State Bank of Hyderabad
Report of the Board of Directors

Period covered by the Report

1^st April 2007 to 31^st March 2008

1.     MACRO-ECONOMIC OVERVIEW:

1.1.  The domestic economy is estimated to have grown in 2007-08 by 8.7% as against a growth rate of 9.6% in 2006-07 as per advance estimates released by Central Statistical department (CSO).

1.2.  Agriculture sector is estimated to grow by 2.6% during the year 2007-08 as against 3.8% growth during 2006-07. This lower than anticipated growth in agriculture had its impact on the price situation with shortfall in domestic production & hardening of international prices like wheat, pulses, edible oil etc. The latest indications from IMD suggest normal monsoon for year 2008-09.

1.3.  The industrial sector is estimated to post a growth of 8.6% during 2007-08 slowing down from the level of 10.6% during 2006-07.  The manufacturing sector is estimated to grow at 9.1% during 2007-08 as compared to 12.2% growth during 2006-07. Construction sector is estimated to have grown at a lower rate of 9.6% as against the growth of 12% during 2006-07.

1.4.  The growth in services sector was in double digits in the major areas like Trade, Hotels, Transport and Communications services. The overall services sector is estimated to grow at 10.7% during 2007-08 as against 11.1% during 2006-07.

1.5.  The exports grew a healthy 22.9% in US dollar terms at USD 138.43 billion for the period April 2007 to February 2008 from USD 112.64 billion during April 2006 to February 2008.  Successive cuts in the US interest rates have impacted the exports & exporters profit margin. Imports during April 2007 to February 2008 grew by 30.2% to USD 210.89 billion compared to USD 161.96 billion during April 2006 to February 2007.

1.6.  Forex reserves (excluding gold & SDRs) of the country continued to be at a comfortable level and stood at US$ 299 billion as at March 2008 from US $ 192 billion as at start of the year.

1.7.  Interest rates have remained high during the current financial year. Reserve Bank of India raised CRR from 6% as on March, 2007 to 7.5% during the year as monetary measures to check inflation. Headline inflation, based on movement in the wholesale price index (WPI) was 7.41% for the week ended 29th March, 2008 as compared with 5.9% at end-March 2007. The jump in inflation during the year was mainly led by prices of food items like fruits, vegetables and pulses, and aviation fuel. Crude oil prices had been source of worry with the same breaching USD 110 per barrel.

1.8.  During the year 2007-08, Broad Money   (M3) grew by 20.6% up to March 28, 2008 as against 21.6% registered during the corresponding period of the last year. As on 28.03.2008, the gross   bank   credit of scheduled commercial banks stood at Rs. 23,48,493 crore representing an increase by 21.60% in 2007-08 vis-à-vis growth of 28.10% witnessed during the previous year.

1.9.  ASCB deposits stood at Rs. 31, 92,141 crore as at 28th March 2008. ASCB deposits grew 22.20% YoY against 23.80% in the previous year. Such growth had been driven by significant increase in the volume of discretionary deposit during the year.

2.      BANK’S PERFORMANCE:   

2.1.  Resource Mobilization:

The Bank’s total liabilities increased by Rs. 12,568 crore (25.62%) to Rs. 61,620 crore during FY8.The aggregate deposits stood at Rs. 51,796 crore as at March 2008 vis-à-vis the level of Rs. 42,083 crore as at 31.03.2007. Fresh accretion was of the order of Rs.9, 713 crore registering a growth of 23.08% in FY08 as against Rs.7, 587 crore during last year. The share of retail segment constituted 38.96% of the aggregate deposits as on 31^st March 2008.

 COMPOSITION OF AGGREGATE DEPOSITS 

                                                                                              As on

2.2.  Resource Deployment:

2.2.1.      The total loan portfolio (including food-credit) expanded by 26.60% during FY08 to Rs.36,015 crore from Rs. 28,448 crore as on 31.03.2007. Food credit declined by Rs.16 crore (1.61%) and Bank achieved a growth of Rs.7,583 crore (27.61%) in non food credit during FY08.

2.2.2.      Loans to individuals within the retail segment grew by Rs.968 crore (14.73%) and reached a level of Rs.7,537 crore vis-à-vis Rs.6,569 crore as at Mar’07.Finance to industry and trade accounted for Rs.19,931 crore (56.87%) of non food credit. The Bank’s credit Deposit Ratio stood at 70.13% as at March 2008 as against 67.97% in March 2007.

2.2.3.      During FY08, the level of investment grew by 22.08% (YoY) to Rs.16,993 crore as at March 2008 from Rs 13,919 crore in March 2007. A major portion of the investment was in government approved securities.

3.      Priority Sector Lending:

3.1.  Advances to Priority Sector reached a level of Rs.12,869 crore as at the end of FY08 from the level of Rs.11,315 crore as at the beginning of the year. This constitutes 45.40% of the Adjusted Net Bank Credit of the bank vis-à-vis the RBI benchmark of 40%.

 3.2.  AGRICULTURE ADVANCES:   

The direct agriculture advances grew by Rs 1,239.67 crore & indirect agricultural advances grew by Rs 177.27 crore during FY08. Against disbursal target of Rs.2,337.00 crore under the Special Agricultural Credit Plan [SACP] for the year 2007-08 (Rs.1,437.00 crore under Production Credit and Rs.900.00 crore under Investment Credit), disbursements are Rs.1,324.84 crore under Production Credit and Rs.713.32 crore under Investment Credit achieving 92.19% and 79.26% of the targets respectively. The total achievement during the year stood at Rs.2,038.16 crore i.e.87.21% of the target under the Special Agricultural Credit Plan.  

(Rs. in crore)

3.3.  ACHIEVEMENT OF BENCH MARK: As against RBI stipulated benchmark of 18%, we have achieved 18.66% in total agricultural advances as on March 2008 as against 13.80% as at March 2007.

3.4.  KISAN CREDIT CARDS:   During the current year 1, 09,928 Kisan Credit Cards have been issued, with an outlay of Rs. 383.58 crore as against 1,31,003 KCC with an amount of Rs 365.16 crore for the year ended March 2007. Cumulatively 7, 08,883 Kisan Credit Cards have been issued by the Bank with an outlay of Rs. 1,843.74 crore up to March 2008.

During FY08 the Bank financed 1,42,964 new farmers which includes 42,098 marginal farmers and 17,167 tenant farmers.  

3.5.  SBH KISAN STAR CARD SCHEME (KSCS): 

During the current year 3,778 Kisan Star Cards were issued amounting to Rs.77.42 crore. Cumulative figure stood at 24,117 KSCs with an outlay of Rs.201.22 crore up to March 2008.

3.6.  TRACTOR FINANCE:  

During the year we have financed 4,247 new tractors amounting to Rs.188.32 crore. We have entered into MoU with 13 tractor companies to make the tractor finance customer friendly and hassle free. A new product – Scoring model for financing tractor loans with differential margin, security, interest etc. is introduced which is attractive for good borrowers.

3.7.  SELF HELP GROUPS:                                                                                              

34,842 Self Help Groups have been credit linked during the year with an outlay of Rs.312.59 crore. Cumulative figures stood at 1,87,339 SHGs with an outlay of Rs. 906.90 crore up to March 2008 vis-à-vis 1,52,497 No. of groups with exposure of Rs.594.31 crore as on March, 2007.

Instructions have been issued to consider sanction of term loans to the members of SHGs towards repayment of high cost debt availed from non-institutional lenders (private money lenders) keeping in view the past performance of SHGs and their credit needs.                      

4.      Micro Small & Medium Enterprises (MSME):

During the year, financing to Micro Small and Medium Enterprises (MSMEs) remained a focused area for the Bank. The outstanding credit to MSMEs stood at Rs.5, 042 crore as at the end of March 2008 as against Rs.3, 865 crore in March 2007 registering a growth of Rs.1, 177 crore. Advances to MSME sector grew by 30.47% as against stipulated annual growth of 20% p.a.                        

4.1.  Small Scale Industries:

Advances to Small-Scale Industries (SSI) grew by Rs.732 crore (44.12%) during the year to Rs. 2,391 crore from Rs. 1,659 crore as at the beginning of the year. The number of SSI units financed by the Bank has stood at 15,125 as on March 31, 2008.                        

4.2.  Small Business Finance:

Advances under Small Business Finance schemes of the Bank covering retail trade, transport operators, professionals & self-employed persons and small business enterprises increased by Rs.135 crore to reach a level of Rs.1,129 crore as on 31.03.2008. The total number of SBF units financed by the Bank reached 1, 38,037 as on 31.03.2008.

4.3.  SME Credit Plus: Under SME Credit Plus scheme, the Bank has financed 956 units with total limits of Rs.46 crore during FY08.

4.4.  Laghu Udyami Credit Card Scheme (LUCC):

The Laghu Udyami Credit Card Scheme is designed for providing hassle free credit for small business units with working capital limits up to Rs.10 lacs with its simplified procedures and operational convenience. Under the scheme 5,210 cards with a total outlay of Rs.153 crore are issued during FY08.   

4.5.  SPECIALISED MSME BRANCHES:

Apart from financing MSMEs through normal activity at almost all its general branches, the Bank has 11 specialized MSME branches designed to exclusively meet the credit requirements of the Micro, Small and Medium Enterprises. All the specialized MSME branches are located in Andhra Pradesh and these branches contribute to about 9% of total MSME advances of the Bank.

5.      Retail Lending:

5.1.  Housing finance has remained a thrust area in 2007-08. The Bank recorded a growth of Rs. 532.75 crore during the year against Rs 434 crore in 2006-07. Bank extended loans to 8,441 new borrowers under Housing loan scheme thereby increasing the total number of Housing loan borrowers to 73,490. The housing portfolio of the bank stood at Rs 2,808 crore as at March 2008.

5.2.  Education Loans:

The bank recorded a growth of Rs.179.57 crore during the year, under Education loans to students as against Rs 148 crore during 2006-07. The bank extended Education Loans to 8,758   fresh applicants under the scheme. The total number of accounts as at the end of FY08 stands at 33,098. As per RBI policy, Bank raised the ceiling on Education Loans from Rs 7.5 lakhs to Rs 10 lakhs for studies in India and from Rs 15 lakhs to Rs 20 lakhs for studies abroad, to qualify under priority sector. The education loan assistance to students stood at Rs   598 crore as at March 31, 2008.  

5.3.  Vehicle/Car loans:

Under this portfolio the number of accounts increased from 30,181 to 31,908 thereby adding 1,727 fresh borrowers. There is a growth of Rs.80.09 crore from April 2007 and the present outlay stands at Rs.363.74 crore.   

Bank waived Third Party Guarantee and also obtention of liquid security for all Vehicle loans. Bank introduced uniform margin of 15% on road price of the vehicle. Tie-up arrangements are being continued with reputed manufacturers such as Maruthi, Hyundai, Hero-Honda, Bajaj Auto etc.

6.      Profitability:             

6.1.  Gross Profit & Net Profit  

Ø      The Operating Profit for FY08 at Rs 991.19 crore declined by 1.26% as against Rs. 1,003.81 crore for FY07. The Net Profit for FY08 increased by 10.19% on YOY basis to Rs 556.99 crore as against Rs. 505.50 crore for FY07. The total earnings during FY08 improved by 28.72% to Rs.5, 080.29 crore as against Rs. 3,946.84 crore for FY07. Total expenditure during FY08 increased by 38.94% to Rs. 4,089.10 crore as against Rs. 2,943.03 crore for FY07.

6.2.  Net Interest Income & Net Interest Margin:

Ø      Interest & Discount on Advances during FY08 improved by 42.15% to Rs. 3,144.62 crore as against Rs. 2,212.15 crore for FY07. The yield on advances increased by 105 bps from 9.16% as at March 2007 to 10.21% as at March 2008.

Ø      The average yield on investments improved to 7.69% as at March 2008 as against 7.60% as at March 2007. The average yield on call money lending for the year ending March’08 stood at 6.59% and average yield on CBLO lending at 5.32%. **

Ø      Interest paid on deposits during FY08 grew by 55.27% to Rs. 3,142.20 crore as against Rs. 2,023.71 crore for FY07. The cost of deposits increased by 132 bps from 5.43% as at March 2007 to 6.75% as at March 2008.

Ø      The Net Interest Income during FY08 declined by 9.37% to Rs. 1,112.91 crore as against Rs. 1227.96 crore for FY07. Higher cost of deposits impacted the Net Interest Income.

Ø      The Net Interest Margin stood lower at 2.43% as at March 2008 as compared to 3.12% as at March 2007. **

6.3.  Non Interest Income:

The Bank’s non interest income during FY08 improved by 15.88% to Rs. 677.14 crore as against Rs. 584.35 crore during FY07. **

(** As per RBI guidelines the Amortization expenditure is reduced from Interest income in FY 08. In FY 07, the same was reduced from other income. The figures for FY 07 have been recalculated for better comparison.)  

Ø      Exchange and Commission income during FY08 improved by 9.14% to Rs. 429.12 crore as against Rs. 393.18 crore for FY07.

Ø      Profit from sale of investments during FY08 improved by 100.21% to Rs. 169.25 crore as against Rs. 84.54 crore for FY07. The increase is mainly on account of sale of equities, equity oriented mutual funds and debt mutual funds.

Ø      Income from government business during FY08 declined by 9.26% to Rs. 91.65 crore as against Rs. 101 crore during FY07. Income from Forex business during FY08 improved marginally to Rs. 68.41 crore as against Rs. 68 crore for FY07. Commission on LC / BG during FY08 improved to Rs. 63.93 crore as against Rs. 55 crore for FY07. Recovery in written off accounts is lower at Rs 79.38 crore during FY08 as compared to Rs 107 crore during FY07.

6.4.  Operating Expenses:

The total operating expenses during FY08 declined to Rs. 798.86 crore as compared to Rs. 808.50 crore for FY07.

7.      Provisions and Contingencies:

7.1.  Net Worth & Capital Adequacy:

The Banks Net Worth declined marginally from Rs 2,488.38 crore as at end of FY07 to Rs. 2,443.55 crore as at end of March 2008. The Book Value per share declined marginally from Rs 14,425.39 as at March’07 to Rs. 14,165.51crore as at March 2008 on account of draw down from reserves for making one time full provision towards implementation of AS-15.  

The Bank’s CRAR stood at 12.35% as on 31.03.2008 as against 12.51% as on 31.3.2007. The Bank became Basel II compliant as on March 31, 2008. The Capital Adequacy Ratio as per Basel II (CAR B II) stood at 11.97% as on March 31, 2008. 

8.      Cross Selling:

State Bank of Hyderabad started cross selling activities by marketing the Insurance policies of SBI Life Insurance Company by obtaining a Corporate Agency during the year 2002. We market group products and individual products through our entire branch network.

The Bank has tie-up arrangements with SBI Mutual Fund to mobilize mutual fund applications / investments from our customers. Further the Bank has entered in to tie-up arrangements with M/S UTI Mutual Funds to market their mutual fund products.

The Bank has entered in to a memorandum of understanding (MOU) / tie-up arrangements with United India Insurance Company to market their products and   obtained Corporate Agency.  Under this agreement, SNEHA and AROGYA SURAKSHA - products are marketed across the branches besides insuring the assets financed with M/s United India Insurance Company.

The Bank earned an income of Rs 12.45 crore during the year 2007-08 from cross selling activities as against Rs 9.29 crore during the previous year.

8.1.  SBI LIFE: The Bank has collected a premium of Rs 57.91 crore during FY08 as against the premium of Rs. 35.37 crore during FY07. Bank earned commission of Rs 6.25 crore during FY08 as against Rs. 5.82 crore during FY07 from SBI Life Products.

 The Bank marketed various group products/schemes under Creditors Life Insurance Schemes (Home Loan/Car Loan/Tractor Loan borrowers), Group products like Swadhan and two new Individual products, Child Plan and Elite Plan.

8.2.  GENERAL INSURANCE:

The Bank earned a commission of Rs. 1.45 crore during FY08 through marketing General Insurance products of United India Insurance Company Ltd., as against an income of Rs. 1.45 crore in the year 2006-2007.

8.3.  Mutual Fund: The Bank has earned a brokerage of Rs. 3.26 crore during the year from the sale of SBI and UTI Mutual Funds products, as against income of  Rs. 1.98 crore in the year 2006-2007.  The Bank mobilized funds of Rs. 43.54 crore in SBI Infrastructure Fund and we stood first among all the Associate Banks.

8.4.  CREDIT CARDS:

The Bank earned commission of Rs. 6.25 lacs as against the budget of Rs.5.00 lacs for the year 2007-08.

9.      New Products:

The Bank has launched a few new products during year to cater to the needs of various market segments.

10. Consultancy Services:

During the FY 2007-08, the Bank’s Technical Consultancy Department (TCD) handled 33 operational references for conducting techno-economic viability studies, which involved total outlay of Rs.205.41 crore and total credit requirements of Rs.137.70 crore.

11. Industrial Rehabilitation:

31 large sick industrial units with aggregate outstanding of Rs.270.15 crore are being monitored by the Bank as on 31.03.2008. Of the 31 accounts, 23 accounts are under reference to BIFR. There are 11 accounts under reference to CDR aggregating to Rs.158.99 crore.

12. NPA Management:          

During FY 08, the gross Non performing assets declined from Rs 350.83 crore to Rs 311.94 crore. The gross NPA as a percentage to total advances declined from 1.23% as at March 31, 2007 to 0.87% as at March 31, 2008. The Net NPAs stood at Rs. 56.97 crore as at March’08 as against Rs 61.30 crore as at March’07. The Net NPAs as a percentage to net advances were at 0.16% as compared to 0.22% as at March’07. Provision coverage stood healthy at 80.45% as at March 2008.

13. International Banking: 

13.1   Foreign Exchange Turnover: The Bank achieved a merchant turnover of Rs.23, 239 Crore as on March 2008 as compared to a turnover of Rs.16, 663 Crore during the corresponding period in the previous year. Foreign currency sales turnover recorded a figure of Rs.14, 669 Crore and purchases Rs.8, 570 crore. The trading turnover stood at Rs 1, 44,096 Crore (42.63% YoY growth) as on March 2008 compared to Rs 1, 01,023 crore during previous year. The forex operations have yielded exchange revenue of Rs. 40.41Crore during the year 2007-08 as against Rs.30.79 Crore in the previous year.

           13.2    Export Finance: 

The Bank’s credit assistance to exporters has grown by 10.37% to Rs.1, 724 crore as on 31.03.2008 from Rs.1, 562 crore as on 31.03.2007.

13.3   International Services Branch (ISB):

The ISB branch was opened during the financial year 2006-07 for facilitating on line credits to the account of beneficiaries of all branches in respect of collections of foreign currency instruments and foreign inward remittances. It registered a turnover of Rs.547 crore during the current financial year. Reduction in the cooling period from existing 21 days to 14 working days has been introduced in respect of collection of foreign instruments and the facility extended to the Branch Managers to exercise discretion for affording credit in 7 working days from the date of credit to our NOSTRO account (on selective basis) has contributed to increased turnover in the first year of operation itself.

14. Merchant Banking:       

Since most of the present day IPOs are launched through book building route, the Bank is mainly focused on Debenture Trusteeship and Depository Services.

 Debenture Trusteeship: The Bank has earned income of Rs 94.03 lacs during FY08 by acting as debenture trustee.

15. Depository Services: 

The Gunfoundry branch maintains 5,743 accounts with NSDL for Depository Services and has earned income of Rs. 10.04 Lacs. During the year, the Bank has entered into a franchisee arrangement with SBI Cap Securities Ltd. (SSL) for opening of Demat, Online Trading / E-broking account to its customers. The Bank has 557 online trading D- mat accounts with total turnover of Rs. 6.87 crore up to March 2008.

16. Social Banking:      

16.1 Assistance to Weaker Sections:

The total finance extended to weaker sections stood at Rs.3, 265.22 crore as at the end of March 2008 as against Rs 2,813 crore as at March 2007. This constituted 11.52% of the Adjusted Net Bank Credit of the Bank vis-à-vis the benchmark of 10%.

16.2 Credit to Women Beneficiaries:

Outstanding financial assistance to women beneficiaries stood at Rs.2, 051.23 crore as at the end of March 2008 as against Rs 1,468 crore as at March 2007. Credit to women constitutes 7.23% of Adjusted Net Bank Credit [ANBC] as against the benchmark of 5%.

16.3 Prime Minister Rojgar Yojana (PMRY):

The financial assistance provided under the scheme during the year ended 31.03.2008 was Rs.63.29 crore covering 8,010 beneficiaries achieving 81% of the target.

16.4 Swarna Jayanthi Shahari Rozgar Yojana (SJSRY):

 Under the scheme, 1,601 beneficiaries were provided financial assistance of Rs.6.45 crore during the year achieving 99% of the target.

16.5 Assistance to Members of SC/ST Community:

The Bank continued to accord due priority to extend financial assistance to SC / ST borrowers. Financial assistance to SC / ST borrowers as at the end of March 2008 amounted to Rs.687.82 crore covering 1, 27,065 beneficiaries.

17. Lead Bank Scheme:

17.1 The Bank holds Lead Bank responsibilities in six districts of Andhra Pradesh and two districts of Karnataka. In addition, the Bank also has Lead Bank responsibilities of Hyderabad Metro District.  Under the annual Credit Plan 2007-2008, the Bank achieved 87.43% of its allocated share of 2003 crore.

17.2 Rural Institute for Self Employment Training:

During the year one “Rural Institute for Self Employment Training” was opened in Utnoor (Adilabad District) taking the total number of RISETs to seven. These Institutes have conducted 120 Programmes during the year 2007-08 and trained 7,049 rural youth with 73% settlement.

17.3 Financial Inclusion

Districts of Nizamabad & Rangareddy in A.P. and Koppal and Raichur in Karnataka where the Bank has lead bank responsibilities have achieved 100% Financial Inclusion.

Our Bank launched a pilot project in June 2007 in Raiparthy Mandal in Warangal district, Andhra Pradesh as a part of financial inclusion drive with other major commercial banks for effecting payments under Social Security Pensions (SSP) and National Rural Employment Guarantee Schemes (NREGS) through the smart card technology. The Bank has covered 23 villages under the Raiparthy Mandal with details of beneficiaries covered till March 2008 as under:  

*Started from last week of March 2008

18.  DECCAN GRAMEENA BANK:

Deccan Grameena Bank sponsored by the Bank is having a combined network of 173 branches. The aggregate deposits and advances of the Deccan Grameena Bank stood at Rs1, 444 crore and Rs.1, 002 crore respectively as on 31.03.2008.   The net profit for FY08 stood at Rs. 1.00 crore as compared to the profit of Rs.1.00 crore recorded last year.  The average credit-deposit ratio of the Bank stood at 69.34% as on 31.03.08. Deccan Grameena Bank financed 87,204 Self Help Groups with a credit linkage of Rs.345 crore benefiting 11, 90,335 individuals and had issued 1, 86,353 Kisan Credit Cards with aggregate limits of Rs. 319 crore.

The DGB has also been marketing SBI Life products and during the year 39,489 policies were sold and premium of Rs. 0.81 crore was collected. DGB earned Rs. 0.18 crore by selling the policies.

19. Customer Service:

All the 1001 branches of the bank are on Core Platform.  The Bank leveraged its technology to provide several value added service facilities viz. Multi-City Cheques; Transaction based Internet Banking Facility for Personal and Corporate customers, Real Time Gross Settlement (RTGS), Electronic Funds Transfer (EFT), National Electronic Funds Transfer (NEFT) and Core Power facilitating Anytime Anywhere Banking. A total of 510 ATMs had been installed up to 31^st March 2008. The customers enjoy access to the network of over 8,500 State Bank Group ATMs.

19.1 A website, viz. www.onlinesbh.com is maintained for customers of all branches, to avail Internet Banking services. A transaction-based Internet Banking facility has been extended to retail and corporate customers.

19.2 The Bank has set up a Call Center with a toll-free telephone facility for attending to the queries, complaints and grievances of the customers and also for extending guidance, assistance and information about Bank’s services and schemes. Initiatives are on to make the facility 24x7 by leveraging technology.

19.3 The Bank has in place a Code of Fair Banking Practices and Citizens’ Charter to facilitate excellence in customer service and to enhance transparency in all its operations.

19.4 As a part of our sustained initiatives of empowering the customers, the Bank has become a member of the Banking Codes & Standards Board of India.  The Bank has placed its various policies in the website for the information of the customers regarding their rights in dealing with the Bank.

19.5 The Charter and Deposit Policy are available on the Web-site “sbhyd.com/custrights/citizencharter.asp”

19.6 The Bank has since adopted a Fair Practices Code for Lenders. The Code provides detailed information to customers in key areas such as bank charges, terms & conditions of sanction, time-norms for processing of loan applications, mechanism for redressal of grievances, etc., and thereby seeks to improve transparency in respect of the Bank’s practices & processes of lending.

19.7 Committee on Procedures and Performance Audit on Public Services (CPPAPS): An executive level committee headed by Managing Director as Chairman with 2 eminent customers as members (non-official) has been setup to over see the implementation process of customer service.

19.8 Head Office Customer Service Committee (HOCSC): A committee constituted to review the services offered to the customers by the branches. Suggestions received from members of the committee comprising of all Zonal Managers, Representatives from both the Award/Officers associations are being implemented for improving customer services in Bank.

19.9 As a new initiative for enriching the customer satisfaction level and addressing the need of High Value Depositors of Rs.1 crore and above under PER segment have been introduced. The high value customers have been extended various facilities inclusive of operation of accounts at all the branches of the Bank.

20. Business Process Re-engineering:    

20.1 Banking industry is undergoing rapid and radical changes driven by technology, innovation in products and services and ever expanding customer expectations. To address such challenges effectively, the Bank rolled out the following BPR initiatives that create value and quality for the customers.

20.2 Grahak Mitra is a front office initiative for guiding the customers in conducting their transactions smoothly and helping them in choosing alternate delivery channels like ATM cards, internet banking, etc. This initiative has been implemented in 145 centres covering 344 branches. .  

20.3 To expedite and facilitate easier Cheque tendering, the Bank has provided specially designed drop boxes at 204 centres covering 473 branches

20.4 To further improve the service and give single point credit delivery system, RACPC-Hyderabad has been converted to a fully computerized End State RACPC on CBS platform. 89 branches of Hyderabad are linked to the centre. Besides speedy appraisal, sanction & documentation of housing, education, vehicle and mortgage loans, all other processes including account maintenance, set up, supervision and monitoring is done through skilled personnel.

20.5 Small Enterprises Credit Cells (SECC) at Hyderabad has also been converted to a fully computerized End State SMECCC on CBS platform. 81 branches of Hyderabad are linked to the centre. All credit requirement of SME borrowers are being processed at the centre thereby making it a single point delivery system.

20.6 RASECCs (Combined cells for processing Retail & Small Enterprises loan proposals) at Aurangabad, Vizag, Vijaywada and Warangal centers have also been converted to fully computerized End State RASMECC on CBS platform. The remaining four centres at Chennai, Mumbai, New Delhi and Bangalore will be taken up for conversion to  End State RASMECC during the next financial year.

20.7 To offer exclusive personalized services to high-end customers of both PER and ME segments, Relationship Managers have been posted at 106 Branches (RM-PB: 64 branches at 32 centres & RM-ME: 42 branches covering 7 centres).

20.8 To improve the efficiency of cash management, Currency Administration Cells (CACs) have been opened at 11 centres linking 155 branches. The average cash holding of the linked branches has been reduced by 60%.

20.9 Centralized Pension Processing Centre (CPPC) was established at Secunderabad for ensuring smooth and efficient processing of Central Government pensions. The cell is processing 36,668 pension payment orders of central government pensioners pertaining to 696 branches. As on March 2008, 19,995 pensioners pertaining to 425 branches are being paid their pensions online through CPPC.

20.10 For giving thrust to increase the Bank’s market share, Marketing teams (OSF-HL, MPSF & CSF) specially designed to mobilize and market P segment and Small Enterprises segment assets and liability products have been established at 9 centres viz. Hyderabad, Vizag, New Delhi, Chennai, Bangalore, Mumbai, Aurangabad, Vijaywada and Warangal.

20.11 To avail the benefit of having specialized loan processing centres manned by skilled staff at smaller centres having less than 10 branches, Mini CPCs have been launched at Karimnagar, Gulbarga, Khammam, Nizamabad, Nanded, Ramagundem, Mahoobnagar, Guntur and Kakinada centres.

20.12 “Micro Marketing Study” initiative was launched at Hyderabad Centre to conduct an in-depth market survey of the twin cities of Hyderabad and Secunderabad. The study focuses on re-designing the Branch network so that the right type of Branches at the right location with appropriate staffing can be established to exploit the full potential of the market. 

20.13 The Agri-CPC was launched at Karimnagar, Parbhani and Nizamabad Centres designed to source, market, process and sanction agricultural loans (ACC/KCC/ATL) at intensive agricultural centres thereby, providing efficient service to the farmers.

20.14 Stressed Assets Resolution Centre (SARC) initiative was launched at Hyderabad centre specifically to recover and manage hardcore NPAs, thereby allowing the Branches to focus on new business while converting their NPAs into productive assets with least time & cost.  65branches of Hyderabad city have been linked to the centre.

20.15 Clearing Central Processing Centre (CCPC) was launched at Pune and Aurangabad centres for handling inward / outward clearing centrally.

20.16 Replenishment of cash at OFF-SITE ATMs by CAC : The initiative has been operationalised at Aurangabad and is proposed to be extended to off-site ATMs at Hyderabad in the next phase.

20.17 Trade Finance Central Processing Centre (TFCPC) was launched at Hyderabad in January 2008 to handle all business related to Trade Finance like LCs, Bills, Guarantees (both Inland and Foreign) centrally. Seven forex intensive branches have been linked to the centre during the current financial year. The remaining branches of the city will be linked to TFCPC during financial year 2008-09.

21. Support systems:        

21.1 Risk Management:

A new Risk Governance Structure has been put in place by the Bank. The Credit, Market and Operational risk management and ALM functions have been integrated with creation of Integrated Risk Management Department (IRMD) headed by a Deputy General Manager. The Risk Management Committee of the Board of Directors (RMCB) monitors the implementation of integrated risk management systems in the Bank. To assist the RMCB, various risk management committees like Credit Risk Management Committee (CRMC), Market Risk Management Committee (MRMC), Operational Risk Management Committee (ORMC) and Asset Liability Management Committee (ALCO) with Top Management as members are in place. The Committees meet periodically to deliberate on issues in their respective areas and formulate appropriates policies, mitigation strategies / practices in the Bank.

21.2 In line with State Bank Group policy, the Bank has become Basel-II compliant as on 31.03.2008. The Bank has put in place the required systems / policies viz. Integrated Risk Management (IRM) Policy, Credit Risk Management (CRM) Policy, Operational Risk Management (ORM) Policy, Market Risk Management (MRM) Policy, Internal Capital Adequacy Assessment Process (ICAAP) Policy, Credit Risk Mitigation and Collateral Management (CRM&CM) Policy, Disclosure Policy, Stress Testing Policy, IRM Vision Statement etc.

21.3 The Bank has articulated a Board approved Road Map with for implementation of Basel-II guidelines, starting with primary approaches. Stage wise milestones to be achieved vis-à-vis Basel II implementation including advanced approaches in all the three areas of risks have been enumerated. The same is reviewed on an on going basis.

21.4 The Bank’s Board has approved all the four domestic rating agencies i.e. CARE, ICRA, CRISIL & FITCH, as finalized by RBI, for rating of corporate exposures. MoUs have been entered into with all the above agencies.

21.5 A series of ‘Customers Meets’ was organized in important cities of India to bring awareness to corporate customers about benefits of ratings under Basel-II regime. This has yielded good results and several corporates got themselves rated for various facilities enjoyed.

21.6 The process of independent validation of CRA of borrowal accounts having exposure of Rs. 10.00 crore and above by the CRA validation Committee at Head Office level is now established. 

21.7 Structured risk framework to identify the Risk Events has been developed in respect of various business mixes of the branches. Under phase-I of the Risk & Control Self Assessment (RCSA) roll-out, 116 branches were covered to identify the Risk Events for assessment of operational risk.

21.8 Risk Profile Templates (RPTs) of the Bank were compiled on a quarterly basis and reports submitted to Board / RBI regularly. Progress on implementation of risk management systems in the Bank as per the guidelines issued by RBI are monitored on an ongoing basis. The progress reports are being submitted to the Board / RBI periodically.

21.9 A series of seminars were conducted at all Regional Offices of the Bank to impart training to all Branch Managers on “Risk Management –Implementation of Basel-II guidelines in the Bank”.

22. Technology and MIS:

22.1 The Bank had implemented Core Banking Solution at all of its branches in December 2005. All new branches opened there after have Core banking platform.  Its countrywide network of 1001 branches offer a wide range of banking services and several technology based products & services. These include Anywhere, Anytime Banking, Multi City Cheque facility, Inter Bank and Intra Bank funds transfer facility through Electronic Fund Transfer (EFT), Real Time Gross Settlement (RTGS), National Electronic Fund Transfer (NEFT), SBGP Scheme for intra-group funds transfer etc., Automated Services in Core Banking include Inland Remittances through a specialized International Services Branch and faster processing of clearing and collection of cheques/instruments through a centralized system. Bank has also centralized ECS (Debit/Credit) transactions at select centres, while all branches are enabled for RTGS, NEFT, SB Group Payment facilities.

22.2 The Bank also provides Net-banking facilities through Internet Banking Service (www.onlinesbh.com) both for Retail and Corporate Customers. The services under Internet Banking Service include balance enquiry, funds transfer, DD issue, new account opening, payment of Utility Bills, e-payment of both direct (CBDT) and indirect (CBEC, Service Tax) taxes, Railway Ticket Booking, E-payment of Railway Freight Charges. Electronic Accounting System for Customs, Excise, Service Tax Transactions (EASIEST) and OLTAS have been successfully implemented by the Bank. RTGS and NEFT services were integrated with Internet Banking Service enabling the customers to transfer funds across the Banks.

22.3 Bank is a Member of the State Bank Group ATM Network having access to over 8500 ATMs all over the country. Bank has expanded its ATM network by installing 110 new ATMs during 2007-08 taking the total tally to 510 ATMs. Total number of ATM-cum-Debit Cards stood at 19.60 lacs as at March 2008. ATM enabled Kisan Credit Cards were also introduced for Agricultural Customers. In addition to the normal banking transactions viz., Cash Withdrawal, Balance Enquiry, Mini Statement etc., value added services like Card2Card Funds Transfer, SBI Credit Card payment, Payment of College Fee, IIT Entrance, Mobile Topup, Donations to Temples (TTD, Vaishnodevi, Shirdi etc) have been introduced through ATM Network. Plans are under way for installation of Mobile ATM and Biometric ATM for the convenience of customers in rural centres.

22.4 Bank has already made arrangements for implementation of Cheque Truncation System (CTS) at all the branches in New Delhi, where RBI plans to take up the pilot implementation.

22.5 Under Financial Inclusion, the Bank plans to integrate Core Banking Solution with various sub systems, using Smart Card based solutions.

22.6 Bank’s website (www.sbhyd.com) provides information about the Bank, Deposit and Loan Schemes. Facility for online submission of application for Educational Loans has been introduced in the Website. E-grievances system is in place.

22.7 The MIS has been redesigned to provide the required information and reports to the Zonal Offices and Head Office Departments. Credit Information System has been fully operationalised and Annual Closing Returns for Advances are generated through the CIS Software. Bank has automated generation of Capital Adequacy Returns as per Basel II norms and centralized procedures for consolidation of data/information for effective Risk Management.

23. Systems & Procedures:

Various guidelines received from the Government of India and R.B.I. are being systematically implemented by the Bank with added emphasis on KYC and AML prescriptions.                                                                

The systems and procedures are being constantly reviewed and modified or simplified to address the requirements of customers and also to ensure compliance of guidelines from Government and RBI.

24. Vigilance:

24.1 Thrust on preventive vigilance has been the essence of vigilance administration. To ensure this objective the branches were advised to adhere to systems and procedures and also by inclusion of one session on “preventive vigilance” in the in-house training programmes.

24.2 Various preventive measures – such as strengthening the internal control systems for ensuring total compliance with KYC norms; maintenance of Negative List of Builders and DOs and DONTs for Housing loans etc.- have been circulated.

24.3 Whistle-blowing is adequately encouraged. Alertness awards are encouraged to exhibit extraordinary sense of alertness and .Preventive Vigilance Committees, formed at branches, are also monitored to pre-empt occurrence of frauds.

24.4 For the First time, a special Chapter on”Frauds” has been included in the Bank’s Book of instructions.

24.5 The Bank has put in place a Policy on” Fraud Risk Management”.

24.6 A bulletin - hyVIGIL- is also brought out from the desk of CVO covering various sensitive and fraud prone areas in banking for enhancing awareness of the operating staff. The Association of business communication of India in its 47^th annual awards adjudged Bank’s hyVIGIL as the best under the category “special column (English)”.

24.7 In order to provide a secure environment for branch operations in the Core Banking scenario, comprehensive guidelines   emphasizing the need for caution in maintaining Secrecy of Passwords and User Management have been reiterated.

25. Internal Audit / Inspection:

25.1 The Bank implemented the revised audit process with effect from 01.08.2006. Additional weightage for Risk Parameters, (Credit, Operational and external compliances) was introduced for making the rating process more rigorous. 

25.2 During the year 718 branches have been covered under RFIA and 96% branches were rated as ‘Well Controlled/Adequately Controlled’.  All branches due for audit during the year have been covered under RFIA.

25.3 Verification on compliance of KYC and AML norms on all accounts opened at the branch had been carried out. Concurrent Auditors are also verifying the compliance of KYC and AML norms at branches on an ongoing basis.

25.4 Concurrent audit covers 61.26% of the deposits, 62.41% of advances and other risk exposures of the Bank as against the RBI's stipulation of 50% of business.  Concurrent Auditors are posted in 117 branches of the Bank accounting for 61.44% of Bank’s total business.

25.5 Information System Audit Cell established in 2006-07 had been strengthened. The department has commenced audit of Centralized IT establishments / centralised processing centres.

25.6 The Bank introduced, during the year 2007-08 a system of visits by Inspection department officials to select branches under concurrent audit.  The officials verify a few areas including IT audit with a view to assessing the effectiveness of the concurrent audit.

25.7 Verification and Income & Expenditure audit have been integrated with RFIA with effect from 01.06.2007.

26. Branch Expansion:   

During April 2007 to March 2008, 24 new branches were opened and 12 extension counters were upgraded to full-fledged branches.

The network of branches grew to 1,001 as on 31^st March 2008. The total number of extension counters stood at 45 as at the end March 2008. The population group – wise share of branches of the Bank as at the end of the year was as under:

27. Human Resources Management & Industrial Relations:

As on 31^st March 2008 the Bank had a complement of 12,813 employees, cadre wise composition- 4,992 officers, 5,027 clerical staff and 2,794 subordinate staff. The total number of women personnel stood at 1,879, of which 391 were in officer’s cadre, 1,226 in the clerical/cashier cadre and 262 in sub-staff cadre. The number of physically challenged employees on the Bank’s rolls was 235.Total ex-service personnel working in the Bank stood at 1,452.

The Bank has a number of welfare schemes for its employees, providing assistance for education of their children, health care for the employees and their families, group insurance and facilities for sports and recreation, canteen and library etc. A gym and physiotherapy center has been established at Head office for the benefit of   the staff during the year under reporting. A sum of Rs.14.77 Crore was spent during the last year on staff welfare activities.

27.1 Government guidelines on SC/ST:

Government guidelines applicable to SC/STs under reservation policy have been implemented in the Bank in letter and spirit. The following percentages of vacancies are being reserved for SC/ST candidates in various cadres.

Direct Recruitment of officers on All India basis by means of open competitive tests –SC-15% and ST-7.5%.

In the Direct recruitment to Clerical /Subordinate cadre staff different percentage of vacancies are being reserved to SC/ST candidates in different states as per the GOI guidelines issued from time to time.

Promotions within the officers’ cadre are done by selection method where rule of reservation does not apply. However the benefit of Zone of Consideration is extended to SC/ST employees in promotions within the officer’s cadre up to MMGS-III.

As per GOI guidelines reservations are provided in case the vacancies filled through promotion process to a particular cadre exceed 25% of the total vacancies to be filled during the year.

The details of number of SC/ST employees working in our Bank as on 31.03.2008 are:

The Bank has been complying with the post based roster system in filling up of vacancies in accordance with Government of India guidelines. Check off facility has also been provided as per GOI guidelines to SC/ST welfare Association.                        

27.2 INDUSTRIAL RELATIONS:

Industrial relations in the Bank remained cordial during the period from 01.04.2007 to 31.03.2008. Four Zonal level Structured Meetings were conducted with Associate Banks’ Officers’ Association, Unit: State Bank of Hyderabad and two with SBH Staff Association. Both the Associations had been responsible and co-operative to ensure growth and development of business of the Bank and to create a healthy environment.

Apex level bipartite meeting with Associate Banks’ Officers’ Association was held at Patiala on 18.08.2007. Similarly an apex level bipartite meeting was also held with State Sector Bank Employees Association (SSBES) on 21.08.2007 at Indore.

27.3 SPORTS:

The Bank is playing a notable role in the promotion of sports activities with emphasis on cricket and football. Bank has recruited 3 Cricket 4 Football players during the year. As many as 5 members of the Bank’s cricket team are representing Hyderabad Cricket Association and Andhra Cricket Association in the Ranji Trophy. Bank’s Cricket team has participated in various tournaments   and brought laurels to the Bank.  

27.4 Training & development:

On going skilling and reskilling of its personnel has always been an important agenda for the Bank. The training calendar is articulated to provide strategic linkage with business needs and provide practical skills that are vital to improve customer service.

In the Financial Year 2007-08, a total of 5124 personnel were trained at the Bank’s training centers. 903 officers were trained in other institutions like State Bank Staff College, State Bank Academy, State Bank Institute of Information and Communication Management, State Bank Institute of Rural Development, National Institute of Bank Management, Bankers’ Training College, College of Agriculture Banking-Reserve Bank of India, Indian School Business etc.  

28. Community Service Banking:

The Bank, as a responsible corporate citizen, was sensitive to the growing needs of the society and continued its rich traditions to reach out to the needy. The Bank involved itself in a wide range of social activities spreading its wings both in rural and urban areas to serve the community at large and also to enhance the image of the Bank. The Bank has donated Rs. 2.44 crore during the current financial year to charitable institutions, NGOs, schools and for multidimensional community services.

29. Progressive Use of Hindi:

Concerted efforts were made in achieving the targets fixed by Government of India for the implementation of Official Language Hindi. All papers/documents under Section 3(3) of Official Language Act, like -Circulars, Circular Letters, Press releases, Annual Report, Corporate Plan, List of Branches & Supervisory staff, etc were issued in bilingual form. Rule 5 of Official Language Rules, 1976 was complied with by replying to in Hindi to the letters received in Hindi.

30. Corporate Governance:

The Code of Corporate Governance in State Bank of Hyderabad is a document of Self-discipline, transparency, integrity and Accountability.  It includes the policies and practices adopted by the Bank in achieving the objectives of being a major and visible player in the industry with best parameters in profitability, efficiency, systems, technology and customer service. Bank continued its commitment to excellence in customer and employee satisfaction.

31. Board of Directors:

The Board of Directors consists of the Chairman, Managing Director, 3 Directors nominated by State Bank of India who are officers of State Bank of India, 3 non-official directors, one nominee each from Reserve Bank of India and Government of India, a Workmen Director and an Officer–employee Director as on 31.03.2008.

Attendance of each Director at the Board meetings: 

32. Resume of Directors: 

1.      Shri O.P.Bhatt – Chairman of State Bank of India and its Associates with effect from. 01.07.2006. Director under clause (a) of sub-section (1) of section 25 of the State Bank of India (Subsidiary Banks) Act, 1959.

2.      Shri Amitabha Guha – Managing Director of State Bank of Hyderabad with effect from. 22.05.2004. Director under clause (aa) of sub-section (1) of section 25 of the State Bank of India (Subsidiary Banks) Act, 1959.

3.      Smt. Bharati Rao – Dy Managing Director & CDO, State Bank of India.  Director in her capacity as Deputy Managing Director & Group Execitive (A&S) under clause (c) of sub-section (1) of section 25 of the State Bank of India (Subsidiary Banks) Act, 1959 with effect from.  01.01.2008.

4.      Smt. Madhavi Sharma - General Manager, Reserve Bank of India, Chennai.  Director under clause (b) of sub-section (1) of section 25 of the State Bank of India (Subsidiary Banks) Act, 1959 with effect from.  20.07.2006.

5.      Shri Jiban Goswami – Chief General Manager, Associate Banks’ Department, State Bank of India.  Director under clause (c) of sub-section (1) of section 25 of the State Bank of India (Subsidiary Banks) Act, 1959 with effect from. 17.04.2006

6.      Shri S.A.Thimmiah – Deputy General Manager, Associate Banks’ Department, State Bank of India.  Director under clause (c) of sub-section (1) of section 25 of the State Bank of India (Subsidiary Banks) Act, 1959 with effect from 08.07.2006

7.      Shri I Ram Reddy - Workmen representative nominated under clause (ca) of sub-section (1) of section 25 of the State Bank of India (Subsidiary Banks) Act, 1959 with effect from. 28.04.2006

8.      Shri M Harshavardhan – Officer-employee Director nominated under clause (cb) of sub-section (1) of section 25 of the State Bank of India (Subsidiary Banks) Act, 1959 with effect from. 13.03.2006.

9.      Shri Ramesh Datla – Director under clause (d) of sub-section (1) of Section 25 of the State Bank of India (Subsidiary Banks) Act, 1959 with effect from. 01.06.2007. Shri Ramesh Datla is an entrepreneur (SSI) and is Managing Director of M/S ELICO Limited. He is Chairman CII- SME sub committee, southern Region council. He is also Chairman of Employers’ Federation of Southern India (EFSI) Andhra Pradesh branch, Hyderabad. He is a member – National Instrumentation Development Board (NIDB), Department of Science & Technology (DST) Govt. of India, New Delhi.

10.  Shri S.P.S Sangwan – Government of India nominee and Under Secretary, Ministry of Finance, Department of Financial Services (Banking Division).  Director under clause (e) of sub-section (1) of section 25 of the State Bank of India (Subsidiary Banks) Act, 1959 with effect from. 25.03.2004.

11.  Dr. C L Laxmipathi Gowda – Director under clause (d) of sub-section (1) of Section 25 of the State Bank of India (Subsidiary Banks) Act, 1959 with effect from 10/10/2007. Shri Laxmipathi Gowda is an agricultural scientist and Global Theme Leader – Crop Improvement, ICRISAT, Patancheru. He has 32 years of experience in Agricultural research & development in more than 20 Asian and African countries.

12.   Shri Gajendra Singh Rajukhedi - Director under clause (c) of sub-section (1) of Section 25 of the State Bank of India (Subsidiary Banks) Act, 1959 with effect from 01/11/2007. Shri Gajendra Singh Rajukhedi is a social Activist. He has represented Dhar constituency of Madhya Pradesh in 12^th and 13^th Lok Sabha. He served as Vice Chairman, National Commission for Schedule Tribes (2006-07). He was a member of Defence Advisory Commission, Govt.of India. 

33. Board of Directors – Changes

Shri P Laxminarayana Rau completed his term as Director of the Bank and demitted office on 09/06/2007.  Shri Y Vijayanand retired from Bank’s Service on 31^st August 2007.

The Board wishes to place on record its deep sense of appreciation of the valuable guidance offered and services rendered by the outgoing Board members towards the overall development of the Bank and also welcomes the newly appointed Directors.

During the year, 7 meetings of Board of Directors were held on the following dates.

The quorum for the Board meeting is four Directors of whom one shall be the Chairman or an Officer-Director nominated by the State Bank of India under Section 25 (1) (c) of the State Bank of India (Subsidiary Banks) Act, 1959.

The details of the remuneration paid to the Directors are:

Remuneration paid to the Managing Director during the financial year 2007-08:

Sitting fee paid to other Directors:  The Directors were paid a sitting fee as given below.

For attending Board meetings:                               Rs.5, 000/- per meeting

For attending other Committee meetings:             Rs.2, 500/- per meeting

Sitting fees are not paid to the Managing Director and the Directors who are nominees of Reserve Bank of India, Government of India and State Bank of India Official Directors.  Shri Ramesh Datla has not been paid any sitting fees acceding to his request.

Accordingly, sitting fee paid to the directors during the financial year 2007-08 totalled to Rs.2, 16,760/-.

All the non-executive Directors declared that they do not have any pecuniary relationship vis-à-vis the Bank and they have not entered into any other transaction with the Bank, except those in the usual course of employment.

34. Executive Committee

In terms of Section 35(1) of the State Bank of India (Subsidiary Banks) Act 1959, an Executive Committee of the Board of Directors had been constituted to consider various business matters viz. sanctioning of credit proposals, approval of capital and revenue expenditure, investments, donation, administrative matters etc., falling beyond the powers of the Managing Director / HOCC.

In terms of Regulation 38 (1) of Subsidiary Banks General Regulations 1959, the Committee comprises of the Managing Director of the Subsidiary bank, three Directors nominated under clause (c) of sub-section (1) of section 25 of the Act of whom not more than two shall be officers of the State Bank and one Director elected under clause (d) of sub-section (1) of section 25 of the Act.  Three directors, of whom one shall be the Chairman, or a director being an Officer of the State Bank nominated under clause (c) of sub-section (1) of section 25 of the Act, shall form a quorum for the meeting. Meetings of the Executive Committee were held at least once in a month and during the year 2007-08 the Executive Committee met 19 times.

35. Audit Committee of the Board

Audit Committee has been constituted to provide direction as also to oversee the operation of the total audit function in the Bank.  It reviews inter-alia the inspection reports of specialized and extra large branches and all branches with unsatisfactory ratings.

The committee meets at least once a quarter. During FY08 it met 6 times.  

36. Special Sub-committee of the Directors for monitoring Large-value frauds:

The Committee was constituted pursuant to Reserve Bank of India directives vide their letter No. DBS.FGV(F) No. 1004/23.04.01/2003-04 dated 14^th January 2004 approved by the Bank’s Board at its meeting held on 24^th March 2004 to monitor and review each fraud of Rs1 crore or more .

37. Directors Committee

This Committee reviews disposal of vigilance / disciplinary cases and departmental enquiries. During the year 2007-08, the committee has met 3 times.

38. Risk Management Committee of Board

To assist the Board in overseeing the implementation of integrated risk management systems in the Bank, Risk Management Committee of the Board of Directors (RMCB) was constituted in June 2004 and has been functioning effectively. Various risk management committees like Credit Risk Management Committee (CRMC), Asset Liability Management Committee (ALCO) and Operational Risk Management Committee (ORMC) comprising the Top Management and other senior functionaries act as reserves. During the year 2007-08, the committee has met 5 times.

39. Customer Service Committee of the Board:    

The CSCB   was constituted in our bank on 14^th January 2004 as per RBI directives. The committee under the Chairmanship of Managing Director oversees the implementation of customer services guidelines and the effectiveness of the bank’s mechanism for Redressal of customer grievances. Bank conducted 4 quarterly meetings during the current year as per periodicity.

40. Shareholders/Investors Grievance Committee   

State Bank of India holds the entire equity of the Bank. During the year the Bank had raised capital fund aggregating Rs.1,010 crore through various designated instruments. These bonds have been listed in Mumbai stock exchange. As applicable to all listed companies the Bank has adopted clause 49 of the listing agreement. The revised clause had been approved for implementation by the Bank’s Board.

41. Disclosures                        

Disclosures on materially significant related party transactions i.e. transactions of the Bank of material nature with its promoters, the directors or the management, their subsidiaries or relatives etc. that may have potential conflict with interest of the Bank at large:  NIL.

Details of non-compliance by the Bank, penalties, and strictures imposed on the Bank by Stock Exchanges or SEBI or any statutory authority on any matter related to capital markets during the last three years: NIL

Position of payment of listing fee to all the Stock Exchanges where the Bank is listed:  Paid up to 31.03.2008 and the bonds are listed as on 31.03.2008.

42. Means of Communication                                          

Half yearly report sent to each household of shareholders:  NA.

Publication of quarterly results in newspapers & website: Yes

Whether it also displays in official news releases: Yes

The presentations made to institutional investors or to the analysts: None

Whether Management Discussion & Analysis is a part of the Annual Report or not and given under the Director’s Report in the Annual Report:  Yes

43. STATUTORY AUDIT:           

State Bank of India, with the approval of the Reserve Bank of India, had appointed M/s Neeth & Co. Hyderabad along with existing firms M/s Doogar & Associates, New Delhi, M/s. Kapoor Tandon & Co., Kanpur, Dinesh Mehta & Co., New Delhi and of M/s Sreedhar Suresh & Raja Gopalan, Chennai as statutory central auditors for the accounting year ended 31^st March, 2008.  915 Branches were subjected to statutory audit as against 879 branches during the previous year.

The Board of Directors records its appreciation for the excellent support and co-operation extended by the statutory auditors for completion of the audit well in time and for the enriching feedback offered by them.

44. ACKNOWLEDGEMENTS:

The Board wishes to place on record its appreciation for the patronage and support extended by the Bank’s esteemed customers and for the support and co-operation extended and contribution made by all the members of the staff. The Board also wishes to record its appreciation for the contribution made by Staff Union and Officers’ Association.  The Board is also grateful for the considerable support and guidance being continuously extended to the Bank by Reserve Bank of India and various Government agencies.