The Chairman's Message
It gives me great pleasure to place before you the highlights of your Bank'sperformance during the financial year 2017-18.
It gives me great pleasure to place before you the highlights of your Bank'sperformance during the financial year 2017-18. Details of the achievements and initiativestaken by your Bank are provided in the enclosed Annual Report for the year 2017-18.
Global economy experienced broad based growth in 2017. In particular economic activitygained momentum in the US and the Euro area. Meanwhile emerging market and developingeconomies have also performed better with growth pick-up in emerging Europe and emergingAsia being the major contributors to growth. Levying of tariffs by the US and fears oftrade war between the US and China increased the financial volatility in 2018. Howeverwith the US suspending the tariffs against China after some negotiations between the twocountries fear of full-fledged trade war has now abated. Overall global GDP is expectedto grow at 3.9% in 2018 with the advanced and emerging economies to post 2.5% and 4.9%growth respectively. Having said that increase in protectionist policies geo-politicaluncertainty and the escalation of US sanctions on Iran with the consequent impact on oilprice represent the key risks to global growth.
Indian economy is expected to grow at 7.4% in FY2019 from 6.7% in FY2018 against thebackdrop of improved global demand better monsoon prospects credit uptick and continuedreforms undertaken by the Government. Furthermore speeding up of the resolution processof distressed assets under the Insolvency and Bankruptcy Code is likely to improveconfidence in the economy. Increasing oil prices though remains a major risk to thecountry's external balance.
YOUR BANK'S PERFORMANCE
Sustained CASA growth Driving Deposits Growth
Due to higher base led by demonetisation the aggregate deposits of your Bank grew at amodest rate of 4.68% to Rs. 2706343 crore from the previous year level of Rs. 2585320crore. The growth in aggregate deposits is mainly due to the increase in savings bankdeposits which grew by 7.88% YoY and deposits from the foreign offices (grew by 17.07%).Your Bank has improved its CASA ratio to 45.68% an improvement of 128 bps from 44.40%last year.
Retail Loans Drives Credit Growth
The gross advances of your Bank crossed the Rs. 2000000 crore mark and grew at 4.91%to the level of Rs. 2048387 crore by March 2018 from the previous year level of Rs.1952507 crore. Retail segments (Per SME & Agri) now constitute 57.5% of thedomestic loan book ( Rs. 1746389 crore). Much of the growth in advances came from PerRetail segments including home loans and auto loans. Overall Per Retail loans grew by13.55% in FY2018 which is in line with the Bank's strategy of growing more aggressivelyin this segment. Within retail home loans grew by 13.26% to Rs. 313106 crore in FY2018from Rs. 276454 crore in FY2017. Your Bank's home loan portfolio now constitutes morethan 57% of Per Retail loans. Additionally your Bank continues to be the largest homeloan provider in the banking sector with a market share of over 32% as on 31stMarch 2018 amongst ASCB.
With a view to building and sustaining the momentum for Transforming India your Bankhas created the largest number of touch points in terms of number of branches and othermodes reaching out to public at large. Today we have 22414 branches 59541 ATMs CDMsRecyclers 6.10 lakh PoS machines and 58274 Business Correspondent outlets. The CustomerExperience Excellence Project (CEEP) has been rolled out in more than five thousandbranches across the country which are equipped with Self Service machines such as ATMCDM/ Recycler SWAYAM for Passbook Printing Electronic Cheque Drop Box and Internetenabled PCs.
Your Bank has been an epitome of trust across the length and breadth of the country. Ithas extended its wings across the globe with financial products for the NRI communityIndian corporates exporters and importers as well as the local populace and corporates.The number of foreign offices of your Bank is currently 206 spread across 35 countries inall the continents. During FY2018 Your Bank opened one new branch in Maldives. Nepal SBIBank Limited a subsidiary of SBI opened seven branches. During the same period Sylhetbranch (Bangladesh) and Doha branch (Qatar) were closed. Further two Managed Exchangecompanies and two Representative Offices (Dubai and Abu Dhabi) came within the ambit ofSBI on account of merger with Associate Banks.
Technology & Digital Banking
Your Bank is a strong proponent of leveraging information technology to deliverconvenience to its customers. Your Bank has been offering innovative and cutting-edgeproducts to its customers with the objective of enabling banking transactions at anytimeand from anywhere.
With approximately 27.83 crore Debit Cards as of March 2018 your Bank continues tolead in Debit Card issuance in the country with a market share of 32.3%. In August 2017your Bank has also launched the facility of instant issuance of personalised Photo DebitCard Quick Photo Debit Card' within five minutes to Saving Bank (SB) accountholder of any branch of SBI.
Your Bank has one of the largest ATM networks in the world with 59541 ATMs includingCash Deposit Machines (CDMs) and Recyclers as on 31st March 2018. Your Bankhas a 28.8% market share in ATM network in India. SBI ATM network transacts 47.2% of thecountry's total ATM transactions. On an average over 1 crore transactions per day arerouted through our ATM network.
The Mobile Banking channel now has over 305 lakh registered users and has processedtransactions amounting to Rs. 600000 crore in FY2018. Your Bank has also retained itsprime numero uno position among Banks both in terms of volume of transactions (21.2%) andvalue of transactions (19.8%).
SBI Online is the 5th most popular online global financial website with 4.79crore users and 159 crore transactions during the year.
India is undergoing a digital transformation and witnessing an accelerated pace ofinnovation and technology adoption. As the digital economy is _ourishing your Bank isalso progressing with its technological advancements and growing its presence inmulti-channel platforms keeping itself ahead of the curve. Consequent to our digitalinitiatives we have improved the share of digital transactions as a percentage of totaltransactions by over 600 bps during the year.
On 24th November 2017 State Bank of India launched India's firstcomprehensive digital service platform "YONO" an acronym for You OnlyNeed One'. An integrated omni-channel digital platform YONO offers banking and otherfinancial products along with access to India's largest B2C marketplace for its customersto meet their lifestyle needs across 16 categories. As of 31st March 2018there were more than 4 million downloads with nearly 15 lakh registered users and 1.36lakh Digital and Insta Savings Accounts opened.
We are also committed towards transforming ourselves into a digitalised organisationsupported by technology enabled backend operations. Along with the digitalisation ofconsumer facing operations we continue to invest in the automation of our internalprocesses to improve efficiency risk management reduce cost of operations and re-deployemployees in revenue accretive roles. Further such consistent initiative towardsdigitising payment transactions not only reduces cost of transactions but also helps inreducing carbon footprint through lesser use of paper.
The year 2017-18 was a difficult year as far as net Profits are concerned. The maincontributing factors being increase in loan loss provisions mark to market losses onGovernment securities and provisions and payments to employees.
The Operating Profit and Net Interest Income of the Bank remained flat at Rs. 59511crore and Rs. 74854 crore respectively in FY2018 on the back of reduction in MCLR andBase rate and continued Asset Quality stress.
The Non-interest and fee income registered a growth of 4.61% and 10.51% respectively inFY2018. Recovery in Written-Off Accounts registered a robust growth of 34.56% and thetrend is expected to continue. The staff expenses declined by 2.34% during FY2018. Whilewe did have 3211 new employees who joined the Bank due to retirement etc. of 18973employees the overall staff strength declined by 15762 during the year.
Similarly due to strong awareness created across the organisation and various costoptimisation measures put in place the increase in overheads was contained to below 10%.
On the trading side Q4 was an exceptional quarter with domestic bond yields risingrapidly on the back of rise in crude oil prices hardening of US interest rates and riseof geopolitical risks in Middle East region. As a result trading income declined andsignificant MTM losses occurred. RBI had since then permitted banks to amortise losses onthe trading book over four quarters however we have not availed the benefit of RBIdispensation.
Gross NPAs of the Bank increased from Rs. 177866 crore as on March 2017 to Rs.223427 crore as on March 2018 whereas Net NPA increased from Rs. 96978 crore to Rs.110855 crore during the same period. Material changes in the method of recognisingcorporate stressed assets occurred after the RBI's February 2018 notification. Despitethis the slippage ratio in FY2018 has declined to 4.85% from 5.78% in the previous year.Overall the Gross NPA Ratio stood at 10.91% and the Net NPA ratio at 5.73% at the end ofFY2018. Provision Coverage Ratio (PCR) improved by 464 bps from 61.53% as on March2017 to 66.17% as on March 2018.
The Bank has approached the National Company Law Tribunal (NCLT) after the RBI issueddirectives under the Banking Regulation Act 1949. As on March 2018 the Bank has Rs.77626 crore of funds tied in accounts listed before NCLT for resolution. The PCR forthese accounts is 63% which we believe is adequate for resolution of these accounts. Weexpect bulk of the resolutions in NCLT List 1 to go through in H1FY19 and NCLT List 2 islikely to be resolved by end of FY2019.
The retail asset quality has held up well during this period and I do believe that thecorporate credit cycle is also nearing the end. From FY2019 onwards we should see asignificant improvement.
Despite the drag on Profitability due to higher provisioning the Bank remained wellcapitalised. Through portfolio reordering Credit Risk Weighted Assets (CRWA) to grossAdvances ratio declined by 780 bps to 71.14% as on 31st March 2018. During theyear the Bank raised Rs. 15000 crore of equity through a very successful QIP which wasthe largest ever in India and the third largest in Asia-Pacific. The Government in turnhas infused Rs. 8800 crore. Rs. 5436 crore was also raised through disinvestment of 8%stake in SBI Life through IPO route.
As a result CET 1 Ratio of the Bank improved by 27 bps to 9.68% as on March 2018.Overall CAR remained at 12.60% well above the regulatory requirements.
During FY2018 your Bank has undertaken several innovative and new initiatives to giveadditional thrust to each and every business segment of the Bank. Some of the importantinitiatives taken are as under:
Your Bank completed the historic merger of SBI with its five Associate Banks andBhartiya Mahila Bank Ltd. on 1st April 2017. Due to the tireless efforts ofour team the whole process went through seamlessly with no hiccups either on thetechnology front or the HR front. Customer onboarding was very smooth and we are nowreaping the synergies of merger on multiple fronts.
In line with Government of India's priorities your Bank has taken multipleinitiatives to boost the affordable housing sector. To meet customer expectations ofbetter and faster delivery in the home loan segment your Bank undertook AssuredTurn-Around-Time Drive which resulted in reduction of average turn-around time (TAT) ofHome Loan Sanction to 9 days by March 2018. This TAT is comparable to the best inthe industry.
Your Bank has come up with two new websites one exclusively for SBI HomeLoans (https://homeloans.sbi). It updates customers with the latest informationregarding Bank's home loan products. The other is SBI Realty Website (www.sbirealty. in).This website showcases your Bank's approved projects across India to prospective homebuyers. It helps to bring together developers and buyers on a single platform givingbuyers access to the deals on SBI approved projects.
Specific to the area of affordable housing "SBI Grih Nirman AffordableHousing Project Finance Scheme" has been launched to tap the emerging potential forfinancing affordable Housing Projects and is especially geared towards first-time homebuyers. Also your Bank has partnered with CREDAI in an event where 375 affordable housingprojects were launched by builders across India.
Your Bank has integrated Bank's Loan Origination System with Vidya LakshmiPortal (VLP) of Government of India to ensure better tracking of Education loanapplications and faster sanctioning of loans.
Wealth Management and Transaction Banking have now become sustainable levers forfee income. Under the Wealth Management Services your Bank added 5 new centres and 55dedicated new Wealth Hubs during the financial year. The number of customers has increasedto 24168 in March 2018 from 3772 in March 2017 and AUM reached Rs. 14284 crore in March2018 from Rs. 2996 crore in March 2017. Your Bank has also launched Wealth ManagementServices for NonResident Indians.
Transaction Banking Unit (TBU) a technology driven platform offerscomprehensive transaction related products and solutions to clients. Fee income from
TBU was up by 33.6% YoY and Turnover went up by 67.3% during FY2018. By keeping a trackon market developments your Bank provides technology based futuristic solutions toclients.
Your Bank launched India's first comprehensive digital service platform"YONO" (You Only Need One) which offers banking and other financial productsalong with access to India's largest B2C marketplace for its customers to meet theirlifestyle needs.
With a vision to Be the Bank of Choice for a Transforming India' yourBank has successfully implemented the ambitious project of NHAI - National Electronic TollCollection (NETC). Your Bank is issuing SBI FASTag working on Radio FrequencyIdentification technology (RFID) which enables the customers to pay the tollelectronically across all the National Highway Toll plazas. Using SBI FASTag customers canpay their toll electronically and can top up/recharge their SBI FASTag wallet onlinethrough a dedicated portal using cards or net banking of any bank.
Through its subsidiaries SBI provides a wide gamut of financial services to itscustomers. The growth exhibited by the subsidiaries has been healthy in this financialyear.
SBI Capital Markets Limited posted a PAT of Rs. 327 crore during FY2018 vis--vis Rs.252 crore in FY2017. SBI Life Insurance has proven its market leadership in FY2018 withnumber 1 position in Individual New Business Premium among private insurers. The Companyrecorded PAT of Rs. 1150 crore in FY2018 against Rs. 955 crore in FY2017. SBI Cards'Credit Card base has grown by 37% YoY and Spends on card witnessed a YoY growth of 73%.The company delivered PAT of Rs. 363 crore for FY2018 vis--vis Rs. 390 crore in FY2017.SBI Funds Management Private Limited with an investor base of over 7.8 million posted aPAT of Rs. 331 crore during FY2018 against Rs. 224 crore during FY2017. Also during thecurrent year SBI Mutual Funds crossed the historic milestone of Rs. 2 Trillion Assetsunder Management (AUM) mark.
SBI Global Factors Private Limited a leading provider of factoring services fordomestic and international trade displayed turnover of Rs. 3555 crore for FY2018 ascompared to turnover of
Rs. 3047 crore in FY2017. The total AUM of SBI Pension Funds Private Limited as on 31stMarch 2018 was Rs. 89283 crore displaying annual growth of 34% against Rs. 66723 croreon 31st March 2017. Its overall AUM market share in Private Sector was 58%while in the Government Sector it was 35%.
SBI General Insurance Company Limited recorded 36.1% YoY growth in Gross WrittenPremium ( Rs. 3553 crore for FY2018) against an industry growth of 17.5%. The PAT was Rs.396 crore for FY2018 vis--vis Rs. 153 crore in FY2017. The company has grown by 124.8%in Crop Insurance in FY2018 by actively participating in the PMFBY schemes and extendinggeographies.
RECOGNITION & AWARDS
I am enthused to share with you the details of some of the awards won by your Bank. Wewere awarded the National Award for Highest SHG bank linkages' for FY2018 byMinistry of Rural Development. Your Bank has been declared as the Winner of GoldenPeacock Award for Risk Management' for 2017. SBI has been awarded as The Best TradeFinance Bank for the South Asia region by Global Trade review London for the secondconsecutive year. For the constant efforts put in by your Bank through the SBI Foundationto increase its Corporate Social Responsibility footprint we have been awarded GoldenGlobe Tiger Award for Excellence & Leadership in CSR and ET Now CSR Leadership Awardsin various categories. In the area of Information Technology we won Best Bank Award forUse of Technology for Financial Inclusion and Best Bank Award for
Electronic Payment Systems among Large Banks in the IDRBT Banking Technology ExcellenceAwards. Your Bank's Hindi House magazine PRAYAS was also accredited with the 1stPrize' in Rajbhasha Kirti Awards 2017.
Among the Subsidiaries SBI Life was awarded India's Leading insurance Company Life (Private sector) at the Dun & Bradstreet BFSI Summit 2018. It was also adjudgedas one of the Most Trusted Brand 2017 for the Seventh consecutive year by The EconomicTimes Brand Equity - Nielsen survey. SBI Pension Funds was adjudged winner in the PensionFund House Category by Outlook Money for FY17. SBI General won the ET Best BFSI BrandsAward 2018 and Bancassurance Leader award in the Insurance awards organised byFintelekt.
CORPORATE SOCIAL RESPONSIBILITY
Your Bank believes that it has a solemn duty to make sustainable social change in thelives of the less fortunate and underprivileged members of the society. Your Bank alwaysplaces the interest of the common man especially the most marginalised at its core. YourBank earmarked 1% of the previous year's net Profit as the budget for CSR spend for theyear. Its CSR activities are widespread and deep-rooted and have made a true difference inthe lives of thousands from the underserved and downtrodden communities. CSR is acontinuing commitment of your Bank for developing the quality of life of the community andsociety as a whole. During the year your Bank conducted 23007 training programstraining 613020 youngsters from rural areas with settlement rate of 68% throughits 151 Rural Self Employment Training Institutes.
The CSR spend of the Bank for FY2018 stood at Rs. 112.96 crore. This is the sixthsuccessive year where your Bank's CSR spend has crossed the milestone of Rs. 100.00crore.
ENVIRONMENT AND SUSTAINABILITY
Your Bank is committed to environment protection and contributes positively to reducethe carbon footprint. Major initiatives in this area are (i) Waste to gold: A projectthat aims to motivate and develop the skills of youth to address waste management in thecity; and develop small sustainable businesses for their livelihood as well and (ii) SBICorbett: Under this project SBI Foundation is providing villages with a sustainable wastemanagement system and conducting trainings of SHG Workers to provide awareness in nearbyschools and hotels.
Responsible interaction with environment to avoid depletion and degeneration of naturalresources and maintaining long term quality of the environment is a priority for yourBank. Your Bank has contributed Rs. 2.05 crore towards the following: (a) Acquiringsolar power plant solar water heater and solar street lamps (b) Tree plantations andmaintenance of parks and gardens and (c) Donating battery operated vehicles.
Your Bank has shown its commitment in the renewable energy space not only by taking uprenewable financing but also by building its own captive renewable capacity through windenergy and solar roof tops. Your Bank has so far installed 151 solar roof top sites with acapacity of 6.23 MW.
The bygone financial year was an exceptional year in many ways. Additionally theoperating environment of the Banks became more challenging as the year progressed due tohardening of bond yields. Financial sector volatility also increased and macro challengesin terms of higher crude prices and trade wars have again gained prominence.
It is in this backdrop the future strategy of the Bank has to be clearly articulatedand executed. In the next two years the Bank will adopt a strategy that will achieve ahealthy credit growth of 10-12% by 2020. Growth in business will be achieved by atwo pronged strategy comprising of portfolio reordering that will reduce the CRWA to Totaladvances ratio and internal reorganisation of the corporate banking.
Revamping of corporate credit structure and system within the Bank will proceed on suchlines that will widen the universe of clients and focus on new segments. The CorporateAccounts Group (CAG) will focus on high priority and quality individual & grouprelationships and the concept of Group relationship coordinators will be introduced. CAGwill offer an end-to-end solution to high quality large corporates focusing on fee incomeproject finance and supply chains around large corporates. The credit risk managementfunction will also be strengthened by on-boarding sector specialists and improving duediligence.
Drawing lessons from the experiences in the banking industry during the lastyear the Bank has further strengthened the overall internal audit and control process.
The threat of competition from market competitors cannot be taken lightly and the Bankwill leverage its balance sheet strength and pricing power to optimise the risk returnmatrix.
HR issues need a fresh look as usage of advanced digital technology such as ArtificialIntelligence (AI) and big data increases within the Bank. The skill set of the employeesneeds to be upgraded in line with the changing operating environment. Given the pace ofretirements in the next five years it is important to put in place a robust plan ofsuccession. Potential leaders will be identified and mentored through customised trainingprogrammes to create a strong leadership pipeline. Some of these works are already inprogress and concrete action plan will be implemented in the next two years.
The contours of banking sector are changing in line with the aspirations of young Indiawho is becoming increasingly technology oriented. The Bank already has a dominant presencein digital space and we shall strive to further improve our position across all digitalchannels. The Bank is actively exploring the use of AI Cloud Platforms and collaborationwith FinTechs to improve systems and processes. The investments in digital banking by yourBank will pay rich dividends as issues of asset quality are sorted out. I have no doubt inmy mind that financial year 2019 will be the year of hope and financial year 2020 will bethe year of happiness. In the words of an unknown "The past cannot be changed. Thefuture is yet in your power". I thank all our shareholders for their continuedfaith in our strength and capabilities our customers for their valuable support and trustand our employees for their tireless efforts towards achieving our goals.