It gives me great pleasure to place before you the highlights of your Bank'sperformance during the financial year 2016-17. Details of the achievements and initiativestaken by your Bank are provided in the enclosed Annual Report for the year 2016-17.
Global economy stagnated in 2016 with GDP growth of 3.1% as per the latest IMFestimates. Economic activity in advanced economies eased moderately compared to theprevious year with sluggish performance of the US being the major contributor. Meanwhileemerging economies performed relatively better.
The good thing is that the modest pick-up in economic activity which began in thesecond half of 2016 is gaining momentum this year. Japan recovered during the firstquarter of this year against the backdrop of strong exports and investments related to theTokyo 2020 Olympics. Meanwhile decline in unemployment and improving dynamics of factoryoutput suggests Euro area is also gaining momentum. Even the US economy is expected toimprove with the possibility of a fiscal stimulus. Overall growth in advanced economiesis projected to come in at 2% in 2017. Meanwhile the emerging and developing world isexpected to grow at a healthy 4.5% in 2017 with the major support coming from recovery inRussia and Brazil coupled with resilient India and to some extent China. Nonethelessrising protectionist policies oil price dynamics geo-political tensions represent thedownside risks to growth outlook.
Against this backdrop India's GVA growth which is expected to expand by 6.7% in FY2017is set to increase to around 7.4% in FY2018 (RBI estimates). However with faster pace ofremonetisation and forecast of normal monsoon by the Indian Meteorological Departmenteconomic activity is going to further recover in the ongoing fiscal. Furthermoreperformance on the external front continues to improve with positive export growthperformance since September 2016. The Current account deficit is expected to narrow downto less than 1% in FY2017. Going forward though recovery in oil prices is likely to putsome pressure on external balance CAD is expected to remain range bound between 1-1.4%of GDP.
YOUR BANK'S PERFORMANCE
In FY2017 aggregate deposits of your Bank have registered a multi-year high growth of18.14% to Rs 2044751 crore from the previous year level of Rs 1730722 crore. The risein aggregate deposits is mainly due to the surge in savings bank accounts (which grew by27.81%) following demonetization. The higher growth of your Bank's deposits compared toAll Scheduled Commercial Bank's (ASCB) growth has pushed up the market share by 38 bps to18.05% in March 2017. Your Bank has improved its CASA ratio to 45.58% an improvement of174 bps from 43.84% last year and a large portion of the deposits have stayed in yourBank despite the lifting of withdrawal limits in mid-March 2017.
Advances Inched Up
Growth in advances of your Bank has remained subdued during FY2017. The gross advancesof your Bank crossed the Rs 1600000 crore mark and grew at 7.80% to the level of Rs1627273 crore by March 2017 from the previous year level of Rs 1509500 crore. Comparedto the banking industry growth your Bank's higher growth in advances has pushed up themarket share by 65 bps to 17.02% in FY2017. You will be happy to know that your Bank'smarket share is continuously improving over the years. Much of the growth in advances camefrom retail segments including home loans and auto loans. Overall retail loans grew by21.18% in FY2017 which is in line with your Bank's strategy of growing more aggressivelyin this segment. Within retail auto loans have registered a healthy growth of 21.24% toRs 46736 crore in FY2017 from Rs 38549 crore in FY2016 and home loans grew by 17% to Rs222605 crore in FY2017 from Rs 190552 crore in FY2016. Your Bank's home loanportfolio constitutes nearly 56% of retail loans. Additionally your Bank has continued tobe the largest home loan provider in the banking sector with a market share of over 25%as on 31 March 2017 amongst ASCB.
Further there are sectors where your Bank has reduced its exposure which includetelecom where advances declined by 12.23% roads and ports segment by 15.58% Engineeringsector by 25% textiles by 15.72% and Iron & Steel by 1.92% compared to a year ago.Advances to large corporates and SME increased by 3.59% and 3.41% respectively in FY2017while loans to mid corporates remained fiat. Finally in case of agriculture credit yourBank continued to surpass the target set by the Government disbursing Rs 125270 croreas loans as against the scheduled target of Rs 95168 crore for FY2017.
With the opening of 386 new branches the branch network of your Bank has reached17170 as of March 2017 of which 64% are in rural and semi-urban areas. With an aim forimproved customer service better crowd management reduction in wait times and overallreduction in the service time (processing time) your Bank has rolled out CustomerExperience Excellence Project (CEEP) which has moved at an accelerated pace in FY2017.1519 branches were rolled out under CEEP during FY2017 and the total number of branchesunder CEEP is at 4525 as on March 2017.
In addition with its extensive global presence your Bank is a truly InternationalBank. The number of foreign ofices of your Bank is currently 195 spread across 36countries in all the continents. During FY2017 your Bank opened two new branches - IBUGIFT City Gujarat and SBI Yangon Myanmar (upgraded from Representative Ofice). Nepal SBIBank Limited a subsidiary of SBI has opened three branches. The International Banking armof your Bank has consistently been a major contributor to the business and profits of yourBank.
State Bank of India is a strong proponent of leveraging information technology toimprove eficiency and deliver convenience to its customers. Your Bank has been ofieringinnovative and cutting-edge products to its customers with the objective of enablingbanking transactions at any time and from anywhere. Your Bank's technology strategy hasevolved in tune with the current consumer trends of social collaboration mobilitycloud-based platforms and big data analytics.
Digitisation and excellence in operations has been core to your Bank's strategy inproviding convenience to customers. It has resulted in a reduction in turnaround time andextended benefits to your Bank's customers.
With over 28 crore State Bank Debit Cards as on 31st March 2017 your Bankcontinues to lead in Debit Card issuance in the country. A concerted efiort by your Bankto empower the customers to enjoy Anytime Anywhere Banking' through Debit Cards hasresulted in improvement in its market share in Debit Cards spends from 26.29% in March2016 to 29.23% in March 2017 which is far ahead of any other bank. Various innovationslike introduction of sbiINTOUCH contactless Debit Cards Mumbai Metro Debit Card amongothers aggressive marketing campaigns and Debit Card awareness programme have placedyour Bank in the top slot in terms of Debit Card spends.
Your Bank along with its Associate Banks has one of the largest ATM networks in theworld with more than 59200 ATMs including Kiosks Cash Deposit Machines and Recyclers ason 31st March 2017. During FY2017 your Bank replaced over 3000+ oldATMs and Recyclers with new improved machines equipped with the latest technology. YourBank has so far installed 6400 Recyclers to provide 24x7 cash withdrawal and depositfacilities. With a 28.44% of market share State Bank Group's ATM network transacts 54.06%of the country's total ATM transactions. Nearly 77% of the financial transactions of theBank are routed through Anytime Channels. On an average over 1 crore transactions per dayare routed through our ATM network and Rs 3485 crore cash is being dispensed by the GroupATMs on a daily basis.
In sync with the focus of Government of India to create a digital economy your Bankhas strengthened its position as a top merchant acquiring Bank by installation of 2.06lakh Point of Sale (PoS) terminals during FY2017 thereby taking the count to over 5.09lakh up by 69% over last year with a market share of 20.16% of PoS terminals.
Your Bank has also retained its numero uno position in Mobile Banking spacefacilitating 44.37% of the total transaction value on Mobile Banking platforms in thecountry. Your Bank has seen an astronomical growth in transactions put through on itsmobile banking platform during FY2017. The volume of transactions grew by over 56% andvalue of transactions by 507%.
Your Bank has always sought to provide futuristic technology to its customers. One stepin this direction was setting up the high-tech one of its kind banking outlets -sbiINTOUCH. Your Bank has seven sbiINTOUCH premium outlets and 250 sbiINTOUCH branchesequipped with state-of-the-art digital technology covering more than 143 districts acrossthe country.
Launched in November 2016 SBI Pay is an inter-operable mobile-based payment solutionwhich rides on Unified Payment Interface (UPI) system of NPCI. The app is a paymentsolution for customers of SBI as well as of other banks. It ofiers the facility of sendingand receiving money based on Virtual Payment Address (VPA) as a unique identifier.
State Bank Buddy - the Mobile Wallet is another choice of payment-channel madeavailable to both customers and non-customers. Launched in August 2015 the wallet isavailable in 13 languages. Since launch Buddy has seen remarkable growth in user-baseespecially post demonetisation. The mobile wallet has crossed a user base of 1 crorewithin 20 months of launch.
In order to expand Bank's reach to the rural populace and enable the benefits ofdigitisation to the masses your Bank has rolled out an exclusive ofiering inassisted' mode - State Bank MobiCash. The wallet has been launched in partnershipwith BSNL and is also available for basic/feature phone users along with smart phoneusers.
Analytics and Big Data
Your Bank is using analytics extensively to maximise operational eficiency. Predictiveanalytics and customer segmentation are used with the objective of enhancing customerrevenues through cross-selling and up-selling. Risk Analytics is used both for appraisalof fresh applications and for ongoing monitoring of the loan portfolio. Analytics-drivenpre-qualified lending programs launched in 2016 have generated significant business whilereducing cost of acquisition. Improved and timely intelligence delivery to branches/operating functionaries has resulted in quantifiable growth in customer retention andwallet share.
On the Big Data front in order to cater to the ever-increasing volume and types ofdata your Bank is in the process of setting up of a data lake. This will facilitatefaster processing of a large volume of structured and unstructured data and performingadvanced analytics with a view to gain insights for business decision making anddevelopment of new products.
Profitability improved during the financial year both revenue and costparameters of operating profit improved to result in an operating profit growth of 17.55%YoY. Net profit growth however remained muted at 5.36% YoY due to elevated credit costsand reached Rs 10484 crore. This
financial year was also special owing to the impact of demonetisation in Q3 and severedrought conditions in South India. However as mentioned above operating profits the indicator of sustainability of ongoing operations have fared remarkably well inFY2017. For the financial year as a whole the operating profits of your Bank crossed themilestone of Rs 50000 crore to touch Rs 50848 crore.
As mentioned above the Bank chalked robust performance in non-interest income profiton sale of investments forex income and overall reduction in cost to income ratio by 138bps to 47.75% Net Interest Rate Margin (NIM) of the Bank too continues to remain healthyat 2.84%. The Bank was able to maintain this margin mainly because of 174 bps improvementin CASA ratio to 45.58%.
The AQR exercise of previous year had resulted in significant rise in Non-PerformingAssets (NPA) of the Bank. This increase during FY2017 was much lower from Rs 98173 croreto Rs 112343 crore. The Gross NPA thus stood at 6.90% as on March 2017 up by 40 bps.Despite the rise in Gross NPA the Net NPA ratio declined by 10 bps to 3.71% YoY. Thus theprovisioning coverage ratio increased by 5.26% to 65.95% in FY2017.
The recoveries and upgradations during the year registered a growth of 23.57% over thelast year while fresh slippages during FY2017 were 39.13% lower than the previous year.
In terms of segment wise contribution to stressed assets contributions by SME AgriRetail and International Banking registered a net decline while those by large corporatesand Mid-corporates increased.
Despite the challenges faced during the last financial year your Bank has remainedwell capitalised to absorb future shocks and maintain its future growth trajectory.Capital Adequacy Ratio (CAR) of the Bank under Basel III stood at 13.11% in March 17 andTier 1 at 10.35%.
Your Bank utilised various options to increase capital by Rs 28828 crore duringFY2017. Bank raised fresh AT1 capital to the tune ofRs 9100 crore during FY2017. TheGovernment infused Rs 5681 crore while the sale of Bank's Non-Core Assets /Strategic Investments addedRs 2662 crore. Retained earnings contributed the remaining Rs8379 crore towards the capital augmentation exercise.
For the year FY2017 I am happy to announce that the Board of Directors of your Bankhas declared a dividend of Rs 2.60 per share of face value of Rs 1 each.
During the year 2016-17 several new and innovative initiatives have been taken by yourBank to give additional thrust to each and every business segment like home loans autoloans SME rural business etc. Some of the important initiatives in this regard are asunder: z In order to move towards less cash economy your Bank has launchedmerchant payment acceptance solutions like Bharat QR and Aadhaar
Based Payments viz. BHIM-Aadhaar-SBI. In addition to basic acquiring servicesthe Bank is also providing Value Added Services like Cash@PoS for cash dispensationto debit card holders DCC (Dynamic Currency Conversion) and EMI on PoS terminals. zYour Bank has launched the concept of "SBI Digital Village" to convertcertain identified villages into a cashless eco system. 21 villages were launched on 1stJuly 2016 across the country under the scheme. z Your Bank revamped its MobileBanking App and launched the State Bank Anywhere Personal in January 2017. zSBI has partnered with Flipkart to ofier its consumers the facility of pre-approved EMIFacility on purchases. Under this partnership your Bank will provide overdraft facilityto pre-qualified set of customers for transacting on Flipkart for a minimum purchase of Rs5000.
Your Bank also launched SBI Mingle' the social mediabanking platform for Facebook and Twitter users. Using SBI Mingle the Bank's customerscan do a host of banking services like checking account balance and requesting ministatements on their Facebook or Twitter accounts.
In a joint endeavor aimed at being the largest collaboration in the housingspace to address housing needs of the Indian population SBI & Tata Housing haveentered into a partnership that ofiers a unique platform that would enable easierfinancing and purchase of homes.
To improve asset quality in SME under the project Vivek your Bankis revamping its credit underwriting process to move away from the traditional balancesheet based underwriting and towards revised financial modules and balance sheetaugmented by cash fiow recast from multiple sources. Further with a view to adopt andfollow uniform standards of credit dispensation ensure quality and preserve Corporatememory Loan Origination Software (LOS) and Loan Life Cycle Management System (LLMS) havebeen introduced for small value and high value loans respectively.
Above all Your Bank has introduced one more progressive measure "Workfrom Home Policy" to enable the employees who are not able to attend ofice to workfrom home using technology. This move is in line with your Bank's endeavor to implementbest practices in all areas of concern.
Your Bank has extended an additional option to oficers up to MMGS-III in theBank in the form of "Smart Compensation Package" by restructuring their salary/perquisites in tune with market demand by monetising and clubbing perquisites.
Though your Bank is known for its iconic ethos and deeply ingrained ethicalpractices we have created and put in place a new position of Chief Ethics Oficer with amandate to foster nurture and integrate this long standing ethos with the organisationalfabric in a more structured manner.
ASSOCIATES & SUBSIDIARIES
Your Bank has merged its five associate Banks and Bharatiya Mahila Bank with itself on1st April 2017. This is the first such large scale consolidation in the IndianBanking industry which will lead to increased balance sheet size and economies of scale.With this merger SBI has entered into the league of top 50 global banks with a balancesheet size of Rs 33 lakh crore with 24017 branches and 59263 ATMs serving over 42 crorecustomers. The increased balance sheet size will enable your Bank to command better termsin both international and domestic markets. The added branch network customer base andstafi strength will help it expand reach and enable the Bank to rationalise resources andredundancies across the board. Your Bank's endeavour will be to optimise costs andmaximise revenues through the merger synergies leading to significant cost savings andreduction in cost-to-income ratio.
Of the non-banking subsidiaries SBI Capital Markets Limited posted a PAT of Rs 252crore during FY2017. SBI Life witnessed a 43% YoY growth in New Business Premium at Rs10144 crore and Assets Under Management growth of 22% to Rs 97737 crore in FY2017. TheCompany earned a net profit of Rs 955 crore in FY2017 up from Rs 861 crore inFY2016. SBI Cards has grown its card base by 15% and posted PAT of Rs 390 crore forFY2017 as against Rs 284 crore for FY2016. In terms of spends market share of the companyis 13.1%. SBI Funds Management Private Limited posted a PAT of Rs 224 crore in FY2017 asagainst Rs 165 crore during FY2016 showing growth of 36%. The average Assets UnderManagement of the company during FY2017 stood at Rs 157025 showing growth of 47% and itwas ranked 5th in the industry in terms of AUM. SBI General Insurance Company Limited hasachieved break even in the 6th full year of operation in FY2017 with PAT of Rs 153 crore.
RECOGNITION & AWARDS
I am proud to share with you the details of some of the awards won by your Bank. YourBank was selected as India's Best Bank by Financial Express. Business Today also awardedus with the title of Best Bank of the Year (Public Sector). Your Bank has been conferredwith the prestigious "Best Trade Finance Bank" award by Global Finance Magazine.As a mark of outstanding performance in the area of training to its employees your Bankhas been declared the Winner of Golden Peacock National Training Award' in financialservices (Banking) sector. Your Bank was also awarded the Helen Keller Award 2016 for ourcommitment towards promoting equal employment opportunities for Difierently Abled Personsand National Award 2016 for Empowerment of Persons with Difierent Abilities in thesub-category Best Employer. For our persistent efiorts in scaling up technology to improvethe overall banking experience your Bank has been given the IDRBT Banking TechnologyExcellence Award for Innovative use of technology and Digital Banking IBA BankingTechnology Award for Best Technology Bank Best Digital & Channel Technology Best Useof Analytics and Best Financial Inclusion Initiative Special Recognition Award forwinning in all categories in NPCI - National Payments Excellence Award Netapp InnovationAward 2017 for Innovative Use of Data Storage and Green IT among others.
Among the Associates State Bank of Mysore was awarded with Eco-Technology Savvy BankAward (Emerging Category) by Chamber of Indian Micro Small and Medium Enterprises. StateBank of Travancore was awarded Skoch Award for segment leadership in MSME and SocialInclusion and Best MSME Bank in SME Excellence Award 2016.
Among the Subsidiaries SBI Cards bagged five awards at the 25th World HRD CongressReaders' Digest Most Trusted Brand Award 2016 Excellent Compliance Performer-2016'across Indian industries at the Annual Compliance 10/10 Awards among others. SBI Lifereceived Life Insurance Company of the Year' and Bancassurance Leader LifeInsurance
(Large Category)' Awards at the Indian Insurance Awards 2016. It was awarded one of theMost Trusted Brand 2016' for the sixth consecutive year by The Economic Times BrandEquity Nielsen survey. SBI General won at the India Insurance Awards 2016 in the"Under-served Market Penetration" and in the "Commercial Lines GrowthLeadership" categories.
CORPORATE SOCIAL RESPONSIBILITY
Social Responsibility is deeply ingrained in the culture of your Bank. Your Bank hasbeen undertaking social welfare initiatives much before the formal CSR concept becamecommon practice or an industry norm. Your Bank believes that it owes a solemn duty to theless fortunate and underprivileged members of the society to make sustainable socialchange in their lives. Your Bank has always placed the interest of the common manespecially the most marginalised at its core. SBI has been a caring and enablingorganisation and sustainable business practices are at the heart of our businessoperations.
The CSR contribution of your Bank for FY2017 was Rs 109.82 crore. Your Bank's localhead ofices (Circles) spent Rs 89.82 crore and the remaining Rs 20 crore was donated toSBI Foundation. This is the fifth successive year when your Bank's CSR spend has crossedthe mile stone of Rs 100 crore.
Your Bank continued to champion "Sustainability" through a multifoldapproach which included inter alia management of social and environmental risks instrategic decision-making lending and developing innovative products and services. YourBank was the first Public Sector Bank in the country to publish its Sustainability Reportfor FY2016. Taking the initiative forward the second report for FY2017 has been drawnup in accordance with international guidelines set by the Global Reporting Initiative(GRI). These guidelines constitute the most widely used sustainability reporting frameworkglobally.
Asset quality pressures have remained elevated during this year due to tepid growth inthe economy and low capex demand. However the recent Ordinance issued by Govt. of Indiato resolve the NPA issue by vesting RBI with greater powers is a welcome move in thisdirection. I expect these issues to be resolved in the next two years signs of which areevident at this stage.
Your Bank's progress under Basel III transition is on schedule. Your Bank's efiorts tocontrol costs have borne fruit with cost to income ratio declining by 138 bps. Your BankRss performance on non-interest income front has been fairly satisfactory and we willcontinue to diversify our income sources.
On the technology front demonetisation provided the single largest reason to expandthe digital base of the Bank. This is visible in expansion of Banks' PoS network moreacceptability of sbiINTouch SBI mobile banking. I expect that this trend will continueand in years to come a substantial part of the banks' business will be migrated to digitalchannels thus decongesting bank branches and reducing our overheads. Cyber security hasemerged as an important area of concern for us. Although there were no disruptions due tothe recent episode of ransomeware in India it is now important that cyber security policyof the Bank becomes proactive instead of reactive. Your Bank will be actively working inthis direction for next few years.
From the next financial year the solo results of your Bank will include the assets ofAssociate banks. The merger has catapulted the Bank into the league of top 50 banks in theworld and has increased the market share within the domestic banking space. The size comeswith its own advantage. We expect the cost structure of the bank to move favourablyprimarily due to economies of scale and adopting uniform best practices. Digital footprint of the Bank will be favourably impacted by the merger and the large customer basewill ofier immense cross sell opportunities to the Bank.
FY2018 is expected to be challenging yet more promising than the previous yearprimarily because policy environment is now more predictable. Political stability hasincreased and this will provide the basis for more bold reforms in next two years.
I thank all our shareholders for their continued faith in our strength andcapabilities customers for their valuable trust and our employees for their tirelessefiorts towards achieving our goals.