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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


Mar 31, 2011

Report of the Board of Directors to the State Bank of India, the Reserve Bank of India and the Central Government in terms of Section 43 (1) of State Bank of India (Subsidiary Banks) Act, 1959 Period covered by the Report: 1st April 2010 to 31st March 2011

2. The Banks Operations and Performance

2.1 Business Turnover

The gross business turnover of the Bank crossed the major milestone of Rs.One lac crore in December 2010. The total business of the Bank stood at Rs.104,202 crore on 31st March 2011, registering a growth of 16.63% from the level of Rs.89,345 crore as on 31st March 2010.

2.2 Working Results and Operating Profit

Operating profit (after staff provisions) of the Bank for 2010-11 went up by 21% to Rs.1,175.97 crore from Rs. 972.27 crore for the previous year. Net Profit for the year stood at Rs.727.73 crore as compared to Rs.684.27 crore in 2009-10. The Earnings per share (of Rs.10 face value) stood at Rs. 145.55 compared to Rs.136.85 at the end of the previous year.

The Net Interest Income increased by 21% from Rs.1,400 crore in FY 09-10 to Rs. 1696 crore in FY 10-11. Net Interest Margin stood at 2.87%.

2.3 Dividend

The Bank declared a higher dividend of Rs. 18 per share (180%) for the year to the shareholders, entailing a total payout of Rs. 90 crore. Of this, an interim Dividend of Rs. 8 per share (80%) was paid out in October 2010. The Pay-out ratio works out to 12.41% of the distributable profit (excluding dividend tax).

2.4 Capital Augmentation & Capital Adequacy

The Banks capital funds improved from Rs.4397 crore as at the end of March 2010 to Rs.4881 crore as at the end of March 2011. The capital adequacy Ratio under Basel II stood at 12.54% in March 11 as compared to 13.74% in March 10 against a minimum of 9% stipulated by RBI. The Tier-I CRAR on this date is 9% as against 9.24% as at the end of the previous year. The Banks 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 2011-12.

2.5 Deposits

Aggregate Deposits of the Bank registered a growth of 15.49%, reaching the level of Rs.57,599 crore as on 31st March 2011 as against Rs. 49,874 crore as on 31st March 2010. Personal Deposits, which contribute the bulk of the resources, grew by Rs.3,618 crore to reach Rs. 36,096 crore. NRI Deposits recorded improved performance

compared to the previous year, grew by Rs. 725 crore and stood at Rs.11,562 crore. NRI Deposits constituted 20.07% of the Aggregate Deposits of the Bank as on 31st March 2011. Total Deposits of the Bank [including Inter Bank Deposits] moved up to Rs. 58,158 crore as on 31st March 2011 from Rs. 50,883 crore as on 31st March 2010.

2.6 Advances

Advances of the Bank registered a growth of 19.72% during the year and reached a level of Rs. 46,044 crore as on 31st March 2011 as against Rs. 38,461 crore as on 31st March 2010. The main contributions came from the C&I segment [growth of Rs.4,637 crore] and Agriculture segment [growth of Rs.2,280 crore]. The Banks Retail lending stood at Rs.23,055 crore and constituted 50% of Total Advances as at the end of March 2011. The Credit Deposit Ratio of the Bank stood at 79.17% as on 31st March 2011 as against 75.59% as on 31st March 2010.

2.7 Market Share

Banks All India market share in Deposits has improved from 1.09% on 31st March 2010 to 1.10% on 26th March 2011. The market share in Advances has been static at 1.16% in the same period. However, the market share would be 1.17% if the Rs.1,000 crore of Inter Bank Participation Certificate (IBPC) issued by the Bank during the year is included. The Bank continued to maintain its position as the premier bank in Kerala with a market share in business of 22.13% as at September 2010 [the latest date up to which data has been released by RBI] with 14% of the total branch network in the state.

2.8 Priority Sector lendings

The Bank continued to give special emphasis on lending to the Priority Sector in conformity with the national policies, expectations and fulfilment of social objectives. Banks gross Advances to the Priority Sector increased from Rs. 14,260 crore as at the end of March 2010 to Rs.17,353 crore as at the end of March 2011, and constituted 44.07% of the Adjusted Net Bank Credit against the benchmark of 40%.

2.9 Agricultural and Rural Finance & Self Help Groups

Agriculture segment was the standout performer during the year under review. Bank has disbursed an amount of Rs. 5,716 crore under Agriculture segment as at the end of March 2011 against the Special Agricultural Credit Plan target of Rs.4,000 crore. The level of lending to agriculture sector stood at Rs. 5,580 crore as on 31st March 2011.

Agri segment showed a positive growth of Rs. 2,280 crore as at the end of financial year 2010-11 compared to a growth of Rs.449 crore during the same period last year. The share of Agriculture Advances to Adjusted Net Bank Credit [ANBC] improved sharply to 14.17% from 10.33% at the end of the previous year.

During the current fiscal 16,677 Kisan Credit Cards (Working capital facility to farmers) and 4,519 Kisan Gold Cards (Investment credit to farmers) were issued with an outlay of funds of Rs. 146 crore and Rs. 182 crore respectively. During the current year, the level of Kissan Credit Card loans increased by 29% and 79% in number and amount respectively against the RBI stipulation of 20%.

The growth in Agriculture lending was driven by an intensive agriculture lending campaign called "SBT- Haritotsavam- 2010" during the period June to September 2010. Against a lending target of Rs.1,000 crore, the amount disbursed during the period was Rs.1,424.25 crore, benefiting 2,04,082 farmers.

Bank continued to be active in assisting Self Help Groups and financing them through MFIs and NGOs. 84,787 groups were assisted so far with a financial outlay of Rs.656 crore. Bank has entered into an MOU with Kudumbasree (State mission for poverty alleviation) for giving loans to SHGs at low rate of interest. The notable feature of the programme is community farming by women neighbourhood groups with bank assistance. 600 women who are active in Self Help Groups were honoured with SBT Kudumbasree Award.

Farmers meetings were conducted at various centres to give wide publicity for 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. The Bank stands in the first position in terms of number of Farmers Clubs among Commercial banks in Kerala. The farmers Clubs sponsored by Pattanakkad and Bharananganam branches were awarded merit certificates by NABARD for their farmer friendly performance.

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

The Bank continued to extend support to Micro, Small and Medium Enterprises, in conformity with national objectives. The total lending to MSME sector recorded a growth of 14.49% over previous year to touch Rs. 8,487 crore. The lending to Micro & Small Enterprises [MSEs] stood at Rs. 5,061 crore which is 18.69% higher over the previous year level. The Small Scale Industries and Small

Business segment recorded a growth of Rs.214 crore during the year, reaching a level of Rs.3906 crore as on 31st March 2011.

The growth in this sector was fuelled by an intensive MSME lending campaign conducted from 01st October 2010 to 31st January 2011. Against a target of Rs. 500 crore under MSME segment [including Rs.150 crore under micro segment, Rs. 150 crore under small segment and Rs. 200 crore under medium segment], the total lending during the campaign period was Rs.628 crore. 1% reduction in interest and waiver of processing charges were offered during the campaign period.

Road Transport Operators (RTO) segment has recorded steady progress after liberalization of collateral security norms and interest rate concession. The lending to the sector grew by 43.98% to reach Rs. 514 crore as at March 31, 2011.Tie up arrangements with various manufacturers / dealers of commercial vehicles served to increase the presence in the market.

The Bank is a Member Lending Institution under the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) scheme for providing collateral free loans. Awareness programmes / workshops /seminars were conducted in all Regional Offices of the Bank / Training sessions and other important centres for operating staff about the scheme. Meetings of entrepreneurs were also conducted to educate them about the scheme. 10,350 loans amounting to Rs. 316 crore have been extended under the scheme so far.

The Banks Technical Consultancy Cell carried out three project appraisals, four rehabilitation studies and two general studies during the year. The cell also involved in the three Entrepreneurship Development Programmes (EDPs) conducted by the Bank during the year.

2.11 Commercial & Institutional Finance

The Bank performed well under the segment by tapping the potential in market and C&I advance of the Bank reached Rs. 23,835 Crore as on 31st March 2011. This segment contributes more than 50 % of Banks total advances, which comprises financing Trade and Services, Industry, Infrastructure, financing Corporate customers and other institutions. The 4 Industrial Finance Branches at New Delhi, Bangalore, Chennai and Ernakulam were re- designated as Commercial Branches, to sharpen their focus and broad base their portfolio. The 5 Commercial Network branches (including the Corporate Finance Branch at Mumbai) contribute 40% of the Credit growth. These

branches share of the Credit of the Bank has moved up from 22% to 25% during the year. Their share of the Non- fund based income of the Bank improved from 19% to 23% in the same period. Account Planning Initiative was rolled out at these branches during the year to improve the share of income of the Bank from major accounts.

2.12 Personal Finance

The Bank continued to be active in extending finance to Personal Segment, mainly by way of Housing Loans, Car Loans and Educational Loans. The Personal segment Advances went up to Rs. 13,345 crore as at March 2011 from Rs. 12,696 crore as at the end of the previous year, recording a growth of 5.11%. As many as 20,646 Housing Loans aggregating Rs. 2,363 crore were extended during the period under review, taking the outstanding Housing Loan level to Rs. 6,714 crore as at 31 Mar 2011, an improvement of 20.34% over March 2010 level of Rs. 6144 crore. Similarly 17,215 Car Loans aggregating Rs. 590 crore were extended during the same period, taking the outstanding Car Loan level to Rs. 1,420 crore as at 31 Mar 2011, which is higher by Rs. 96 crore over March 2010 level of Rs. 1,324 crore.

As in the previous years, the Bank continued to support the growing generation to prosecute higher studies by extending Educational Loans under Gyan Jyothi Schemes. The Bank has granted the maximum number of education loans in the State of Kerala. During the year under report, Bank sanctioned 19,782 Educational loans amounting to Rs. 565 crore. The total amount outstanding under this head stood at Rs. 1,713 crore.

The Bank also extended the subsidy assistance provided by the Government for Housing Loans and Educational Loans. These included the 1% interest Subvention for Home Loan borrowers up to a limit of Rs.10 lac where the estimate/cost of construction should not exceed Rs.20 lac, (applicable to the loans disbursed from 01st October 2009 to 31st March 2011), Interest Subsidy for Housing Urban Poor (ISHUP) Scheme to provide home loans with interest subsidy to Economically Weaker Sections (EWS) / Low Income Groups (LIG) for acquisition/construction of house and Central Scheme to provide Interest Subsidy on Education Loan borrowers. Maximum permissible loan amount under ISHUP is Rs.1 lac for EWS and Rs.1.60 lac for LIG category of borrowers (maximum amount eligible for subsidy is Rs.1 lac).

The subsidy scheme for education loans is available to students belonging to Economically Weaker Sections whose

parental annual income does not exceed Rs.4.5 lac. Interest Subsidy will be provided by the Government during the moratorium period for the disbursements made on or after 01st April 2009.

2.13 Policies and Guidelines

A comprehensive Policy for lending to Micro Finance Institutions (MFIs)/Non Governmental Organisations (NGOs) has been formulated for regulating and standardising the Advances to the sector. The policy gives detailed guidelines to enable the Bank to increase the outreach by financing large number of SHGs/JLGs in a cost effective manner and supplement the efforts of the branches in financing SHGs/JLGs and enabling financial inclusion. The policy will also act as a precaution to pursue caution while funding micro finance institution (MFIs/NGOs) by adhering to the norms for funding.

Interest rate and charges on Bill Discounting under Inland Letter of Credit Scheme have been revised in line with the market condition to make the products the best in the market and to maintain the profitability.

The Policy on valuation of properties and empanelment of valuers has been revised comprehensively in order to improve smooth and quick delivery of credit and also to ensure speedy recovery of NPAs.

2.14 Introduction of Base Rate

The Bank has introduced Base Rate System effective on July 1, 2010, in conformity with RBI guidelines. Base rate was set at 7.75% on date, which has since been increased three times in tune with the market conditions. The Base rate of the Bank stands at 9% as at 31st March 2011.

2.15 Treasury Operations

The Gross investments of the Bank stood at Rs.17,956 crore as on 31st March 2011 as against Rs.15,881 crore as on 31st March 2010. The revenue from investment operations (interest and dividend) for the year was Rs.1,147 crore as against Rs.957 crore for the previous year. The average yield on investments was at 6.82% during the year as compared to 6.40% during the year ended 31st March 2010. The Bank earned a profit of Rs.98 crore from treasury operations during the period under report.

2.16 International Banking

The Banks total forex turnover during the year for merchant transactions was Rs.16,746 crore compared to Rs.15,050 crore during the previous year. Inter Bank turnover was higher at Rs.4,34,520 crore as against Rs.3,66,210 crore during the previous year. The total profit from forex

operations during the year was Rs. 40.29 crore as against Rs.39.99 crore as on 31st March 2010. The Export Finance extended by the Bank stood at Rs. 1,101 crore, which was 15.13% higher over the level at the end of the previous 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 27 of the 28 Exchange houses with which the bank has drawing arrangements. Remittances through Moneytrans E Remit (including credits through NEFT) numbered 32.73 lac aggregating to Rs. 14,207.69 crore during 2010-11 as against 24.51 lac and Rs. 9,892 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.

Xpress Money, instant cash transfer arrangement with UAE Exchange and Financial Services Limited operating through select branches has been extended to branches in Thiruvananthapuram, Kottayam, Ernakulam and Kozhikode Zone.

Other products like Xpress Remit, an online remittance facility from US and UK and Viswa Yatra Foreign Travellers Card providing an alternative to carrying foreign currency while travelling abroad continue to be much favoured by the public in general

2.17 Cross Selling

The Bank has been constantly endeavouring 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 to its customers.

Banks Cross Selling products include SBI Life Insurance Company‘s life Insurance products, United India Insurance Companys Non Life (General Insurance) products, SBIMFs Mutual fund products and SBI Cards 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 Banks customers. The Bank also has tie up arrangements with UTI Mutual Fund, Sundaram Mutual Fund, Franklin Templeton and Tata Mutual fund houses.

As against Rs. 12.19 crore income earned during the year 2009-10 income from the Cross Selling business during the current year has improved to Rs. 20.57 crores, which represents a YOY growth of 68.74%.

SBI Life Insurance with a share of over 83% continues to be the major contributor to Cross Selling Income followed by General Insurance and Mutual Fund at 10% and 7% respectively.

Our Bank has a tie up with United India Insurance Company Limited for marketing its Non life products through the branch network. Unisuraksha, a personal accidental Death and Total Permanent disability cover, Unihealth, a Health plan (Mediclaim) 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 under consideration more than 45 families, most of being poor and needy have benefited from these claims. Banks Health plan "Unihealth" a co-branded product of the Bank and UIICO too is gaining acceptance fast.

Among the Mutual fund products Systematic Investment Plans, [SIPS] Fixed Maturity Plans [FMPs] debt and equity funds of SBIMF launched from time to time are also marketed through the branches.

SBI credit cards are also being sold to the Banks customers through its branch network. Platinum Credit cards for high value customers, Secure Cards, SBI Gift Cards and VIshwa Yatra Cards for overseas travellers 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 in the coming fiscal.

Bank has as on date 1,003 Certified Insurance facilitators and 751 AMFI qualified employees, which form the Insurance and Mutual fund sales force of the Bank. Plans have been drawn out to double these numbers in 2011-12.

2.18 Asset Quality

The Bank continued to give special focus to improving the quality of Assets and containing NPAs. The percentage of Gross NPAs to Gross Advances stood at 1.80% on 31st March 2011 with the Gross NPA level at Rs. 835 crore. The percentage of Net NPA to Net Advances stood at 0.98% as on 31st March 2011 compared to 0.91%, a year ago.

Banks approach to Asset Management includes revival of viable sick industrial units as an important strategy through appropriate rehabilitation packages. Rehabilitation/ Restructuring packages are under implementation in respect of 37 units with a total exposure (Fund Based +Non Fund Based) of Rs.297.50 crore. Out of these 37 units,

10 units are under Corporate Debt Restructuring [CDR] scheme with exposure of Rs.175.87 crore, 27 units under BIFR scheme with exposure of Rs.121.63 crore. During the year, 12 accounts were referred to CDR scheme for restructuring. Out of these 12 accounts, restructuring packages for four accounts were approved, three accounts were withdrawn from the CDR mechanism and the others are under process.

2.19 Government Business

The Bank conducts State Government Business in 108 branches in Kerala and 2 branches in Tamil Nadu. Approval is awaited from Reserve Bank of India for linking 10 more Non-Banking Treasuries to the branches in Kerala. Further, 196 branches (136 branches in Kerala and 60 outside branches) are authorized for Central Board of Direct Taxes (CBDT) collection and 148 branches in Kerala are authorized for Central Board of Excise and Customs (CBEC) collection. 314 Post Offices are having drawing arrangements with the Bank and 43 Railway Stations have opened accounts with the branches.

The e-payment facility launched by the Bank for payment of commercial taxes for Kerala is well received by the Business Community. As many as 6.82 lac transactions amounting to Rs. 6,245 crore were collected under this Scheme. Proposal for introduction of e-payment of Motor Vehicle Taxes in Kerala State is in the final stages of implementation and will be launched from the beginning of the next financial year 2011-12. E-payment facility for Karnataka Commercial Taxes through the Bank is also expected to be introduced shortly.

The Bank became the exclusive Banker to 14 FRIENDS Centres promoted by IT Mission, Kerala, with 4 more FRIENDS Centres linked to the Bank during 2010-11. Around 2000 Akshaya Centres under IT Mission are also linked with the Bank. The number of Currency Chests maintained by the Bank stood at 127 after 5 unviable Currency Chests were surrendered to Reserve Bank of India during the year. The Bank successfully operationalised the Electronic Data Interchange (EDI) Project at the new Thiruvananthapuram International Airport Cargo Complex. The Bank is one among the 16 banks selected for introduction of e-payment of Customs on all-India basis, scheduled for FY 2011-12. The Bank has maintained a market share of 70% of Kerala State Government transactions during the financial year. Angamally Branch has been authorised by CBEC for collection of Customs Duty at Cochin International Airport, which was functioning as a sub-agency of State Bank of India since 1999.

2.20 Electronic Payment Systems

There was greater focus on migrating more remittance transactions to electronic modes. The Payment & Settlement Group functioning at Belapur, Mumbai attends to electronic remittances like RTGS/NEFT and GRPT transactions and the funds settlements between the bank and other Banks/ RBI. There has been increased awareness among the customers to use electronic mode of remittances. The total number of outward electronic messages (RTGS/NEFT/GRPT) emanating from the branches has increased from 12.18 lac during FY 2009- 10 to 22.80 lac in FY 2010-11, registering an increase of 87% during the year.

3. Marketing Initiatives and Development of New Products

3.1 Bank has been nominated as authorised Bank for import of Gold by Reserve Bank of India. This is a pre-requisite for carrying out retail sale of Gold coin through the branches in tie up with State Bank of India. The sale of Gold Coins through the branches will be operationalised in the first quarter of financial year 2011-12.

3.2 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 campaigns. These campaigns contributed to increase the business level significantly. ‘Aishwaryotsav 2010, the retail loan campaign and ‘SBT Mahotsav 2010, the Deposit Mobilization campaign conducted during the financial year 2010-11 were very successful and helped the Bank to reach out to the mass of the population in the country, especially in the State of Kerala.

3.3 Aishwaryotsav 2010, the retail loan campaign for the intensive marketing of Home Loans and Car Loans covered the whole festival season of Kerala State and other parts of the country. The campaign commenced just before ONAM, the National Festival of Kerala, run through Dusserah, Deepavali, Ramzan, Bakrid and Christmas and continued till the New Year Eve (from 01st August to 31st December 2010). Against the lending target of Rs.800 Crore the campaign recorded sanctions aggregating Rs. 1,706 Crore from 11,113 Car Loans and 11,170 Housing Loans.

3.4 The intensive Deposit Mobilization Campaign, SBT Mahotsav 2010, was conducted during October to December 2010. Against a targeted growth of Rs. 2,000 crore in Aggregate Deposits, the campaign saw opening of new accounts aggregating Rs. 2,950 crore including

1,13,288 new SB Accounts. Free Unisuraksha Accident Insurance coverage was offered to new SB Account customers who opened accounts with an initial Deposit of Rs.5,000/-.

3.5 A special Current Account campaign for the 3 special Current Accounts namely "SBT Biz, SBT Easy Biz and SBT Easy Biz Plus"accounts were conducted from 10th February 2011 to 31st March 2011, to enhance the share of Current Accounts in Deposit mix, through selected branches.

3.6 Project Finance Unit was set up in the Bank to develop project appraisal skills in-house, and also to avoid good proposals go past the bank for want of Techno Economic Viability (TEV) study. Bank undertakes Technical and Financial appraisal of small and medium sized projects, which have not been vetted by agencies of national/ international repute. During this year TEV study conducted on 37 projects, having total project cost of Rs. 2,093 crore.

3.7 Other Marketing initiatives included:

- Assisting Customers for obtaining of PAN Card by tie-up arrangement with UTI Technology Services Ltd. [UTITSL], the official agent for issuing Permanent Account Number. The Branches collect applications for PAN Card from customers and forward them to the Central Processing Unit of the Company at Chennai. Approximately 40,000 customers have utilised this facility so far.

- Arrangements were made with telecom companies - BSNL, Airtel, Vodafone and Idea to provide Ring Back Tone using the Banks ‘Signature Tune in the Landlines and Mobile connections of the Bank for creating a new identity and image for the institution.

- As a step to reach out to the younger generation of the Society, Appreciation Letters were sent to 7,000 top ranking Students in the Common entrance test conducted by Government of Kerala with an invitation to open savings bank account with the Bank. Most of the students responded positively and the initiative served to broaden the customer base.

- National/International days of importance were celebrated for reaching out to different sections of the Society as a tool of customer acquisition and for better visibility. During such observations, selected products, which are appropriate for the occasion, were highlighted through advertisements in Newspapers.

3.8 Many New Products and services were designed and offered to ensure total satisfaction to the customer by anticipating customer needs and after collecting market

intelligence on the Banks products as well as analyzing the offerings by the competitors. The new customer friendly products were added to the impressive basket of the Banks products and schemes during the year include:

- Scheme for financing against the pledge of warehouse receipts issued by private warehouses to individual farmers, traders, commission agents, partnership firms, proprietorship concerns who have stored their agricultural commodities in the private warehouses was introduced during the year.

- Dairy Entrepreneurship Development Scheme (DEDS), in association with NABARD, a venture capital scheme with capital subsidy (25%). The scheme covers all districts in the state. This will help in mitigating the shortage of milk in Kerala.

- Finance for Solar Home Lighting System, launched under DRI scheme. Solar products provide reliable and cost effective electricity. There is a wide range of solar products in the market viz. lamps, portable lanterns, road lighting luminaries, single-phase energy meters etc. which are clean, reliable, noise free and pollution free, and free from electric tariff volatility.

- SBT Gold Loan Premium, a new gold loan product aimed at premium customers. The minimum and maximum amount of loan under the product is Rs.25,000/- and Rs.10 lac respectively for a period of 6 months.

- Banking Arrangement with the Kerala Non-Resident Keralites Welfare Board [KNRWB] for the members of the Board, who are NRIs or Ex-NRIs to remit their monthly contribution to the scheme through the Banks Branches.

- SBT School Special, a simplified loan product introduced for educational institutions which fall under service segment as per the classification under MSMED Act, for providing financial support to Education sector.

3.9 Several modifications/improvements have been effected in the existing schemes to meet customer expectations and to facilitate better customer service as shown hereunder:-

- The eligible finance for Home Decor Scheme has been enhanced to 25% of Housing loan amount or Rs. 5 lac whichever is less (from 15% of Housing loan or Rs.1.5 lac whichever is less).

- The Diamond Jubilee Open Term Loan has been simplified to enable SME manufacturing and service segment units with ratings of SB 7 and above eligible

for loan. Maximum loan for manufacturing segment is enhanced to Rs. 250 lac and for Service sector Rs. 100

lac.

- ‘SME Easy Loan scheme, has been liberalised to enable Professional & Self Employed Individuals and Smal Business Enterprises also eligible for loan under the scheme. The maximum loan amount is enhanced to Rs.300 lac for Small Enterprises and Rs.500 lac for Medium Enterprises. The eligibility for Micro Enterprises is however, restricted to Rs.25 lakh.

- Car Loan to MSME units: MSME Current Account holders of the Bank or their family members are also eligible for car loan under the modified scheme. Margin has been stipulated uniformly at 20% of the invoice price.

- The maximum loan limit under Prasanthi Elite Loan for pensioners enhanced to 18 months net pension to pensioners with a maximum of Rs.5 lac. The limit for family pensioners is 15 months of net family pension with ceiling of Rs.1.5 lac and the repayment period fixed at 60 months or completion of 75 years of age whichever comes earlier.

- The "Rent Plus" scheme variant introduced at reduced interest rate for limits sanctioned upto 31st March 2011, to select group of customers who rented out their building to Banks and MNCs, in order to canvass more quality loans.

4. Customer service

4.1 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 enhanced by quality value-added services.

4.2 A well-defined and full-fledged customer grievances redressal mechanism is functioning in the Bank. Reports on the number of complaints received / disposed / pending in the Bank as a whole are submitted to the Banks Board and the Apex Level Customer Service Committee at Head Office. The Standing Committee on Customer Service constituted pursuant to Tarapore Committee recommendations also reviews the quality of customer service extended in the Bank at regular intervals.

4.3 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 redressal of the complaints. The Department

acts as a coordinator between the branch and the complainant and ensures quick disposal of complaints.

4.4 As a proactive measure, apart from acknowledging each complaint on the day on which it is received, 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 significantly. The feedback being received from customers has been encouraging.

An SMS based facility (SMS SBT CARE) has been put in place whereby customers can send their grievances from anywhere by SMS to 98471 98471 from their mobile.

4.5 The updated version of Citizens Charter is made available in booklet form and also in the Banks website which provides customers and the general public with the key information regarding the common areas of customer banker relationship. Similarly the details of service charges levied by the Bank are also published in the Banks website for the information of the public.

4.6 Progress of implementation of Citizens Charters and the Fair Practices Code are also being monitored at Head Office and Zonal Office level customer Service Committee meetings. Inspecting officials are also examining the quality of customer service rendered at the branches.

4.7 Bank has also established a Call Centre with Toll free No. 1800425-5566 enabling the customers/ general public to clear their doubts/ complaints expeditiously. Adequate publicity of the aforesaid facilities available to public is in place both through print and visual media.

4.8 "Customer Day" is observed at all the offices of the Bank on the 15th of every month to enable the customers to voice their grievances or offer suggestions for the betterment of customer service.

4.9 Banking Codes & Standards Board of India (BCSBI) - The Bank is a member of the Banking Codes & Standards Board of India, which is a registered society, sponsored by Reserve Bank of India. The Code of Banks Commitment to Customers is available on the Banks website. This is a voluntary Code, which sets minimum standards of banking practices. The Deputy General Manager (Compliance) is the designated Principal Code Compliance Officer at Head Office. The relative Annual Statement of Compliance has also been submitted by the Bank to the BCSBI.

5. NRI Services

The Bank, the pioneer and market leader in NRI business in Kerala, has been continuously improving its products and services to NRIs. All technology based products and services have been made available to NRIs also, so that they can bank with their most preferred bank from any corner of the globe.

The Representative Office in Dubai, opened in August 2008, is acting as an interface between branches and NRIs to meet their banking needs. Banks extended arms are available in UAE and Sultanate of Oman, the two vibrant and developing countries in the Gulf Cooperation Council (GCC), through its managed Exchange companies, viz., City Exchange LLC in UAE and Global Money Exchange in Sultanate of Oman. Bank has made available Relationship Managers at the door steps of NRIs in UAE, Qatar, Oman, and Bahrain.

A team headed by Chief General Manager participated in the Biennial Convention of Federation of Keralite Associations in North America (FOKANA) at Albeny, USA during July 2010, which was well accepted by American Malayalees and paved way for establishing several new contacts.

The recently developed product, NRI PLATINUM account, has been well accepted by high net worth NRIs, as the product provides special identity to customers and a host of services free of cost. Personalized multicity cheque payable at all branches at par and SBT Gold Card (VISA) that provides complimentary insurance is the special features of the product.

Premium Rupee Account is a special product designed to provide NRIs the twin benefit of interest plus premium in the foreign exchange market. NRE funds invested in this product are absolutely tax-free and retain NRI status for the funds on maturity. The benefit derived from the scheme works out to 8-9% per annum, at present, depending on foreign exchange market conditions.

All transactions of Rs. 5,000 and above are acknowledged through SMS to NRIs. Internet banking facility offered by the bank enables the NRIs to effect transfer of funds within the Bank as well as to other banks in India and also third party transfers, carry out their standing instructions for various payments, rail bookings, fee payments, and also online shopping and opening Term Deposits and Recurring Deposits. It also enables them to view their accounts and transactions.

NRI News Channel, a monthly newsletter containing important news items and information regarding products and services, interest rates etc. useful to NRIs, is circulated

to all NRI constituents through the branches by email.

NRE account opening for new customers sourced by Exchange Companies are now centralized at the Liability Central Processing Centre [LCPC] functioning at Thiruvananthapuram, which facilitates immediate opening of accounts and issuance of Multicity chequebooks and ATM Card to NRIs.

Welcome Kit containing welcome letter, non-personalised chequebook, ATM card and brochures on various products and services are provided with Representative Office, Exchange Companies and Relationship Managers to facilitate issuance to NRIs who approach them for opening accounts. The account is subsequently activated to enable them to carry out the transactions.

The four NRI Branches at Attingal, Mavelikkara, Thiruvalla and Ernakulam and specialized NRI Cells in more than 50 branches in NRI centres provide very specialized and personalized services to the NRIs.

6. Lead Bank Scheme

6.1 The Bank is spearheading the Lead Bank activities in three districts of Kerala State viz. Alappuzha, Kottayam and Pathanamthitta. The District Credit Plans for the year 2010-11 was launched in the Banks lead districts during March 2010 with 58 % increase in outlay over the previous year.

6.2 Considering the importance of District Level Review meetings of Lead Banks, academicians from various fields and successful entrepreneurs were invited as per the recommendation of the Thorat committee on Lead Bank Scheme. The Lead Banks also initiated several innovative activities like outreach programme in unbanked areas, where Banking Ombudsman RBI attended. Kissan Credit Card beneficiaries meetings, Counselling for students seeking educational loans, Financial Literacy seminars and EDPs for different target groups were also arranged in the lead districts.

6.3 The total outlay by all financial institutions in the three Lead Districts for 2010-11 was Rs. 13,801.79 crore of which the Banks share was Rs. 3,270.93 crore (23.70%). The disbursement under Priority Sector Advances in the districts during the year 2010-11 by all financial institutions is Rs. 10,206.66 crore of which the Banks share is Rs. 2,171.82 crore, which constitutes 21.22% of the outlay.

7. Financial Inclusion

7.1 Financial Inclusion 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). 89% of the 1.97 lac No-frills 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 etc. are other initiatives in this direction.

7.2 In conformity with the directions of Reserve Bank of India, the Bank has formulated a Financial Inclusion Plan, which has been rolled out during the year and is, expected to be streamlined by the next two years. This plan for Financial Inclusion will be an integral part of the business plan of the Bank.

7.3 The following steps/activities have been undertaken by the Bank as a part of fulfilling the Banks commitment to Financial Inclusion.

- 29 villages having a population over 2,000 have been allocated to the Bank by SLBC Kerala for providing basic banking services through BF/BC route or by opening branches.

- Bank has decided to provide Basic banking in these villages through the BF/BC route except in Perumanna village in Calicut district, where a new branch was opened on 30th March 2011.

- An MoU has been signed between "Kudumbashree" and Bank for engaging "Kudumbashree as Banking Correspondents for the Bank in the state of Kerala.

- An agreement has been signed between Bank and M/s. Bartronics India Limited, Hyderabad for engaging them as Technical Service Providers for Smart Cards and Financial Inclusion Project of the Bank.

- In Tamilnadu the Bank has been allocated 14 villages for providing basic Banking Services, which will also be covered through the BF/BC route.

- The Bank has set up Customer Service Points in all the 28 villages allocated to the Bank in Kerala and enrolments have started in 16 villages. The services were flagged off on 22nd February 2011 by the Managing Director and Banking Ombudsman, RBI in a very colourful function at Veeranakavu village in Thiruvananthapuram district and given much publicity by the print and electronic media.

- The products offered under the Product name "SBT- SAHAYA HASTHAM" consists of an SB Account (Zero balance), A Recurring Deposit account and an Overdraft (General Credit Card) for Maximum of Rs. 10,000/- for the rural poor.

- Two days training was imparted to 27 Customer Service Providers and their standbys. One day training was also imparted to Branch Managers of 25 Link Branches in Kerala.

- Trusts have been formed for 3 Financial Literacy and Credit Counselling Centres in the 3 districts where Bank has lead bank responsibility ie., Alappuzha, Kottayam and Pathanamthitta districts in Kerala

- An MoU has been signed between Bank and Unique Identification Authority of India (UIDAI) for the Bank to function as Registrars for UID Project of the Government of India on 23rd November 2010.

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

7.4 Rural Self-Employment Training Institutes (RSETIs)

RSETIs have been started by the Bank in Wayanad, Pathanamthitta, Alappuzha and Kottayam for providing skill upgradation training to the rural youth with focus on BPL category. The 4 institutes had trained 9847 persons and 95% of the people are women beneficiaries, majority of the trainees are reported to be successful in starting self-employment ventures. The important courses includes beautician, electrical wiring, ornaments manufacturing, accounting, Computer hardware servicing, aluminium fabrication, kitchen gardening, mushroom cultivation with vegetable growing and off-site programmes like rubber tapping.

7.5 Financial Literacy And Credit Counselling Centre (FLCCs)

FLCC has been established in Banks Lead Districts, along with RSETIs for providing financial literacy & credit counselling. Their major action point includes popularization of financial literacy activities, arranging seminars for counselling students aspiring for higher education.

8. Support to disadvantaged segments

8.1 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 Scheduled Caste / Scheduled Tribes [SC/ST] borrowers. The advance to SC/ST borrowers under Priority sector aggregated to Rs. 1,991 crore. This works out to 11.47% of the banks Priority sector Advances, compared to 0.77% of the banks Priority sector lending at the end of the previous year. The Non Performing Asset position in respect of SC/ST borrowers under Priority Sector stood at about 3% of the outstanding as furnished above.

8.2 Minority Communities [MC] / Other Backward Communities [OBC] / Physically Handicapped [PH] / Ex Servicemen [EX-SER] Cell

The Bank has designated an Officer of General Manager rank as Chief Liaison Officer for OBC Cell and PH/Ex- Servicemen Cell. The Bank has also designated an Officer of Deputy General Manager rank as Chief Liaison Officer for Minority Community Cell assisted by Liaison Officers at Head Office, five Zonal offices, and two Regional Offices to protect the interests of the employees belonging to the respective sections.

The Cell ensures:

- Compliance by the Bank with orders and instructions pertaining to the reservation of vacancies in favour of Ex-Servicemen and Physically handicapped in the matter of recruitment/ promotions and other service benefits.

- Compliance by the Bank with orders and instructions pertaining to the reservation of vacancies in favour of MC/OBC in the matter of recruitment and other service benefits.

- The Bank takes appropriate steps to provide all help and co-operation to the Backward classes Development Corporation.

8.3 Assistance to Minority Communities [MC]

The Bank continues to give due importance in extending financial assistance to meet the credit requirements of the MC borrowers. The advance to MC borrowers under Priority sector aggregated to Rs. 5,908 crore. This works out to 34% of the Banks Priority sector Advances for MC, compared to 22% of the Banks Priority sector lending as at the end of the previous year.

9. Information Technology - Technology Upgradation & IT Initiatives

9.1 With Core Banking Solution (CBS) implemented across all the branches of the bank including the newly opened branches, ITS department is playing a key role in facilitating corporate innovation and growth. The Core Banking System has provided the Bank with 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 alternate channels to customers for transacting their business. The Corporate Data Centre (CDC) is at Belapur in Navi Mumbai. The Core system is a product-based system whereby new schemes of the bank can be introduced easily with global parameter setting

at CDC level. Global setting of parameters of various products, both deposits and loans, are done at CDC. The capacity of the servers and other equipments, and other performance parameters are periodically reviewed and upgradation / addition of new equipment is arranged as and when felt necessary.

9.2 Alternative Delivery Channels: The CBS facilitates effective implementation of Alternative Channels like Automated Teller Machines [ATMs], Internet Banking, and Mobile Banking for extending products and services to the customers. The ATM network was beefed up by adding more ATMs. The Internet Banking facility is recognised to be the best among its class. Mobile Banking Service, which was rolled out last year, is getting acceptance from customers.

9.3 ATMs: The Bank has a network of 833 ATMs, including 244 offsite ATMs. The network of 699 ATMs in Kerala is the largest in the state. All of the ATMs are networked with State Bank Group ATMs numbering over 25,000.

07 new ATMs and 40 Multi Function Kiosks (MFK) were installed during the year. The Banks ATM-cum-Debit cards are accepted in all outlets having Master Card logo. Several facilities such as Visa Money Transfer (VMT), Money Send, SBI Credit Card payment, SBI Life Premium payment, Mobile recharge, Donation, Fee payment, JMET / GATE Application Fee payment, Mobile Banking registration, Cheque Book order etc. have also been enabled in the ATMs.

9.4 The Bank has a card base of 44.44 lac as on 31st March 2011, which translates into an increase of 20.92% over the card base as at the end of the previous year.

9.5 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.

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

- Site-to-site integration was done in March 2011, with NSDL, to enable the customers to view online, their Income Tax Annual Credit statement (Form 26AS) for the current assessment year and past five assessment years.

- Site-to-site integration was done in March 2011, with the University of Kerala, to facilitate e-payment of examination fees, for students and colleges. This procedure is the first of its kind in Kerala.

- e-TDR, e-STDR, and e-RD facilities which enables the customers to open fixed deposits and recurring deposits without branch intervention, were rolled out during the year.

- e-Payment of Kerala Water Authority bills was introduced in August 2010.

- Online Bill Payment facility for customer who does not have Internet Banking Facility was introduced in July 2010. The Branch INB officer can register the biller on behalf of the customer and initiate Autopay facility for payment of utility bills

9.7 Anti phishing measures: Several anti-phishing steps have been taken to protect the interest of the customers including:

- Introduction of mandatory high security SMS passwords for completing all online transactions above Rs.10,000/- per day, other than to own accounts.

- A cooling period of 4 to 16 hours has been introduced for adding newly created beneficiary. A message will be sent to customers mobile phone regarding creation of new beneficiary, as an alert against probable phishing attempt.

- A new facility called "Limited transaction and View" has been introduced, wherein the transaction rights of the customer can be restricted to own accounts opened under the same CIF (Customer Information File).

- A new option has been enabled where the customer can login to the site and register for SMS alerts, which will be updated in CBS.

- Mobile number has been made mandatory both in CIF and temporary address for INB registration.

9.8 Mobile Banking Service (MBS)

Mobile banking provides the customers with another safe, secure, fast and convenient channel for banking transactions. The services provided include enquiry services, funds transfer, demat account services, bills payment mobile top up, m-commerce etc. The daily limit for MBS transaction is Rs. 50,000/- for aggregate of funds transfer & transactions involving purchase of goods & services, with an overall calendar month limit of Rs. 2,50,000/-. 32,519 new Mobile Banking registrations were activated during the year.

Our customers are having the option of using Mobile Banking Service over any of the following four channels viz.

a) Application based b) WAP based c) USSD based d) SMS based.

9.9 A slew of value added applications were developed to make the system more useful to the customers. These include:

- ATM Complaint Management System software: An in house web based application for speedier ATM complaint resolution was implemented. Branches can directly lodge the ATM / POS (Point of Sale) related failed transaction complaints through a simple data entry menu provided in the software.

- Interface for ascertaining the status of Online Loan Applications from the Homepage: Applicants who have applied for loan online can verify the status of their loan application from the website.

- Collection of Customs Duty through e-payment - Software for electronic Data submission: A new interface Package has been developed for Dwarka Branch, which is identified as the e-FPB for Customs duty collection through Internet The package helps to generate various electronic data required for the EASeR-C (Electronic Accounting System for e-Receipts in Customs) system conceived by CBEC

- Customization of "Paysys" application for Higher Education Department, Kerala State:

"Paysys", a web based package which enables Corporates to make bulk payments to their customers through core banking and NEFT, was customized for use by the Higher Education Department for distribution of scholarship to students through Thiruvananthapuram Main and Fort branches.

10. Business Process Re-Engineering (BPR) Initiatives

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

10.2 Centralised Loan Processing Centres for appraisal, sanction and disbursement of loans in Retail, Small & Medium Enterprises segments have been set up at 8 major centres. This has enabled the Bank to reduce the response time in these centres, thereby, improving the level of customer satisfaction. It has also enabled standardization of internal processes leading to improved quality of assets and speeding the delivery time. Banks Rural Central Processing Centre is set up at Palakkad covering all the branches in the District, which has improved the quality of lending at the Centre.

10.3 Multi Product Sales Teams have been established at 7 of the loan CPC centres to target specific markets, for canvassing business. Stressed Assets Resolution Centres (SARCs) have been rolled out at 7 centres for more focused attention on recovery, thereby releasing funds blocked in non-performing assets which can then be utilised for more productive purposes.

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

10.5 As a forerunner to setting up Centralised Clearing Processing Centres at MICR centres, the outward clearing work is centralized at the service branches at the MICR centres of Thiruvananthapuram, Ernakulam, and Kozhikode and Bengaluru. With the introduction of this initiative, the Bank is able to afford credit to the accounts in respect of local clearing instruments on the day following the day of deposit of the cheque.

10.6 Trade Finance Central Processing Centres, aimed at ensuring efficient and uniform handling of transactions related to inland and foreign trade and Bank Guarantees by experienced operating personnel, have been rolled out at Ernakulam and Chennai.

10.7 A Liability Central Processing Centre 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 to the linked branches consisting of ATM cards and cheque books. This facilitates the customers to operate the accounts immediately after opening the account.

10.8 Drop Boxes have been provided at the branches for hassle free and safe handling of instruments deposited. Grahak Mitras have been positioned at select branches to proactively guide the customers in conducting transactions. Relationship Managers have been posted at select branches to extend personalized services to the customers.

10.9 The above major BPR initiatives implemented by the Bank are contributing to improvement of the overall efficiency, service delivery, customers convenience and business growth

11. Internal Control Systems & Supervision

11.1 Integrated Risk Management

The Banks 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. Subordinate to the Board, Risk Management Committee of the Board has been constituted to have an oversight on all the risks assumed by the Bank and to decide appropriate policy and strategy for risk management. 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, etc. As part of credit risk management, the Bank has a structured and standardised credit approval process, which includes comprehensive credit rating of proposals. The market risk is largely managed through adherence to various position limits, stop loss limits, Value at Risk [VaR] limits etc. The operational risk management framework comprises risk and controls self- assessment (RCSA) and identification, measurement and monitoring of various losses experienced by the Bank and mitigation of risks. The risk management objectives will be accomplished by leveraging technology.

The Bank is closely monitoring the roadmap for migration to advanced approaches of Basel-II with respect to all risks by striving to create sufficient and accurate database and ensuring involvement and awareness among all the staff members of the Bank.

During the financial year 2010-11, the following major risk management initiatives were taken:

- New Credit Rating models were introduced for NBFCs (Non Banking Financial Companies) and infrastructure

projects.

- Retail Pool Scoring Models were introduced for personal loans, housing loans, education loans, car loans and two wheeler loans.

- Credit Rating models for trading and manufacturing sector were modified.

- 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, during the quarter October- December 2010, officials from risk management department conducted daylong workshops for the Controllers and the AGMs and Chief Managers heading branches in Thiruvananthapuram, Ernakulum and Kottayam zones and all Branch Managers and Controllers in Mumbai and Delhi regions.

11.2 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.

Liquidity and Interest Rate Risks are identified, measured and monitored by ALM Section through Duration Gap Analysis, Stress Testing on Liquidity and Interest Rate Risks etc. and put up to ALCO for discussion and decision making. ALCO also discusses in detail other statements of Structural Liquidity & Interest Rate Sensitivity, Short Term Dynamic Liquidity, Quarterly Review of Contingency Funding Plan, etc.

The ALM Section prepares the statements of Structural Liquidity & Interest Rate Sensitivity and Short Term Dynamic Liquidity which helps to monitor the liquidity levels vis-a-vis the benchmark levels fixed by RBI / as per Banks ALM Policy and proposes corrective action wherever found necessary. Various interest rate revisions including the revisions of the Benchmark Prime Lending Rate (BPLR) and Base Rate (BR) of the Bank are discussed and decided by the ALCO.

The ALCO also discusses the current financial position of the country on an ongoing basis. The changes in the market are monitored continuously and decision support papers on the current economic developments are put up to the Top Management.

11.3 Inspection and Supervision

The Bank has put in place an effective institutional mechanism for Risk Based Supervision through RBS Cell in Inspection Department. As envisaged by the regulator, the Bank introduced Risk Focused Internal Audit (RFIA) under RBS w.e.f 1st April 2003, where business parameters have been de-linked from the Risk Parameters. With effect from 1st April 2010, score for Business Parameters has been taken out of RFIA

In addition to the regular internal inspection, IS Audit, Compliance Audit, Surprise Inspection, System Audit of Zonal Offices and Head Office departments, etc. are conducted by the Inspection Department.

Following the migration to the Core Banking System, RFIA was revamped by way of revision in Audit Report Formats, rating mechanism, grouping of branches, sampling norms and periodicity of Inspection. The Information System Audit (IS Audit) cell was formed within the Inspection Department

11.4 Credit Audit

The audit of high value credit accounts is undertaken by the Credit Audit Department, with the aim of improving the asset quality of the Bank. Accounts with total exposure of Rs. 2 crore and above are covered under Credit Audit. The Department conducted audit of 1,077 accounts during the year, covering the pre-sanction and post sanction aspects. This includes 14 AUC accounts and 73 accounts with exposure below Rs. 2 crore and above Rs.1 crore on a random basis during the year.

With the integration of Credit Audit with Risk Focussed Internal Audit (RFIA), the marks awarded by the credit auditor are normalized by the internal auditors under Credit Risk Management, wherever necessary. Monthly performance reports of the department are regularly submitted to the Audit Committee of the Executives and the review reports are being submitted to the Audit Committee of the Board at its next meeting for information.

11.5 Inter-Office Reconciliation

As per RBI guidelines, all high value debit entries of value Rs.1 lac and above and 99.99% of 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 2010 achieving 100% reconciliation of debit entries. The Bank is committed to perform better than the target set by RBI and shall aim at reconciling all entries within three months of their origin.

11.6 Compliance

The Bank ensures that GOI and RBI directives/instructions received are being complied with promptly. Quarterly review reports on the compliance status and performance of the department are regularly submitted to the Audit Committee of the Board for information.

11.7 KYC norms & AML/CFT measures

The Bank has put in place a Board approved revised policy and procedural guidelines on Know Your Customer (KYC)/ Anti Money Laundering (AML) /Combating of Financial Terrorism (CFT) measures in line with the master policy and subsequent guidelines issued by Reserve Bank of India. A dedicated KYC-AML Cell is functioning in the Head Office to oversee the compliance of KYC/AML/CFT measures. Deputy General Manager (Compliance) is the designated Principal Officer for KYC/AML in the Bank.

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

Data cleansing of the existing database of customers is now under progress to update in the Core Banking System [CBS] all relevant customer data. The progress in the implementation is being reported to the Board periodically.

KYC/AML Cell is publishing a quarterly newsletter and maintaining 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 programmes are conducted regularly through seminars on Zonal/ Regional Office levels, Learning Centers and branch visits.

11.8 International Financial Reporting Standards (IFRS)

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 April 1, 2013 in compliance with the Converged IFRS (IND-AS). The

Bank being a member of State Bank Group will be taking a common group approach on convergence to IFRS. The IFRS cell at Head Office coordinates with relevant Departments for collection, compilation and submission of data as required by the parent Bank (State Bank of India) for preparation of Consolidated Financials by them under Converged IFRS. The Bank shares a common IT platform with the State Bank of India and any changes made in Core Banking System as per the requirement under IFRS will also be available to the Bank. The IFRS Cell had arranged a presentation on "Implementation of IFRS-Challenges for Indian Banks" by Shri. P.R. Ravi Mohan, Chief General Manager, Reserve Bank of India, to the Top Executives of the Bank to create awareness on the challenges and issues for the Bank on transition to Converged IFRS".

12. Security arrangements

12.1 The year under review was largely free from security incidents, except for ten attempts / security incidents this year (compared to 8 last year). However there was one major incident where Rs. 1 Crore cash was lost while in transit near Chennai. But the resultant loss was contained at Rs. 1.24 lacs, as most of the stolen cash was recovered soon after, thanks to quick action by the functionaries and police authorities. There were seven theft attempts on ATMs, a minor fire incident and minor attempts of break in on bank b


Mar 31, 2010

BANK’S PERFORMANCE

2.1 Working Results and Operating Profit

Operating profit (after staff provisions) of the Bank for 2009-10 stood at Rs.1,055.87 crore as against Rs.1,056.27 crore for the previous year. Net Profit for the year stood at Rs.684.27 crore as compared to Rs.607.84 crore in 2008-09. The Earnings per share (of Rs.10 face value) improved from Rs.121.57 to Rs.136.85.

2.2 Dividend

The Bank declared a higher dividend of 160% to the shareholders, entailing a total payout of Rs.93.60 crore, including dividend tax. The Pay-out Ratio works out to 12.05% of the distributable profit (excluding dividend tax).

2.3 Capital Augmentation & Capital Adequacy

The Bank’s capital funds improved from Rs.3,843.34 crore as at the end of March 2009 to Rs.4,397.23 crore as at the end of March 2010. The Bank has migrated to Basel-II framework with effect from 31st March 2008. The Capital Adequacy Ratio under Basel II stood at 13.74% in March 10 as compared to 14.03% in March 09 against a minimum of 9% stipulated by RBI. The Tier-I CRAR on this date is 9.24% as against 8.59% as at the end of the previous year.

2.4 Deposits

Total deposits of the Bank registered a growth of 21.03%, reaching the level of Rs.50,883 crore as on 31st March 2010 as against Rs.42,041 crore as on 31st March 2009. Personal Deposits grew by Rs.3,891 crore to reach Rs.32,478 crore. As a consequence of economic slowdown experienced in the Gulf countries, particularly the UAE, the NRE Deposits were subdued during the year. Other factors like the low NRE interest rates, unfavourable exchange rates, large scale conversion of NRI deposits to domestic deposits and the lure of real estate sector also contributed to the subdued trend. NRI deposits stood at Rs.10,837 crore and constituted 21.30% of the Total deposits of the Bank as on 31st March 2010.

2.5 Advances

Total advances of the Bank registered a growth of 17.97% during the year and reached a level of Rs.38,461 crore as on 31st March 2010 as against Rs.32,601 crore as on 31st March 2009. The main contributions came from the C&I segment [growth of Rs.3,242 crore] and Personal segment [growth of Rs.1,974 crore]. The Bank’s Retail lending stood at Rs.19,688 crore and constituted 51.19% of the credit portfolio as at the end of March 2010. The Credit Deposit Ratio of the Bank stood at 75.59% as on 31st March 2010 as against 77.54% as on 31st March 2009.

2.6 Business Turnover

The business turnover of the Bank stood at Rs.89,345 crore on 31st March 2010, registering a growth of 19.70% from the level of Rs.74,642 crore as on 31st March 2009.

2.7 Market Share

Bank’s All India market share in deposits has improved from 1.08% on 27th March 2009 to 1.09% on 26th March 2010. In Advances the share has improved from 1.15% to 1.18% in the same period. The Bank continued to maintain its position as the premier bank in Kerala with a market share in business of 22.56% as at December 2009 (as per latest published Data by Reserve Bank of India as on date of this report) with 14.23% of the total branch network in the state.

2.8 Priority Sector Lendings

The Bank continued to lay special emphasis on lending to the Priority Sector in conformity with the national policies, expectations and fulfillment of social objectives. Bank’s Priority Sector Lendings increased from Rs.13,015 crore as at the end of March 2009 to Rs.14,091 crore as at the end of March 2010, recording a growth of Rs.1,076 crore. As at March 2010, Priority Sector advances [including eligible investments] constituted 43.87% of the Adjusted Net Bank Credit [ANBC] against the benchmark of 40%.

2.9 Agricultural and Rural Finance & Self Help Groups

Bank has disbursed an amount of Rs.3,083 crore under agriculture segment as at the end of March 2010 against the Special Agricultural Credit Plan target of Rs.3,000 crore. The level of lending to Agriculture segment (including eligible investments) stood at Rs.3,414 crore as on 31st March 2010 which represents a growth of Rs.461 crore over the previous year. Bank’s Agriculture Advances constitute 10.33% of ANBC.

An intensive Agricultural lending campaign titled “SBT HARITOTSAVAM-2009” was conducted during Jul-Sep 2009 with a lending target of Rs.500 crore and 70,000 new accounts under various heads in Agriculture segment. The campaign was a grand success achieving disbursements aggregating Rs.502 crore under 94,000 new accounts. During the current fiscal 28,804 Kisan Credit Cards (Working capital facility to farmers) and 5,311 Kisan Gold Cards (Investment credit to farmers) were issued with an outlay of funds of Rs.188 crore and Rs.172 crore respectively. In order to spread the message of lending to needy farmers and to create awareness among the rural folk on the various agricultural schemes being implemented in the Bank, a publicity van was plied through the rural areas.

The security norms were relaxed for crop loans up to Rs.1 lac in respect of farmers having legal ownership of agricultural land with good repayment track record for last two years to improve the lending to agriculture and bring maximum number of farmers to the bank’s books. Under the SGSY scheme, exemption in collateral security for individual loans was raised from Rs.50,000/- to Rs.1 lac and Group loans from Rs.5 lac to Rs.10 lac respectively.

Bank has been committed in promoting Self Help Groups and financing them through MFIs and NGOs. 78,677 groups were assisted so far with a financial outlay of Rs.542 crore. Bank during the year financed 37 families with an outlay of funds of Rs.29 lac under Bhavansree Scheme for constructing houses to members of Self Help Groups / Neighbourhood groups living below poverty line.

With a view to pass on the benefit of technological advancement to the farmers, a utility has been provided for registration of applications on-line in respect of Agricultural advances for the use of general public. The facility is available in the internet website of the Bank.

Farmers’ Meets were conducted in most of the rural and semi-urban branches with the involvement of NABARD officials and Government Development Departmental functionaries to create awareness among the public of the various agricultural products. The 210 Farmers Clubs functioning in rural and semi urban areas act as catalyst in rural transformation.

2.10 Lending to Micro, Small And Medium Enterprises (MSMEs)

Bank continued its active support to Micro, Small and Medium Enterprises (MSMEs). Lending to this segment has recorded a growth of Rs.885 crore to touch Rs.7,412 crore as on 31st March 2010.

The impact of the economic slowdown continued for the better part of the year, though recovery was seen in many sectors. Manufacturing units, especially under the traditional sectors like coir, cashew and textiles, which have a high dependence on exports, continued to face fewer orders. The relief measures introduced to assist the affected units like providing of additional working capital, term loan, relaxation in margin requirements, longer period for financing receivables, reducing interest rates etc, helped many units survive the difficult period. Some of the measures taken for assisting the units affected by the economic slowdown include:

i. Additional working capital limits upto 20% of the existing working capital facilities.

ii. New term loan facility for purchase of generator sets and also machinery/tools/ other fixed assets.

iii. MSME Care Centres have been opened at all Zonal Offices and Regional Offices at Mumbai and Delhi for rendering support to units. Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) - The Bank is a Member Lending Institution under the CGTMSE scheme for providing collateral free loans. Workshops were conducted in all Regions of the Bank to improve the awareness of the operating staff about the scheme. Meetings of entrepreneurs were also conducted to educate them about the scheme. So far the Bank has covered 5,914 loans amounting to Rs.146 crore under the scheme.

2.10.4. The Bank’s Technical Consultancy Cell carried out 15 project appraisals, rehabilitation studies and industry specific studies during the year. 3 Entrepreneurship Development Programmes (EDPs) were conducted by the Bank during the year.

2.11 Commercial & Institutional Finance

Despite the repercussions of global recession during the year, the Bank performed well under the segment by tapping the potential in the market and C&I advance of the Bank reached Rs.19,198 crore as on 31st March 2010. Almost half of Bank’s Total Advances comes under this segment, which comprises financing Trade and Services, Industry, Infrastructure, financing corporate customers and other institutions.

The existing loan policy of the Bank was revised comprehensively in January 2010 by incorporating latest directives from RBI/ SBI. The policy on valuation of properties, empanelment of valuers, etc has been revised in order to improve smooth and quick delivery of credit.

Project Finance Unit

Project Finance Unit was formed in the Bank in order to develop project appraisal skills in-house, and also to avoid good proposals go past the Bank for want of Techno- economic viability (TEV) study. The unit undertakes Technical and Financial appraisal of small and medium sized projects, which have not been vetted by agencies of national/international repute. During the period ending March 2010, PFU has conducted TEV study on 43 projects worth Rs.1,125 crore.

2.12 Personal Finance

The Bank continued to be active in extending finance to Personal Segment, mainly by way of Housing Loans, Car Loans and Educational Loans. The Personal segment Advances went up to Rs.12,696 crore as at March 2010 from Rs.10,722 crore as at the end of the previous year, recording a growth of 18%. As many as 24,517 Housing Loans aggregating Rs.2,330 crore were extended during the period under review, taking the outstanding Housing Loan level to Rs.6,144 crore as at 31 March 2010, an improvement of 26.47% over March 2009 level of Rs.4,858 crore. Similarly 24,121 Car Loans aggregating Rs.741 crore were extended during the same period, taking the outstanding Car Loan level to Rs.1,324 crore as at 31 March 2010, which is higher by 35% over March 2009 level of Rs.984 crore.

As in the previous year, the Bank has granted the maximum number of education loans in the State of Kerala. The Bank extended over 30% of the total number of the loans sanctioned in Kerala. During the year under report, Bank sanctioned 14,611 loans amounting to Rs.416 crore for various courses to deserving students. The total amount outstanding increased by over 24% to Rs.1,682 crore from Rs.1,354 crore last year.

2.13 Assistance to SC/ST/Minority Community (MC)

The Bank continues to give due importance in extending financial assistance to meet the credit requirements of the SC/ST/MC borrowers. The advance to SC and ST borrowers under priority sector aggregated Rs.1,562 crore and Rs.3,123 crore for MC.

This works out to 10.77% of the Bank’s priority sector advances for SC/ST and 21.53% of the Bank’s priority sector lending for MC. In the previous year this was 8.48% for SC/ST and 17.55% for MC of the Bank’s priority sector lending. The non-performing asset position in respect of SC/ST borrowers under Priority Sector stood at 2.72% of the outstanding.

2.14 Treasury and International Operations

Bank’s total forex turnover during the year for merchant transactions (including exchange company transactions) was Rs.32,197 crore compared to Rs.33,582 crore during the previous year. Inter bank turnover was higher at Rs.3,66,209 crore as against Rs.2,12,102 crore during the previous year. The total profit from forex operations during the year was Rs.77.91 crore as against Rs.86.64 crore as on 31st March 2009.

The Investments of the Bank stood at Rs.16,024 crore as on 31st March 2010 as against Rs.13,232 crore as on 31st March 2009 and the average investments during 2009-10 was Rs.14,960 crore as against Rs.11,922 crore during 2008-09. The revenue from investment operations (interest and dividend) for the year was Rs.1,105 crore as against Rs.860 crore for the previous year. The average yield on investments was at 6.92% during the year as compared to 7.30% during the year ended 31st March 2009. The Bank earned a profit of Rs.78.99 crore from Treasury Operations during the period under report.

2.15 Government Business

The Bank conducts Government business in 107 branches in Kerala and 2 branches in Tamil Nadu. Further, 196 branches (136 branches in Kerala and 60 outside Kerala branches) collect Direct Taxes (CBDT) and 148 branches in Kerala collect Indirect Taxes (CBEC). Bank has launched e-payment facility for Direct and Indirect taxes and Commercial Taxes of Governments of Kerala and Maharashtra. As many as 2.62 lac e-payments aggregating Rs.2,360 crore were made using the On-line Commercial Tax payment facility. 14 Non Banking

Treasuries have been converted as Banking Treasuries and linked to the respective branches during 2009-10. The market share of the Bank in the total turnover of Kerala State Government transactions for 2009- 10 works out to 73.77% compared to 72% in 2008-09.

3. Marketing Initiatives and Development of New Products

3.1 Marketing initiatives aimed at customer relationship management and customer acquisition assumed a new dimension by organizing massive campaigns for canvassing Agricultural Loans and other retail loans, and for augmenting deposits. Conducting intensive drives during festive seasons was one of the strategies adopted to enhance the business level and customer base.

3.2 The marketing efforts were supplemented by high intensity advertising campaigns spanning print, audio, video and web media. These efforts brought about a palpable improvement in the image and visibility of the Bank across the length and breadth of the country.

3.3 Aishwaryotsav- Retail Loan campaign: Special Home loan and Car loan schemes were introduced in connection with Onam festival from 17th August 2009 to 30th November 2009, with differential interest rate fixed for first three years. The well received campaign ultimately helped the Bank to bag 8,528 new Housing loan accounts with an outlay of Rs.800 crore and 11,269 new car loans with a total outlay of Rs.348 crore.

3.4 SBT Mahotsav deposit mobilization campaign was celebrated during the period between 2nd November and 16th December 2009 with a specific target to increase the share in CASA Deposits, Card rate deposits and CASA account numbers. It helped the Bank to mop up Rs.1,872 crore of deposits and 1.58 lac new accounts.

3.5 New Products & Business Initiatives

The following new customer friendly products were added to the impressive bouquet of the Bank’s products and schemes during the year:

- EZ Trade - 3-in-1 facility for Demat and Online Trading, highly secure integrated platform comprising i) Savings bank/ Current/Overdraft account ii) Demat account and iii) Trading account. This facilitates the customers to access their Online Demat and Trading accounts from anywhere, anytime with paperless and hassle-free processes. This facility, ntroduced in June 2009, is available in 58 branches.

- “SBT BIZ” with Minimum Balance of Rs.25,000/- and “SBT Shakthi” a special Current Account with fee/subscription collection functionality and minimum balance of Rs.25,000/- were launched to enhance the share of Current Accounts in the Deposit Mix and to bring down the cost of deposits.

- Sukanya Deposit Scheme: A new deposit scheme was introduced exclusively for girl child aged between 10 and 18 years to commemorate National Day for the Girl Child.

- SBT Nano Car Booking Funding Scheme: After entering into a tie-up with M/s Tata Motors Ltd. a loan scheme for booking TATA Nano car was introduced where 00% of the booking amount is advanced on simple terms.

- “ASBA” - Applications Supported by Blocked Amount” - has been launched by the Bank with the product name SBT e- Invest, which facilitates investors to apply for public issues. The application money is blocked in the investor’s account til allotment is finalised and the person continues to earn interest on the application money till the amount is transferred from the account. The investor need not bother about refund since money remains in the account

- Prasanthi Elite Loan for pensioners: A loan scheme to cater to the needs of elite group of pensioners has been introduced with a maximum limit of Rs.5 lac.

- Swagatham - A scheme for returning non- residents - In the backdrop of a large number of non-resident Keralites returning due to the global recession, the Bank ntroduced a scheme to provide financial assistance to enable them to take up manufacturing, service, trade and agriculture activities. The scheme has generated a lot of goodwill for the Bank amidst the expatriates.

- “XPRESS Remit”, a new online remittance facility in Foreign Currency, introduced by the Bank in association with SBI GLS, enables customers in US and UK to make remittances from their desktop, round the clock to their account with SBT, through Automated Clearing House (ACH) mechanism.

- Vishwa Yatra Foreign Travel Card (VYFTC) - Bank has introduced VYFTC on 13 November 2009 in association with State Bank of India and VISA to meet the demands of customers going abroad and to provide a convenient, cost effective and more secure alternative to carrying foreign currency / travellers cheques.

3.6 Electronic Payment Systems

The Bank has been able to bring about better awareness among the customers on using electronic mode of remittances. The Payment & Settlement Group functioning at Integrated Treasury, Mumbai, attends to electronic remittances like RTGS/NEFT and Group Payment [GRPT] transactions and the funds settlement between the Bank and other Banks/RBI. The total number of outward electronic messages (RTGS/NEFT/ GRPT) emanating from branches has ncreased from 74,617 to 1,49,47 registering 100.32% increase during the year.

3.7 Other modifications/ additions in existing schemes

Based on market studies and the feedback received from branches as well as customers, some of the schemes were modified/ revamped during the year, to facilitate better customer acceptance.

- Reverse Mortgage Loan Scheme extended to all branches.

- Suvidha Loan amount limit increased to Rs.1 crore.

- Maximum loan amount in Car loan enhanced to Rs. 30 lac.

-The maximum amount of deposit in Super Surplus scheme increased to Rs.1,00,000/-

- Interest concession of 0.25% on card rate on Housing loans, Car Loans and Personal Loans under Corporate Salary Package.

- “Home Appliances Dealers Plus” and “Distributors Plus” schemes - reduction in interest rate and relaxing the eligibility criteria.

Upward revision of limit cap to Rs.200 lac for “Pharma Plus” scheme.

- Warehouse receipt financing for farmers and traders engaged in Produce marketing - the maximum cap per borrower under the scheme for financial assistance against warehouse receipt issued by National Bulk Handling Corporation increased from Rs.2 crore to Rs.3 crore.

- Special Drought Relief Scheme to help the farmers affected by drought and weak monsoon - Minor Irrigation Loan with reduced interest rate and extended repayment periods.

- Special concessions to support the farmers who have been affected by weak monsoon by extending crop loans at reduced interest rates.

- The Traders’ Special scheme modified to improve the quality of assets

- Doctors’ Special modified with interest rate changes and higher loan amount.

- Interest rate and charges on Bill Discounting under Inland Letter of Credit Scheme revised in line with the market condition to make the product the best in the market.

- Collateral security norms for lending to RTO liberalized.

3.8 Tie-up arrangements

The Bank has tie-up arrangements with various manufactures/dealers/ organisations for improving business levels and accelerated customer acquisition.

- Maruti Suzuki India Ltd.: The Bank has a tie-up with Maruti Suzuki India Ltd. as preferred financier for extending finance for purchase of Maruti cars. The Bank has extended maximum loans for Maruti Cars among Associate Banks. The 15,667 such loans extended by the Bank constitute 30% of such loans extended by all the Associate Banks put together and represent an improvement of 46% over the previous year.

- Hyundai Motors India Ltd.: The Bank entered into a tie-up with Hyundai Motors India Ltd. as preferred financier for extending finance for purchase of Hyundai cars.

- Mahindra & Mahindra Ltd : The Bank has entered into a tie-up with Mahindra & Mahindra Ltd. as preferred financier for extending finance for purchase of passenger vehicles of M&M.

- Commercial dairying is picking up as a rural enterprise in Kerala. The farmers have to depend on professional milkers for milking, which is costly. To mitigate the difficulty, Malabar Regional Co-operative Milk Producers Union (MRCMPU) under MILMA has entered into an agreement with M/s De Laval India to deliver milking machines at discounted rate to the dairy farmers of Malabar Region. The bank has formulated a scheme for financing of milking machine under this tie-up.

4. Cross Selling

4.1 The Bank continues to make efforts to meet the needs of the customers for other investment channels like Insurance, Mutual Funds etc through tie-up arrangements. The income from such activities has also served to improve the Non-Interest income of the Bank. Income from Cross selling has improved by more than 27% from Rs.9.63 crore in FY 2008-09 to Rs.12.19 crore in FY 2009-10. SBI Life Insurance business improved substantially by more than 43%. General Insurance business turnover in tie- up with United India Insurance Company and income generated thereon have marginally gone up by 1.7%. The Accident Insurance policy, SBT Uni Suraksha, carrying Accident Death Cover of Rs.5 lac, has gained more popularity. More than 37 families, most of them poor, have benefited from settlement of claims arising out of death of policyholders. The number of such policies issued has crossed 2 lac. Efforts are afoot to improve sourcing of applications for SBI cards through the Branches.

4.2 During the year as many as 244 members of Bank’s staff were trained and qualified as AMFI Certified Employees (ACEs) authorised to handle Mutual Funds, taking the total number of ACEs to 812. In order to improve the SBI Life business, Bank trained several employees/officers. There are as many as 902 employees qualified as Certified Insurance Facilitators (CIFs) out of which 171 employees qualified during the FY under report. With this the Bank has moved closer to the objective of having an ACE and a CIF each in all branches.

4.3 Bank covered a record number of more than 15,000 Housing and Car Loans during the year under Credit Protection facility of Dhanaraksha provided by SBI Life which covers the loan outstanding as per repayment Schedule in the event of unfortunate death of borrowers. The scheme effectively provides succour to the bereaved family while preventing the loan account from becoming a stressed/non- performing asset.

4.4 Grameen Shakthi, a micro Insurance product, which covers the life of SHG borrowers to the extent of Rs.50,000 at a nominal cost of Rs.601 per annum, was also launched and marketed to benefit

5.000 borrowers.

5. NRI Services

5.1 SBT, the market leader in NRI business in Kerala, has been continuously improving its products and services to NRIs. All technology based products and services have been made available to NRIs also, so that they can bank with their most preferred bank, SBT, from any corner of the globe. The Representative Office in Dubai, opened in August 2008, is acting as an interface between branches and NRIs to meet their banking needs. Bank’s extended arms are available in UAE and Sultanate of Oman, the two vibrant and developing countries in the Gulf Cooperation Council (GCC), through the Bank managed Exchange companies, viz., City Exchange LLC in UAE and Global Money Exchange in Sultanate of Oman.

5.2 The recently developed product, NRI PLATINUM account, has been well accepted by high networth NRIs, as the product provides special identity to customers and a host of services free of cost. Personalized multicity cheque payable at all branches at par and SBT Gold International Debit Card (VISA) that provides complimentary insurance are the special features of the product.

5.3 The MoneyTrans e-Remit, a web based fast and secure facility for remittances from Gulf countries, introduced by the Bank is a unique product well received by the customers and Exchange Companies. The remittances through the scheme will reach the accounts with the bank directly, immediately on upload and will be acknowledged by SMS/email to the remitter. This facility has been extended to 25 exchange companies that are having drawing arrangements with the Bank. This facility is in addition to the existing Rupee draft drawing facility and Swift remittance. Remittances through e-Remit numbered 24.36 lac aggregating Rs.9,826 crore during 2009-10 as against 13.46 lac aggregating Rs.5,929 crore during 2008-09.

5.4 All credits of Rs.5,000 and all debits above Rs.25,000 are acknowledged through SMS to NRIs. Internet banking facility offered by the bank enables the NRIs to effect transfer of funds within the Bank as well as to other banks in India and also third party transfers, carry out their standing instructions for various payments, rail bookings, fee payments, and also online shopping. It also enables them to view their accounts and transactions.

5.5 NRI News Channel, a monthly newsletter containing important news items and information regarding products and services, interest rates etc. useful to NRIs, is circulated to all NRI constituents through the branches by email.

5.6 Opening of new NRE account sourced by Exchange Companies is now centralized at the Liability Central Processing Centre [LCPC] functioning at Thiruvananthapuram, which facilitates immediate opening of accounts and issuance of Multicity cheque book and pass book to the customers.

5.7 ISB Helpdesk attached to Foreign Exchange Dept., Ernakulam attends to queries relating to various remittances made from Gulf countries. ATM Helpdesk, Internet Banking Helpdesk and NRI Helpdesk attached to Head Office, support the NRIs to resolve all their grievances in respect of their accounts and transactions.

5.8 The four NRI Branches at Attingal, Mavelikkara, Thiruvalla and Ernakulam and specialized NRI Cells in more than 50 branches in NRI centres provide specialized and personalized services to the NRIs.

6. Business Process Re-engineering (BPR) Initiatives

6.1 The Bank has embarked on implementation of various BPR initiatives beginning from February, 2005, with the objective of improving performance and enhancing customer service to global standards, by leveraging on its core competencies, state of the art technology and redesigned operating architecture.

6.2 Centralised Loan Processing Centres (CPCs) for appraisal, sanction and disbursement of loans in Retail, Small & Medium Enterprises segments have been set up at 8 major centres, resulting in improved quality of assets and shorter turnaround time in extension of loans. Bank’s Rural Central Processing Centre functions at Palakkad covering all the branches in the District and improving the quality of lending to this segment.

6.3 Multi Product Sales Teams [MPSTs] have been established at seven of the loan CPC centres to target specific markets, for canvassing business. Stressed Assets Resolution Centres (SARCs) have been rolled out at 7 centres in Kerala for more focused attention on recovery, thereby releasing funds blocked in non-performing assets which can then be utilised for more productive purposes.

6.4 Relationship Managers have been posted at select branches to extend personalized services to the customers. Grahak Mitras have been positioned at select branches to proactively guide the customers in conducting transactions. Drop Boxes have been provided at the branches for hassle-free and safe handling of instruments deposited. Currency Administration Cells, which facilitate Cash transmittal between Chest and non-chest branches to save the cost involved with idle cash, have been rolled out in 11 centres

6.5 Pension processing has been centralized at the Centralised Pension Processing Centre set up at Thiruvananthapuram, covering all pensioners drawing pensions from any of the branches in Kerala State, ensuring accuracy in pension calculations, timely disbursement of pension and quick settlement of transactions.

6.6 As a forerunner to setting up Centralised Clearing Processing Centres at MICR centres, the outward clearing work is centralized at the MICR centres of Thiruvananthapuram, Ernakulam and Kozhikode. With the introduction of this initiative, the Bank is able to afford credit to the accounts in respect of local clearing instruments on the next day of deposit.

6.7 Trade Finance Central Processing Centres [TFCPCs], aimed to ensure efficient and uniform handling of inland and foreign trade finance related transactions and Bank Guarantees by experienced operations personnel, have been rolled out at Ernakulam and Chennai.

6.8 A Liability Central Processing Centre 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 will provide to branches pre-generated Welcome Kits consisting of ATM cards and cheque books, facilitating the customers to open and operate the accounts within a short span of time.

7. Information Technology - Technology Upgradation & IT Initiatives

7.1 With the Core Banking Solutions implemented across all the branches of the bank including the newly opened branches, IT department is playing a key role in facilitating corporate innovation and growth. In order to minimize damage to network equipment, several proactive actions were taken such as installing Surge arresters in lightning prone branches.

Branches having frequent connectivity issues were provided with VSAT to prevent branch isolation. Branches were rerouted to nearest City Aggregation Points (CAP) to improve network performance and reduce BSNL channel charges. The upgraded version of Antivirus named SEP is installed in all the networked users, standalone PCs & Laptops to protect the Network from operational risks due to the virus attacks and to ensure full protection against virus/ worms.

7.2 Alternative Delivery Channels

The Bank has 726 ATMs as on 31st March 2010, including 222 offsite ATMs. The Bank’s network of 611 ATMs in Kerala is the largest in the state. All ATMs are networked with State Bank Group ATM Network of over 21,500 ATMs. In addition to withdrawal of cash round the clock, State Bank Group customers can transfer funds up to Rs.50,000/- to accounts within the Group (Card to Card Transfer) using ATM.

The Bank has an ATM-cum-Debit card base of 36.75 lac as on 31st March 2010, which represents an increase of 21.40% over the position as at the end of the previous year. The total number of active cards constitutes 96.13% of the total operative Savings Bank accounts.

The average number of hits of the ATMs during the period under review is 262. The Bank’s ATM uptime is 94.86% during 2009-10. The total number of ATM transactions put through during the year was 489.94 lac involving a sum of Rs.12,280 crore. The total number of POS (Point of Sale) transactions during the year was 4.86 lac involving a sum of Rs.106 crore.

VISA Gold Card - an International ATM cum Debit card working on VISA platform with higher maximum limit on daily cash withdrawal - was introduced for the benefit of High Networth customers.

Internet Banking - The Bank offers a convenient and efficient Internet Banking [INB] facility. Existing 128 bit SSL (Secured Socket Layer) Encryption has been enhanced to 256 bit EVSSL (Extended Validation Secured Socket Layer) Encryption, to provide more security to INB customers. The total number of INB customers increased from 1.60 lac as on 31st March 2009 to 2.67 lac as on 31st March 2010. The number of transactions and value of transactions put through Internet Banking increased by 193.15% and 188.39% respectively on year-on-year basis.

The Internet Banking facility has also enabled very significant Government to Customer [G2C] and Business to Business [B2B] transactions. The online payment of Commercial Tax of Kerala State Government introduced in the month of September 2009 was a landmark event. This was followed by Online payment of Commercial Tax of Maharashtra State Government introduced in the month of February 2010. Supplier Payment has been enabled for Hindustan Petroleum Corporation Ltd., [HPCL] in the month of

February 2010. Corporate customers (dealers) having accounts with the Bank can now remit online to HPCL’s selected accounts.

Mobile Banking Service (MBS), another alternative channel for banking/non-financial transactions, was started on 25th July 2009. This helps the Bank to provide the customers with another channel for banking transactions, which is safe, secure, fast and convenient. The daily limit for 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.

Several value added applications were developed to make the system more useful to the customers. These include:

- Corporate Payment Gateway - a Web based package - is developed in-house enabling Corporate to make payments through core banking and NEFT Internet Web Interface for corporate users was developed using e-token double factor authentication.

-Auto Debit Facility, a package developed and ready for implementation to facilitate the regular bill payments of corporates such as Kerala Water Authority (KWA), Non Keralites Welfare Board etc. The mandates have to be registered by the customer with the Bank to enable the payment of bills on due date.

- Auto SMS generation through SBI gateway: The SMS Solution offered by State Bank of India has been implemented for generating SMS Credit alerts and other communications to NRI Customers. Installment due intimation on loans etc are now routed through the new channel, which is very cost effective and scalable.

- The Bank’s website was revamped during the year to make it more efficient and user- friendly A web based online loan request package has been developed and linked from the homepage. Customers can directly apply for the Housing loan, Education loan, SME and Agriculture Loans through this website. Necessary provisions are given in the software for routing the application to Loan Cell at Head Office for preliminary scrutiny and for forwarding it to the respective branch for further processing.

8. Lead Bank Scheme

8.1 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 2009-10 were launched in the Lead Districts well in time. The various mandatory meetings in all the blocks of the Lead Districts were conducted strictly in accordance with the guidelines issued by RBI. The Bank had initiated several developmental programmes like Entrepreneur Development Programmes, Farmers’ Meet and Planters’ Meet for different target groups in the Lead Districts.

8.2 The total outlay under Priority Sector by all financial institutions in the three Lead Districts for 2009-10 was Rs.8,735.50 crore of which the Bank’s share was Rs.1,840.96 crore. The estimated disbursement under Priority Sector advances in these three districts for the year 2010-11 by all financial nstitutions is Rs.13,801.76 crore of which the Bank’s share is Rs.3,030.51 crore, which constitutes 22% of the outlay.

9. Financial Inclusion

9.1 Financial Inclusion through deepening and widening of financial services is one of the key challenges before the Indian Banking sector. Financial inclusion is the delivery of financial services at an affordable cost to the vast sections of disadvantaged and low- income group. Achieving financial inclusion is seen necessary to improve and achieve social inclusion. In response to the RBI’s directives, the Bank has formulated a Financial Inclusion Plan to be rolled out over the next three years. This plan for Financial Inclusion will be an integral part of the business plans with the following key objectives:

- Effecting improvements within the existing formal credit delivery mechanism.

- Suggesting measures for improving credit absorption capacity especially among rural folk

- Evolving new models for effective outreach

- Leveraging on technology based solutions.

The Bank proposes to implement this full- fledged Financial Inclusion Plan, approved by the Board, over the next three years. The Bank has set up a separate Financial Inclusion Department to monitor and implement the plan, headed by an officer in Senior Management grade.

9.2 The Bank crossed the Million mark in ‘Janapriya’ No-frills accounts, opening ,98,558 such accounts during the year to reach 10,10,978 accounts. These constitute about 45% of the total number of accounts opened by all public sector banks in the state of Kerala. By way of mainstreaming Self Help Groups, Joint Liability Groups, etc, the Bank has opened 80,000 accounts. Biometric Smart Card pilot project, implemented in Nedumkandam under a

Business Correspondent / Facilitator Model, will be extended to the other centres.

9.3 Financial Literacy, Credit Counselling And Training

The Bank has established Rural Self- Employment Training Institutes (RSETIs) and Financial Literacy and Credit Counselling Centres (FLCCs) during the year in its Lead Districts viz. Pathanamthitta, Alappuzha and Kottayam. The Wayanad Rural Micro Training Institute [WRMTI] established in 2005, was converted to an RSETI. The RSETIs will support the socio-economic development of the villages, by imparting vocational training to disadvantaged sections of the society to enable them to take up gainful economic activities. The RSETIs have trained 6,382 persons in Wynad and Pathanamthitta. 95% of the beneficiaries are women. 60% of the trainees are reported to be successful in starting self-employment ventures, with credit assistance from the Bank. The FLCCs provide free financial literacy/education and credit counseling, including education on responsible borrowing, proactive and early savings. They will also extend debt counseling to individuals who are indebted to formal and/or informal financial sectors.

10. Industrial Rehabilitation

10.1 Bank’s approach to Asset Management includes revival of viable sick industrial units as an important strategy. Rehabilitation/Restructuring packages are under implementation in respect of 27 units with a total exposure (FB+NFB) of Rs.266.30 crore. Out of these 27 units, 11 units are under CDR scheme with exposure of Rs.194.12 crore, 15 units under BIFR scheme with exposure of Rs.71.52 crore and 1 unit under Bank’s scheme with exposure of Rs.0.66 crore.

10.2 During the year, six accounts were referred to CDR scheme for restructuring. Out of these six accounts, restructuring packages for two accounts were implemented and others are under process.

11. Management of NPAs

11.1 The Bank continues to give topmost priority to NPA management and recovery of Non-Performing Assets (NPA) and Advance Under Collection (AUC) accounts, with a view to improving the asset quality and profitability. These assets have been frequently reviewed and followed up by the management functionaries at various levels. Recoveries are also made by constant follow-up of the DRT cases, and also by invoking the provisions of SARFAESI Act 2002 etc. Recovery/settlement of Stressed Assets through Compromise Scheme of the Bank, Lok Adalat and Bank Adalat was taken up vigorously.

11.2 The percentage of Gross NPAs to Gross Advances stood at 1.65% on 31st March 2010 with the Gross NPA level at Rs.641.98 crore. The percentage of Net NPA to Net advances stood at 0.91% as on 31st March 2010 compared to 0.58%, a year ago.

11.3 SME OTS-2009: A scheme for one time settlement of SME accounts which had become doubtful asset as on 31.03.2009, was introduced on September 15, 2009. The scheme was applicable to accounts with outstanding below Rs.25 lac. The recovery effected under the scheme was Rs.1.16 crore.

12. Internal Control Systems & Supervision

12.1 Integrated Risk Management

The Bank has a robust Risk Management framework in place. The Board of Directors has the overall responsibility to implement a Risk Management System in the Bank. Under the Board, Risk Management Committee of the Board (RMCB) is the apex body to decide appropriate policy and strategy for internal risk management. Subordinated to RMCB, 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.

12.2 The Internal Capital Adequacy Assessment Process (ICAAP) document has been prepared in accordance with the Pillar-II requirements and has been submitted to RBI. The Bank has completed Risk and Control Self Assessment (RCSA) for the management of Operational Risk, in all the branches and user departments. As part of preparedness towards migrating to The Standardised Approach (TSA) of Operational Risk by the next FY 2010- 2011, the Bank has completed the mapping of income streams into eight Business Lines as stipulated by RBI. A web based software has been installed to capture loss data for the management of Operational Risk as required under Advanced Measurement Approach.

12.3 Asset Liability Management

The Asset Liability Management System implemented effective from April 1, 1999 is functioning as per the guidelines prescribed by Reserve Bank of India. The Asset Liability Committee (ALCO) headed by Managing Director meets regularly. The ALCO discusses in detail the statements of Structural Liquidity and Interest Rate Sensitivity, Short Term Dynamic Liquidity, Stress Testing on Liquidity and Interest Rate, Quarterly Review of Contingency Funding Plan, Duration Gap Analysis, Analysis of Interest Rate Risk by the Traditional and Duration Gap Methods. Various interest rate revisions including the revision of the Benchmark Prime Lending Rate (BPLR) of the Bank is discussed and decided by the ALCO.

12.4 Market Related Funds Transfer Pricing (MRFTP)

In order to facilitate effective Asset Liability Management, the existing Transfer Pricing Mechanism [TPM] using the Multiple Transfer Price Formulae [MTPF], introduced in 2003 and fine-tuned in 2006, was replaced with Market Related Funds Transfer Pricing [MRFTP] from 1st April 2009. MRFTP is a scientific internal fund transfer price mechanism evolved to ascertain the true profitability of operating units by benchmarking the product prices to the market rates. Under MRFTP, the performance measurement system reflects a consistent and fair picture about the branches’ profitability. It also improves the product pricing policy of the bank.

12.5 Inspection and Supervision

The Inspection Department at Head Office co-ordinates the Audit and Inspection activities of the Bank. In addition to the regular internal inspection, IS Audit, Compliance Audit, Surprise Inspection, System Audit of Zonal Offices and Head Office departments, etc. are conducted by the Inspection Department.

12.6 The Bank has put in place an effective institutional mechanism for Risk Based Supervision through RBS Cell in Inspection Department. As envisaged by the regulator, the Bank introduced Risk Focused Internal Audit (RFIA) under RBS w .e. f. 1st April 2003, where business parameters have been de-linked from the Risk Parameters.

12.7 Following the migration to the CORE Banking System, RFIA was revamped by way of revision in Audit Report Formats, rating mechanism, grouping of branches, sampling norms and periodicity of Inspection. The Information System Audit (IS Audit) cell was formed within the Inspection Department.

12.8 Credit Audit

The audit of loan appraisal and administration for high value credit accounts with the aim of improving the asset quality of the Bank is undertaken by the Credit Audit Department. Accounts with total exposure of Rs.2 crore and above are covered under Credit Audit. The Department conducted audit of 933 accounts during the year, covering the pre- sanction and post sanction aspects. Of the 933 accounts, 42 related to accounts with exposure below Rs.2 crore and above Rs.1 crore on a random basis. With the integration of credit audit with RFIA, the marks awarded by the credit auditor are normalized by the internal auditors under Credit Risk Management, wherever necessary.

12.9 Inter-Office Reconciliation

As per RBI guidelines, all the high value debit entries of value Rs.1 lac and above and 99.99% of debit amount need to be reconciled within a period of six months from the date of their origin. As against this stipulation, the Bank had completed reconciliation of Inter-branch accounts up to December 2009 achieving 100% reconciliation of debit entries by end-March 2010. The Bank has also reconciled all credit entries of value Rs.50,000/- and above for the quarter ended September 2009 in Branch Clearing General Account. The Bank aims to reconcile all entries within a shorter time frame than the target of 3 months set by RBI.

12.10 Compliance

The Bank ensures that GOI and RBI directives/instructions received are being complied with promptly. Quarterly review reports on the compliance status and performance of the Departments are regularly submitted to the Audit Committee of the Board for information.

13. Vigilance Machinery And Frauds Monitoring

13.1 The period under review was a year where the vigilance climate in the Bank was quite normal. The integrity level of staff/ officers in this Bank is very high and hence the instances of criminal misconduct committed by the staff/officers were minimal. Unfortunately two instances of frauds, where staff members were involved, reported during the year have posed some concern. Regular Departmental Action against erring officials has been initiated.

13.2 As part of Preventive Vigilance measures, the Vigilance Department officials handled sessions on Preventive Vigilance through Bank’s training system highlighting the importance of adherence to systems and procedures and probity in public life. The Bank issued circulars every quarter stating the modus operandi of fraud cases so as to avoid recurrence of similar instances. Surprise inspections were conduced at branches. Structured meetings/ conferences were held by the CVO at various Zones of the Bank and branches to propagate and ensure the implementation of Preventive Vigilance mechanism in the Bank in its true spirit. More than 700 branches spread all over India were covered in three months’ time.

13.3 During the year the CVO was attached to Central Vigilance Commission for a week from 9th November to 13th November 2009. The Vigilance Department officials attended a training programme at CBI Academy, Gaziabad for one week. One official attended a National Seminar on Cyber Crimes, Cyber Law, Cyber Security at Thiruvananthapuram, conducted by Centre for Development of Imaging Technology (C-DIT), an autonomous Centre under Govt. of Kerala.

13.4 Vigilance Awareness Week was observed as per CVC directives with wide publicity. An Essay Competition was held for members of the staff followed by a quiz programme for college students. SBT Honesty Awards were conferred on 4 students, selected from various schools in and around the city, to inculcate the policy of honesty in the minds of young citizens and also with an idea to ‘catch them young’ for the fight against corruption. The Honesty Awards were given away by Shri K P Somarajan IPS, Director, Vigilance and Anti Corruption Bureau, Kerala.

14. Human Resources Development & Industrial Relations

14.1 Staff Resources & Recruitments

The Bank had on its rolls 12,192 members of staff as on 31st March 2010, comprising 4,182 officers, 5,784 clerical and cash department staff and 2,226 subordinate staff inclusive of 404 Part Time Sweepers. The number of women employees and ex- services personnel in the Bank was 4,348 and 1,186 constituting 35.66% and 9.73% respectively of the total workforce. Out of the women employees, 981 were officers, 2,836 non-subordinate staff and 531 subordinate staff. The Bank also had on its rolls 117 physically handicapped employees.

14.2 As many as 1,191 staff were recruited during the year - 70 in the officers’ cadre, 1,019 in non–subordinate and 102 in the subordinate cadre. The recruitment of more than one thousand award staff in one batch is a record achievement in the history of the Bank.

14.3 During the year, 64 employees were promoted from subordinate to non- subordinate cadre, 264 RKGKs (promotees from subordinate cadre) were converted to Computer Terminal Operators as a one- time dispensation, 136 employees were promoted from clerical cadre to the Officers’ cadre, and 385 promotions effected within Officers’ cadre.

14.4 Staff Productivity

The business per employee improved from Rs.686 lac as at the end of March 2009 to Rs.758 lac at the end of March 2010. Net profit per employee improved from Rs.5.58 lac as at the end of March 2009 to Rs.5.80 lac at the end of March 2010.

14.5 Training Programmes

A variety of Training programmes are conducted at the Learning centres to update the knowledge, awareness and skills of the staff members on an ongoing basis with particular reference to corporate goals/ concern areas. During the year under review 179 training programmes were conducted imparting training to 2,567 officers, 1,497 non-subordinate staff and 58 subordinate staff

14.6 In addition to in-house training programmes at Learning Centres in Thiruvananthapuram and Ernakulam, 616 officers were deputed to other institutions in India like the State Bank Academy, Gurgaon, State Bank Staff College, Hyderabad, State Bank Institute of Rural Development, Hyderabad, State Bank Institute of Information and Communication Management, Hyderabad College of Agricultural Banking (RBI) Pune, National Institute of Bank Management, Pune, Indian Institute of Management, Bangalore, Administrative Staff College of India, Hyderabad, CBI Academy, Gaziabad , etc.

14.7 In order to nurture the future leaders of the Bank 30 Assistant General Managers were given a customized Leadership & Management Training at the prestigious Indian Institute of Management, Bengaluru, while 5 officials were deputed for attending the following foreign trainings / Conferences:

- Advanced Management Programme at Stanford GSB, California

- Global Advanced Management Programme at Shanghai, China

- FEDAI Annual Conference at Nairobi, Kenya

- Kellogg School of Management, USA

14.8 Performance Recognition

Twenty two branches were selected for membership of MD’s Club / CGM’s Club for the year 2008-09 and the Branch Heads and Staff Representatives were felicitated at a glittering function held at Thiruvananthapuram. Two new Incentive schemes – Award for Excellence in Performance of AGMs (Region) and Performance Linked Incentive Scheme for Staff – were introduced.

14.9 Library & Knowledge Forum

In order to inculcate reading habit among the staff/participants, the library at Learning Centre, Thiruvananthapuram was renovated and books on Leadership/ innovation/marketing / personal development etc were added. Four computers have also been installed in the Library, for viewing educational CDs and use of e-learning modules by the participants. Functional libraries have also been made operational in all the 7 Zonal/ Regional Offices. To impart knowledge/ skills to the staff, weekly sessions were held by the Knowledge Forum coordinated by HR Department at Head Office, on Fridays on various topics related to Banking, Leadership, Personality Development, etc.

15. Staff–SC/ST/Minority Community (MC)/Ex-ser./PH Cell

The Bank has a separate Cell headed by a Chief Liaison Officer in the rank of General Manager assisted by Liaison Officers at the Module levels, to take care of the welfare and interests of the SC/ST employees. Periodical meetings of the Liaison Officers with the Chief Liaison Officer and of the representatives of the SBT SC/ST Staff Welfare Association with the Top Management, are held to understand their specific issues, if any, and to redress their grievances. The Welfare Association has been provided with furnished office premises with all infrastructure. Salary check-off facility for payment of subscription by the members to the Association is also provided.

15.1 Reservation policy was introduced in the Bank for Scheduled Castes and Scheduled Tribes from 1972 in direct recruitment and from 1978 in promotions. Reservation at 15% for SCs and 7.5% for STs are provided both in direct recruitment as well as in promotion to officers’ cadre up to the specified levels. In direct recruitment for Clerical cadre and Subordinate staff cadre, reservation at the percentage prescribed by the respective State Governments is provided.

15.2 As on 31st March 2010 the percentage of SC/ST employees in the rolls is as under:

15.3 Post based rosters as per Government of India guidelines are maintained in the Bank.

15.4 A Concession of 5% of marks in written test for recruitment as well as for promotion and relaxation of 5 years in upper age limit in recruitment are allowed to candidates belonging to SCs and STs. In all the recruitment drives, the total number of vacancies and number of vacancies reserved for SCs and STs are advertised extensively in all the major newspapers. Pre- examination training programmes were conducted for candidates belonging to SC/ ST/Minority/ex-servicemen category appearing for recruitment test of clerical staff and Probationary Officers in Associate Banks. Training programmes were also conducted for employees belonging to SC/ ST category appearing for promotion from non-subordinate cadre to officer cadre.

15.5 The SC/ST Cell at Head Office acts as a Liaison Office between Bank and the Ministry of Finance, Govt. of India for supply of information, answering questions and queries and clearing doubts in regard to matters covered by the reservation orders. Cases of suspicious caste certificates are referred to 3 Member Scrutiny Committee constituted by the respective State Governments and followed up closely. In verified cases, actions as recommended by the Scrutiny Committee are taken.

15.6 The Cell also ensures:

- Compliance by the Bank with orders and nstructions pertaining to the reservation in favour of SCs/STs in the matter of recruitment/ promotions and other service benefits such as relaxations/ concessions admissible to them.

- Placing of Annual Review Report on the progress of implementation of reservation policy for SC/ST to the Board of Directors.

- De-reservation proposal has been made with the full knowledge and concurrence of the Chief Liaison Officer, while making reference to the Ministry of Finance (Banking Division) regarding de-reservation of reserved vacancies,

- The Bank takes appropriate steps to implement instructions/guidelines issued by the National Commission for SC/ST.

- GOI’s directions are followed in respect of DPCs/ Selection Committees pertaining to SC/ST/MC members.

- Proper implementation of the reservation orders by conducting annual inspection of the rosters maintained in the organization.

15.7 Apart from SC/ST Cell, Bank has set up PH/Ex-Servicemen Cell and OBC Cell headed by Chief Liaison Officers in the rank of General Managers and Minority Community Cell headed by Chief Liaison Officer in the rank of Deputy General Manager assisted by Liaison Officers at Head Office, five Zonal offices, and two

Regional Offices at Mumbai and New Delhi to take care of the welfare and protect the interests of the employees belonging to the respective sections. The Cell ensures:

- Compliance by the Bank with orders and instructions pertaining to the reservation of vacancies in favour of Ex-Service and Physically Handicapped in the matter of recruitment/promotions and other service benefits.

- Compliance by the Bank with orders and instructions pertaining to the reservation of vacancies in favour of MC/OBC in the matter of recruitment and other service benefits

15.8 Important Visits / Inspections

The National Commission for Scheduled Castes headed by its Hon’ble Chairman, Dr. Buta Singh conducted a review of implementation of Reservation Policy in the Bank on 1st July 2009. The action points that emerged in the meeting are being implemented.

15.9 An inspecting team from the Ministry of Finance headed by Shri L K Meena, Deputy Secretary, visited the bank on 11th September 2009. The reservation rosters maintained by the Bank were inspected by the team which expressed satisfaction over the level of compliances of various rules and regulations pertaining to reservation in the bank

16. Industrial Relations

16.1 The time tested mechanism of bilateral negotiations at various levels of the organisation with the Employees’ Union and the Officers’ Association through periodical structured meetings and redress of the issues ensured harmonious and cordial ndustrial relations in the Bank throughout the year.

16.2 Bipartite meetings were held with Employees’ Union and Officers’ Association at Head Office level and Zonal Offices at periodic intervals. The Bank hosted the Central Bipartite meeting with ABOA on 22nd February 2010 at Kumarakom. Staff Welfare Committee and Sub-committee meetings of Staff Welfare Fund were held 6 times during the year.

16.3 At the industry level, there were joint and separate strikes by the employees & officers on 6th and 7th August 2009 and 16th December 2009.

16.4 The Bank has introduced many improvements/modifications in the staff welfare schemes during the year, including higher reimbursement on health check up charges for spouses of staff members and for retired staff and their spouses, enhancement of the claim amount from Rs.3,50,000/- to Rs.5,00,000/- for Super Suraksha Insurance scheme for staff, enhancement of scholarship to wards of staff etc.

16.5 The Staff Literary, Sport and Cultural Festival, Bankfest, was conducted at Thiruvananthapuram from 5th February to 7th February 2010. More than 500 staff members participated from all the Zones

17. Security Arrangements

This has been another year without any loss of cash or valuables to the Bank due to security lapses. There were eight attempts / security incidents this year compared to eleven last year, of which four were of minor nature. The other four were fire incidents. A number of measures are in the process to qualitatively improve the security of bank branches. Integrated fire and security alarm systems are being installed in all branches. Many other measures are being taken to upgrade the security of vulnerable branches. CCTVs are being installed in all metros, large towns and vulnerable branches. The above measures are significant steps to upgrade security. Recruitment of more security guards, which is in progress, will further beef up the physical security of currency chests and vulnerable branches. Head Office security has been strengthened by installation of X-ray baggage scanner. CCTVs would also be installed at Head Office shortly. The availability of a fire officer has enabled significant improvement in fire safety arrangements in branches. The security arrangements in branches are being reviewed constantly by Security Officers on their visits and corrective measures taken, wherever warranted. The Department issued a Handbook on Security as a ready reckoner, covering all aspects comprehensively. Besides, a number of important circulars/letters were issued by the Department to improve security arrangements in branches. Training to inculcate security awareness, not only to the security guards but also to as many members of the staff as possible, is being arranged through regular programmes.

18. CUSTOMER SERVICE

18.1 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 enhanced by quality value-added services.

18.2 A well-defined and full-fledged customer grievances redress mechanism is functioning in the Bank. Reports on the number of complaints received / disposed of / 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 Tarapore Committee recommendations, also reviews the quality of customer service extended in the Bank at regular intervals.

18.3 A Customer Service Department headed by an Assistant General Manager has been formed at Head Office with effect from 1st January 2010. The main emphasis is on quick disposal of customer complaints and ensuring maximum customer satisfaction. The Department acts as a coordinator between the branch and the complainant and ensures quick disposal of the complaints. 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 drastically.

18.4 The establishment of the new Customer Service Department and the immediate response has had very positive impact. The number of complaints has come down significantly and many complainants have conveyed their appreciation for the quick response by the Bank and immediate resolution of the complaints.

18.5 The updated version of Citizen’s Charter is made available in booklet form and also in the Bank’s website, which provides customers and the general public with the key information regarding the common areas of customer-banker relationship. Similarly the details of service charges levied by the Bank are also published in the Bank’s website for the information of the public.

18.6 Progress of implementation of Citizen’s Charters and the Fair Practices Code is also being monitored at Head Office and Zonal Office level Customer Service Committee meetings. Inspecting officials are also examining the quality of customer service rendered at the branches.

18.7 Bank has also established a Call Centre with Toll free No. 1800-425-5566 enabling the customers/ general public to clear their doubts/ complaints expeditiously. Adequate publicity of the aforesaid facilities available to public is in place both through print and visual media.

18.8 The importance of maintaining highest level of customer service has been reiterated through various circulars. Bank has also launched an innovative mechanism called SMS “SBT CARE” for customer care. Accordingly, the customers can send a query by sending an SMS in a particular mobile number, if they require any information about the Bank’s products and services or if they are not satisfied with any of the services. “Customer Day” or “Open House Meet’ is observed at all the offices of the Bank across the Organisation on the 15th of every month (next day, if 15th is a holiday or half day), to enable the customers to voice their grievances or offer suggestions for the betterment of customer service.

18.9 Banking Codes & Standards Board of India (BCSBI)

The Bank is a member of the Banking Codes & Standards Board of India which is a registered society sponsored by Reserve Bank of India. The Code of Bank’s Commitment to Customers is available on the website. This is a voluntary Code, which sets minimum standards of banking practices. The Deputy General Manager (Compliance) is the designated Principal Code Compliance Officer at Head Office. The relative Annual Statement of Compliance has also been submitted by the Bank to the BCSBI.

19. Corporate Governance

The Bank is committed to the best practices in the area of Corporate Governance, in letter and in spirit. A detailed report on Corporate Governance is given as annexure in the Annual Report.

20. Right To Information Act

The Right to Information

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