Oct 2013, seeking permission
to migrate to AMA. However, as per the
communication received from RBI, the
AMA application has been put on hold
till a detailed assessment is completed
in respect of similar application by SBI.
The Operational Risk Management
Department (ORMD) has been
organizing training programmes for
creating awareness among officers about
Basel II requirements, Operational Risk
Management, Advanced Measurement
Approach for Capital Computation and
Fraud Prevention Measures.


The Asset Liability Management
Committee (ALCO) of the Bank is
entrusted with the task of managing
liquidity and interest rate risk. The
committee meets regularly to monitor the
risks and Net Interest Margin (NIM) on
an ongoing basis. The tolerance limits
for liquidity mismatches and interest rate
risks are fixed in accordance with RBI
guidelines and Bank's ALM Policy and
reviewed by ALCO at regular intervals.
Various interest rate revisions, revision of
Base Rate and possible mismatches in
the Structural Liquidity projections of the
Bank are also discussed and appropriate
decisions are taken.



Bank has rolled out various BPR
initiatives since 2005, in consonance with
the design principles provided by SBI.
The BPR initiatives leverage technology
to significantly enhance customers'
satisfaction and convenience. So far 19
BPR initiatives have been rolled-out.
Loan Origination Software for processing
of Retail Loans has been successfully
implemented in our Bank at Bangalore,
Mysore and Delhi Centres besides other
Metro centres. The software has been
extended to other Urban/Semi-Urban
centres and we plan to roll-out completely
by September 2016, thereby cutting down
the processing period besides improving
the quality of the processing and asset.
The Bank also opened another RACPC
at Bengaluru to meet the requirement of
expanding network.

    1. The Central Pension

Processing Centre (CPPC) :

The Central Pension Processing Centre
(CPPC) is functioning at Mangalore
and pension/arrears of pension has
been disbursed to 1,56,953 pensioners
online throughout the Bank. CPPC is
now using SBI package for disbursing
Central Government pensions. We
have also introduced system of online
submission of Digital Life Certificate
(Jeevan Praman), whereby pensioners
can submit life certificate from the
comfort of their house after seeding their
Aadhar & Mobile numbers with the Bank.

Centralised deduction of Income Tax on
pensions beyond taxable limit, effected
from October 2015.

9 .2. Our Centralized Clearing
Processing Centres (CCPCs) at
Bangalore, Mysore, Chennai, Delhi and
Mumbai undertake entire clearing work
of all branches through decentralized
Model of Cheque Truncation System of
clearing thus obviating the necessity of
physical transfer of cheques as per the
directions received from Reserve Bank of
India in this regard.

GOK have announced plans to
completely switch over to CTS mode in
respect of Govt cheques also and do
away with Paper to Follow procedure,
whereas GOI have already shifted to
CTS mode w.e.f. February'16. Now,
the entire clearing process is being
migrated to WebCTS with only 1
production centre at each of the 3 grids
Viz, Northern, Western and Southern
grids. Accordingly work is underway
to integrate the clearing process of
Bengaluru, Mysuru, Chennai, Mangaluru
centres besides Service Branches at
Hubballi and Kolkata into Bengaluru
centre and close down other centres.
This will further speed up the clearing
process without the need for physical
movement of cheques. All branches
have been provided with Scanners to
upload the image as and when received.
CCPC Bengaluru has been identified as
the Nodal Branch for National Automated
Clearing House (NACH) and also for
Mandate Management. With migration
to CTS mode, on decentralised basis
and only 1 operative centre at each grid,
Service Branches at Hubballi, Kolkata
and Hyderabad have been closed down
and their residual functions shifted to the
main branches.

  1. Currency Administration Cells:

Rollout of 2 Currency Administration
Cells at Tumakuru and Hoskote has
been completed during the year. We are
planning to add 3 more CACs at Puttur,
Hassan and Mandya in FY 17.


  1. Audit:

The overall objective of Internal Audit is
to contribute to the effectiveness of the
Internal Control System in achieving the
Bank's objectives, besides providing
high quality counsel to management on
the effectiveness of Risk Management
and Regulatory compliance by the Bank.
Towards this end, Risk Focused Internal
Audit (RFIA) and IS Audit were conducted
in all the 680 branches/BPR entities,
envisaged in the Annual Audit Plan
2015-16. That apart, 104 newly opened
branches were subjected to Spot Audit,
besides 8 Head Office departments. We
have also conducted Management Audit
of 3 Zonal Offices, 2 Regional offices and
3 Networks. During 2015-16, 99% of our
branches have secured Well Controlled/
Adequately Controlled rating and none
rated as 'Unsatisfactory'. However, 6
branches have slipped from Adequately
Controlled to Moderately Controlled
rating as on Mar'16 and we are taking
steps to strengthen compliance level at
these branches also.

  1. Concurrent Audit is a major
    function which monitors proper follow-up
    of laid down systems and procedures on
    a continuous basis. 212 branches/offices
    covering 53% of aggregate deposits
    and 69% of total advances and 8 Head
    Office departments were subjected to
    Concurrent Audit during this year.

We also conduct Special Revenue
Audit every year to guard against income
leakage. 365 branches with advances
level of more than '20 crs and income
leakage of '5 Lacs and above were
subjected to Special Revenue Audit (as
against 462 branches during the previous
year). The total income leakage detected
was '538.11 lacs and fully recovered

The summary findings enumerated in
these audit reports are appraised to the
Audit Committee of the Board and follow
up actions are ensured.

    1. Credit Audit:

The audit of loan appraisal and
administration for high value credit
accounts with the aim of improving the
asset quality of the Bank is undertaken
by the Credit Audit Department. Accounts
with total exposure of '2 cr and above
are covered under Credit Audit. During
the financial year 1,132 loan accounts in
175 branches were covered under Credit
Audit, of which 968 accounts

(85%) were rated as Low and Very Low
Risk accounts.

  1. Vigilance:

Vigilance administration as an important
aspect of management function is carried
out as per the directives of the Central
Vigilance Commission so as to achieve
good Corporate Governance for the
overall growth of the Bank.

  1. Whistle Blower” policy has been
    introduced in our Bank for the employees
    to report to the Management, instances
    of unethical behavior, actual or suspected
    fraud or violation of the Bank's code of
    conduct or ethics policy.

  2. The officers from Vigilance
    Department conducted surprise
    inspections of 52 offices/branches during
    the year under report. The main areas
    of scrutiny are adherence to systems and
    procedures, rotation of staff and deficiencies
    in fraud-prone areas. The deviations and
    other irregularities are brought to the notice
    of the Module/Regional Heads for taking
    corrective actions. Vigilance Department is
    bringing out a Quarterly House Magazine,
    which contains vital information on vigilance
    related matters useful to the operating

  1. In accordance with the guidelines
    of the Central Vigilance Commission,
    the 'Vigilance Awareness Week' was
    observed at all the offices of the Bank
    from 26th October 2015 to 31st

October 2015. The focus of observing
the Vigilance Awareness Week was
Preventive Vigilance as a tool of Good
Governance”. Seminars and meetings
were conducted, wherein information
relating to evolving and effectively
implementing preventive techniques in
vigilance administration, which includes
transparency, accountability and fair
play, objectivity and timely response in
dealing with matters relating to public
administration etc., were explained to
customers/Staff members. The role of
leveraging of technology in respect of all
systems and process for deliverance of
services to be synchronized through use
of technology, was strongly emphasized.
The valedictory function was held on 31st
October 2015 and addressed by Shri.
T.M.Bhasin, Vigilance Commissioner,
CVC, Chief Guest on the occasion.

  1. Fraud Monitoring and
    Investigation Cell (FMIC):

The Fraud Monitoring and Investigation
Cell (FMIC), functioning under the
administrative control of the General
Manager & CVO, monitors certain critical
areas of branch functioning on regular
basis. Thrust is laid for taking certain
preventive measures by monitoring
various exceptional reports generated
through CBS covering transactions
related to expenditure, advances,
manual debits to interest a/c besides all
other unusual transaction including those
reported in Sundays and holidays. During
FY15-16, two officers have been honored
with Staff Alertness Award in recognition
of their contribution in preventing and
detection of frauds.

  1. Special committee of the Bank in
    terms of RBI has been constituted for
    monitoring and follow-up of high value
    frauds of '1 cr and above. The committee
    besides monitoring and follow-up is
    tasked to identify, systemic lacunae,
    reasons for delay in detection, ensuring
    staff accountability besides efficacy of
    the remedial measure. The committee
    held 2 meetings during FY15-16.


  1. Customer Grievance Redressal:

The Bank has also implemented a friendly
Customer Redressal System called SMS
UNHAPPY to facilitate customers air
their grievances/complaints/ feed back
by simply sending an SMS message

UNHAPPY” to 99 0002 0002. The bank's
dedicated staff from “Happy Room” call
back the customers for speedy redressal
of their grievance.

    1. Complaint Management System
      (CMS) package:

The Bank has implemented a three
tier automated system for complaints
management and monitoring and
resolution. All the complaints received
at the Branches/Regional Offices/
Zones/Networks and Head Office level
are lodged in a common digital platform.
The complaints are acknowledged
with a unique number on their receipt.
Presently, the acknowledgements are
being sent through e-mails registered by
the complainants with us or by post.

    1. Contact Centre :

State Bank of Mysore has established
a dedicated “SBM Contact Centre” to
provide information on Products and
Services of the Bank besides status of
customer's account through a toll free
number 1800-425-2244 accessible
throughout the country. The information
is provided in English, Hindi and Kannada
languages 24x7x365 basis. Further, as a
part of the initiative, Lead Management
System (LMS) launched in our Bank
generate leads through customer calls
helpline No.1800 425 2244 which are
forwarded to the concerned branches,
and converted into business.


A missed call / SMS, from the mobile
number of the customer registered in the
account with the Bank, is accepted as an
authorized request to provide convenient,
cost effective and prompt basic banking
services. Initially following facilities have
been introduced:

  1. Balance Enquiry of registered

  2. Mini Statement of registered

  3. Blocking of ATM card

  1. Customer Services Committee
    of the Board:

The Bank has put in place Standing

Committee on Customer Service and
Customer Service Committee of the Board
are in place to oversee the implementation
of Customer service initiatives/directions
of Government of India/Reserve Bank of
India. Standing Committee on Customer
Service held 4 meetings on 21.05.2015,

  1. 14.12.2015 & 12.02.2016
    during the year. The Customer Service
    Committee of the Board has met thrice on

  1. 31.12.2015 and 14.03.2016
    during the year. A Chief Customer Service
    Officer (CCSO), an internal ombudsman
    has been appointed in the Bank w.e.f

  1. in terms of RBI directive as
    part of the move towards the objective
    of attaining zero tolerance to customer

  1. Right to Information Act, 2005:

Revised list of Central Public Information
Officers (CPIOs) and Appellate Authorities
(AAs) made available in Bank's website
and also circularized.

  1. Productivity:

Business per employee increased from
'11.72 crs as at March 2015 to '11.84
crs as at March 2016. The Business per
branch has marginally increased from
'117.75 crs in March 2015 to '121.55 crs
in March 2016 due to our policy of not
aggressively marketing bulk/corporate
business besides addition of 25 new
branches opened during the year.

  1. Public Relations

  1. Bank's publicity has been
    effectively carried out through the
    medium of attractive hoardings, press
    advertisements, banner displays,
    glow sign displays at Kempegowda
    International Airport Limited, Railway
    Station and Bus Stations in important
    cities/towns and advertisements on
    modern bus shelters, etc. Customers
    meetings were conducted especially
    in rural centers to project the image of
    the Bank and publicize the advantages
    of thrift and timely repayment of Bank

  2. LCD based Video hoarding in the

Head Office compound covers the entire
spectrum of banking activity with attractive
messages on products and services with
periodical updates on interest rates etc.
Messages having social content are also

  1. The Bank has been actively
    participating in various State-level
    seminars, District utsavas, fruit and
    flower shows, music, cultural and sporting
    events at various districts/taluks. This
    brings us closer to society and enhances
    our Brand Image. Bank has been
    participating in the Karnataka Rajyotsava
    function and sponsoring SBM Tableau
    in Dasara Parade at Mysuru, which is
    appreciated by one and all.

The hoardings installed at vantage
points were periodically changed with
attractive themes, greeting the public on
festivals with our latest deposits/lending
schemes, revision of interest rates etc.
Special media campaigns covering the
various loans schemes, special offer in
housing, vehicle, gold loans and MSME
loans under CGTMSE scheme, other
retails loans and new deposit schemes
like Savings Bank, Term Deposit,
Personal Accident Insurance, Vidyarthi
Sanchay were carried out periodically
in the print and electronic media and
through hoardings.

Bank's performance highlights,
launching of new products and services,
opening of new branches, ATMs, BPR
initiatives and technological achievements
were also extensively covered in print
and electronic media.

  1. Organizational Development

  1. Branch Expansion:

The Bank has opened 25 new branches
during the FY 2015-16. With this, the
Bank's network of branches stands at
1,037 spread over 17 States and 1 Union
Territory. The branch network comprised
243 Metro, 225 Urban, 228 Semi-Urban
and 341 Rural branches.

  1. After effective implementation
    of CTS system, 3 Service Branches at
    Kolkata, Hubli and Hyderabad have been

  2. closed with their residual work transferred
    to Cells attached to nearest branches.

  3. Branches in Minority Concentrated
    Districts - Centers (MCDs)/ Under
    Banked Districts: During the year, the
    Bank has opened 4 branches in Minority
    Concentrated Districts/Centers and 1
    branch in Under-Banked Districts. As
    at March 2016, out of 1,037 branches,
    the Bank has 90 branches in MCDs
    constituting 8.7% of the branch network
    and 114 branches in Under-Banked
    Districts, constituting 11% of the branch

  1. Implementation of Official
    Language Policy:

Bank is progressively encouraging
usage of Hindi and Regional Languages
to facilitate ease of doing business to
the customers in the language of their
choice. Constant efforts are being made
to create healthy atmosphere for use of
Official Language. For progressive use
of Hindi, our Bank's Website is also made
available in Hindi and also Kannada with
constant updates from time to time. The
option of Hindi and Regional Language
is provided in all ATMs of our Bank
along with generation of transaction
slips in Hindi. Hindi facility has been
made available in Mobile Banking also.
For enriching knowledge of Hindi of our
Staff, separate Quarterly Hindi Magazine
being published regularly. During the
year under review, the parliamentary
committee on official language inspected
Head Office, Bangalore on 07.01.2016
and appreciated our efforts made for the
progressive use of Hindi in our Bank.

  1. Head Office received an
    SHIELD by the Town Official Language
    Implementation Committee (Banks),
    Bangalore for the special efforts made by
    the Bank in the field of Official Language
    Implementation. Mysore, Hubli, Central
    and Mangalore Zones also received
    awards from respective Town Official
    Language Implementation Committees.
    Under the aegis of Government of India,
    Hindi Sanghosti and Hindi Seminars
    were organised at various places
    apart from organising Functional and
    Computer Workshops at various

  1. Community Services Banking:

Our Bank as a caring and responsible
corporate entity is conscious of the
nurturing we have received from society
and are alive/ aware of our duty to payback
a fraction of what we have received from
them as a sense of gratitude. As per the
Government of India guidelines, bank is
authorized to spend 1% of its net profit
towards Community Service activities
by making equitable donations to any
organization engaged in Community
Development activity with a clean image
and good track records. Such donations
are made without any strings attached.

  1. During FY16, Bank had

undertaken various activities/

programmes include conduct of health
camps, tree planting programme,

sponsoringTaluk and district level sports,
donating text books, utensils, table and
writing benches, blankets to orphanages,

equipments to children with special

needs, sponsored prevention of cancer
awareness programmes etc.

  1. Bank also participated in the
    Swachchh Bharat Abhiyaan and donated
    '26.10 lac for constructing Green Toilet to
    rural schools besides contribution of '10
    lacs for rejunevation and development of
    lakes situated in Mysuru.

Director’s Report