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Directors Report of State Bank of Travancore

Mar 31, 2015

During the course of the fnancial year 2014-15, the following changes have occurred in the Board of Directors of the Bank.

1. Shri. M.C Jacob and Shri Sajen Peter were elected as Shareholder Directors of the Bank with efect from 29th April 2014.

2. Shri. S Vishvanathan, Managing Director & Group Executive (A&S), Director under clause (c) of sub-section

(1) of Section 25 of the State Bank of India (Subsidiary Banks) Act, 1959 upon superannuation, tendered his resignation on 1st May 2014, from the Board of Directors.

3. Shri. Rajeev Nandan Mehra, Director under clause (c) of sub-section (1) of Section 25 of the State Bank of India (Subsidiary Banks) Act, 1959 upon superannuation, tendered his resignation on 1st May 2014, from the Board of Directors.

4. Shri. B Ramesh Babu, Chief General Manager (A&S), State Bank of India, was appointed as Director, under Clause (c) of sub-section (1) of Section 25 of the State Bank of India (Subsidiary Banks) Act 1959 with efect from 5th May 2014.

5. Shri. Ramesh Chandra Srivastava, General Manager (A&S), State Bank of India, was appointed as Director under Clause (c) of sub-section (1) of Section 25 of the State Bank of India (Subsidiary Banks) Act 1959 with efect from 17th July 2014 in place of Shri Purna Chandra Jena.

6. Shri. V.G Kannan, Managing Director & Group Executive (A&S), was appointed as Director, under Clause (c) of sub-section (1) of Section 25 of the State Bank of India (Subsidiary Banks) Act 1959 with efect from 21st October 2014.

7. Shri. Ashok Kumar Singh, was appointed as Director under Clause (e) of sub-section (1) of Section 25 of the State Bank of India (Subsidiary Banks) Act 1959 with efect from 29th January 2015 in place of Shri Jitendar Kumar Mehan.

The Board of Directors welcomed Shri. V.G Kannan, Shri. B Ramesh Babu, Shri. Ramesh Chandra Srivastava, Shri. Ashok Kumar Singh, Shri. M.C Jacob and Shri. Sajen Peter, as Directors of the Bank.

The Board of Directors placed on record their appreciation and thanks for the valuable services rendered by Shri. S Vishvanathan, Shri. Rajeev Nandan Mehra, Shri. Purna Chandra Jena and Shri. Jitendar Kumar Mehan, during their tenure as Directors of the Bank.

15. Board and Executive Committee Meetings

During the year 2014-15, ten Meetings of the Board of Directors were held. The Executive Committee of the Board of Directors met 14 times.

16. Statutory Audit

M/s Kumar Vijay Gupta & Co., New Delhi, M/s G.Venugopal Kamath & Co. Kochi, M/s Gopalaiyer and Subramanian, Coimbatore, M/s.Babu A Kallivayalil & Co. Kochi, were appointed as Statutory Auditors of the Bank for the year 2014-15 by State Bank of India, with the approval of Reserve Bank of India. The Board of Directors sincerely appreciates the valuable suggestions ofered and the excellent support and cooperation extended by the Statutory Central Auditors for the completion of the audit well in time.

17. Acknowledgments

The Board of Directors gratefully acknowledge the valuable advice and support extended by the Ministry of Finance, Government of India, Reserve Bank of India, Indian Banks'' Association, State Bank of India and the cooperation and support extended by the Securities and Exchange Board of India, Financial Institutions, Stock Exchanges and Correspondents.

The Board also wishes to place on record its sincere

appreciation for the excellent support, goodwill and patronage received from the esteemed customers and shareholders, the support and cooperation extended and contributions made by the members of staf- award and supervising. The Board also places on record its appreciation for the contributions made by the Employees'' Union and Ofcers'' Association.

By Order of the Board, Jeevandas Narayan Managing Director


Mar 31, 2014

The Bank''s Performance

Net Profit for the year stood at Rs.304.34 crore as compared to T615.04 crore for the previous year 2012-13, showing a decline of 50.52% over last year. The Operating Profit (after Staff Provisions) for the year ended 31st March, 2014 stood at Rs.1369.69 crore as compared to Rs.1351.00 crore recorded for the year ended 31st March, 2013.

The capital adequacy ratio under Basel II stood at 11.52% as on March 31st, 2014 as compared to 11.70% as on March 31st, 2013 against a minimum of 9% stipulated by RBI. The Capital Adequacy Ratio under Basel III improved from 10.74% as on 1st April, 2013 to 10.79% as on 31 st March, 2014.

Bank''s aggregate deposits showed a growth of 5.54 % and stood at Rs.88,707 crore as on 31st March, 2014 compared to Rs.84,047 crore in the previous year. The share of Personal Segment Deposits was Rs.62,246.92 crore which constituted 70.17% of Aggregate Deposit. In absolute terms, Personal Segment Deposits has grown by Rs.9,656 crore Y-o-Y.

Total Deposits of the Bank (including Inter Bank Deposits) stood at Rs.89,337 crore as on 31 st March, 2014 from the level of Rs.84,624 crore as on 31 st March, 2013.

The Gross Advances of the Bank stood at Rs.70,782 crore as at the end of 31 st March, 2014 as against Rs.68,389 crore a year ago, registering a growth of 3.50%. The subdued growth Is mainly due to sluggish credit off take coupled with macroeconomic condition. Further, focus was shifted from large corporate to retail lending. Personal segment advances grew by Rs.374 crore and reached a level of Rs.18,294 crore, whereas the C&l segment declined byRs.311 crore and reached a level ofRs.34,901 crore.

Retail lending atRs.3S381 crore constituted 50.69% of the Gross Advance as at the end of 31 st March, 2014.

The Credit Deposit Ratio of the Bank as on 31st March, 2014 was 7923% as against 79.75% a year ago.

The Bank''s gross business crossed Rupees One Lakh Sixty Thousand crore during FY 13 - 14. The total business of the Bank reached a level of Rs. 1,60,119 crore as on 31st March, 2014, from Rs.1,52,108 crore as on 31 st March, 2013. showing a growth of 5.27%.

The Bank continued to give special emphasis on lending to the priority sector in conformity with national policies, expectations and fulfillment of social objectives. Bank''s Gross Advances to the Priority sector increased from Rs.24378 crore as at the end on March 2013 to Rs.29,179 crore as at the end of March 2014 and constituted 42.26% of the Adjusted Net Bank Credit against the benchmark of 40%.

The Bank disbursed an amount of Rs.10,4Q8 crore under Agriculture segment as at the end of March 2014 against the Special Agricultural Credit Plan target of T7.20O crore. Agriculture segment showed a growth ofRs. 1,137 crore during the financial year 2013-14. Exposure to Agriculture segment reached a level of Rs.13,212 crore as on 31st March, 2014, which is 19.13% of ANBC, against a benchmark of 18%.

MSMEs play a major role in the country''s economic development. The Bank gives due Importance for the growth of this vital segment of the economy. Total lending to MSME sector as on 31st March, 2014 stood at 11,460.54 crore, registering a growth ofRs.2,230.31 crore over the previous year. The lending to Micro and Small Enterprises (MSEs) stood at Rs.7,774.10 crore which is 37.37% higher over the previous year level.

The Gross NPA level of the Bank as on 31st March, 2014 stood at Rs.3,077 crore and its percentage to Gross Advances stood at 4.35% compared to 2.56% as on 31.03.2013.The Net NPA level of the Bank as on 31st March, 2014 stood at 71,929 crore. The percentage of Net NPA was 2.78% in FY 13 -14 compared to 1.46% as at the end of the previous year.

Branch Network

The Bank opened 104 new branches during the year. As at the end of 31st March, 2014 the total number of branches touched 1117, and now is represented in 15 States and 3 Union Territories. It has 13 Extension Counters.

The number of branches in Kerala increased from 758 in March, 2013 to 820 as at the end of 31st March, 2014. A new Zonal office at Bengaluru was opened during the year. Seven Regional offices were opened at Thiruvalla, Kottarakara, Madurai, Thodupuzha, Hyderabad, Pala & Malappuram during the year for better operational control and faster credit dispensation.

Dividend

The Bank declared a dividend of 72.50 per share (25%) for the year to the shareholders, entailing a total pay-out of 712.50 crore. The dividend Pay-out Ratio for the year 2013-14 works out to 4.11% of the Net Profit.

Market Share

The Bank''s market share in ASCB Deposits was 1.16% as on 21 st March, 2014 as compared to 1.22% as on 22nd March, 2013. The market share in Advances has come down from 1.25% as on 22nd March, 2013 to 1,16% as on 21st March, 2014. The Bank''s All India Market share in total business as on 21st March, 2014stoodat1.16%. (Source: RBI)

The Bank continued to maintain its position as the premier Bank in Kerala with a market share of 21.32% in business among all Commercial Banks (as at the end of December 2013) with a 14.06% of the total branch network. In respect of NRI deposits, our market share in the State is 24.24%. (Source SLBC, KERALA)

Business Initiatives

The Bank opened 3 specialised MSME Branches at Kollam, Kozhikode and Palakkad during the financial year 13 - 14, taking the total number of specialized MSME branches to 8 (eight).

In order to provide personalized service to the NRI Customers, Bank has opened NRI specialized Branches at Mumbai, Kottayam and Kollam during the current year taking the total of such branches to eleven. Two more Relationship Managers have been deputed to the gulf countries during the year to strengthen Bank''s International presence taking the total number of Relationship Managers posted abroad to Nine.

Rupee drawing arrangements were established with five more Exchange Houses in the Gulf countries during the year, taking the total number of such arrangements to 43.

Another major initiative during FY 13 -14 was the arrangement for a fully automated payment of salary and pension for 80,000 KSRTC employees.

In order to provide one-stop service to customers, the Bank introduced a 3-in-1 account for securities transactions. In this regard Tie-up arrangement with SBICAP Securities Ltd, (SSL) was put in place to enable the customers for opening of Demat and Trading accounts.

With the objective of improving the market share in Corporate segment and enhancing the business mix to global standards, Bank established a separate network called "Commercial Business Network°(CBNW). The core idea behind the formation of CBNW is to cater to the banking needs of Mid Corporate, emerging Business Groups and large SMEs which contribute to the Bank''s asset portfolio. Now, CBNW has in its fold, 13 branches across the country and it is proposed to add more branches during 2014-15.

Development Banking

The Marketing Department of the Bank continues to play its role in facilitating customer acquisition, retention and broadening of the Bank''s customer base by conducting segment centric marketing drives.

Financial Inclusion is delivery of banking services at an affordable cost to the vast sections of the disadvantaged and low-income groups. The Bank opened over 25.56 Lac No-frills accounts (Janapriya accounts). 90% of these accounts were opened in the State of Kerala. Joint Liability Group (JLG) schemes, Biometric Smart Card Project, General Credit Cards to the Janapriya Account Holders are other initiatives in this direction,

The Bank has formulated a Financial Inclusion Plan, which has been rolled out during 2013-14 and ail Fl villages allotted to the Bank have been covered in the State of Kerala. This plan for Financial Inclusion will bean integral part of the business plan of the Bank.

The Bank continues to give due importance in extending financial assistance to meet the credit requirements of the Scheduled Caste (SC)/Scheduled Tribe (ST) customers. A credit Cell is functioning at Head Office under the control of Deputy General Manager (MSME) for monitoring flow of credit to SC/ ST. Advances to SC and ST borrowers under priority sector, aggregated to Rs.4,038 crore constituting 13.84% of priority sector lending.

The Bank continues to give due importance in extending financial assistance to meet the credit requirements of the Minority Communities, Advances to Minority Communities stood at X9.692 crore as on 31.03.14, as against Rs.8,536 crore as on 31.03.2013, constituting 3321% of the Bank''s priority sector lending.

The Bank actively encouraged lending to women entrepreneurs. Total lending to women entrepreneurs stood at Rs.8,625.32 crore covering 7,69351 borrowers. The exposure constitutes 12.49% of ANBC.

As a member of the Aadhaar Payments Bridge System (APBS) and National Automated Clearing House (NACH) of the National Payments Corporation of India (NPC), Bank started processing of files received from NPCI. Bank a so processed files received through CPSMS (Central Plan Scheme Monitoring System) of the Controller General of Accounts. Both these channels are meant for payment of Government Direct Benefits Transfer (DBT) to the beneficiaries.

As on 31/03/2014 Bank has processed 35,13,357 records un- der NACH amounting Rs.217,39,86,410/- and 1,04336 records amounting to Rs.22,67,04,863/- under CPSMS. From July 2013, Bank started processing ECS files from NPCI also.

Technology Initiatives

The Bank has a network of 1352 ATMs. The Bank''s ATM cum Debit cards are accepted in all outlets having Master Card / Visa logo. Several facilities such as Visa Money Transfer (VMT), Money Send, SBI Credit Card payment, SBI Life Premium payment, Mobile recharge, Donations, Fee payment, JMET / GATE Application Fee payment. Mobile Banking registration, Cheque Book order have also been enabled in the ATMs.

The Bank''s highly secure Internet Banking platform supported by encryption offers utmost security to Internet Banking customers against phishing / hacking threats and provides Intra-Bank / Inter-Bank funds transfer facility up to a limit of Rs.500 crore per transaction. 1,55,527 new registrations were activated during the FY 13 - 14, showing a growth of 27.71% over previous year.

Mobile Banking provides customers with another safe, secure, fast and convenient channel for banking transactions. The services provided includes enquiry services, fund transfer, Interbank Mobile Payment System (IMPS), Demat account services, bill payment, mobile top-up, DTH recharge,

M-commerce etc. The daily limit for Mobile Banking services (MBS) transaction is Rs.50,000/- for aggregate of funds transfer & transactions involving purchase of goods & services, within an overall calendar month limit of Rs.2,50,000/-. A more advanced fund transfer channel, P2A, was added to the existing IMPS payment services enhancing the ease and convenience of the Mobile Banking facility. The new channel provides 24 x 7 instant-payment facility to any IMPS member Bank.

All the branches of the Bank are enabled for RTGS/GRPT/ NEFT remittances. The total number of outward electronic remittances for the year ended 31.03.2014 was 63,74,055 registering an increase of 32% over the previous year. While growth in number of RTGS transactions had remained at the same level of 14% recorded in the previous year, number of GRPT outward transactions increased by 50% in the current year. NEFT transactions registered an increase of 50% over the last year level. RTGS application was moved over to an upgraded versions complying with ISO 20022 messaging protocol with effect from October 2013. In order to improve customer service, one more settlement batch was started for NEFT transactions at 8.00 AM during the year.

Customer Service

Customer service in the Bank is accorded top priority and every endeavour is made to improve the quality of service to the customers and redress their grievances.

A well defined and full-fledged Customer Grievances Redressal Mechanism is put in place in the Bank. An official of the rank of Deputy General Manager is placed as head of the Customer Service Department to give greater focus on redressal of complaints.

Bank has provided a facility (SMS SBT CARE) to the customers whereby they can send a message from anywhere by SMS to 56363 or give a missed call to 9847198471 from their mobile, The customer is contacted by the officials of the Bank and the complaints are taken up for redressal on priority.

Bank has also established a call centre with toll free number: 1800 425 5566 which enables the customers and general public to seek clarification on Bank''s products and service.

Corporate Social Responsibility (CSR)

Bank, under Corporate Social Responsibility initiatives has extended a wide range of social activities both in rural and urban areas to serve the community at large. The major CSR initiatives under taken by the Bank during the year areas under:

Medical equipment like BP apparatus, glucometer kit to Life Style Disease Clinic managed by Malabar Cancer Society, Kannur -YuvaVimukthi Project.

Donation of ceiling fans and water purifiers to needy schools all over India.

Installation of solar lighting panels at school building, provision of books, stationery items, bags and laboratory equipments to the students at Shanti Bhavan Educational Trust-Residential School, Hosur.

Donation of Ambulance to Deena Daya Seva Trust, Thodupuzha.

Reimbursed the full treatment and food expenses of identified deserving patients at Regional Cancer Centre Thiruvananthapuram, for one day.

Donation of EEG machine to Vivekananda Medical Mission Hospital, Attapady.

Provision of mid-day meal to 12,000 students in 52 institutions in Central Kerala.

Reimbursed full expenses of poor cancer patients for two days at Malabar Cancer Centre, Thalassery.

Internal Control Systems & Supervision

The Integrated Risk Management facilitates the Bank to have a holistic view of the risk management. Modular structure under Integrated Risk Management has various divisions focused on management of a specific risk - Asset Liability, Market Risk, Credit Risk, Operational Risk, and Information Systems Security. The risk management architecture of the Bank consists of the Board of Directors at the top having overall responsibility to implement Risk Management Systems in the Bank.

Asset Liability Management (ALM) system has been implemented in the Bank, since April 1, 1999, as per the Reserve Bank of India guidelines on ALM and Liquidity Risk Management As per the Bank''s ALM Policy, the Asset Liability Management Committee (ALCO) is authorised to evolve appropriate systems and procedures for ongoing identification and analysis of liquidity and market risks and to prescribe parameters for efficient management of these risks. The ALCO headed by Managing Director meets regularly to review and monitor the same.

Market Risk is largely managed through adherence to various policies, in the conduct of the investment and trading activities along with adherence to various risk limits like position limits, stop loss limits, Value at Risk (VaR), Management Action

Trigger (MAT) and Cut Loss Triggers (CLT) etc through constant monitoring of the risk positions. The policies are reviewed periodically keeping in view regulatory changes, business requirements and market developments.

For Credit Risk management, the Bank has a structured and standardised credit approval process which includes comprehensive credit rating of proposals. For retail loans, Bank uses a risk scoring model. Bank has in place various exposure limits - for single borrower, group of borrowers, specific sectors, industries - as per regulatory requirement and as per its internal policies. Bank takes up regular reviews of its various loan portfolios to assess the risk profile and initiates proactive measures.

The Bank is estimating capital charges for Operational Risk under Basic Indicator Approach. Other risk prone operational areas of the Bank''s business are monitored and proactive actions for improvement are initiated in consultation with other departments like Inspection, Systems & Procedure, Frauds Prevention, and Monitoring & Recovery etc.

Apart from the above, Bank has put in place an effective institutional mechanism for Risk Based Supervision (RBS) through RBS Cell in the Inspection Department. As envisaged by the Regulator, the Bank introduced Risk Focused Internal Audit (RFIA) under RBS with effect from 1st April, 2003. Based on the guidelines on Internal Audit issued by Government of India, Bank''s Inspection & Audit Policy has been suitably modified. The Bank has also incorporated the RBI guidelines on Information System Audit in the IS Audit Policy.

Preventive Vigilance

Due to initiation of Preventive Vigilance mechanism through various measures, such as Surprise Inspections, Branch visits, circulars, vigilance awareness meetings etc, Bank could inculcate a sense of positive approach towards compliances from vigilance angle among all the functionaries including adherence to systems and procedures.

Leveraging technology in vigilance administration has been given priority. The technology initiatives introduced during the year includes E-WR checking, E-tendering software solutions and Biometric access to CBS.

A programme on positive vigilance in Contracts and Procurements was conducted in May 2013 for the benefit of officers handling various contracts and procurements in the Bank. At the request of CBI a training programme for inspecting officials of the CBI was conducted by the Department at Thiruvananthapuram from 2/09/2013 to 6/09/2013.

"A Whistle Blow of Policy" was introduced by the anti corruption initiative and also to detect and prevent unfair practices wherever reported. The complaints received under the policy were studied and investigations were conducted. The details of Whistle Blower are kept confidential.

Human Resources

As on 31-03-2014, the Bank had on its rolls 14,491 members of staff, comprising 5,094 officers, 7,005 clerical and cash department staff and 2,392 subordinate staff inclusive of 643 Maintenance Staff. The number of women employees and ex-service personnel constituted 5,864 and 1,665 respectively of the total work force. Out of the women employees, 1,557 are officers, 3,521 are non-subordinate staff and 786 are subordinate staff. The Bank has also on its rolls 231 persons with disability. During the year, 2,761 staff were recruited (116 in the officers'' cad re, 2,210 in Non - subordinate and 435 in the subordinate cadre).

Business per employee stood at Rs.1156 crore as at the end of March 2014 as against Rs.12.59 crore for the same period a year ago. Net Profit per employee is Rs.2.20 lac as on March 2014 compared to Rs.5.06 lac for the year ended March 2013.

Bank has formulated a scheme to recognize and motivate high achievers amongst branches by awarding the honor of MD''s Club, CGM''s Club and GM''s Club membership to top performing branches.

Changes in the Board of Directors

During the course of the financial year 2013-14, the following changes have occurred in the Board of Directors of the Bank,

1. Shri P Nanda Kumaran, Managing Director State Bank of Travancore, upon superannuation on 31st May, 2013 tendered his resignation from the Board of Directors.

2. Shri S Vishvanathan, Managing Director & Group Executive (A&S) appointed as Director under clause (c) of sub-section (1) of Section 25 of the State Bank of India (Subsidiary Banks) Act, 1959 with effect from 17th July, 2013.

3. The tenure of Shri K Muraleedharan Pillai, Director ended on 18th July, 2013.

4. Shri P V Prasad, Special Assistant, State Bank of Travancore, NRI Thiruvalla Branch, appointed as Workmen Employee Director under Clause (ca) of sub-section (1) of Section 25 of the State Bank of India (Subsidiary Banks) Act 1959 with effect from 19th July, 2013 in place of Shri K Muraleedharan Pillai, Director.

5. Shri Pratip Chaudhuri, Chairman State Bank of India, under Clause (a) of sub-section (1) of Section 25 of the State Bank of India (Subsidiary Banks) Act 1959 upon superannuation on 30th September, 2013 tendered his resignation from the Board of Directors.

6. Shri C Rajkumar, Chief Manager State Bank of Travancore was reappointed as Director under Clause (cb) of sub-section (1) of Section 25 of the State Bank of India (Subsidiary Banks) Act 1959 with effect from 1st October, 2013.

7. Smt Arundhati Bhattacharya became a Director and Chairman of the Board of Directors of the Bank under Clause (a) of sub-section (1) of Section 25 of the State Bank of India (Subsidiary Banks) Act 1959 with effect from 7th October, 2013.

8. Shri V Kaliappan, became a Director under Clause(c)of sub-section (1) of Section 25 of the State Bank of India (Subsidiary Banks) Act 1959, from 11th November, 2013.

9. Shri Pradip Kumar Sanyal, General Manager (A&S), 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 tendered his resignation from the Board of Directors of the Bank with effect from 20th November, 2013

10. Shri Purna Chandra Jena, General Manager (A&S), State Bank of India was appointed as Director under Clause (c) of sub-section (1) of Section 25 of the State Bank of India (Subsidiary Banks) Act 1959 with effect from 26th November, 2013 in place of Shri Pradip Kumar Sanyal.

11. Shri Jeevandas Narayan, appointed as Managing Director from 10th January, 2014, became a Director on the Board of Directors in terms of section 25(1) (aa) of the State Bank of India (Subsidiary Banks) Act 1959.

12. The tenure of Shri C N Venugopalan, Director ended on 10th January, 2014.

13. The tenure of ShriT Balakrishnan and Shri KT Rajagopalan, Directors ended on 31st January, 2014.

The Board of Directors welcomed Smt Arundhati Bhattacharya, Shri S vishvanathan, Shri Jeevandas Narayan, Shri P V Prasad, Shri C Rajkumar, Shri V Kaliappan, Shri Purna Chandra Jena as Directors of the Bank.

The Board of Directors placed on record their appreciation and thanks for the valuable services rendered by Shri Pratip Chaudhuri, Shri P Nanda Kumaran, Shri Pradip Kumar Sanyal, Shri K Muraleedharan Pillai, Shri T Balakrishnan, Shri K T Rajagopalan and Shri C N Venugopalan during their tenure as Directors of the Bank.

Statutory Audit

M/s, Abraham &Jose, Thrissur, M/s, G,K Rao & Co,, Hyderabad, M/s R.G.N, Price & Co, Chennai, and M/s Kumar vljay Gupta & Co. New Delhi were appointed as Statutory Auditors of the Bank for the year 2013-14 by State Bank of India, with the approval of Reserve Bank of India. The Board of Directors sincerely appreciates the valuable suggestions offered and the excellent support and cooperation extended by the Statutory Central Auditors for the completion of the audit well in time,

Acknowledgments

The Board of Directors gratefully acknowledge the valuable advice and support extended by the Ministry of Finance,

Government of India, Reserve Bank of India, Indian Bank''s Association, State Bank of India and the cooperation and support extended By the Securities and Exchange Board of India, Financial Institutions, Stock Exchanges and Correspondents.

The Board also wishes to place on record its sincere appreciation for the excellent support, goodwill and patronage received from the esteemed customers and shareholders, the support and cooperation extended and contributions made by the members of staff - award and supervising. The Board also places on record its appreciation for the contributions made by the Employees'' Union and Officers'' Association.

By Order of the Board,

Jeevandas Narayan

Managing Director


Mar 31, 2012

1. The Bank's Operations and Performance

1.1 Total Business

The gross business of the Bank crossed the milestone of Rupees One Lakh Twenty Five Thousand crore. The total business of the Bank stood at Rs.1,26,816 crore as on 31st March 2012, registering a growth of 21.70% from the level of Rs. 1,04,202 crore as on 31st March 2011.

1.2 Working Results and Operating Profit

Operating profit (after staff provisions) of the Bank for 2011-12 went up by 6.19 % to Rs. 1248.80 crore from Rs. 1,175.97 crore for the previous year. Net Profit for the year stood at Rs.510.46 crore as compared to Rs. 727.73 crore in 2010-11. The Earnings per share (of Rs.10 face value) stood at Rs.102.09 compared to Rs.145.55 at the end of the previous year.

The Net Interest Income increased by 7.92 % from Rs.1,696.03 crore in FY 10-11 to Rs. 1830.37 crore in FY 11-12. Net Interest Margin stood at 2.66%.

1.3 Dividend

The Bank declared a dividend of Rs.18 per share (180%) for the year to the shareholders, entailing a total pay out of Rs. 90 crore Of this, an interim dividend of Rs.16 per share (160%) was paid out in April 2012. The Dividend Pay-out Ratio works out to 17.73 % of the Net Profit.

1.4 Capital Augmentation & Capital Adequacy

The Bank's capital funds improved from Rs. 4,881.08 crore as at the end of March 2011 to Rs. 5,867.09 crore as at the end of March 2012. The capital adequacy Ratio under Basel II stood at 13.55% in March 12 as compared to 12.54% in March 11 against a minimum of 9% stipulated by RBI. The Tier-I CRAR on this date is 9.35% as against 9.00% as at the end of the previous year. The Bank's Board of Directors had approved a Rights Issue of shares to the shareholders for an amount of Rs.500 crore. The approvals from the RBI and State Bank of India for the issue have been received. The capital augmentation will serve to improve the Capital adequacy ratio of the Bank in 2012-13.

1.5 Deposits

Aggregate Deposits of the Bank registered a growth of 23%, reaching the level of Rs.70,965 crore as on 31st March 2012 as against Rs. 57,599 crore as on 31st March 2011. Personal Deposits, which contribute the bulk of the resources, grew by Rs.9,281 crore to reach Rs.45,378 crore. NRI Deposits recorded improved performance compared to the previous year, grew by Rs 3,747 crore, surpassed the annual budgeted growth and stood at Rs.15,309 crore as on 31st March 2012. NRI Deposits constituted 22 % of the Aggregate Deposits of the Bank as on 31st March 2012. Total Deposits of the Bank [including Inter Bank Deposits] moved up to Rs. 71,470 crore as on 31st March 2012 from Rs. 58,158 crore as on 31st March 2011.

1.6 Advances

Advances of the Bank registered a growth of 20.20% during the year and reached a level of Rs. 55,346 crore as on 31st March 2012 as against Rs. 46,044 crore as on 31st March 2011. The main contributions came from the C&I segment [growth of Rs.6,266 crore] and Agriculture segment [growth of Rs.3,322 crore]. The Bank's Retail lending stood at Rs.26,353 crore and constituted 47% of Gross Advances as at the end of March 2012. The Credit Deposit Ratio of the Bank stood at 77.44% as on 31st March 2012 as against 79.17% as on 31st March 2011.

1.7 Market Share

Bank's All India market share in Deposits has improved from 1. 10% on 25 th March 2011 to 1.16% on 3 0th March 2012. The market share in Advances has improved from 1.16% to 1.18% during the same period. However, the market share in Advance would be 1.22% when including the Rs.2,000 crore of Inter Bank Participation Certificate (IBPC) issued by the Bank during the year. The Bank continued to maintain its position as the premier bank in Kerala with a market share in business of 23.78% as at September 2011 [the latest date up to which data has been released by RBI] with 16.11% of the total branch network in the state.

1.8 Priority Sector Lending

The Bank continued to give special emphasis on lending to the Priority Sector in conformity with the national policies, expectations and fulfillment of social objectives. Bank's gross Advances to the Priority Sector increased from Rs. 17,353 crore as at the end of March 2011 to Rs.20,287 crore as at the end of March 2012, and constituted 43.64% of the Adjusted Net Bank Credit against the benchmark of 40%.

1.9 Agricultural and Rural Finance &

Self Help Groups

The Bank's performance under Agriculture segment is remarkable during the year under review. Bank was able to achieve the bench mark of 18%, stipulated. Bank has disbursed an amount of Rs. 9,639 crore under agriculture segment as at the end of March 2012 against the Special Agricultural Credit Plan target of Rs. 5,000 crore. The level of lending to agriculture sector stood at Rs.8,902 crore as on 31st March 2012. Agric segment showed a positive growth of Rs. 3,322 crore as at the end of the financial year 2011-12, compared to a growth of Rs.2,280 crore during the same period last year. The share of Agricultural Advances to Adjusted Net Bank Credit [ANBC] improved to 19.15 % from 14.17% as at the end of previous year.

During the current fiscal 16,197 Kisan Credit Cards (Working capital facility to farmers) and 2,950 Kisan Gold Cards (Investment credit to farmers) were issued with an outlay of funds of Rs.192 crore and Rs.127 crore respectively. A campaign was conducted from 1st September 2011 up to 15th January 2012 for coverage of all eligible farmers under Kisan Credit Card.

The Bank had conducted an intensive agriculture lending campaign called "SBT- Haritotsavam-2011" during the period 20th June to 20th October 2011 with a lending target of Rs.2,000 crore to cover 2,50,000 farmers.

The amount disbursed during the period was Rs.2,780 crore benefiting 3,29,000 farmers. 12 episodes of 'SBT Vayalum Veedum' - (Farm and Home) - was broadcasted through All India Radio as publicity to the campaign. The program me, wholeheartedly received by the general public, was intended to give awareness on Bank's various agricultural schemes and the procedures for availing them.

Bank has sponsored 222 Farmers Club, including the three new Clubs formed during the year. At the Farmers' Club meetings, issues faced by the farmers were brought to the notice of the Bank and other Agencies working in the field and necessary solutions suggested. Farmers' Meets with Agricultural Seminars, 'Karshaka Mela' etc. were conducted at various centers to give wide publicity of schemes available to farmers. A special brochure on agricultural schemes in local languages was printed and supplied to the branches for the benefit of farmers. Advertisements were given in leading newspapers and magazines highlighting our various schemes. Farmers' Day was observed and celebrated throughout the branches in Kerala on 17th August 2011 (1st day of 'Chingam'), associated with Krishi Bhavans, Animal Husbandry Department etc. Best farmers were felicitated and agricultural loans distributed at the function."Onattukara Sangamam" with agricultural exhibition and seminars were organized by the branches in and around Mavelikara area (previously known as 'Onattukara').

Schemes for food processing and agro based industries (with investment in plant and machinery upto Rs.10 crore) was introduced at special reduced rate of interest, covering a wide variety of activities like manufacturing and processing of food products including rice mills, cotton mills etc. Centrally sponsored subsidy linked scheme for rearing sheep, goats and rabbits were also introduced. Schemes for Dairy Entrepreneurship Development and poultry farming with NABARD subsidy were marketed vigorously.

Micro Credit / Self Help Groups: Bank continued to be active in assisting Self Help Groups (SHGs) and financing them through Micro Financing Institutions (MFIs) and Non-Government Organizations (NGOs). 88,273 SHGs were assisted up to March 2012 with a financial outlay of Rs. 738 crore. The Bank disbursed loans aggregating to Rs. 82 crore to 3,486 SHGs during the year.

1.10 Lending to Micro, Small and Medium Enterprises (MSMEs)

MSMEs play a major role in the country's economic development. The Bank gives due importance for the growth of this vital segment of the economy.

The total lending to MSME sector recorded a growth of 6.59% over previous year to touch Rs.9,047 crore. The lending to Micro & Small Enterprises [MSEs] stood at Rs.5,476 crore which is 8.19% higher over the previous year level.

The growth in this sector was fuelled by an intensive MSME lending campaign conducted from 1st September 2011 to 31st March 2012. Against a target of Rs.750 crore under MSME segment the total loan disbursement during the campaign period was Rs. 727.86 crore covering 5,873 Accounts.

Road Transport Operators (RTO) is an important sub segment under service enterprise. The relaxation in security norms and reduction in interest rate have contributed steady growth under this vital segment. Outstanding under RTO segment as on March 2012 is Rs. 464 crore comprising 7847 accounts.

The Bank is a Member Lending Institution of CGTMSE which provides guarantee cover to collateral free loans. A book on CGTMSE Scheme was published for the benefit of the operating officials. Awareness programmers'/ workshops / seminars on the scheme were conducted in all Regional Offices of the Bank and other important centers for operating staff. Meetings of entrepreneurs were also conducted to educate them about the scheme. 12,891 loan accounts amounting to Rs. 420.09 crore have been extended under the scheme.

1.11 Commercial & Institutional Finance

The Bank performed well under the segment by tapping the potential in the market and C&I advance of the Bank reached Rs. 29,682 crore as on 31st March 2012 with a growth of 26.76% over March 2011. This segment contributes more than 52.97 % of Bank's total advances, which comprises financing Trade and Services, Industry, Infrastructure, financing corporate customers and other institutions.

Commercial Net-Work (CNW) Branch System was introduced in the Bank for giving focused attention to select branches to achieve substantial growth in large value advances. Commercial branches at Bangalore, Chennai, Ernakulum and New Delhi and Corporate Finance Branch Mumbai were brought under the system. The 5 CNW branches put together have a business level of Rs.17,000 crore. CNW branches' Credit portfolio is Rs.14,870 crore which is about 25% of the Bank's total advances. They also handle Non Fund Based advances of Rs.2,528 crore.

With the objective of improving the market share in the Corporate segment and enhancing business mix to global standards, Bank has established a separate module called "Commercial Business Group" (CBG), in line with the Commercial Net-Work branches. The CBG concept came into existence with effect from 01st November 2011.

The core idea behind the formation of CBG module is to cater to the banking needs of Corporate customers, Emerging Business Groups and Mid Corporate and also large SME/SSI & Agri clients which will contribute for the bank's asset size to a great extent. To begin with, 11 potential branches across the country were brought under the CBG module: Kolkata Main Branch, R.K.Puram Branch-New Delhi, Indore Branch, Nagpur Main Branch, Ahmadabad Branch, Bangalore City Branch, Hyderabad Branch, Secunderabad Branch, Mount Road Branch-Chennai, Tirupur Branch and Coimbatore Main Branch. More branches will be brought under the CBG module.

At present, CBG branches contribute about 7% of the banks business as a whole and have much more potential to contribute further with the new concept under the specialized network. The CBG network is expected to achieve the desired objectives in the coming years and will become a flag-ship segment of the Bank in future.

Bank has a Project Finance Unit (PFU) at Head Office. The PFU was formed in the Bank to develop project appraisal skills in-house and to avoid good business proposals go past the Bank for want of Techno Economic Viability (TEV) study. PFU undertake technical and financial appraisal of small and medium sized projects, which have not been vetted by agencies of national/ international repute. The Technical Consultancy Cell (TCC) attached to the Micro Small and Medium Enterprises Business Department at Bank's Head Office also got merged with the PFU. Apart from conducting viability studies, PFU is exploring the avenues for preparation of Information Memorandum and Debt Syndication also to supplement Bank's income. PFU conducted TEV study on 23 projects and earned an income of Rs.25 lakh as 'study charge' during 2011-12.

1.12 Personal Finance

The Bank continued to be active in extending finance to Personal Segment, mainly by way of Housing Loans, Car Loans and Education Loans. The personal segment advances have gone up to Rs. 15,320 crore (including IBPC of Rs. 2,000 crore) as at March 2012 from Rs. 14,345 crore (including IBPC of Rs.1,000 crore) as at the end of the previous year, recording a growth of 6.80 %. As many as 14,652 Housing Loans aggregating to Rs. 1,750 crore were extended during the year, taking the outstanding Housing Loan level to Rs. 8,022 crore as on 31st March 2012. Similarly, 10,141 Car Loans aggregating to Rs. 392 crore were extended during the same period, taking the outstanding car loan level to Rs.1,271 crore.

As in the previous years, the Bank continued to support the growing generation to pursue higher studies by extending Education Loans under Gyan Jyothi Scheme. During the year under report, Bank sanctioned 11,836 Education Loans amounting to Rs. 342 crore. The total amount outstanding under this head stood at Rs. 2,263 crore.

1.13 Treasury Operations

The Gross Investments of the Bank stood at Rs. 22,473 crore as on 31st March 2012 as against Rs 17,956 crore as on 31st March 2011 and the average investments during 2011-12 was Rs. 21,155 crore as against Rs. 18,188 crore during 2010-11.The revenue from investment operations (interest and dividend) for the year was Rs. 1,379 crore as against Rs. 1,147.00 crore for the previous year. The average yield on investments was at 7.06 % during the year as compared to 6.82 % during the year ended 31st March 2011. The Bank earned a profit of Rs. 134 crore from Treasury Operations during the period under report.

1.14 International Banking

Bank's total Force turn-over during the year for merchant transactions was Rs. 26,830 crore compared to Rs. 16,746 crore during the previous year. Inter bank turnover was higher at Rs 8,89,498 crore as against Rs 4,34,520 crore during the previous year. The total profit from Forex operations during the year was Rs. 42.49 crore as against Rs. 40.29 crore as on 31 st March 2011. The export finance extended by the Bank stood at Rs.1,506 crore, which was 36.86 % higher over the level at the end of the previous year. Bank is a member in MCX-SX (Multi Commodity Exchange) for trading in Currency Futures and the total turnover in Currency Futures trading was Rs. 458 crore. During the year Forex Treasury of the Bank migrated to Core Banking platform and integrated its accounting applications with the other accounting packages used at the branches viz B@ncs24, Exim Bills and Finance-1. Bank implemented OFAC (Office of Foreign Asset Control) filter for all the outbound swift messages to United States and Nassau.

The Bank has drawing arrangements with 33 exchange houses in the Gulf at present, of which five arrangements have been concluded during the current financial year. 'Moneytrans E Remit', a state of the art, technologically advanced Speed Remittance Product developed in-house ensures speedy and safe remittance from the Gulf countries. 'Moneytrans E Remit' has been extended to 32 of the 33 Exchange houses with which the bank has drawing arrangements. Remittances through 'Moneytrans E Remit' (including credits through NEFT) numbered 49.22 lakh aggregating to Rs. 25,376 crore during 2011-12 as against 43.50 lakh and Rs 18,882 crore respectively during the previous year. The Bank continues to be the leading Bank in Kerala both in terms of number and volume of remittances. The Bank has launched the instant credit whereby remittances made through 'Money Trans E-Remit' will be credited instantaneously to the account of the beneficiaries with the Bank as and when uploaded by the Exchange Companies. This product has been well received by several exchange houses. Other products like Xpress Remit, an online remittance facility from US and UK and Viswa Yatra Foreign Travelers Card providing an alternative to carrying foreign currency while travelling abroad continue to be much favored by the public in general. To facilitate remittance in Foreign Currencies, Bank has opened 21 Nostro accounts in 13 major currencies with correspondent banks around the globe.

1.15 Cross Selling

The Bank has been constantly endeavoring to meet the requirements of its customers by making available Life, Non life insurance products as well as other non- banking investment products like Mutual Funds.

Bank's Cross Selling products include SBI Life Insurance Company's life Insurance products, United India Insurance Company's Non Life (General Insurance) products, SBIMF's Mutual Fund products and SBI Credit Cards which are being made available to the customers through the branch network. With auto debit facility in place, SIP mode of investment in Mutual Funds is becoming popular amongst the Bank's customers. The Bank also has tie up arrangements with UTI Mutual Fund, Sundaram Mutual Fund, Franklin Templeton and Tata Mutual fund houses whose products are available to customers through the branch network.

As against Rs.20.57 crore income earned during the year 2010-11, income from the Cross Selling business during the current year is Rs.11.83 crore.

SBI Life Insurance with a share of over 69.40% continues to be the major contributor to Cross Selling Income followed by General Insurance, Mutual Fund and SBI Cards at around 22.23%, 8.20% and 0.17% respectively.

Bank has a tie up with United India Insurance Company Limited for marketing its Non life products through our branch network. "Unisuraksha", a personal accidental Death and Total Permanent Disability cover, "Unhealthy", a Health plan (Medicaid) for resident account holders of the Bank and "NRI Care", a health cum accident plan for NRI customers of the Bank are some of the major non life products that are available for the customers of the Bank.

"Unisuraksha", the Personal Accidental Death and Total Permanent Disability cover has gained wide acceptance. During the year more than 3 7 families, most of them being poor and needy have benefited from these claims. Claims of Rs.5 lac in each of these cases were paid by the Insurance Company. Bank's Health plan 'Unihealth' a co branded product of the Bank and UIICO too is gaining popularity.

Among the Mutual fund products Systemic Investment Plans [SIPs], Fixed Maturity Plans [FMPs], debt and equity funds of SBIMF launched from time to time are also marketed through our branches. SBI Mutual Fund's Gold Fund too is gaining acceptance amongst the investing public.

SBI credit cards are also being sold to the Bank's customers through its branch network. Platinum Credit Cards for high value customers, Secure Cards, SBI Gift Cards and Vishwa Yatra Cards for overseas travelers are some of SBI Cards products being marketed by us. Auto debit facility for SBI Credit Cards is expected to be in place soon and this will give a boost to Credit Cards sourcing in the coming fiscal.

Bank as on date have 1054 Certified Insurance facilitators and over 848 AMFI qualified employees who form the Insurance and Mutual fund sales force of the Organization. Plans have been drawn out to increase these numbers substantially in 2012-13.

1.16 Sale of Gold Coins

The Bank has launched sale of gold coins through 35 select branches during this year. The bank has entered into an arrangement with State Bank of India for the procurement of Gold Coins in the denomination of 2,4,8,10,20,50 grms. The bank has sold 36 Kg of Gold coins during the year under review.

1.17 Opening of Gold Point Branches

As a strategic initiative, the Bank planned to open exclusive Gold Loan branches branded as "Gold Point" Branches in all the 14 District Head Quarters in the State of Kerala and one at Nagercoil in the State of Tamilnadu. The bank has opened 13 branches in Kerala and one in Nagercoil during last year.

The Gold Point branches are opened to focus on Gold loans. The Unique Selling Proposition (USP) of the branches is disbursal of the loans in "10" minutes. The branches have disbursed Rs.47.21 crore during last year. The Bank has planned to open Gold Kiosks in major branches to boost our market share in the Gold Loan business.

1.18 Asset Quality

The Bank continued to give special focus to improve the quality of Assets and containing NPAs. The Gross NPA level of the Bank as on 31st March 2012 is Rs 1,488.75 crore and its percentage to Gross Advances stood at 2.66 % compared to 1.80% of last year. The Net NPA level of the Bank as on 31st March 2012 stood at Rs 853.57 crore. The percentage of Net NPA is 1.54 % compared to 0.98% as at the end of the previous year.

Asset Tracking Centre (ATC): Asset Tracking Centre is a new initiative inaugurated by the Bank's Chairman on 28th May 2011 at Head Office for follow up of irregular accounts by tele calling the borrowers. Based on the good response, the same has been extended to all RASMECCCs, Zonal Offices and Regional Offices. So far 62,792 accounts were tracked and 8,767 accounts were regularized with a recovery of Rs. 27.67 crore.

System based classification of assets: Bank has moved on to system based identification and collation of Non Performing Assets.

Revival of viable sick industrial units through appropriate rehabilitation packages is an important strategy of the Bank. Rehabilitation/Restructuring packages are under implementation in respect of 34 units with a total exposure of Rs.331.13 crore. Of which 12 units are under CDR scheme with an exposure of Rs.213.86 crore and 22 units under BIFR scheme with exposure of Rs.117.27 crore.

1.19 Government Business

The Bank maintains its status as the Principal Banker to Government of Kerala with a market share of 70% of total Kerala State Government transactions. The Bank conducts State Government Business at 118 branches in the State of Kerala and 2 branches in Tamil Nadu. Bank has agreed to link 9 more Non-Banking Treasuries to our branches during the year. Bank has closed 3 unviable currency chests and at present have 115 currency chest branches in Kerala, 1 in Karnataka and 8 in Tamil Nadu. 196 branches of our Bank are authorized by CBDT for collection of direct taxes (136 branches in Kerala and 60 branches outside Kerala) and 148 branches are authorized by CBEC in Kerala for indirect taxes in physical mode. All branches are authorized for e-payment of direct and indirect taxes. The Bank has accounts of 341 Post Offices and the total turnover during the Financial Year is Rs. 4,981 crore. Several Post Offices are coming forward to open their accounts with the Bank as per the Government Policy for linking of Post Offices with the banks.

The E-payment facility launched by the Government of Kerala through our Bank for payment of Commercial Taxes is well received by the business community and the Bank has clocked a Turnover of Rs.7,925 crore for the year. E-payment for remittance of vehicle taxes and related fees has been introduced by the Bank in co- ordination with the Commissioner of Transport on a pilot basis in Kazhakuttom Sub-RTO and Thiruvananthapuram RTO Offices. The Bank also successfully launched online facility for remitting fees for various UPSC examinations.

The Bank has received Rs.64 crore of commission on account of Government business during the year under review as compared to Rs.54 crore during the last financial year.

1.20 Electronic Payment Systems

Electronic Payments of the Bank is managed by the Payment and Settlement Group which functions at Ballarpur, Navi Mumbai, in the same premises where the PSGs of other Associate Banks are functioning. All the branches of the Bank are enabled for RTGS/GRPT/NEFT remittances. The total number of outward electronic remittances for the year ended 31st March 2012 was 30,95,326 registering an increase of 35.76% over the previous year. While the number of RTGS outward transactions was at the previous year level, NEFT and GRPT transactions showed considerable improvement with corresponding reduction in the number of Demand Drafts issued by branches. There is also a shift from the RTGS to the Group Payment System (GRPT), in view of higher awareness at branches. NEFT outward transactions for the year was 22,64,650 registering a growth of 46.38% over the previous year level. The NEFT system moved over to a higher version of SFMS in Windows 2008 platform. RTGS system moved over to high security SHA2 regime during the year. The Business Continuity Plan is in place for both RTGS and NEFT. GRPT outward transactions for the year was 3,18,398 showing an increase of 45.30% over the previous year. A new system of inter bank payments under the name "Inter Bank Mobile Payment System" (IMPS) was tested successfully during the current year and the same will be implemented shortly. Being a very convenient mode of inter bank payment available 24 x 7 through mobile, IMPS will gain popularity.

2. Marketing Initiatives and Development of New Products

2.1 As in the earlier years, the Bank continued its proven strategy of customer acquisition and retention and broadening the customer base by conducting massive marketing campaign. The following are the marketing initiatives implemented during the year.

Kerala Govt. Employees' Salary Account: The efforts to route the salary payment of State Government employees has became a reality with the new Government issuing orders in this regard. More than 50% (2,51,000 accounts) of the employees have already opened salary account with the Bank and many departments started disbursing salary through SBT. Arrangements with remaining departments are in progress. Bank introduced a power packed Salary Savings Bank product for the benefit of State Govt employees.

Traffic e-challan system - collection arrangement with Police Department: Kerala Police Department has introduced collection of petty fine from traffic violators through bank accounts for the benefit of public in Thiruvananthapuram on pilot basis. Bank entered into an agreement with the Department for maintaining the collection account. The arrangement facilitates the payment of traffic fines at all the branches of State Bank of Travancore.

Skink Welfare Department: Arrangement has been finalized with Sainik Welfare Department for disbursement of pension to war widows, ex-servicemen and their dependents through the Bank accounts of State Bank of Travancore.

E-Payment in PWD: Government of Kerala has decided to introduce e-tender system for PWD works and e- payment system for payment to contractors in PWD, as part of National e-governance initiative. The Bank had tied up with PWD to arrange the e-payment to the contractors through out Kerala.

2.2 Other Marketing Initiatives and New Products

The following new customer friendly products were added to the impressive basket of the Bank's products and schemes during the year.

- SBT Gold Savings Scheme: For purchase of gold ornaments/coins from jewellers having tie up with Bank.

- SBT Home Loan PAL (Pre Approved Limit): The loan limit is approved in advance even before the finalization of property. Hence the loan amount and quick sanction of the loan is assured to the client. The client can also confidently negotiate with the seller/builder.

- SBT Green: Savings Bank account introduced for the commitment in social cause in good spirit and for the cause of Green Banking.

- SBT Suraksha: Product exclusively launched for funding 100% of the SBI Life premium to cover Home loan outstanding through a separate account.

- SBT Swarna Saphallyam: For financing purchase of gold coins. Min: Rs. 25000/- Max: Rs. 10 lacs. Margin: 20% of security value plus VAT. Interest: 3% above Base rate.

- OD in Savings Bank Account: As part of our Financial Inclusion initiatives, a new product has been introduced, extending the benefit of Savings account with Overdraft facility upto Rs. 10,000/- for non farmers, landless laborers in rural areas for meeting their contingencies.

- SBT Defense Salary Account: The product is exclusively designed for Defence Service Personnel and has four variants viz., Silver, Gold, Diamond and Platinum, suiting to the personnel in different ranks in Defence Service.

- SBT Construction Equipment Loan: Finance for purchase of construction equipments like Cranes, Tippers, Excavators, Proclaimers, JCBs, Concrete Batch Mixing etc.

- RTO Loans - Tie up arrangement with Tata Motors: To improve business under RTO segment, a tie up arrangement was made with Tata Motors Ltd. for financing purchasers of their commercial vehicles.

- SBT Solar Special: Scheme for financing off-grid and decentralized solar home lighting system and water heating system under Jawaharlal Nehru National Solar Mission (JNNSM).

- SBT Jewellery Nirman Special: New scheme for financing jewellery manufactures in Thrissur District.

- Weavers Credit Card: Scheme to provide Term Loan and Working Capital to weavers in the handloom sector through issue of weavers credit card.

- SBT Hotel Special: A new scheme for financing Hotels, Restaurants, Fast Food Chains, Pizza Centers, Caterers etc.

- SBT Auto BIZ: A new current account with Quarterly Average Balance (QAB) of Rs.25,000 formulated to keep the cost of deposits low and to enhance the share of Current Accounts in the total deposits.

- Shakthi Plus: A new modified version of 'Shakthi' current account with pre-uploaded fee collection functionality, which is most suitable for Universities, Colleges, State Electricity Boards, Corporations, Chit funds, etc.

- Flexi ax: A new term deposit product for 15 days to 180 days for Rs.15 lac and above in lieu of the high cost CDs.

3. Customer service

3.1 Customer service in the Bank is accorded top priority and every Endeavour is made to improve the quality of service to the customers and redress their grievances. All efforts are made to improve the customer satisfaction by offering suitable products.

3.2 A well defined and full-fledged customer grievances redressed mechanism is put in place in the Bank. Reports on the number of complaints received / disposed / pending in the Bank as a whole are submitted to the Bank's Board and the Apex Level Customer Service Committee at Head Office. The Standing Committee on Customer Service constituted pursuant to Tara pore Committee recommendations also reviews the quality of customer service extended in the Bank at regular intervals.

3.3 An official of the rank of Assistant General Manager is placed as head of the Customer Service Department to give greater focus on complaints received from Customers and speedy redressed of the complaints. The Department acts as a coordinator between the branch and the complainant and ensures quick disposal of complaints.

3.4 As a proactive measure, apart from acknowledging each complaint immediately on receipt, senior officials at Customer Service Department Endeavour to call the complainant personally wherever contact numbers are available. Many of the complaints get resolved on the same day itself. The average time taken for disposal of complaints at Head Office/Zonal Office level has been reduced substantially. This has created a very positive effect with our customers and various letters of appreciation are received.

3.5 Bank has provided a facility (SMS SBT CARE) to the customers whereby they can send their grievances from anywhere by SMS to 9847198471 and to 56363 from their mobile. The customer is contacted by the officials of the Bank and the complaints are taken up for redressed on priority.

3.6 Bank has also established a Call Centre with Toll Free No:1800 425 5566 which enables the customers and general public to seek clarification on Bank's products, service, etc. Adequate publicity through print and visual media is ensured during the year.

3.7 Branches were encouraged to conduct Customer Relations Programmes. Customer Meets were conducted at several centres to ascertain customer responses and suggestions. The suggestions received were recorded and action taken. Bank celebrated "Customer Contact Week" from 12th December 2011 to 18th December, 2011. Various Town Hall meetings and Customer Meets were conducted during this period.

3.8 With the intention to tune staff members/officers for rendering better customer service and drive home the importance of customer service/customer grievance management, Bank had organized Seminars which were addressed by the Banking Ombudsman for Kerala at select centers.

4. NRI Services

SBT, the pioneer and the most preferred Bank of NRIs is the market leader of NRI business in Kerala. The products and services offered to NRIs are continuously being reviewed and improved to suit their requirements. The representative office at Dubai, Two exchange companies managed by us in Dubai and Oman and the relationship managers posted in the GCC countries have helped substantially for this achievement.

NRI PLATINUM account, our specialized NRE product is well accepted by High Net-Worth NRIs because of its special features. The rise in NRE fixed deposit rates consequent to the deregulation of interest rates on Non- Resident External Rupee (NRE) Deposits and Ordinary Non-Resident (NRO) Accounts by RBI as well as the favorable exchange rates has resulted in the increased remittances from abroad. Instant credit facility, an improved version of 'Money Trans-E remit' has been introduced during the year for immediate direct online credit to the beneficiary's account and acknowledgement by SMS/E mail A premium NRI branch has been opened during the year in Thiruvananthapuram increasing the number of NRI Specialized Branches to five. Three more branches will be opened shortly.

5. Lead Bank Scheme

5.1 The Bank is shouldering Lead Bank responsibilities in three districts of Kerala State viz. Alappuzha, Kottayam and Pathanamthitta. The District Credit Plans for the year 2012-13 was launched in the lead districts during March 2012. The total outlay by all financial institutions in the three Lead Districts for 2011-12 was Rs.15, 830.10 crore of which the Bank's share was Rs.3,373.30 crore (21.31%).

5.2 The Lead Banks coordinated several activities like out-reach program me in unbanked areas, where Banking Ombudsman of RBI, Executive Director / Regional Director attended. Counseling for students seeking educational loans, seminars on Financial Literacy and Entrepreneur Development Program me for different target groups were also arranged in the lead districts. Service Area Approach for education loans was implemented and redressed forum for education loans was formed with LDMs as convener. A Special Campaign was conducted on Priority Sector Advances particularly for extending Kisan Credit Cards. A campaign for opening of Savings Bank accounts was conducted by our Lead Bank Offices in the Lead Districts for widening the coverage of banking services.

5.3 Rural Self-Employment Training Institutes (RSETIs)

RSETIs have been started by the Bank in Weaned, Pathanamthitta, Alappuzha, and Kottayam for providing training in skill up gradation to the rural youth with focus on BPL category. These 4 institutes had trained 13,022 persons and 92% of the people are women beneficiaries. Majority of the trainees are reported to be successful in starting self-employment ventures. The courses for which training is imparted includes beautician, ornaments manufacturing, Computer Tally, Mobile Phone Servicing & Repairing, aluminum fabrication, tailoring, textile ornamentation, kitchen gardening, mushroom cultivation with vegetable growing, dairying & vermin compost and off-site programmers' like rubber tapping, driving etc. RSETIs also imparted training to beneficiaries selected under Kerala State Self Entrepreneur Development Mission (KSSEDM).

5.4 Financial Literacy and Credit Counseling Centre (FLCCs)

Bank has started FLCC along with RSETIs in the Lead Districts of Alappuzha, Kottayam and Pathanamthitta, for providing financial literacy & credit counseling. The main initiatives implemented are imparting financial literacy, information about product and credit availabilities and arranging seminars for counseling students aspiring for higher education.

6. Financial Inclusion

6.1 Financial Inclusion (FI) is delivery of banking services at an affordable cost to the vast sections of the disadvantaged and low-income groups. The Bank has opened over One Million No-frills" accounts (Janapriya accounts). Bank has opened around 13.20 lacs No-frills accounts, out of which 70% are in the State of Kerala. Joint Liability Group (JLG) schemes, Biometric Smart Card Project, General Credit Cards to the Janapriya Account Holders etc. are other initiatives in this direction.

6.2 In conformity with the directions of Reserve Bank of India, the Bank has formulated a Financial Inclusion Plan, which has been rolled out during 2010-11 and all FI villages allotted to the Bank have been covered. The Financial Inclusion will be an integral part of the business plan of the Bank.

6.3 The following activities have been undertaken by the Bank as part of fulfilling the Bank's commitment to Financial Inclusion.

- SLBC Kerala has allotted 29 villages in the population category of above 2000 to the Bank for providing basic banking services through Banking Facilitator (BF) / Banking Correspondent (BC) route or by opening branches.

- Bank has provided basic banking in these villages through the BF/BC route, except in Peru manna Village in Kozhikode District where a new branch was opened on 30th March 2011.

- Bank has engaged Kudumbashree" as Banking Correspondent in the State of Kerala.

- M/s Baronies India Ltd., Hyderabad is the Technical Service Provider for Smart Cards and Financial Inclusion Project of the Bank.

- The Bank has been allotted 6 villages in Tamilnadu for providing basic banking services, which has been covered through the BF/BC route for which the Bank has engaged Individual BCs.

- All the BCs / Customer Service Providers (CSPs) and Link Branch Managers have been imparted training.

- The FI Project of the Bank has been christened as SBT-SAHAYA HASTHAM".

- Bank has appointed 6 Channel Managers for the FI Project.

- The Bank has enrolled nearly 13,000 customers under SAHAYA HASTHAM in the 34 FI Villages and added 1,954 No-Frills Accounts through the new branch at Peru manna Village during the year.

6.4 UID Project:

- Unique Identification Authority of India (UIDAI) has appointed the Bank as Registrar for the UID Project of the Government of India.

- M/s Tear Software Ltd., Hyderabad has been selected as the Enrolment Agency for the Bank's Unique Identification Project in Kerala.

- The Bank has enrolled 21,763 residents under the UID Project.

7. Support to disadvantaged segments

7.1 Assistance to Scheduled Caste / Scheduled Tribes [SC/ST]

The Bank continues to give due importance in extending financial assistance to meet the credit requirements of the SC/ST borrowers. Bank has adopted 4 villages in Kerala and one village in Tamil Nadu where SC/ST concentration is more, for extending credit for their development. The advances to SC and ST borrowers under Priority sector stood at Rs 2,604.04 crore (12.84%). The percentage of NPAs in respect of SC/ST borrowers under Priority Sector is 1.01 % of the outstanding.

7.2 Assistance to Minority Communities [MCs]

The Bank continues to give due importance in extending financial assistance to meet the credit requirements of the Minority Communities. The advances to MCs under Priority Sector stood at Rs. 6,968.25 crore. This works out to 34.34% of the Bank's Priority Sector advances, compared to 34.05% as at the end of the previous year.

8. Information Technology - Technology Up gradation & IT Initiatives

8.1 The Core Banking System (CBS) has provided the Bank with the state-of-the-art software that has greatly enhanced the efficiency of customer services, speeded up data processing capabilities, strengthened MIS, enabled efficient Asset Liability Management, reduced transaction cost and offered alternative channels to customers for transacting their business. The CBS is a product-based system whereby new schemes of the bank can be introduced easily with global parameter setting at CDC level. The capacity of the servers and other equipments, and other performance parameters are periodically reviewed and up gradation / addition of new equipment is arranged as and when felt necessary.

8.2 Alternative Delivery Channels

The CBS has facilitated effective implementation of Alternative Channels viz. Automated Teller Machines [ATMs], Internet Banking and Mobile Banking. The ATM network was beefed up by adding more ATMs. The Internet Banking facility is recognized to be the best among its class. Mobile Banking Service, which was rolled out in July 2009, is getting steady acceptance from customers.

8.3 ATMs

The Bank has a network of 929 ATMs, including 273 offsite ATMs. The network of 764 ATMs in Kerala is the largest in the State. All ATMs are part of the State Bank Group ATMs, having around 27,000 ATMs. Ninety six new ATMs were installed during the year. The Bank's ATM-cum-Debit cards are accepted in all outlets having Master Card/Visa logo. Several facilities such as Visa Money Transfer (VMT), Money Send, SBI Credit Card payment, SBI Life Premium payment, Mobile recharge, Donations, Fee payments, JMET / GATE Application Fee payment, Mobile Banking registration, Cheque Book order etc. have also been enabled in our ATMs. The Bank has a card base of 54.25 lacs as on 31st March 2012, which translates into an increase of 22.03% over the card base as at the end of the previous year.

8.4 Internet Banking

The Bank offers a convenient and efficient Internet Banking ( INB) facility through 256 bit EVSSL (Extended Validation Secured Socket Layer) encryption. This provides more security to Internet Banking customers against phishing / hacking threats. The Bank has added 90,434 new INB registrations during this year, ie. an increase of24.86% over the registrations as at the end of previous year. The total number of INB registrations as on 31st March 2012 is 4,54,131.

Major initiatives in Internet Banking during the year are as follows:

a) Site to site integration has been done with:

- Kerala State Motor Vehicles Department for making online payment for any of the 20 services provided by the department.

- UPSC for fees payment.

- CBEC for making payment of Excise and Customs Duty.

- M/s Atom Technologies, M/s E-Billing solutions and M/s Tech Process Solutions, thus enabling customers to make payment for online purchases in around 2,500 online merchant sites.

- NSDL for viewing Form 26 AS and payment for application for PAN.

b) Other initiatives:

- ATM Cards enabled for making payments for merchant transactions and Direct taxes (OLTAS) through Internet Banking.

- Simplified, single user Corporate Internet Banking facility with transaction rights (SARAL) launched.

- Facility for opening and closure of e-TDR/ e-RD introduced.

- Internet Banking facility to Visually challenged persons rolled out.

- i-Collect, the generic e-payment and e-collection module suitable for Retail/ Corporate Internet Banking Customers has been introduced.

- E-payment of Maharashtra State Professional Taxes has been enabled through SBT ONLINE.

- SBT Insta pay, an electronic Bill payment facility has been enabled, which does not require prior registration with Billers. Online recharge of Mobile phones and DTH TVs are also enabled in this module.

- Customized Corporate Internet Banking provided to Kerala State Housing Board and M/s Strathy Motors for their centralized funds management and monitoring.

- Anti phishing measures: Several anti-phishing steps have been taken to protect the interest of our customers such as:

- Website Authentication to customers: Extended validation SSL certificate has been implemented for the site which makes the address bar green when the customer visits the site.

- Customers are educated periodically through security alert messages to their registered mobile number.

- One Time Password over SMS, for online transfer of amounts more than Rs. 10,000/- (per day limit) for online transfer of funds to third parties and for all merchant transactions irrespective of the amount, excluding few merchant sites like IRCTC, LIC & Govt. sites. This is in addition to One Time password over SMS required for adding the beneficiary's account.

- For every transaction, post transaction SMS alert is sent to the customer's registered mobile number.

8.5 Mobile Banking Service (MBS)

Mobile Banking provides the customers with another safe, secure, fast and convenient channel for banking transactions. The services provided includes enquiry services, funds transfer, demit account services, bills payment, mobile top up, DTH recharge, m-commerce etc. The daily limit for MBS transaction is Rs. 50,000/- for funds transfer & transactions involving purchase of goods & services, within an overall calendar month limit of Rs.2,50,000/-.

49,363 new Mobile Banking registrations were activated during the year ie. an increase of 144.77 % over the registrations as at the end of previous year. The total number of MBS registrations as on 31st March 2012 is 83,461.

The customers also have an option of using Mobile Banking Service over any of the following four channels viz., (a) Application based (b) WAP based (c) USSD based and (d) SMS based.

8.6 A standing committee has been formed for conducting Gap analysis on Information Security, Electronic Banking, Technology Risk Management and Cyber Frauds as per RBI Guidelines.

9. Business Process Re-Engineering (BPR) Initiatives

9.1 With the objective of improving performance and enhancing customer service to global standards, the Bank has embarked on implementation of various BPR initiatives by leveraging on its core competencies, state of the art technology and redesigned operating architecture.

9.2 Retail Assets & Small and Medium Enterprises City Credit Centers (RASMECCCs) for appraisal, sanction, disbursement and maintenance of loans in Retail, Small & Medium Enterprises segments have been set up at 8 major centers. This has enabled the Bank to reduce the response time in sanction and disbursal of loans at these centers, thereby improving the level of customer satisfaction. It has also enabled standardization of internal processes leading to improved quality of assets.

9.3 A Rural Central Processing Centre (RCPC), set up at Palakkad covering all the branches in the District, has improved the quality and pace of lending under Agriculture, MSME and Personal Segments.

9.4 Multi Product Sales Teams have been established at 7 of the RASMECCCs to target specific markets, for effectively canvassing new business.

9.5 Stressed Assets Resolution Centers (SARCs) have been rolled out at 8 centers for more focused attention on recovery, thereby releasing funds blocked in non- performing assets which can then be utilized for more productive purposes.

9.6 A Liability Central Processing Centre (LCPC) has been established in Thiruvananthapuram to provide back office support to branches, in opening and servicing of liability accounts such as Savings Bank and Current Deposit Accounts. The Centre provides pre-generated Welcome Kits consisting of ATM cards and cheque books to all the branches. This facilitates the customers to operate the accounts immediately after opening the account. Issue of Personalized Cheque Books to the customers of all the branches is also centralized at LCPC.

9.7 Pension processing has been centralized at Centralized Pension Processing Centre (CPPC) set up at Thiruvananthapuram. This Centre covers all pensioners drawing pension from all branches. The Centre ensures accuracy in pension calculations, timely disbursement of pension and quick settlement of transactions.

9.8 A Centralized Clearing Processing Centre (CCPC) is established at Thiruvanathapuram with a view to move back office non customer facing activities related to clearing and collections away from branches to enable branches to focus more on customer service. The initiative also helped the Bank to afford credit to the accounts in respect of local clearing instruments on the day following the day of deposit of the cheque.

9.9 Trade Finance Central Processing Centres (TFCPCs), aimed at ensuring efficient and uniform handling of transactions related to inland and foreign trade and Bank Guarantees have been rolled out at Ernakulum and Chennai.

9.10 Drop Boxes have been provided at the branches for hassle free and safe handling of instruments deposited. Drop Boxes have been provided at two on- site ATMs on a pilot basis.

9.11 'Graham Mithras' have been positioned at select branches to proactively guide the customers in conducting transactions.

9.12 Relationship Managers have been posted at select branches to extend personalized services to the customers.

10. Internal Control Systems & Supervision

10.1 Integrated Risk Management

The Bank's risk management philosophy is based on a clear and timely identification of various types of risks, accurate risk assessment and measurement procedures and continuous monitoring. The risk management architecture of the Bank consists of the Board of Directors at the top having overall responsibility to implement Risk Management System in the Bank. In order to have focused attention on various risks, Credit Risk Management Committee (CRMC), Market Risk Management Committee (MRMC) and Operational Risk Management Committee (ORMC) are in place to manage Credit Risk, Market Risk and Operational Risk respectively at the granular level. The General Manager (P&D) is designated as the Chief Risk Officer (CRO). The Integrated Risk Management Department headed by Deputy General Manager is responsible for the overall daily management of risks at micro level.

Management of all the risks is governed by various policies such as Credit Risk Management Policy, Loan Policy, Market Risk Management Policy, Investment Policy, Operational Risk Management Policy, Loss data Policy, Business Continuity Planning Policy, Outsourcing Policy, etc. As part of credit risk management, the Bank has a structured and standardized credit approval process which includes comprehensive credit rating of proposals. Other risk prone operational areas of the Bank's business are monitored and proactive actions for improvement are initiated in consultation with other departments like Inspection, Systems & Procedure, Fraud Prevention, Monitoring and Recovery Department etc.

The year witnessed great volatility in both domestic and fore markets. However, the Bank could tide over the situation as sound market risk management practices were in place. The market risk is largely managed through adherence to various position limits, stop loss limits, Value at Risk (VaR), Management Action Triggers (MAT), Cut Loss Triggers (CLT) etc. The Bank is in the process of upgrading the present software so as to compute market risk capital charge on a daily basis as per RBI guidelines.

The Bank is closely monitoring the roadmap for migration to advanced approaches of Basel II and Basel III norms by striving to create sufficient and accurate database, ensuring involvement and awareness among all the staff members of the Bank and planning for build up of a capital base of the desired quantity and quality.

During the financial year 2011-12, the following major risk management initiatives were taken:

- Credit Rating models for trading and manufacturing sectors modified and introduced in IT platform capable of retaining historic data.

- New Credit Rating models introduced for NBFCs and infrastructure projects were launched in IT platform capable of retaining historic data.

- Purchase of Loan Origination Software for retail loans was finalized and expected to be introduced to facilitate retention of data for migration to advanced approaches.

- The bank started computing Value at Risk for all investments in trading book as part of risk management.

- As part of spreading awareness and risk management culture all over the Bank and as part of capital conservation measure, officials from risk management department conducted day-long workshops for all the branches.

- External consultants have been appointed for guiding the bank through the process of migration to advanced approaches for Credit Risk, Market Risk and Operational Risk.

10.2 Asset Liability Management

The Asset Liability Management System implemented effective from 1st April 1999 is functioning as per the guidelines prescribed by Reserve Bank of India. The Asset Liability Management Committee (ALCO) headed by Managing Director meets regularly.

The Bank's ALM Policy based on RBI guidelines lays down broad benchmark levels in managing liquidity and market related risks. Liquidity and interest rate risks are identified, measured and monitored by the ALCO through the prescribed statements, viz. Statements of Structural Liquidity and Interest Rate Sensitivity, Short Term Dynamic Liquidity, Duration Gap Analysis, Stress Testing on Liquidity and Interest Rate Risks etc. ALCO discusses these statements in detail and takes corrective actions whenever necessary. As per the Bank's ALM Policy a contingency funding plan is reviewed on a quarterly basis. Revisions of interest rates on deposits and advances, including the Benchmark Prime Lending Rate (BPLR) and Base Rate (BR) are discussed and decided by the ALCO. The ALCO also discusses the economic developments and monitors the changes in the market on an ongoing basis.

10.3 Inspection and Supervision

Internal audit/inspection is an independent appraisal of operations of various Systems of Controls within an organization to determine whether acceptable policies and procedures, designed to add value and improve an organization's objectives, are followed and resources are used efficiently and economically. Inspection and Audit Department at Head Office monitors various risk parameters by conducting regular Internal Inspection, IS Audit, Compliance Audit, Surprise Inspection of Branches and System Audit of various Head Office Departments and Modules.

Apart from the above, Bank has put in place an effective institutional mechanism for Risk Based Supervision through RBS Cell in the Inspection Department. As envisaged by the Regulator, the Bank introduced Risk Focused Internal Audit (RFIA) under RBS w.e.f. 1st April 2003. With effect from 1st April 2010, score for Business Parameters has been taken out of the purview of the RFIA. Subsequent to migration to Core Banking, corresponding changes have been brought in, especially in the area of Audit Rating, Audit Report Formats, grouping of branches, sampling norms and periodicity of inspection. The Bank has introduced separate systems for verification of Gold, Cash and securities and for regular RFIA. Various user friendly formats have been introduced for Cash and Gold verification, FEMA Audits, Tax Audits, IS Audits etc. The Department is also involved in the area of monitoring Concurrent Audit of designated branches and movement of audit rating of these branches.

In order to instill knowledge and to improve the quality of various reports, the department is imparting training for the existing and newly joined inspecting officials in the area of RFIA, IS Audits and Concurrent Audit. In order to improve the efficiency of Internal Audit, during the year 2011-12, the Bank started awarding Certificates to Branches who have secured highest rating in two successive audits.

10.4 Credit Audit

The audit of 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 Rs.2 crore and above are covered under Credit Audit. The Department conducted audit of 1060 accounts during the year, covering the pre-sanction and post sanction aspects. The Department had also conducted credit audit of 26 accounts with exposure below Rs.2 crores and above Rs.1 crore on a random basis during the year.

10.5 Inter-Office Reconciliation

As per RBI guidelines, all high value debit entries of Rs.1 lakh and above and 99.99% debit amount need to be reconciled within a period of six months from the date of their origin. The Bank has completed reconciliation of Inter Branch accounts up to 30th September 2011, achieving 100% reconciliation of debit entries.

10.6 Compliance

The Bank ensures timely compliance of various statutory and regulatory returns and also prompt reply to references received from Government of India / Reserve Bank of India and other institutions viz., State Bank of India, Indian Banks Association etc. The Chief Compliance Officer monitors the Compliance function effectively and submits periodical reports to the Audit Committee of the Board for information.

10.7 KYC norms & AML/CFT measures

The Bank has put in place a Board approved revised policy on Know Your Customer (KYC)/ Anti Money Laundering (AML)/ Combating of Financial Terrorism (CFT) measures as per RBI policy. A dedicated KYC- AML Cell is functioning in the Head Office to oversee the compliance of KYC/AML/CFT measures. Dy. General Manager (Compliance) is the designated Principal Officer for KY C/AML in our Bank.

As per the policy, the branches are required to obtain photograph, identity proof and address proof while opening new accounts. Customer acceptance and Customer identification are the most important pre- requisites in the opening of new accounts. Branches also have been advised to update the identity proof and address proof of the existing customers at regular intervals. Controllers during their visits to the branches as also the Auditors and Concurrent Auditors verify compliance of KYC norms while opening accounts.

Monitoring of transactions is done with a view to submit the required reports to the Financial Intelligence Unit- India (FIU - IND) mandated by Prevention of Money Laundering Act 2002. With a view to implementing and supporting the monitoring of transactions, the Bank has acquired appropriate software which is processing all transactions handled by all the branches of the Bank on a day to day basis. Monthly Cash Transaction Reports (CTRs) and NPO Transaction Reports (NTRs) are being generated by the system for submission to FIU-IND. Suspicious Transaction alerts are generated daily, for analysis by the KYC-AML Cell. After due analysis, suspicious transactions are reported to FIU-IND through Suspicious Transaction Report (STRs), wherever felt necessary. Counterfeit Currency Reports (CCRs) are also being submitted to FIU-IND as and when detected.

KYC/AML Cell is publishing a quarterly news letter and maintains a web site to provide relevant and up-to-date information for Branches/ Administrative Offices.

Training on KYC/AML is being imparted on an ongoing basis in the Bank. Staff awareness programmers' are conducted regularly through seminars at Zonal/ Regional Office levels, Learning Centres and during branch visits.

10.8 International Financial Reporting Standards

As per the Road Map laid down by Ministry of Finance, Government of India ,all Scheduled Commercial Banks are to convert their opening Balance Sheet as on 1st April 2013 in compliance with the Converged IFRS ( IND- AS). The Ministry of Corporate Affairs have notified the Converged Indian Accounting Standards (Ind-AS) and is yet to announce the date of implementation of these standards.

The Bank being a member of State Bank Group will be taking a common group approach on convergence to IFRSs. The Bank had formed an IFRS Cell at its Head Office for the preparatory works. The cell is engaged in collection, compilation and submission of data as required by State Bank of India for preparation of Consolidated Financials by them under Converged IFRSs.

11. Security arrangements

There was no significant loss due to security breach in the Bank, during the Year. Risk assessment of all bank branches was done and accordingly security guards have been deployed in vulnerable branches. Manning of currency chests by five security guards is being ensured by timely recruitment. Formal security audit of all currency chests has been carried out this year and corrective measures initiated wherever required. Security at Head Office has been strengthened by installation of CCTVs system with comprehensive coverage. Chief Security Officer, Fire officer and Zone/Region Security Officers are reviewing security arrangements at branches constantly through branch visits and corrective measures taken wherever required.

12. Information security

The Information Systems Security Cell functioning at the Head Office is in charge of creating , maintaining and disseminating information security strategy, plans and policies. The Cell co-ordinates the Information Systems security activities . The formulation and periodic reviews of IS Security policies , vetting of software etc. are some of the major functions of the IS Security cell.

The cell also undertakes spreading the Information Security awareness among the staff and customers of the Bank. More than 400 staff members have been trained in the Information Security activities during the year under review. Bank has initiated campaigns to spread awareness about various threats faced by the customers like PHISHING, Skimming etc. Awareness campaigns have been conducted through emails, pamphlets , news letter etc. The cell also keeps the staff members conscious of the security threats,.

13. Vigilance Machinery and Frauds Monitoring

The vigilance climate of the Bank during the period under review was generally normal. The integrity level of staff / officers in the Bank is of a high order and instances of criminal misconduct by the staff / officers were minimal. Only two fraud cases with staff involvement have been reported in the year. Regular Department Action (RDA) has been initiated against the erring officials.

The periodic internal review mechanism by the Vigilance Department has focused on the delay at various stages and addressed this issue with close coordination with the Disciplinary Proceedings Department. There has been increased emphasis on preventive vigilance with futuristic approach to ensure compliance with various guidelines/instructions.

During the current year 40 fraud cases have been reported, compared to 17 cases in 2010-11. There has been a recovery of Rs.1,322.65 lakh in the current year consisting of cash recovery of Rs.308.86 lakh, settlement of insurance claims of Rs.36.79 lakh and ECGC claims of Rs.977 lakh. 29 cases involving amounts up to Rs.25 lakh have been closed as per the revised guidelines of RBI. Various measures have been implemented for prevention of frauds. Alertness Awards were distributed to three staff members in recognition of their contribution in the detection/prevention of frauds. 'Whistle Blower' scheme also has been put in place in the Bank for prevention of frauds.

Preventive Vigilance Committees were initially set up in major branches and such Committees are functioning in 184 branches. In order to enhance the effectiveness of vigilance administration in the branches, Preventive Vigilance Committees have been constituted in 330 more branches during the year. As part of green initiative, the minutes of the committee meetings at branches are received through e-mail. The minutes are perused by Vigilance Department and branches are given direction for focusing on preventive vigilance measures.

Surprise inspections from vigilance angle are also conducted at select branches. The reports are scrutinized by CVO who suggests compliance/ corrective action at the branches. The compliance is closely monitored through the controllers. The CVO has also made surprise visits to 15 branches during the year to ensure compliances from vigilance angle.

CVO heads the Dedicated Unit on Frauds Review and Monitoring to review the progress of action taken on frauds involving an amount of Rs.10 lakhs and above but less than Rupees One Crore. The frauds involving an amount of Rupees One Crore and above are reviewed by the Committee of Directors once in a quarter. CVO closely monitors action taken on the complaints received from CVC/CBI. In addition, all the complaints received from the customers/ others are also monitored and those having vigilance angle are subjected to appropriate action through vigilance mechanism.

Vigilance Awareness Week was observed from 31st October 2011 to 5th November 2011 in terms of CVC's directions. The activities carried out during the week include

- Administration

 
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