BANCASSURANCE HAS BEEN APPLIED IN STATE BANK OF INDIA

INDEX
Sl.No. 1 2 3 4 5 6 7 8 9 10 CONTENT Executive summary Research Methodology Company Profile Introduction to the Topic Analysis Observations Suggestions Conclusion Reference Annexure PAGE NO 1 4 7 21 70 100 102 103 105 106

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EXECUTIVE SUMMARY
The banking and insurance industry have changed rapidly in the changing and challenging economic environment through out the world. In the competitive and liberalized environment everyone is trying to do better than others and consequently survival of the fittest has come into effect. Insurance companies are also to be competitive by cutting cost and serving in a better way to the customers. Now the time has come to choose and adopt appropriate distribution channel through which the insurance companies can get the maximum benefit and serve customers in manifolded ways. Multi channel distribution and marketing of insurance products will be the smart strategy to continue to play an important role in distribution, alternative channels like corporate agents brokers and bancassurance will play a greater role in distribution. One of the more recent examples of financial diversification is bancassurance, the term given to the distribution of insurance products through branches or other distribution channels of the banks. The concept that originated in France, now constitutes the dominant model in a number of European and other countries and the same is fast catching up in India as well. SBI Life Insurance Company, a joint venture between SBI and Cardif S.A., a leading life insurance company of France, is a predominant player in bancassurance. This project report gives an idea about A study on Bancassurance at State Bank of India, Goaves branch, Belgaum. In this project report an effort has been made to understand the concept of Bancassurance and its practical applicability at State Bank of India, Belgaum. The study also includes various aspects like which model of bancassurance is applied in State Bank of India, the various individual and group insurance products which are marketed through SBI, the benefits of Bancassurance to the bank, RBI and IRDA guidelines on bancassurance and the evaluation of the future prospects of bancassurance in SBI. examples of ion But there are challenges, the most common challenges to success of bancassurance are poor manpower management, lack of a sales culture within the bank, insufficient product BABASAB PATIL Page 2

BANCASSURANCE HAS BEEN APPLIED IN STATE BANK OF INDIA promotions, failure to integrate marketing plans, marginal database expertise, poor sales channel linkages, inadequate incentives, resistance to change, negative attitude towards insurance and unwieldy marketing strategy. Even insurers and banks that seem ideally suited for a bancassurance partnership can run into problems during implementation. One more important obstacle in development of bancassurance in India has been a set of regulatory barriers. Some of these have recently been cleared with the passage of the Insurance (Amendment) Act, 2002. Particularly with reference to SBI, bancassurance is gaining acceptance gradually. Bank is converging towards a model of global retail financial institution offering a wide array of products creating a one stop-shop where mortgages, savings, pensions and insurance products will be available. Observations: 1) The joint venture model of bancassurance is applied in SBI. SBI Life is the joint venture between SBI and Cardif life insurance company of France. SBI provides network, Cardiff provides technology. 2) Bancassurance is beneficial for the banks, because i. ii. iii. iv. The chances of loan becoming Non performing assets will be reduced as it gives security to the loan amount. It reduces the risk of loans becoming debt loans to the bank. It helps the bank by increasing the skills of the employees. It increases the total other income of the bank.

3) The proportion of total miscellaneous income in total income has been increased after the branch took up the activity of cross selling. 4) Major portion of the employees have not been given any training for cross selling. 5) Out of 30 bank employees, 73.3% employees are involved in the activity of bancassurance. 6) Out of 22 employees who are involved in the activity of cross selling, 90.9% employees opine that it is increasing their skills. 7) Cross selling is advantageous to the bank as when two customer accounts are compared i.e. one who has taken bancassurance with another customer who has not

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BANCASSURANCE HAS BEEN APPLIED IN STATE BANK OF INDIA taken bancassurance, the bank is more benefited incase of customer who has taken bancassurance. Suggestions: 1) Training should be given to all the employees of the branch with respect to cross selling. 2) Banks have witnessed a decline in margins in their core lending business due to falling interest rates. Insurance distribution helps to increase the fee based earnings of banks to a considerable extent. So the bank employees should try to increase the total other income of the bank by doing cross selling. 3) Bank employees who are involved in bancassurance should be given full knowledge of the target customers. 4) In order to attract more policy holders, the bank employees and insurance agents should promptly attend to the enquiries of policyholders. 5) Bank should try to facilitate online and internet payments towards insurance products. Conclusion: With reference to SBI, bancassurance is gaining acceptance gradually. Bank is converging towards a model of global retail financial institution offering a wide array of products creating a one stop-shop where mortgages, savings, pensions and insurance products will be available. Some of the regulatory issues need to be addressed comprehensively and sorted out particularly with respect to competition and market structure problems. Given these changes, bancassurance and collaboration between banks and insurers has a long way to go in India.

RESEARCH METHODOLOGY
Objectives of the Study: BABASAB PATIL Page 4

BANCASSURANCE HAS BEEN APPLIED IN STATE BANK OF INDIA 1. To understand the concept of Bancassurance and its practical applicability at State Bank of India, Belgaum. 2. To know which model of Bancassurance is applied in State Bank of India. 3. To study the various individual and group insurance products which are marketed through State Bank of India. 4. To find out the benefits of Bancassurance to the bank. 5. To study the Reserve Bank of India (RBI) and Insurance Regulatory Development Authority (IRDA) guidelines on Bancassurance. 6. To evaluate the future prospects of Bancassurance in State Bank of India. Statement of the problem: Globally, cross selling is a major component of the business of banks. In India too, it is catching up fast with several of the banks. SBI is the leading bank among all nationalized banks having largest banking network in the country, also has made headway in selling the insurance products along with the banking products. Cross selling would help the banks by boosting their fee income. So there is a scope to study how the concept of bancassurance has been applied in State Bank of India. Scope of the Project: The study is limited to State Bank of India, Goaves Branch, Belgaum. The study will be conducted on the basis of past three years performance of the bank. Limitations of the study: Detailed information is not provided by the bank staff because of the privacy policy of the bank.

Data collection method: Primary data is collected through; BABASAB PATIL Page 5

BANCASSURANCE HAS BEEN APPLIED IN STATE BANK OF INDIA Observation Discussion with the bank manager and bank employees. Filling up of the questionnaire from the bank staff.

Secondary data is gathered through; The financial statements of the bank. From various books, websites, magazines, bank brochures etc.

Tools used for analysis: MS Excel Graphs and charts SPSS

Need for the study: Squeeze on margins of fund based revenue has taken place in the banks now. Growing disintermediation by corporate borrowers, better inventory practices that have reined in working capital needs and a liberalized external borrowing regime coupled with dwindling international rates have eaten fund incomes of the bank. Banks have felt a need to offset these through growing fee incomes particularly from retail side. So there is a need to study how the bank is trying to increase its fee based revenue. Staff retention and motivation is another big challenge for the

banks now. While the opportunities in other sectors are increasing, to retain the employees, bank must provide diversification in the work. So there is a need to study how the bank is using the activity of bancassurance to motivate the employees to remain in the bank. Universal Banking- approach to provide all financial products

under one roof; is another need for the study. It is nothing but integration of the financial services industry in terms of banking, insurance and securities business. The BABASAB PATIL Page 6

BANCASSURANCE HAS BEEN APPLIED IN STATE BANK OF INDIA banks have been looking towards bancassurance, a mechanism of distribution of insurance products through a banks network, as a step towards universal banking. Moreover, hawking of insurance products by banks is seen as a logical step for expanding their business and improving the bottom line. Optimum utilization of infrastructure and resources to maximize

revenue has also created the need for the study. It is necessary to study how the bank is optimally utilizing the resources and infrastructure through the activity of bancassurance. Customer retention in the face of competition is very difficult

for the banks. If the bank provides any additional services along with the usual banking services then only it can survive in the era of competition. So there is a need to study how the bancassurance is helping the bank to retain its customers.

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COMPANY PROFILE
Overview of Indian Banking structure: Banking structure as of 31st Mar 2004 is depicted in the following chart: The growth of Indian banking business can be summed up in the following six phases: No Period 1 1900 to 1949 2 1949 & 1969 3 4 5 1969 to 1985 1985 to 1991 1991 to 2004 Phases Births and deaths of many private banks. Laying of solid and sound foundation; enactment of Banking Companies Regulation Act 1949. Branching out phase, nationalization of 19 private banks, lead bank scheme. Consolidation phase, weaknesses and defects of mass branch banking were investigated by various committees. Reforms and strengthening. First dose of reforms with Sri. M. Narasimham Committee report in 1991. consequently there were series of reforms in SLR, CRR, new norms of assets classification, NPAs and its provisioning, Basel I capital adequacy norms and other prudential norms, permission for entry of new generation of private sector banks, deregulation of interest, risk based management, adoption of computer technology, setting up of debt recovery tribunal, and passage of securitization and reconstruction of financial assets and enforcement of Security Interest Act 6 2004 to date (SARFAESI) 2002. Integration and consolidation phase. BoB absorbed South Gujarath Local area Bank Ltd in June 2004, GBT merged with OBC in August 2004, merger of SBI & its subsidiaries, UBI & BOI are proposed. Even RRBs are merging. In Sept 2005 all RRBs sponsored by Syndicate bank in Karnataka are merged into Karnataka Grameen Vikas Bank. So also Punjab National Bank sponsored RRBs in Punjab. Preparing for Basel II from Jan 2006. Overview of Indian Insurance Industry Indian insurance business is divided into four classes: 1) Life insurance 2)Fire insurance 3)Marine insurance 4)Miscellaneous insurance. The life insurance business is confined to BABASAB PATIL Page 8

BANCASSURANCE HAS BEEN APPLIED IN STATE BANK OF INDIA life insurers and non life insurance businesses can be done by general insurers only, as no composites are permitted as per law. In the last five decades, insurance sector in India has come full circle, from open competitive market to full nationalization and now back to liberalized market where both private and public sector companies have level playing ground. A birds-eye view of insurance sector reforms No Date 1 September 2 1956 January 1972 January 1973 3 4 5 6 7 January 1974 April 1993 January 1994 December 1996 August 1997 November Reforms Incorporation of LIC and merger of 245 private life insurers, nationalized in Jan 1956. Nationalization of general insurance (106 private insurers) Incorporation of GIC (General Insurance Corporation) Formation of four subsidiaries of GIC to take over 106 insurers. Malhotra committee on insurance sector reforms and deregulation set up. Malhotra committee submits report to the finance minister. IRDA Bill introduced in Parliament & referred to the standing committee. IRDA is withdrawn following opposition to foreign participation Government of India clears greater autonomy to LIC and GIC. Union budget announces opening up of insurance sector Notification of IRDA as a statutory authority Approval of IRDA bill by the cabinet with FDI limited to 26% Insurance bill presented in the budget session Private insurance companies are back appointed by the Government of India for conducting a study on

1997 8 June 1998 9 January 1999 10 October 1999 11 February 2000 12 October 2000 Malhotra committee,

insurance, in its report in 1994 stated that only 22% of the Indian population is insured. It has also pointed out that the Indian insurance business is under developed due to state monopoly and lack of aggressive marketing of insurance policies. With setting up of IRDA in Jan 1999, the insurance industry has been opened up, with a restriction of 26% on foreign ownership to Indian insurers and there has been tremendous amount of transformation. Till April 2000, it was Life Insurance Corporation of India and General Corporation of India with its four subsidiaries that operated in a monopoly position of life BABASAB PATIL Page 9

BANCASSURANCE HAS BEEN APPLIED IN STATE BANK OF INDIA and general insurance business, respectively. From October 2000, private players started invading this sector. As of March 2004, the number of private players in the life insurance sector has been thirteen. The traditional stronghold of LIC is now the playground of these new players. With effect from Dec 2000, GIC started to operate as a national re-insurer. GICs four subsidiaries are de-linked and made as independent insurance companies. As of Mar 2004, eight private companies, ECGC (Export Credit Guarantee Corporation Ltd) and Agricultural Insurance Company of India Ltd (AIC) are operating in general insurance besides erstwhile subsidiaries of GIC. Evolution of State Bank of India: The origin of the State Bank of India goes back to the first decade of the nineteenth century with the establishment of the Bank of Calcutta in Calcutta on 2 June 1806. Three years later the bank received its charter and was re-designed as the Bank of Bengal(2 January 1809). A unique institution, it was the first joint-stock bank of British India sponsored by the Government of Bengal. The Bank of Bombay (15 April 1840) and the Bank of Madras (1 July 1843) followed the Bank of Bengal. These three banks remained at the apex of modern banking in India till their amalgamation as the Imperial Bank of India on 27 January 1921. Primarily Anglo-Indian creations, the three presidency banks came into existence either as a result of the compulsions of imperial finance or by the felt needs of local European commerce and were not imposed from outside in an arbitrary manner to modernize India's economy. Their evolution was, however, shaped by ideas culled from similar developments in Europe and England, and was influenced by changes occurring in the structure of both the local trading environment and those in the relations of the Indian economy to the economy of Europe and the global economic framework.

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Bank of Bengal H.O.

Establishment The establishment of the Bank of Bengal marked the advent of limited liability, joint-stock banking in India. So was the associated innovation in banking, viz. the decision to allow the Bank of Bengal to issue notes, which would be accepted for payment of public revenues within a restricted geographical area. This right of note issue was very valuable not only for the Bank of Bengal but also its two siblings, the Banks of Bombay and Madras. It meant an accretion to the capital of the banks, a capital on which the proprietors did not have to pay any interest. The concept of deposit banking was also an innovation because the practice of accepting money for safekeeping (and in some cases, even investment on behalf of the clients) by the indigenous bankers had not spread as a general habit in most parts of India. But, for a long time, and especially up to the time that the three presidency banks had a right of note issue, bank notes and government balances made up the bulk of the investible resources of the banks. The three banks were governed by royal charters, which were revised from time to time. Each charter provided for a share capital, four-fifth of which were privately subscribed and the rest owned by the provincial government. The members of the board of directors, which managed the affairs of each bank, were mostly proprietary directors representing the large European managing agency houses in India. The rest were government nominees, invariably civil servants, one of whom was elected as the president of the board.

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Group photograph of Central Board (1921)

Business The business of the banks was initially confined to discounting of bills of exchange or other negotiable private securities, keeping cash accounts and receiving deposits and issuing and circulating cash notes. Loans were restricted to Rs.1 lakh and the period of accommodation confined to three months only. The security for such loans was public securities, commonly called Company's Paper, bullion, treasure, plate, jewels, or goods 'not of a perishable nature' and no interest could be charged beyond a rate of twelve per cent. Loans against goods like opium, indigo, salt woolens, cotton, cotton piece goods, mule twist and silk goods were also granted but such finance by way of cash credits gained momentum only from the third decade of the nineteenth century. All commodities, including tea, sugar and jute, which began to be financed later, were either pledged or hypothecated to the bank. Demand promissory notes were signed by the borrower in favor of the guarantor, which was in turn endorsed to the bank. Lending against shares of the banks or on the mortgage of houses, land or other real property was, however, forbidden.

Indians were the principal borrowers against deposit of Company's paper, while the business of discounts on private as well as salary bills was almost the exclusive monopoly of individuals Europeans and their partnership firms. But the main function of the three banks, as far as the government was concerned, was to help the latter raise loans from time to time and also provide a degree of stability to the prices of government securities.

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Old Bank of Bengal Major change in the conditions A major change in the conditions of operation of the Banks of Bengal, Bombay and Madras occurred after 1860. With the passing of the Paper Currency Act of 1861, the right of note issue of the presidency banks was abolished and the Government of India assumed from 1 March 1862 the sole power of issuing paper currency within British India. The task of management and circulation of the new currency notes was conferred on the presidency banks and the Government undertook to transfer the Treasury balances to the banks at places where the banks would open branches. None of the three banks had till then any branches (except the sole attempt and that too a short-lived one by the Bank of Bengal at Mirzapore in 1839) although the charters had given them such authority. But as soon as the three presidency bands were assured of the free use of government Treasury balances at places where they would open branches, they embarked on branch expansion at a rapid pace. By 1876, the branches, agencies and sub agencies of the three presidency banks covered most of the major parts and many of the inland trade centers in India. While the Bank of Bengal had eighteen branches including its head office, seasonal branches and sub agencies, the Banks of Bombay and Madras had fifteen each.

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BANCASSURANCE HAS BEEN APPLIED IN STATE BANK OF INDIA Bank of Madras Note Dated 1861 for Rs.10 Presidency Banks Act The presidency Banks Act, which came into operation on 1 May 1876, brought the three presidency banks under a common statute with similar restrictions on business. The proprietary connection of the Government was, however, terminated, though the banks continued to hold charge of the public debt offices in the three presidency towns, and the custody of a part of the government balances. The Act also stipulated the creation of Reserve Treasuries at Calcutta, Bombay and Madras into which sums above the specified minimum balances promised to the presidency banks at only their head offices were to be lodged. The Government could lend to the presidency banks from such Reserve Treasuries but the latter could look upon them more as a favor than as a right.

Bank of Madras India witnessed rapid commercialization in the last quarter of the nineteenth century as its railway network expanded to cover all the major regions of the country. New irrigation networks in Madras, Punjab and Sind accelerated the process of conversion of subsistence crops into cash crops, a portion of which found its way into the foreign markets. Tea and coffee plantations transformed large areas of the eastern Terais, the hills of Assam and the Nilgiris into regions of estate agriculture par excellence. All these resulted in the expansion of India's international trade more than six-fold. The three presidency banks were both beneficiaries and promoters of this commercialization process as they became involved in the financing of practically every trading, manufacturing and mining activity in the subcontinent. While the Banks of Bengal and Bombay were engaged in the financing of large BABASAB PATIL Page 14

BANCASSURANCE HAS BEEN APPLIED IN STATE BANK OF INDIA modern manufacturing industries, the Bank of Madras went into the financing of large modern manufacturing industries; the Bank of Madras went into the financing of smallscale industries in a way which had no parallel elsewhere. But the three banks were rigorously excluded from any business involving foreign exchange. Not only was such business considered risky for these banks, which held government deposits, it was also feared that these banks enjoying government patronage would offer unfair competition to the exchange banks which had by then arrived in India. This exclusion continued till the creation of the RBI in 1935.

Bank of Bombay Presidency Banks of Bengal The presidency Banks of Bengal, Bombay and Madras with their 70 branches were merged in 1921 to form the Imperial Bank of India. The triad had been transformed into a monolith and a giant among Indian commercial banks had emerged. The new bank took on the triple role of a commercial bank, a banker's bank and a banker to the government. But this creation was preceded by years of deliberations on the need for a 'State Bank of India'. What eventually emerged was a 'half-way house' combining the functions of a commercial bank and a quasi-central bank. The establishment of the Reserve Bank simultaneously saw important amendments being made to the constitution of the Imperial Bank converting it into a purely commercial bank. The earlier restrictions on its business were removed and the bank was permitted to undertake foreign exchange business and executor and trustee business for the first time. Imperial Bank The Imperial Bank during the three and a half decades of its existence recorded an impressive growth in terms of offices, reserves, deposits, investments and advances, the increases in some cases amounting to more than six-fold. The financial status and security BABASAB PATIL Page 15

BANCASSURANCE HAS BEEN APPLIED IN STATE BANK OF INDIA inherited from its forerunners no doubt provided a firm and durable platform. But the lofty traditions of banking which the Imperial Bank consistently maintained and the high standard of integrity it observed in its operations inspired confidence in its depositors that no other bank in India could perhaps then equal. All these enabled the Imperial Bank to acquire a pre-eminent position in the Indian banking industry and also secure a vital place in the country's economic life.

Stamp of Imperial Bank of India When India attained freedom, the Imperial Bank had a capital base (including reserves) of Rs.11.85 Crores, deposits and advances of Rs.275.14 Crores and Rs.72.94 Crores respectively and a network of 172 branches and more than 200 sub offices extending all over the country. First Five Year Plan In 1951, when the First Five Year Plan was launched, the development of rural India was given the highest priority. The commercial banks of the country including the Imperial Bank of India had till then confined their operations to the urban sector and were not equipped to respond to the emergent needs of economic regeneration of the rural areas. In order, therefore, to serve the economy in general and the rural sector in particular, the All India Rural Credit Survey Committee recommended the creation of a state-partnered and state-sponsored bank by taking over the Imperial Bank of India, and integrating with it, the BABASAB PATIL Page 16

BANCASSURANCE HAS BEEN APPLIED IN STATE BANK OF INDIA former state-owned or state-associate banks. An act was accordingly passed in Parliament in May 1955 and the State Bank of India was constituted on 1 July 1955. More than a quarter of the resources of the Indian banking system thus passed under the direct control of the State. Later, the State Bank of India (Subsidiary Banks) Act was passed in 1959, enabling the State Bank of India to take over eight former State-associated banks as its subsidiaries (later named Associates). The State Bank of India was thus born with a new sense of social purpose aided by the 480 offices comprising branches, sub offices and three Local Head Offices inherited from the Imperial Bank. The concept of banking as mere repositories of the community's savings and lenders to creditworthy parties was soon to give way to the concept of purposeful banking sub serving the growing and diversified financial needs of planned economic development. The State Bank of India was destined to act as the pacesetter in this respect and lead the Indian banking system into the exciting field of national development. State Bank of India is proud to announce it having received the "TECHNOLOGY AWARD 2005" by The Banker, London. Associate Banks: State Bank of India has the following seven Associate Banks (ABs) with controlling interest ranging from 75% to 100%. 1. State Bank of Bikaner and Jaipur (SBBJ) 2. State Bank of Hyderabad (SBH) 3. State Bank of Indore (SBIr) 4. State Bank of Mysore (SBM) 5. State Bank of Patiala (SBP) 6. State Bank of Saurashtra (SBS) 7. State Bank of Travancore (SBT) The seven ABs have a combined network of 4596 branches in India which are fully computerized and 1070 ATMs networked with SBI ATMs, providing value added services to clientele. The ABs recorded an impressive performance during 2003-04. The combined net profit of these banks increased by 38% over the previous year to reach Rs.1938 Crores. BABASAB PATIL Page 17

BANCASSURANCE HAS BEEN APPLIED IN STATE BANK OF INDIA Deposits and advances grew by 20% and 22%, respectively, during the year. Three of the ABs viz. SBIr, SBP and SBS achieved NIL Net NPA status while the combined Net NPA ratio of all ABs was at 0.84% as on 31st March 2004. The Bank is actively involved since 1973 in non-profit activity called Community Services Banking. All branches and administrative offices throughout the country sponsor and participate in large number of welfare activities and social causes. Their business is more than banking because they touch the lives of people anywhere in many ways. Their commitment to nation-building is complete & comprehensive.

Board of Directors: Central Board of State Bank of India (As on 8th October 2007) Sl.No. Name of Director Sec. of SBI Act, 1955 Shri O.P. Bhatt 1. 19(a) Chairman Shri T.S. Bhattacharya 2. 19 (b) MD & GE (CB) Shri S.K. Bhattacharyya 3. 19(b) MD & CC&RO 4. Shri Suman Kumar Bery 19(c) 5. Dr. Ashok Jhunjhunwala 19(c) BABASAB PATIL Page 18

BANCASSURANCE HAS BEEN APPLIED IN STATE BANK OF INDIA 6. 7. 8. 9. 10. 11. 12. Shri Ananta Chandra Kalita Shri Amar Pal Shri Piyush Goyal Dr. Deva Nand Balodhi Prof. Mohd. Salahuddin Ansari Shri Vinod Rai Smt. Shyamala Gopinath 19(ca) 19(cb) 19(d) 19(d) 19(d) 19(e) 19(f)

SBI Goaves branch, Belgaum started on 30th November, 1998. It has three divisions: Personal branch division: The main work of this division is to lend personal loans, car loans, housing loans etc. Nine employees are working in this division. Commercial branch division: It lends commercial advances above Rs.25 lakhs. Currently, 18 employees are working in this division. Retail Asset Credit Processing Cell: It carries out loan processing and follow up. The total workforce in this division is twenty three.

Insurance Market in India - A Quick look: With the progress of reforms, Insurance market has been flooded with a number of players. As at end-March 2006, among the life insurers, there were 151 companies in private sector and Life Insurance Corporation of India (LIC) was the solitary public sector company. As regarding the present size of the insurance market in India, it is stated that India accounts not even one per cent of the global insurance market. However, studies have pointed out that Indias insurance market is expected to grow rapidly in the next 10 years. Mathur (2004) for instance, stated that in spite of significant growth of life insurance business through the outstanding efforts of LIC, only 25 to 26% of insurable population in India has been insured. In terms of insurance penetration ratio (defined as ratio of insurance premium to GDP), a key indicator of the spread of insurance coverage and insurance culture, India compares poorly by international standards. The penetration ratio was less than one per cent in 1990s and it improved to 4.8% by end-March 2006. As against this, a Survey Report of Swiss Re revealed that the penetration ratio as at end-March 2006, in BABASAB PATIL Page 19

BANCASSURANCE HAS BEEN APPLIED IN STATE BANK OF INDIA respect of some of the European countries, viz., UK and Switzerland at 16.5% and 11.0%. In Asia, Taiwan and South Korea had registered their respective ratio of as high as 14.5% and 11.1%. Insurance Penetration ratio for the World was placed at 7.5% far greater than that of India. Thus in a country with more than 1.2 billion population, the poor penetration ratio indicates that a vast majority of population remain outside the reach of the insurance, especially in rural and semi-urban areas, in the context of the absence of social security schemes. This clearly suggests the presence of vast potential for tapping the insurance market particularly by widening the distribution channels. This is where the strategy of bancassurance could possibly become more relevant. The banking and insurance industry have changed rapidly in the changing and challenging economic environment throughout the world. Insurance companies are also to be competitive by cutting cost and serving in a better way to the customers. Now the time has come to choose and adopt appropriate distribution channel through which the insurance companies can get the maximum benefit and serve. The intermediaries in the insurance business and the distribution channels used by carriers will perhaps be the strongest drivers of growth in this sector. Multi channel distribution and marketing of insurance products will be the smart strategy of continue to play an important role in distribution, alternative channels like corporate agents brokers and Bancassurance will play a greater role in distribution. The time has come for the industry to gradually move from traditional individual agents towards new distribution channels with a paradigm shift in creating awareness and not just selling products. The game is old but the rules are new and still developing. However despite of its teaming one billion population, India still has a low insurance penetration of 1.95 percent, 51st in the world. Despite the fact that India boosts a saving rate around 25 percent, less than 5% is spent on insurance. To streamline the saving into insurance, bancassurance is the best channel to tackle four challenges facing the industry:- product innovation, distribution, customer service and investments. In the age of stiff competition no one is ready to loose its own possession.

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INTRODUCTION TO BANCASSURANCE
Though much ado was made about bancassurance, an alternate channel to hawk risk products through banks, the channel is yet to pick up pace as of today. Most of the insurance companies have already tied up with banks to explore the potential of the channel that has been a success story in Europe and legislations are also in place. Bancassurance primarily banks on the relationship the customer has developed over a period of time with the bank. And pushing risk products through banks is a cost-effective affair for an insurance company compared to the agent route, while, for banks, considering the falling interest rates, fee based income coming in at a minimum cost is more than welcome.

The strategy for using the established, entrenched distribution network for one product to market other new products has long existed in the consumer goods sector. Thus the networks for soaps and detergents have been used by companies to distribute newly launched food products, the distribution channel for Rados has been used to market televisions and so on. Of course, the basic premise for this kind of cross selling is the fact that companies keep diversifying their product portfolios, using established incumbent BABASAB PATIL Page 21

BANCASSURANCE HAS BEEN APPLIED IN STATE BANK OF INDIA networks to promote and distribute new product lines. Banks, too, have in the recent past adopted this strategy both in India as well as internationally. They have moved away from the classical model of deposit taking and credit disbursal through their branch networks and have begun to offer a wide range of products and services like security broking facilities and mutual funds. This is the phenomenon of universal banking that builds on the principle of leveraging existing networks to broaden portfolio offerings. Change in regulatory regimes has also facilitated this diversification. Growing disintermediation by corporate borrowers (direct borrowings by firms from the debt market for both working capital and term loans), better inventory practices that have reined in working capital needs and a liberalized external borrowing regime coupled with dwindling international rates have all eaten into fund incomes of banks. In short, the margins or spreads that banks make between the cost of funds (deposits plus borrowings) and the returns on funds (interest earnings on loans). Banks have felt the need to offset these through growing fee incomes particularly from the retail side. To target the retail segment, banks have felt the need to offer a more diversified product range to appeal to a diverse range of risk profiles. On the other hand, stand-alone financial product providers (NBCs, mutual funds etc.) have faced crippling distribution costs that in the face of growing competition, they have not been able to pass on as load on this product. Thus as far as banks and other financial services providers are concerned, there has been a double coincidence of needs that has led them to collaborate either through direct equity participation or ownership by banks or strategic alliances. SBI Life Insurance Company a predominant player in bancassurance is positive about the channel bringing about a transformation in the way insurance has been sold so far. The company is banking heavily on bancassurance and plans to explore the potential of State Bank of Indias 9000 plus branches spread across the country and also its 4000 plus associate banks - one of the reasons why SBI Life Insurance is not laying much emphasis on increasing its agent force from the present 3000.

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BANCASSURANCE HAS BEEN APPLIED IN STATE BANK OF INDIA The company plans to appoint Certified Insurance Facilitators (CIFs) in a phased manner at its branches. For now around 320 CIFs, one from each of its bank branches have been identified for the purpose in addition to setting up insurance counters at its banking outlets. The number is expected to go up to 500. Out of our present business of around Rs.150-200 crore bancassurance has brought in 50 percent while corporate agency and the agent channel have contributed about 10 percent and 40 percent respectively, says Pradeep Pandey, Head, PR, SBI Life Insurance Company. The company aims at acquiring 75 percent of the total business through bancassurance and the balance through the other channels by 2007.

Definition of Bancassurance: Bancassurance symbolizes the convergence of banking and insurance. It is the provision of insurance and banking products and services through a common distribution channel or to a common client base. The term has its origins in France and involves distribution of insurance products through a bank's branch network. While bancassurance has developed into a tremendous success story in Europe, it is a relatively new concept in Australia and Asia. Most new insurers have entered into memoranda of understanding with banks to use their branches as outlets for marketing standard products. State Bank of India, Vysya Bank and J&K Bank already have joint ventures in life insurance. Vijaya Bank and Punjab National Bank are in the midst of finalizing life and non-life ventures. Bancassurance, known as Alfinanze and most popular in Europe is the simplest way of distribution of insurance products through a bank distribution channel. It is basically selling insurance products and services by leveraging the vast customer base of a bank and fulfill the banking and insurance needs of the customers at the same time. It takes the various forms depending upon the demography, economic and legislative climate of the country, while demographic climate will determine the kinds of insurance products, economic climate will determine the trends in terms of turnover, market shares etc, BABASAB PATIL Page 23

BANCASSURANCE HAS BEEN APPLIED IN STATE BANK OF INDIA legislative climate will decide the periphery within which bancassurance has to operate. The motive behind the Bancassurance also differs. For banks it just acts as a means of product diversification and additional fee income; for insurance company it acts as a tool for increasing their market penetration and premium turnover and for customer it acts as a bonanza in terms of reduced price, high quality products and delivery to doorsteps. So every body is a winner here. While banks and insurance companies stand to gain, what impact does it have on the retail customer? Retail saving choices are getting increasingly complex internationally and Idea is no exception. There is growing need for more diverse instruments and avenues of investment. This coupled with need of integrated financial one stop shops to reduce the transaction costs associated with diversification. Globally, insurance products are a major internment savings and this is likely to be the case in India as well as insurance penetration gathers steam. The issue of building brand equity is critical for new entrants into the insurance market. However, tying up with a bank might provide counterproductive if this objective is to be achieved. A number of surveys in the European market have shown, for instance, that in bancassurance partnerships, it is the banks rather than the insurers brand that dominates and insurance brands often get stifled. Why insurers are turning to banks? One of the key factors is that banks continue to command the highest trust among Indian savers and investors and of the total pool of financial savings of households, 3 per cent (the largest share) goes to bank deposits (RBI annual Report 2002). For any providers of new financial products, banks are the fastest and most trusted channel to reach households. Besides, the bank branch network of 62000 is virtually impossible to replicate and would be indispensable in penetrating newer markets such as rural markets. Bancassurance also leads to a significant lowering of distribution costs for insurers. World's perspective:BABASAB PATIL Page 24

BANCASSURANCE HAS BEEN APPLIED IN STATE BANK OF INDIA If we are looking around the world then we can see that European countries are doing better than others where hardly 20% of us banks are selling insurance in 1998 against 70% to 90% in many European countries. Market penetration of bancassurance in new life business in Europe ranges between 30 % in UK to nearly 70% in France. Almost 100% banks in France are selling insurance products. In 1991 Nationale Nederlanden of Netherlands merged with Post Bank, the banking subsidiary of the post office to create the ING group a new dimension to the bancassurance is harnessing the databank of the post office as well. CNP, the largest independent insurance company in France has developed its products distribution through post offices. The merger of Winterthur, the largest swiss insurance company, with Credit suisse and Citibank with Travelers group have resulted in some of the largest financial conglomerates in the world. Despite the phenomenal success of bancassurance in Europe, properly and casualty products have not made much inroads. In Spain, Belgium, Germany and France more than 50% of all new life premium is generated by bancassurance. A recent study try Boston consulting Group and Bank Administrative Institute in USA claims that if bank made a major commitment to insurance and a more narrowly targeted commitment to investors within 5 years they could increase retail revenues by nearly 50%. Banks existing infrastructure enables them to operate at expense level that is 30% to 50% lower than those of traditional insurers. Bancassurance in India SWOT analysis:Although banks and insurance companies are yet to exchange their wedding rings bancassurance is already in some form in India. Banks are selling personal accident and baggage insurance for its credit card members, issued mortgage linked insurance products like fire, motor or cattle insurance to their customers and establishing face to face relationship with their customers by leveraging their existing capabilities. In order to implement the bancassurance model in India a lot of steps should be takena) High capital investment in the infrastructural development particularly in IT and Tele Communications will have to be required. b) A call centre will have to be created. c) Top professionals will have to be hired. d) R& D cell will have to be created to generate new ideas and products. BABASAB PATIL Page 25

BANCASSURANCE HAS BEEN APPLIED IN STATE BANK OF INDIA A SWOT analysis is done on bancassurance in the context of India. Strengths:In a country like India of one billion people where sky is the limit. There is a vast untapped potentials waiting for life insurance products. There are more than 900 million lives waiting for life cover, 200 million house hold waiting for household insurance policy. Millions of people traveling in and out of India are waiting for overseas mediclaim and Travel insurance policies whole world is eyeing on the second largest middle class segment after China to tap. Other than this there is a huge pull of skilled professionals to relocate the bancassurance venture to provide new product through R&D last of all, LIC & GIC have large branch network facility to implement bancassurance model very effectively. Weaknesses:In the case of rapid growth of Information Technology banks and insurance companies are still lacking its implementation. Though it is awakening but it is too late and too little. In the age of Wide Area Net-work (WAN) and Vast Area Network (VAN), simple LAN has not yet been introduced even in the head-quarters. They are over burdened with the inflationary pressure and tax exemption for all insurance products will inspire the customers (though it is done partially) to be insured. Another one is inflexibility of the products, i.e. they are not tailor-made to the requirements of the customer. Opportunities:Though not at the same level, banks data base in India is enormous and has to be dissected variously and various homogeneous groups are chummed out in order to position bancassurance products. With a good IT structure they can really do wonders. Appropriate atmosphere and political conscientious have to be built up for liberalization and if it is done then RBI or IRDA should have no hesitation in allowing the marriage of banking and insurance sectors to take place. Merger and Acquisition or setting up of joint venture is necessary in this direction. Threats:BABASAB PATIL Page 26

BANCASSURANCE HAS BEEN APPLIED IN STATE BANK OF INDIA Success of bancassurance venture requires change in approach, thinking and work culture on the part of everybody involved. In India there is always a tendency to restrict any change whether its impact becomes favorable or not. So there should be a clear vehemence. Sometimes non-response from the target customers becomes possible threat as it was found in USA in 1980's and failed. US banks have turned their attention (since late 1990's) towards life insurance. Again the investors in the capital may turn their face in case the rate of return on capital falls short of the existing return on capital. So the return from bancassurance must at least match those returns. Also unholy alliance is not allowed to take place as there will be fierce competition in the market resulting in lower price. Bancassurance in State Bank of India Perspective:SBI Life insurance, a joint venture between State Bank of India, the largest bank in the country and Cardif insurance company of France. Cardif has launched eight products so far incorporating certain features that are introduced for the first time in the country. SBI -Life is banking on the bancassurance model on the strength of the SBI Groups 10000 plus bank branches and its vast customer base. In addition it is also tapping other banks corporate agents and the traditional agency route to penetrate the insurance market SBI Life is planning to introduce more novel and user friendly products to cater to the requirements of the consumers in different segments. There are so many insurance products launched so far. Among them 'sanjeevan' in June, 2001 (single premium policy for VRS retirees), Sukhjeban' (guaranteed returns for allage groups), 'Scholar' (for children's higher education combining insurance cover for parents and guardians), 'Swarna ganga' (premium is refunded in the form of saving element with life cover and without obligation medical examination), 'Super Suraksha' (For all deposit holders initially at SBI) are to name a few. Other challenging new products are ready to come into the market to cover under the pension product, the unorganized population such as, self employed professionals, Small traders, artisans, contract labors and house hold helpers. SBI has the largest banking network in the county. The bank is looking for business from every customer segment of the bank rural and urban segments, upper, BABASAB PATIL Page 27

BANCASSURANCE HAS BEEN APPLIED IN STATE BANK OF INDIA middle and lower income segments / groups and corporate segment. Besides own channel, they are planning to distribute products through other interested banking channels. Cardif, SBI-Life's JV partner, has hand on experience with various banks around the world. In France, it is selling insurance products through BNP Paribas network of banks, the largest bank of the country and 35% of bank's retail banking profit comes from distributing insurance products. SBI has customers in Solapur District of Maharashtra with huge response. It is expected that 2/3 rd of the premium income in expected to come by way of bancassurance and the rest from the traditional agency channel as well as ties up with corporate agents (Sundaram Finance). SBI has also introduced group insurance to some well managed corporate staffs. Premiums paid by corporates on behalf of their employees qualify as a deductible expense and employees are not taxed, when employees pay premiums on a saving linked group insurance scheme, the monthly contribution qualifies for section 88 tax rebate and the final maturity sum received is also tax-free. Technology is an integral part of this operation. Cardiff provided the technology required. Cardiff's PMS software has been successfully implemented in 24 countries. It modified the software, engaging TCS to suit our requirements.

BANCASSURANCE MODELS
According to one school of thought, the bancassurance models are classified in the following way; I. Structural Classification: a) Referral Model: Banks intending not to take risk could adopt referral model wherein they merely part with their client data base for business lead for commission. The actual transaction with the prospective client in referral model is done by the staff of the insurance company either at the premise of the bank or elsewhere. Referral model is nothing but a simple arrangement, wherein the bank, while controlling access to the clients data base, parts with only the business leads to the agents/ sales staff of insurance company for a referral fee or commission for every business lead that was passed on. In fact a number of banks in India have already resorted to this strategy to begin with. This model would be suitable for BABASAB PATIL Page 28

BANCASSURANCE HAS BEEN APPLIED IN STATE BANK OF INDIA almost all types of banks including the RRBs /cooperative banks and even cooperative societies both in rural and urban. There is greater scope in the medium term for this model. For, banks to begin with resorts to this model and then move on to the other models. b) Corporate Agency: The other form of non-risk participatory distribution channel is that of corporate agency, wherein the bank staff is trained to appraise and sell the products to the customers. Here the bank as an institution acts as corporate agent for the insurance products for a fee/ commission. This seems to be more viable and appropriate for most of the mid-sized banks in India as also the rate of commission would be relatively higher than the referral arrangement. This, however, is prone to reputational risk of the marketing bank. There are also practical difficulties in the form of professional knowledge about the insurance products. Besides, resistance from staff to handle totally new service/product could not be ruled out. This could, however, be overcome by intensive training to chosen staff packaged with proper incentives in the banks coupled with selling of simple insurance products in the initial stage. This model is best suited for majority of banks including some major urban cooperative banks because neither there is sharing of risk nor does it require huge investment in the form of infrastructure and yet could be a good source of income. Bajaj Allianz stated to have established a growth of 325 per cent during April-September 2004, mainly due to bancassurance strategy and around 40% of its new premiums business (Economic Times, October 8, 2004). Interestingly, even in a developed country like US, banks stated to have preferred to focus on the distribution channel akin to corporate agency rather than underwriting business. Several major US banks including Wells Fargo, Wachovia and BB &T built a large distribution network by acquiring insurance brokerage business. This model of bancassurance worked well in the US, because consumers generally prefer to purchase policies through broker banks that offer a wide range of products from competing insurers. c) Insurance as Fully Integrated Financial Service/ Joint ventures: Apart from the above two, the fully integrated financial service involves much more comprehensive and intricate relationship between insurer and bank, where the bank BABASAB PATIL Page 29

BANCASSURANCE HAS BEEN APPLIED IN STATE BANK OF INDIA functions as fully universal in its operation and selling of insurance products is just one more function within. Where banks will have a counter within sell/ market the insurance products as an internal part of its rest of the activities. This includes banks having wholly owned insurance subsidiaries with or without foreign participation. In Indian case, ICICI bank and HDFC banks in private sector and State Bank of India in the public sector, have already taken a lead in resorting to this type of bancassurance model and have acquired sizeable share in the insurance market, also made a big stride within a short span of time. The great advantage of this strategy being that the bank could make use of its full potential to reap the benefit of synergy and therefore the economies of scope. This may be suitable to relatively larger banks with sound financials and has better infrastructure. Internationally, the fully integrated bancassurance have demonstrated superior performance. Even if the banking company forms as a subsidiary and insurance company being a holding company, this could be classified under this category, so long as the bank is selling the insurance products along side the usual banking services. As per the extant regulation of insurance sector the foreign insurance company could enter the Indian insurance market only in the form of joint venture, therefore, this type of bancassurance seems to have emerged out of necessity in India to an extent. There is great scope for further growth both in life and non-life insurance segments as GOI is reported have been actively considering to increase the FDIs participation to the up to 49 per cent. II. Product-based Classification: i) Stand-alone Insurance Products: In this case bancassurance involves marketing of the insurance products through either referral arrangement or corporate agency without mixing the insurance products with any of the banks own products/services. Insurance is sold as one more item in the menu of products offered to the banks customer, however, the products of banks and insurance will have their respective brands too, e.g., Karur Vysya Bank Ltd selling of life insurance products of Birla Sun Insurance or non-life insurance products of Bajaj Allianz General Insurance Company. ii) Blend of Insurance with Bank Products: BABASAB PATIL Page 30

BANCASSURANCE HAS BEEN APPLIED IN STATE BANK OF INDIA With the financial integration both within the country and globally, insurance is increasingly being viewed not just as a stand alone product but as an important item on a menu of financial products that helps consumers to blend and create a portfolio of financial assets, manage their financial risks and plan for their financial security and well being. This strategy aims at blending of insurance products as a value addition while promoting its own products. Thus, banks could sell the insurance products without any additional efforts. In most times, giving insurance cover at a nominal premium/ fee or sometimes without explicit premium does act as an added attraction to sell the banks own products, e.g. credit card, housing loans, education loans, etc. Many banks in India, in recent years, has been aggressively marketing credit and debit card business, whereas the cardholders get the insurance cover for a nominal fee or (implicitly included in the annual fee) free from explicit charges/ premium. Similarly the home loans / vehicle loans, etc., have also been packaged with the insurance cover as an additional incentive. According to another school of thought, there are four models of bancassurance. They are as follows: Distribution alliance between an insurance company and a bank. Joint venture between a bank and an insurance company. Merger between a bank and an insurance company. Bank builds and sells its own insurance products.

The second model is applied in SBI. SBI Life Insurance Company, a joint venture between SBI and Cardif S.A., a leading life insurance company in France, is a predominant player in bancassurance. Cardif is a wholly owned subsidiary of BNP Paribas, which is the Euro zones leading bank. BNP Paribas is one of the oldest foreign banks with a presence in India dating back to 1860. Cardif has been a pioneer in the art of selling insurance products through commercial banks in France and in 34 other countries. SBI has contributed about 67% of Rs.601 Cr. Premium income of SBI Life in 2004-05.

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INDIVIDUAL PRODUCTS
These insurance products are marketed by Certified Insurance Facilitators. Some of the individual products which are marketed through SBI are; Horizon II: SBI Lifes HORIZON II is a unique, non participating Unit Linked Insurance Plan in Indian Insurance Industry, where you need not to be a financial market expert. This plan offers the flexibility of Unit Linked Plan along with Automatic Asset Allocation which provides relatively higher returns on your money where as increasing death benefits provides higher security to your family. It is a unique, non-participating Unit Linked Insurance Plan. Key features: Twin benefit of insurance cover and market linked returns. Hassle-free investment management of funds from inception to maturity. Automatic Asset Allocation of funds. Automatic rebalancing of funds at yearly intervals, free of cost. Higher protection, to meet your family financial needs. Automatic cover continuance. Liquidity option after 3 years. Facility to top up your investment kitty. Tax benefit as per section 80C and 10(10D) of income tax act. 15 days free look period from the date on which you receive the policy document.

How does it work?

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BANCASSURANCE HAS BEEN APPLIED IN STATE BANK OF INDIA As per the Plan and Term chosen by us , SBI Life will invest the net premium amount into each of the funds mentioned. The number of Units of each fund will be allocated is calculated as: No. of Units Fund(x) = Net Investment in Fund(x) NAV of Fund(x) A unit of each Fund has its own price called the Net asset Value (NAV). The NAV of each Fund is calculated on a daily basis with the following formula: NAV= {Market Value of Investment + Current Assets - Current Liabilities & Provisions} No of Units outstanding Benefits: Hassle Free Investment Management Maturity Benefits: At the end of the term the customer will get the fund value. Increasing Death Benefit: For all in forced policies, in case of death after completion of age 7 your nominee will receive Fund Value + Sum Assured otherwise fund value is payable. What is the policy term? Minimum years: 10, Maximum years: 40 Who can buy this product? The people who are in good health and in the age group of 0 to 60 years. Maximum age at Maturity is 70 years. What is the sum assured? Decide the amount you can put aside to be invested in Horizon II every year. Life Cover Sum Assured(Fixed) will be (Term / 2) x AP where, AP = Annualized Premium. Unit Plus II: Unit Plus II Plans are an attempt to meet all your financial & insurance needs through a single non participating product. The customers can use it the way they like. Whats more BABASAB PATIL Page 33

BANCASSURANCE HAS BEEN APPLIED IN STATE BANK OF INDIA you get market linked returns which in the long term has always proved to give better returns than traditional savings products. This is a non-participating individual unit linked product. People who are in good health and in the age group of 0 to 65 can opt for these plans.

Key features: Unmatched Flexibility to match your changing requirement Choice of 4 investment funds: You can change the allocation percentage when you want, 4 switches free per annum i.e. equity, bond, growth and balanced funds. Choice of term : Limited term or whole life

How does it work? SBI Life Unit Plus II Plans: 2 plans depending on your premium mode: 1. Single Premium Mode: Unit Plus II Single 2. Regular Premium Mode: Unit Plus II Regular Decide the investment amount: Frequency Single Regular Minimum Premium Rs.40, 000 Rs.24, 000 p.a. Maximum Premium No Limit No Limit

Life Cover: It depends upon the total amount you have decided to invest. Single Premium Single Minimum Sum Assured Maximum Sum Assured 125%of single premium 625% of single premium amount amount

Regular Premium Term = 5 to 10 years

Minimum Sum Assured Maximum Sum Assured 5 times annual premiumDepends on the age* amount Page 34

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BANCASSURANCE HAS BEEN APPLIED IN STATE BANK OF INDIA Term 11 years and above Whole Life Term Term/2 x Annual Depends on the age*

Premium (70 - Age at entry)/2 x No Limit Annual Premium

*= Age Band 0 to 40 41 to 50 51 to 60 61 to 65 Benefits: Maturity Benefit: At maturity, the Fund Value as on that date is paid in full. Death Benefit: In the unfortunate event of the death Before or the age 7 years: Fund Value is payable to the nominee. After attaining age 7 and before 65th birthday, the beneficiary will receive higher of Fund Value or Sum Assured less Partial Withdrawals within the last 12 calendar months. If death occurs after age 65, the beneficiary will receive the higher of the Fund Value or Sum Assured less all the Partial Withdrawals made in the last 12 calendar months before attaining the age of 65+all withdrawals made after attaining the age of 65 will be set off against the Sum Assured excluding partial withdrawals from Top Up Amount. Horizon II pension: Horizon II Pension is a safe and a hassle free way to get high returns! Horizon II Pension comes with the unique feature of Automatic Asset Allocation by means of which you truly, dont need to be an expert to grow your money! This is a Unit Linked Pension product. If Maximum Sum Assured Multiplicator Factor 50 Times Of Annualized Premium 40 Times Of Annualized Premium 25 Times Of Annualized Premium 20 Times Of Annualized Premium

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BANCASSURANCE HAS BEEN APPLIED IN STATE BANK OF INDIA you are in the age group of 18 to 60(age as on last birthday) you can opt for Horizon II pension plan. Key features: Horizon II Pension is the most simple unit linked pension plan; all you need to do is: Choose your retirement date, the plan option and the regular premium amount. Based on the plan option and the term opted, SBI Life will invest your money in three different funds viz., Equity Pension Fund, Bond Pension Fund and Money Market Pension Fund. The funds are invested keeping in mind the term opted for and your money is invested in safer funds as your policy approaches maturity. Available with two options: pure pension and pension cum life cover. No medical required to enroll for Pure Pension No premium allocation charges from year 11 onwards. Save tax u/s 80 CCC (1) of IT Act. Investment Plans available: Plan A - Dynamic Plan: Here a higher proportion of your money is invested in equity. It is ideal for longer period of terms. Plan B - Growth Plan: Here, the investment in equity automatically decreases more rapidly as the funds are put into less risky options. This leads to more balanced approach, hence lower volatility coupled with good returns in long run. Benefits: Retirement Benefit: At vesting age you get a choice to withdraw up to one third of the fund value in lump sum-tax free as per the current tax law. The remaining amount has to be used by Annuity from either SBI life or from any other Annuity provider. BABASAB PATIL Page 36

BANCASSURANCE HAS BEEN APPLIED IN STATE BANK OF INDIA Death Benefit: Death during the term of policy Option I Pure Pension - Fund value is payable to nominee. Option II Pension with Life Cover - Fund value plus sum assured after deducting any mortality charges due but not paid during policy year in which death occurs. Death after Vesting age: Death Benefit depends upon the annuity option chosen. What is the policy term? Term = Vesting age - Age atMin entry 10 Years Max 52 Years

Note: Vesting Age = 50 years to 70 years (age as on last birthday) What is the sum assured? For Pure Pension Plan Nil For pension cum life cover planAge Group 18-35 Min Max 5 times annualized premium 10 Lakhs Age Group 36-45 Age Group 46-60 5 times annualized premium 5 Lakhs 1.2 Lakhs

Unit plus II pension: Unit Plus II Pension plan makes sure that you have regular income after you retire and also helps you to maintain your standard of living. This is a unit linked pension plan wherein the policyholder chooses an investment period from 5 to 52 years for a vesting age between 50 to 70 years. You can choose to pay either single premium or pay regular premium for

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BANCASSURANCE HAS BEEN APPLIED IN STATE BANK OF INDIA the entire policy term. Your contributions are invested into 4 fund options as per your choice. This is a non participating Unit Linked Pension product. Key features: Choice to invest & control four different funds as per your risk appetite. Flexibility to choose between two options: pure pension and pension cum life cover. No medical required for Pure Pension, automatic acceptance facility. Flexibility to increase regular contribution. Top up payments: any amount, anytime. 15 days free look period.

How does it work? Choose your vesting age: Any age between 50 years - 70 years. Choose plan option Option I Pure Pension Plan (For age group 18-65) Option II Pension Plan with life cover (For age group 18-60) In case you have opted for option II, your sum assured will be as mentioned below For single premium mode: Age at entry Sum Assured

18-35 125 % of single premium subject to maximum SA of Rs. 10 lacs 36-45 125 % of single premium subject to maximum SA of Rs. 5lacs 46-60 125 % of single premium subject to maximum SA of Rs. 1.2 lacs For regular premium mode:

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BANCASSURANCE HAS BEEN APPLIED IN STATE BANK OF INDIA Age at entry Sum Assured 18-35 5 or 10 times first annualized premium subject to maximum SA of Rs.10 Lakhs

36-45

5 or 10 times first annualized premium subject to maximum SA of Rs.5 Lakhs

46-60 Benefits:

Rs.1.2 lakhs

Death Benefit: During accumulation phase: If you opt for option I: Pure Pension Plan. Fund value will be paid in lump sum to nominee. If you opt for option I: Pure Pension Plan with life cover. The higher of fund value or sum assured will be paid in lump sum to nominee. Guaranteed additions by way of free allocation of units to increase your retirement kitty. On Vesting: It's your income; you decide how it works for you. You have choice and flexibility. You can take up to one third of the fund value in lump sum. During Annuity Phase: Balance amount has to be used to purchase annuity. The rate at which the amount at vesting date will be converted to an annuity is not guaranteed and will be based on the prevailing immediate annuity rates under the relevant annuity option at the vesting date. Tax benefit: Save tax u/s 80 CCC (1) of IT Act.

What is the policy term? Term = Vesting Age - Age at Entry Minimum Years 5 Years BABASAB PATIL Maximum Years 52 Years

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Who can buy this product? If you are in the age group of 18 to 65 you can opt for Unit Plus II pension plan without life cover. For Unit Plus II pension plan with life cover it should be between 18-60 years. Lifelong pension: Life expectancy is improving rapidly. People live longer. You cannot work throughout your life. You will have to retire from work. In the post retirement period you have lot of time for yourself. You would like to do things you have not done while you were working. You need to have a comprehensive plan to meet your post retirement financial needs ensuring complete peace of mind. This is a Pension product. If you are in the age group of 18 years (age as on last birthday) to 65 years (age as on last birthday) you can opt for pure pension plan. For Pension cum Life Cover, it is 18 years (age as on last birthday) to 60 years (age as on last birthday). Key features: A maximum of Rs.1,00,000 p.a. paid as a contribution on a pension plan is fully deductible from the taxable income (within the max. ceiling Rs.1 lakh ) Minimum Guaranteed returns of 4% p.a. (compounded annually) on your Personal Pension Account (till 31st March 2010) + Vested bonus. It helps to accumulate enough savings to meet the old age needs and look for a reliable and enduring pension payment. It is an extremely flexible plan: Choice of the contribution amount you want depending on your premium paying capacity. You may exercise the Top-up facility whenever by paying additional amount to increase your retirement kitty, irrespective of contribution payment mode.

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BANCASSURANCE HAS BEEN APPLIED IN STATE BANK OF INDIA Convenient Contribution payment mode monthly, quarterly, half-yearly, yearly and single contribution is also available. Choice of the choosing your own retirement age. Postponing/ Preponing to a convenient date, the decision for receiving the Pension Benefits. Contribution holiday available from year 4 onwards. The total/balance amount (after withdrawal from PPA, if any) can be utilized in seeking immediate annuity. Free to choose annuity from either SBI Life or other insurance companies. At Vesting Age you have multiple choices of Pension/ Annuity options including Joint Life Time Annuity. On maturity you have a choice to withdraw up to 33% from your Personal Pension Account in a lump sum. This withdrawal amount is tax-free as per the current fiscal law. Helps you to utilize all alternatives of tax savings today and also plan for a worry free tomorrow. In Pension cum Life Cover plan, you have the facility of Automatic Cover Maintenance, which ensures that the cover remains in force even when you miss the premium payments. This facility is available after the first three years of the term. In Pension cum Life Cover plan, the life cover acceptance is based on a simple medical questionnaire without any Medical examination Rebates for Annual, Semi- Annual mode of premium and on high Contribution amount. Enjoy financial independence when you retire. 15 days Free Look Period from the date on which you receive the policy documents. How does it work? Here you pay your contributions for a selected term (accumulation period). Your contribution net of administration charges in your Personal Pension Account with a guaranteed rate of 4% (compounded) per annum till March 2010 depending on the BABASAB PATIL Page 41

BANCASSURANCE HAS BEEN APPLIED IN STATE BANK OF INDIA financial market, additional vested bonus may be declared from the age to start receiving pensions and also have the flexibility in the choice of annuity options and provider. Swadhan: Life has its uncertainties and risks. All that you are interested in is how best to afford a secure future for your loved one. We wish for a low premium insurance policy that not only provides security to our loved ones but also returns back the premium paid. It's a Traditional Term Assurance Policy with refund of part/total basic premium paid at the end of the term to the policyholder. Key features: Protection at affordable premium. Guaranteed refund of basic premium paid on Survival at the end of the term, depending upon the term of the policy. 5% rebate for Female lives Rebate on High Sum Assured Flexible benefit premium paying mode Free look period of 15 days

How does it work? You can take a cover ranging from 5-10 years. In the unfortunate event of death, the nominee would receive the entire sum assured as a lump sum payment. If you survive the entire term, you would be eligible to a refund of premiums depending upon the term of policy. For example, if your policy is for 5 years, you'd be eligible for refund of 50% of the total premiums paid; for 6 years, the refund would be 60%, and so on. Hence, if you've taken a policy for 10 years, you'd receive 100% of your premiums back as refund. Benefits:

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BANCASSURANCE HAS BEEN APPLIED IN STATE BANK OF INDIA Maturity benefit: If you survive for the entire term of the plan, you would be eligible to a refund of the premiums depending upon the term of the policy. %age of Basic Premium refunded 50% 60% 70% 80% 90% 100%

Term 5 years 6 years 7 years 8 years 9 years 10 years

Death benefit: In the event of claim, your nominee would receive full Sum Assured What is the policy term?

Minimum Years Maximum Years 5 years 10 years

What is the sum assured? Minimum Rs.3,00,000 (in multiple of Rs.10,000) Maximum Rs.1 Crore

Shield:

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BANCASSURANCE HAS BEEN APPLIED IN STATE BANK OF INDIA We want our family to have all the good things in life. Life is full of uncertainties and risk. To ensure that these uncertainties do not shatter the dreams you have for your family. Shield is a traditional pure risk policy (with no maturity benefits) that offers you a substantial life cover at a very low cost. It is one of the most preferred individual insurance products. Key features: It offers you life insurance cover at the lowest cost for a selected term. It is available in 3 options to suit your requirement. Level Premium throughout the chosen term with increasing Sum Assured, depending on the option chosen. Tax benefit u/s 80 C and 10 (10 D) of IT Act Attractive rebate for Female lives. Attractive Rebates are offered for Annual / Semi- Annual mode of Premium payment and High Sum Assured. Convenient premium payment options: Single and Multiple premium payment. 15 days Free Look Period from the date on which you receive the policy documents. How does it work? Under this product, you can opt for gradual increase of cover @ 5% every year or for substantial increase of cover @ 50% for every five years. Under both the options, you pay the same amount of premium throughout the entire term of the policy. If you opt for an increasing cover now you wouldn't require a fresh policy later. This will avoid the hassles of taking another insurance policy, paying more premiums and meeting the medical requirements of the insurer. We recommend that you should choose either of the following options. Sum Assured Increases by 5% Per Annum Sum Assured Increases by 50% Every 5 Years Page 44

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BANCASSURANCE HAS BEEN APPLIED IN STATE BANK OF INDIA Benefits: Death Benefit: Depending on the cover chosen, the nominee will receive the sum assured under this policy Maturity Benefit: No survival benefit available at the end of the term. Other Optional Benefits: Accidental Death and Accidental Total Permanent Disability Rider: In case of death due to an accident, the nominee gets the Sum Assured under this rider. If the policyholder is involved in an accident, resulting in Total Permanent Disability, he/she will get Sum Assured under this rider in 10 equal annual installments; He/she will exit from all the rider covers thereafter, but continue to be covered for basic cover on receipt of further premium due, if any. Premium Waiver Benefit Rider: Under this rider the policy holder need not pay future premiums for the base product, if he/she suffers from Total and Permanent Disability due to an accident after the rider is opted for. What is the policy term? Minimum Years Maximum Years 5 years 25 years

What is the sum assured? Range of Sum Assured Minimum Sum Assured Maximum Sum Assured Sum Assured Increases by Sum Assured Increases by 5% Per Annum Rs.3 lakhs Rs.10 Crores 50% Every 5 Years Rs.3 lakhs Rs.8 Crores Level Cover Rs.3 lakhs Rs.25 Crores

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BANCASSURANCE HAS BEEN APPLIED IN STATE BANK OF INDIA Keyman: Keyman is a key member or staff of the organization who is a major contributor to its growth and profit and whose absence may affect the continuity of the business. Keyman Insurance is taken by the Company on the life of the key member or staff. The main objective of Keyman Insurance is to compensate for the financial losses suffered following the death of key member or staff of the organization. The aim is to indemnify the company of these losses and to allow business continuity. All premiums paid for securing a Keyman life insurance policy are treated as business expenditure u/s 37 (1). Shield plan is available for the purpose of Keyman insurance. It is a pure term insurance Plan. Purpose of keyman: It protects the organization against any of the following losses; The loss of customers or sales. The loss of day -to -day specialized skills. The cost of recruiting and training the suitable replacement. Delay or cancellation of any business project that keyman was associated with. The loss of opportunity for future explanation. Recall of existing loan guaranteed by the keyman.

Tax benefits: Companies may claim the premium paid under Keyman insurance as a business expenses under section 37(1) of the income tax act. As per the finance bill 1996, the amount received under a Keyman insurance policy will not exempt from tax under Section 10(10D) of income tax act. The proceeds of policy will be treated as income under section 28(vi) of income tax act. In the event of the policy being assigned to the Keyman, the proceeds of the policy including bonus will be treated as "Profit in the Lieu of Salary" under section 17 (clause 17) of Income Tax Act. Who can buy this product?

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BANCASSURANCE HAS BEEN APPLIED IN STATE BANK OF INDIA Organizations buy this product to protect the organization against the cost caused by the death of key member of organization. What is the sum assured? Minimum 10,00,000 Maximum should be lower of 5 times the average net profit of the company for past 3 years 3 times the average gross profit of the company for last 3 years

Sudarshan: Sudarshan is an Endowment Policy designed to provide savings and protection to you and your family. You can save regularly for the future. Thus at the end of the plan, you will receive a substantial amount of savings along with the accumulated bonuses declared. At the same time, your family will be protected for death risk for the full Sum Assured. It is a traditional endowment plan i.e. saving - cum protection product. Key features: It offers you the option of tailoring your policy according to your requirement and needs, by opting for various extra covers (Riders) that are offered. This is a unique product that offers you an innovative cover (plan B) which helps you to protect your savings against 'the financial consequences of inflation' with constant premium for the entire duration of the plan. It gives you protection against unfortunate terminal or dreaded illness. It is an insurance plan which could also act as a hedging instrument. With this plan you can plan your children's future education, marriage expenses or even your own retirement - in a most flexible manner. How does it work?

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BANCASSURANCE HAS BEEN APPLIED IN STATE BANK OF INDIA Fixed Sum Assured Plan: Allows you to build a regular saving plan that gives you a secure amount at the end of a fixed period plus a bonus. In the unfortunate event of death before maturity, the nominee would stand to receive the Sum assured and the bonus accrued till that date. Increasing Sum Assured Plan - the COLA Option: The Cost Of Living Adjustment (COLA) option is so called because it serves as an automatic hedge against inflation. It allows you to increase the Sum Assured automatically by paying an additional premium compared to the Fixed Sum Assured Plan. Moreover, the life cover also automatically increases during the period as added protection to the family. Benefits: Maturity Benefit: Depending upon the plan option chosen: Fixed Sum Assured (Plan A) Basic Sum Assured along with Vested Bonus is payable Increasing Sum Assured (Plan B) Increased Sum Assured @ 5% p.a. along with Vested Bonus is payable Death Benefit: In the unfortunate event of death of the Life Assured, depending upon the plan option chosen: Fixed Sum Assured (Plan A) The Sum Assured along with Vested Bonus is payable to your nominee. Increasing Sum Assured (Plan B) Increased Sum Assured @ 5% p.a along with Vested Bonus is payable to your nominee. What is the sum assured? Minimum Rs.25,000 Maximum Rs.1 Crore Scholar II:

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BANCASSURANCE HAS BEEN APPLIED IN STATE BANK OF INDIA As a caring parent you would always want your child to get the very best. Is there a way to protect your children against lifes risks? Is there a way to make tomorrow safe for them? Therefore this is the time when careful financial planning can help you fulfill the aspirations that you have for your childrens. SCHOLAR II is designed to protect your childs future educational needs. It is a traditional participating plan. Anyone between 18 to 60 years of age(as on last birthday) with a child between 0 to 15 years can buy this product. Key features: Twin benefit of saving for your child's education and securing a bright future despite the uncertainties of life. Full risk cover throughout the policy term irrespective of payment of survival benefits installments. Option to receive the installments in lump sum at the due date of first installment of Survival benefit. Attractive rebate for Female lives and High Sum Assured. 15 days Free Look Period.

Benefits: Guaranteed payment at regular intervals. When the child attains 18 years of age, the parent has an option of: Receiving the Sum Assured in 4 installments: Age 18 years 19 years 20years 21 years Guaranteed Benefit Payment 25 % of Sum Assured 25 % of Sum Assured 25 % of Sum Assured 25 % of Sum Assured + Vested Bonus * Receiving the Survival Benefits in a single installment along with the Vested Bonus (Policy terminates thereafter). Vested bonus is the total amount of bonus accrued till date, under the policy. BABASAB PATIL Page 49

BANCASSURANCE HAS BEEN APPLIED IN STATE BANK OF INDIA Death Benefit: In the event of unfortunate incident of your early death during the term of the plan, your childs future remains secured in 3 ways: Child future educational needs: 25% of Sum Assured is payable in 4 equal installments when the child attains the age 18 years to 21 years. This ensures the child's higher educational needs are met. Immediate Payment: The nominee receives the Sum Assured along with the bonus declared until that date. All future basic premiums need not be paid: Ensuring that your family is not financially burdened in your absence. Tax Benefits: Tax benefit u/s 80 C and 10 (10 D) of IT Act. Premiums paid for Critical Illness Benefit qualify for tax exemption under Sec 80D. What is the policy term? The premium payment term depends on the age of the child and ends when the child attains the age 18 years. You are covered till the child attains the age 21 years. What is the sum assured? Minimum Rs.500000 Maximum Rs.1 Crore

Setubandhan: A unique Life Insurance bond that helps you, the NRI living abroad, build a bridge between you and your dear ones back in India. Its a traditional Investment - cum - Life Insurance opportunity. Key features:

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BANCASSURANCE HAS BEEN APPLIED IN STATE BANK OF INDIA Guaranteed 5% annual returns(Simple) on your investment with benefit of Single Premium payment. Savings-cum-Protection plan for two terms of 5 or 10 years. Optional Critical Illness cover against six major ailments like heart attack, cancer etc. Facility of repatriation at prevailing exchange rates. Optional life insurance cover for dependents up to Rs.10 lakhs with return of premium. 15 days look period.

How does it work? Setubandhan is an insurance bond for subscription by NRIs as well as by domestic residents in India. It is a life insurance policy that helps to build a bridge between you as the NRI living abroad and your dear ones back home in India. Benefits: Base Policy for NRIs: Guaranteed 5% annual additions(Simple) on Sum Assured with benefit of Single Premium payment In the event of death, the Sum Assured as increased by the annual addition on the date of death will become payable. Upon survival, the Sum Assured with total additions during the period will be payable. Optional Life Cover for Dependant: Term insurance cover for a dependant living in India, subject to a minimum sum assured of Rs.3 lakhs and maximum Rs.10 Lakhs. Premiums are payable annually. `Dependant will mean spouse, and parents not above the age of 55 at the time of entry. Term insurance premium will be refundable at the end of the term upon survival of the life covered (Swadhan). Full refund of premium for a 10-year term and 50% for a 5-year term. What is the sum assured? Minimum Sum Assured: Rs.3 lakhs BABASAB PATIL Page 51

BANCASSURANCE HAS BEEN APPLIED IN STATE BANK OF INDIA Maximum Sum Assured: Rs.1 Crore

Sanjeevan supreme: Life is all about change and with rising costs and economic instability, you may not be sure about your future incomes. You need a product that offers you a life cover for the term of your choice + At the same time does not burden you with liability to pay premiums for the entire term + Cash inflow at regular intervals. It is a Traditional Saving Plan with added advantage of life cover and guaranteed cash inflow at regular intervals. Key features: The plan has a number of money back options specially suited to your needs. The cover is available at competitive premium rates. It has guaranteed cash inflows which can meet your various financial obligations.

How does it work? SBI Life Money Back is a saving plan with added advantage of life cover and cash inflow at regular intervals. This plan is designed for individuals who want to plan for various financial obligations at specified times in life. Keeping your convenience in mind, we have designed four plan options: for 10, 15, 20 or 25 years.

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BANCASSURANCE HAS BEEN APPLIED IN STATE BANK OF INDIA Term of Premium Growth/Deferment Period 4 Years 4 Years 5 Years 5 Years Money Back Period 5 years @ 20% Sum Assured p.a. 10 years @ 10% Sum Assured p.a. 5 years @ 20% Sum Assured p.a. 10 years @ 10% Sum Assured p.a. Total Term of The Policy(2+3+4) 15 years 20 years 20 years 25 years

the Plan Payment Term Plan A 6 Years Plan B Plan C Plan D 6 Years 10 Years 10 Years

Benefits: You can pay off all premiums over a short period of time and be free from paying premiums for the rest of the policy term, while enjoying all the benefits for the entire policy term. Enjoy the benefits of bonus additions for the entire term of the policy. Convenient premium payment options: Single and Multiple premium payment. Maturity Benefit: At the end of the growth period, you would receive guaranteed payout in 5 years or 10 years, depending on the plan option chosen by you. The bonuses declared by the company get accumulated for the entire term of the plan and you would receive total bonus along with the final installment of Survival benefit. Death Benefit: In the unfortunate event of death during the term of the plan, the nominee would receive sum assured + vested bonuses, besides receiving of the survival benefit already paid. Exclusions applicable to the Basic cover: Suicide within the first year. What is the sum assured?

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BANCASSURANCE HAS BEEN APPLIED IN STATE BANK OF INDIA Minimum Rs.50,000 (and multiples of Rs.10,000 thereafter) Maximum Rs.5 Crore.

GROUP PRODUCTS
These products are marketed by branches even without Certified Insurance Facilitators. Some of the group insurance products are as follows; CapAssure Gratuity Scheme:

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BANCASSURANCE HAS BEEN APPLIED IN STATE BANK OF INDIA It is a Non-Participating yearly renewable traditional Group Gratuity Scheme. Under this scheme, the contributions paid continue to accumulate on traditional platform of investments and at the end of the financial year; an investment income earned on your contributions is credited to your gratuity fund account. Key features: Capital Guarantee on Fund Under Management Unique Pooling Fund Advantage: Get higher returns based on aggregated value of all your non-Linked funds Additional Funding up to 3% to absorb exit penalty charged by the previous insurer Flexibility to transfer partially your fund from this scheme to our Unit Linked SBI Life Golden Gratuity scheme! No Suicide Exclusion clause for basic life cover Additional benefit for your employee through Group Accidental Death and Permanent Disability rider Benefits: On Retirement/ Resignation/ Termination: Higher of accrued gratuity benefits payable as per scheme rules or the Gratuity Act. On occurrence of Total Permanent Disability (TPD): Higher of accrued gratuity benefits payable as per scheme rules or the Gratuity Act + Rider Sum Assured, if any, in case of TPD due to accident, will be payable to the employee. On an unfortunate Death: Higher of accrued gratuity benefits payable as per scheme rules or the Gratuity Act + Basic Sum Assured as opted for by the master policy holder + Rider Sum Assured, if any, in case of death due to accident. However, maximum benefit under Accidental Death & Total Permanent Disability (AD&TPD) rider will be limited to lower of basic sum assured or Rs.5 Lakhs. Grace period: A grace period of 30 days will be allowed for payment of life cover premium. However, if death occurs during the grace period, the death claim shall become BABASAB PATIL Page 55

BANCASSURANCE HAS BEEN APPLIED IN STATE BANK OF INDIA payable subject to the receipt of the due and unpaid risk premium or renewal risk premium for the entire group from the Master Policyholder. In case of non-receipt of the risk/rider premium within a grace period of 30 days, the life cover/rider would lapse. Revival Period: Life Cover can be revived within two years from the first due but unpaid premium, subject to payment of risk premium for the future. Tax Benefits: For Employer: The initial and Annual contributions made through an approved Gratuity trust can be claimed as business expenditure as per the provisions under section 36 (1) (v) of the Income Tax Act, 1961 subject to maximum limit of 8.33% of annual salary in respect of each member. Income of investments is exempt from tax under section 10(25) (iv) of the Act. For Employee: Gratuity benefits are tax free up to Rs.3, 50,000 u/s 10(10) in the hands of employee. Gratuity payment may be bettered by employer over and above Rs. 3, 50,000 taxable. (However, in this case the tax free limit as per above will not change.) The contribution made by the employer is not included in the value of taxable perquisites in the hands of the employee. Any death benefit under the Group Term Insurance is tax-exempt under section 10 (10D) of the Income Tax Act, 1961 CapAssure superannuation scheme: It is a Non-Participating yearly renewable traditional group superannuation scheme. The object of this scheme is to ensure that the underlying fund is accumulated in such a manner so that the fund will be sufficient to purchase an expected amount of annuity to an employee upon his retirement / to the legal heir in the event of an unfortunate death during service. The scheme would also entitle the employee for some benefit, defined as per the scheme rules, on his resignation, retirement, permanent total disability whilst in service, death whilst in service. Hence, SBI Life provides CapAssure Superannuation Scheme a BABASAB PATIL Page 56

BANCASSURANCE HAS BEEN APPLIED IN STATE BANK OF INDIA scheme that not only guarantees your capital but also offers you the benefit of additional funding and many more added benefits. There are two types of schemes: defined benefit scheme and defined contribution scheme. Key features: Capital Guarantee on Fund Under Management Unique Pooling Fund Advantage: Get higher returns based on aggregated value of all your non-Linked funds. Additional Funding upto 3% to absorb exit penalty charged by the previous insurer No Suicide Exclusion clause for basic life cover Additional benefit for your employee through our Group Accidental Death and Permanent Disability Rider Benefits: For defined benefit scheme: On Retirement/ Resignation/ Termination: The employee receives either the defined Pension or its equivalent in Purchase Price as per the Scheme Rules. On occurrence of Total Permanent Disability (TPD): The employee receives either the defined Pension or its equivalent in Purchase Price as per the Scheme Rules, + Rider Sum Assured, if any, in case of TPD is due to an accident. On an unfortunate Death: The employee receives either defined Pension amount or its equivalent in Purchase Price as per the Scheme Rules, + Basic Sum Assured as opted for by the master policy holder + Rider Sum Assured, if any, in case death is due to accident. For defined contribution scheme: On Retirement/ Resignation/ Termination: The accumulated amount may be used to purchase an immediate annuity from SBI Life or any other insurer. Or The employee may also choose to transfer his accumulated fund to the BABASAB PATIL Page 57

BANCASSURANCE HAS BEEN APPLIED IN STATE BANK OF INDIA approved superannuation fund of the new employer. Or The funds may be allowed to accumulate till superannuation of the employee. In case of unfortunate event of death during this period, the accumulated amount will be utilized to provide pension to the legal nominee. On occurrence of Total Permanent Disability (TPD): The member receives the accumulated amount to his/her credit + Rider Sum Assured, if any, in case of TPD is due to an accident. On an unfortunate Death: The accumulated amount to the credit of the member + the Basic Sum Assured as opted for by the master policy holder + Rider Sum Assured, if any, in case death due to accident. However, maximum benefit under Accidental Death & Total Permanent Disability (AD&TPD) rider will be limited to lower of basic sum assured or Rs.5 Lakhs. Grace period: A grace period of 30 days will be allowed for payment of life cover premium. However, if death occurs during the grace period, the death claim shall become payable subject to the receipt of the due and unpaid risk premium or renewal risk premium for the entire group from the Master Policyholder. In case of non-receipt of the risk/rider premium within a grace period of 30 days, the life cover/rider would lapse. Revival Period: Life Cover can be revived within two years from the first due but unpaid premium, subject to payment of risk premium for the future. Revival will be treated as per underwriting rules at that time. Tax benefits: Benefits to employers: The Employer will have a better chance of retaining the service of efficient and experienced staff. Better employee morale will lead to grater efficiency and productivity. Annual Contribution by the employer to an approved superannuation fund in respect of any particular employee will be treated as expenditure to the company, BABASAB PATIL Page 58

BANCASSURANCE HAS BEEN APPLIED IN STATE BANK OF INDIA However if the contribution exceeds Rs.1,00,000/- FBT is payable. (In accordance with Income Tax Rules, 87 & 88) Any income received by the trustees on behalf of an approved superannuation fund is exempted (Section 10 (25) (iii) of the Income Tax Act, 1961). Benefits to Employees: Payment of contribution towards an approved superannuation fund is eligible for deduction, subject to a maximum of Rs.1,00,000 (Section 80 C of the Income Tax Act, 1961). Commuted value i.e. commuted part of the pension (maximum up to 1/3 of the pension in case where gratuity is received or 1/2 of the pension incase gratuity is not received), is tax free on death or retirement or attainment of vesting age. Employers contribution will not be treated as perks in the hands of the employee. (as per provision 17(2)(v)) Uncommuted Pension will be treated as salaried income and taxed accordingly.

CapAssure Leave Encashment Scheme (CA-LE): It is a Non-Participating yearly renewable traditional group leave encashment scheme. Under this scheme, the contributions paid continue to accumulate on traditional platform of investments and at the end of the financial year; an investment income earned on your contributions is credited to your CA-LE fund account. Key features: Capital Guarantee on Fund Under Management Unique Pooling Fund Advantage: Get higher returns based on aggregated value of all your non-Linked funds Additional Funding upto 3% to absorb exit penalty charged by the previous insurer No Suicide Exclusion clause for basic life cover Additional benefit for your employee through our Group Accidental Death and Permanent Disability Rider BABASAB PATIL Page 59

BANCASSURANCE HAS BEEN APPLIED IN STATE BANK OF INDIA Benefits: On Retirement/ Resignation/ Termination: Accrued Leave Encashment benefits as per scheme rules. On occurrence of Total Permanent Disability (TPD): Accrued Leave Encashment benefit as per scheme rules + Rider Sum Assured, if any, in case of TPD is due to an accident. On an unfortunate Death: Accrued Leave Encashment Benefit, as per scheme rules will be payable + Basic Sum Assured as opted for by the master policy holder + Rider Sum Assured, if any, in case death due to accident. However, maximum benefit under Accidental Death & Total Permanent Disability (AD&TPD) rider will be limited to lower of basic sum assured or Rs.5 Lakhs. Grace Period: A grace period of 30 days will be allowed for payment of life cover premium. In case of non-receipt of the risk/rider premium within a grace period of 30 days, the life cover/rider would lapse. However, the accumulation of the fund will be continued without life cover/rider and the Leave Encashment claims will be settled subject to the availability of funds. Revival Period: Life Cover can be revived within two years from the first due but unpaid premium, subject to payment of risk premium for the future. Tax Benefits: The cash equivalent of the leave Encashment Benefit as and when paid by the employer is deductible from his income under section 43B (f) of the Income Tax Act. For the Employee the leave encashment benefit is taxable under section 15 of the Income Tax Act. Home loan insurance:

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BANCASSURANCE HAS BEEN APPLIED IN STATE BANK OF INDIA It gives complete protection to housing loan borrowers. It insures the borrowers life during loan repayment period to the extent of entire outstanding to make his family free of loan liability. SBI Life settles loan as per original EMI schedule directly with bank. It is one of the most popular group insurance products. Any HL borrowers of SB group with age group between 18 to 60 can avail this product. Single premium for entire term of policy, valid for entire period of loan (max age 71 or last date of repayment whichever is earlier). No burden on the family incase of unfortunate death of the borrower, simplified claim settlement process. Tax benefit u/s 80 C of IT Act is available. Group immediate annuity: SBI Life Insurance introduces Group Immediate Annuity Plan for employers, who want their existing annuity liability to be totally/partially managed by SBI Life. Buy out of pension liabilities is a method by which the employer transfers the risk of running a defined pension scheme completely to SBI Life Insurance Company. In this way the deferred benefits of the employees are protected and the employer also gets rid of the risk of the pension scheme running into deficits in the future. Key features: One Annuity Option: Life annuity payable at a constant rate through out the life time of annuitant. There is no death benefit under this option. Options to choose the periodicity of your annuity: Employees can choose the periodicity of the annuity depending upon the needs. The options available are Annual, Half yearly, Quarterly, and Monthly. Annuity rates guaranteed for life: Attractive annuity rates due to group effect Annuity rates decided at the time of entry are guaranteed for the rest of life for the given purchase price. Eligibility criteria Employees with in age group of 40 years (as on last birthday) to 80 years (as on last birthday) are eligible to this plan. BABASAB PATIL Page 61

BANCASSURANCE HAS BEEN APPLIED IN STATE BANK OF INDIA Minimum group size: 25 members The minimum annuity amount shall be Rs. 6000 per year.

SBI life golden gratuity: SBI Life presents SBI Life - Golden Gratuity-- a yearly renewable unit linked group gratuity plan. SBI Life - Golden Gratuity is backed by SBI Lifes strong investment team which provides an opportunity for higher market linked returns on corpus made by Past Service Liability payment as Initial Contribution and Current Year Liability as Annual Contribution. Along with managing your gratuity fund a life cover on your employees life protect their family financially in case of unfortunate event. Key features: Eligibility: Entry Age: Minimum age 18 years completed for both Gratuity benefit and Life cover. Maximum age 64 years for Life cover and for Gratuity Benefit Retirement age as per the scheme rules less one year. Annual Contribution can be minimum Rs.50,000/- in multiple of Rs.100/-. Sum Assured has to be minimum Rs.1,000/- . Minimum Group Size should be 10 members. Premium Payment option: The initial contribution can be paid in lump sum or in installments not exceeding five years. The Contributions can be paid annually, half yearly, quarterly or monthly as preferred by the Master Policyholder. Only Annual Mode is allowed for payment of risk premium. Switching Facility: You have the flexibility of switching between our various funds at any time. We allow four switches free of cost every policy year. The minimum amount of switch will be Rs.10,000 unless the 100% of units in a fund are switched to another fund. Contribution Redirection: The contributions can be redirected for investments into a fund of your choice and need not adhere to the initial investment pattern. You can do four times contribution redirection in a policy year free of cost. This facility is available from second policy year onwards.

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BANCASSURANCE HAS BEEN APPLIED IN STATE BANK OF INDIA Revival period: Revival period of 5 years is available. The policy can be revived by paying contributions determined as per revised valuation and the life cover premium. The life cover will be effective from the date of revival. Grace Period: A grace period of 30 days reckoned from the day following the Date of Commencement /Renewal Date will be allowed for payment of life cover premium. Suicide Exclusion: If the Life Assured commits Suicide, whether sane or insane, within one year from the Date of Commencement of Risk under the Policy, the Assurance on the Life of the deceased shall be void.

Sampoorn Suraksha: It is a yearly renewable group term insurance plan which provides life cover at comparatively lower premium than individual insurance to the groups who are engaged in the similar kind of activities. It is available for both Formal and Informal Groups. Formal groups like employee-employer relationship and informal groups like credit life groups, depositors groups, professional groups, affinity groups etc. can be covered under this plan. Formal Groups can also use this plan to provide life cover with the retirement benefit schemes available with us. Key features: Wider age coverage: Sampoorn Suraksha provides wide age coverage starting from 16 years till the age of 70 years for informal group and 80 years for formal groups. Conversion Option: Members of Formal group have an option to convert their group life cover into an individual life cover without medical underwriting. Experience Rating Option: At the end of each policy year, we will investigate the claims experience for the group. Profit/ Loss of the experience will be adjusted against the premium due for the next policy year. Spouse Cover Option: This option is available for members of the Formal groups. Page 63

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BANCASSURANCE HAS BEEN APPLIED IN STATE BANK OF INDIA Premium mode: Premiums can be paid in Yearly / Half-Yearly / Quarterly / Monthly modes for Formal groups. For Informal groups Yearly / Half-Yearly modes are available Settlement Option: Master Policy holder may opt to pay the claim benefit to the nominee of the deceased member over the period of 5 years in Monthly, Quarterly, Half-yearly or Yearly installments. Minimum Sum Assured: Rs.1000/Grace Period: A grace period of 30 days is available for all premium modes. For Monthly mode it is 15 days. For Formal groups, if death claim arises during the grace period the claim will be paid subject to claim investigation and rules after deduction of due and unpaid premium subject to renewal of master policy. For Informal groups, if death claim arises during the grace period the claim will be paid subject to claim investigation and rules after deduction of due and unpaid future premium for the individual member. Reinstatement of Policy: At the end of the one-year term, the master policy can be renewed. If the master policy is not renewed within the grace period the policy will lapse. The lapsed master policy can be reinstated and the cover will recommence from the date of reinstatement. Suicide Exclusion: No Suicide exclusion for basic life cover. Suicide clause is applicable for the Spouse Cover only, in case the option has been availed. Tax benefits: Premium paid by you is considered as part of the business expenses under Section 37 of Income Tax Act, 1961 and is tax deductible. Premium paid by the employer is not treated as a perquisite in the hands of the employee. All claim payments are considered as non-taxable receipts and can consequently be considered as tax exempt under Section 10 (10D) of the Income Tax Act, 1961 Grameen shakti:

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BANCASSURANCE HAS BEEN APPLIED IN STATE BANK OF INDIA The purpose of this product is to provide life insurance protection to the weaker sections of the society, like people who are funded by Micro Financial Institutions or NGOs or avail loan from Bank/ Financial institutions through SHG. SHG is a group of rural poor who have volunteered to organize themselves into a group for eradication of poverty of members. SBI Life has designed Grameen Shakti which is a Group Micro insurance product with refund of premiums at maturity. Key features: Duration of plan: 5 years or 10 years as per the Group Master policy holders choice. Age at entry: Minimum 18 years age last birthday, Maximum 50 years age last birthday. Sum assured: Rs.5,000/- to Rs.50,000/- (in multiples of 5,000) as per choice of Master Policyholder. Requirement from the Group member: Automatic acceptance linked to signature of Membership form that includes Good health declaration and nomination clause Maturity benefits: Depending on term chosen by the Master Policyholder, on survival of the policy term a percentage of total premiums paid would be refunded. 5 years 50% of premium paid net of service tax, 10 years 100% of premium paid net of service tax. Death Benefits: First 45 days after the cover start date or after the revival date No death claim will be accepted (inclusive of accidental death). Form 46th day from cover start date / revival date Sum assured is payable Surrender value: The surrender value will be payable if at least 3 years premiums have been paid and is payable as follows: For a 5 year term 35% of (total premiums paid net of service tax less the first year premium) For a 10 year term 65% of (total premiums paid net of service tax less the first year premium)

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BANCASSURANCE HAS BEEN APPLIED IN STATE BANK OF INDIA Grace Period: 30 days from the premium payment due date which is common for all Group Members under the same Master policy. Revival Period: 2 years from the due date of the first unpaid premium and within the term of the cover subject to underwriting decision. All unpaid premiums have to be paid along with interest (9%p.a). A new 45 days exclusion period from the revival date will be applicable. Grameen super suraksha: The purpose of this Product is to provide life cover at low costs to groups of economically weaker sections of Society, like people who are funded by Micro financial Institutions or NGOs or avail loan form Bank/ Financial institutions through SHG. SHG is a group of rural poor who have volunteered to organize themselves into a group for eradication of poverty of members. Grameen Super Suraksha is a low cost Group term assurance plan for rural people who can seek life insurance protection without maturity benefit. Key features: Duration of plan: 5 years fixed. Age at entry: Minimum 18 years age last birthday, Maximum 50 years age last birthday. Sum assured: As per the Minimum / Maximum premium amount and premium mode. Single Premium: 30 times the Single premium amount (exclusive of Service Tax). Regular Premium: 150 times the Yearly premium amount (exclusive of Service Tax). Requirement from the Group Member: Automatic acceptance linked to signature of Membership form containing a Good health Declaration and nomination clause

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BANCASSURANCE HAS BEEN APPLIED IN STATE BANK OF INDIA Death benefits: First 45 days after the cover start date or after the revival date No death claim will be accepted (inclusive of accidental death). From 46th day from the cover start date / revival date Sum assured is payable. Grace Period: 30 days from the premium payment due date which is common for al Group Members under the same Master policy. During the grace period, claim amount less premium amount due is payable. Revival Period: 2 years from the due date of the first unpaid premium and within the term of the cover subject to underwriting decision. All unpaid premiums have to be paid along with interest (9%p.a). A new 45 days exclusion period from the revival date will be applicable. Surrender value: No surrender value as it is a pure term assurance product

BENEFITS OF BANCASSURANCE TO THE BANK

Bancassurance as an important tool in the hands of bankers, insurers and customers to maximize their benefits at a time. As everybody is a winner in this system, their respective benefits are given below: From the viewpoint of Bank:The benefits are many such as; In a situation of constant asset base the bank can increase Return on Assets (ROA) by increasing their income, by selling insurance products through their own channel. It can cover operating expenses and make operating expenses profitable by leveraging their distribution and processing capabilities. Banks enjoy significant brand awareness within their geographical region providing for a lower per lead cost when advertising through print, radio and television. The

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BANCASSURANCE HAS BEEN APPLIED IN STATE BANK OF INDIA advantage of a bank over traditional distributors is the lower cost per sales lead made possible by their sizeable loyal customer base. Banks have extensive experience in marketing to both existing customers and noncustomers. They also use technology access multiple communication channels such as statement inserts, direct mail, ATMs, telemarketing etc for the improvement in transaction processing and customer service. The chances of loan becoming a non performing asset reduce when the loan is provided with insurance. Cross selling would reduce the risk of loan becoming debt loan, as it will give security to the loan amount. Productivity of the bank employees increases. Bancassurance provides an opportunity to the bank staff to harness their skills and adapt to the changing business environment. By providing customers with both the services under one roof, they can improve overall customer satisfaction resulting in higher customer retention levels. Increase in return on assets by building fee income through the sale of insurance products. Banks can leverage on face-to-face contacts and awareness about the financial conditions of customers to sell insurance products. Banks can cross sell insurance products. E.g.: Term insurance products with loans. For banks, bancassurance would mean a major gain. Since interest rates have been falling and profit on off take of credit has been low all banks have been able to do is sustain themselves but not profit much. Enter bancassurance and fee based income through hawking of risk products would be guaranteed.

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ANALYSIS
Total income and total miscellaneous income before cross selling for the years 2002, 2003 and 2004: Particulars Total income Total miscellaneous income 2002 2003 2004 Rs.4967000 Rs.7608000 Rs.10068000 Rs.828000 Rs.219000 Rs.317000

Total income and total miscellaneous income after cross selling for the years 2005, 2006 and 2007: Particulars Total income Total miscellaneous income 2005 Rs.17253495.36 Rs.621000 2006 Rs.18156082.16 Rs.903000 2007 Rs.25481107.46 Rs.1282000

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Graph Showing Trends of Total Income & Total Miscellaneous Income

30000000 25000000 20000000 Amount 15000000 10000000 5000000 0 2002 2003 2004 2005 2006 2007 Years Total income Total miscellaneous income

The trend line is showing increase in the total income. It is also showing a small increase in the total miscellaneous income after the branch took up the activity of cross selling. % increase in the total income: Particulars % increase in total income 2003 2004 2005 2006 2007 53.17% 32.33% 71.36% 5.23% 40.34%

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BANCASSURANCE HAS BEEN APPLIED IN STATE BANK OF INDIA Percentage Increase in Total Income
80.00%
71.36%

% increase in total income

70.00% 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% 2003 2004 2005 2006 2007
5.23% 32.33% 53.17% 40.34%

% increase in total income

Years

The % increase in total income in the year 2006 is low because advances have not been increased as per the expectations.

% increase in the total miscellaneous income: Particulars % increase in total miscellaneous Income 2003 2004 2005 2006 2007 Nil 44.74% 95.89% 45.41% 41.97%

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Percentage increase in total miscellaneous Income

1.2 % increase in total miscellaneous income 1 0.8 0.6
44.74% 45.41% 41.97% 95.89%

% increase in total miscellaneous Income

0.4 0.2 0
0

2003

2004

2005 Years

2006

2007

The % increase in total miscellaneous income in the year 2003 is nil because loan growth was not there. The % of total miscellaneous income in the year 2006 came down because loan growth was less and the total income has not increased in proportion.

% increase in total miscellaneous income to total income: Particulars % increase in total miscellaneous Income to total income 2003 2004 2005 2006 2007 2.88% 3.14% 3.59% 4.97% 5.03%

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Percentage increase in total miscellaneous Income to total income

6.00%
% increase in total miscellaneous Income to total income

5.00% 4.00% 3.00% 2.00% 1.00% 0.00% 2003 2004 2005 Years
2.88% 3.14% 3.59%

4.97%

5.03%

% increase in total miscellaneous Income to total income

2006

2007

The proportion of total miscellaneous income in total income has been increased after the branch took up the activity of cross selling. Calculation of percentage of commission from cross selling for the past three years 2005, 2006, 2007: Total amount of commission for the past three years: Particulars Total Commission 2005 Rs.345525.12 2006 Rs.645830.73 2007 Rs.690860.70

This commission amount is inclusive of commission from cross selling, commission from mutual funds, commission for selling credit cards etc. For the year 2005, around 45.5% of the total amount of commission has come from cross selling. For the year 2006, about 49.25% of the total amount of commission has come from cross selling. For the year 2007, around 50.95% of the total amount of commission has come from cross selling. Commission from cross selling: Particulars Commission from cross selling BABASAB PATIL 2005 157213.93 2006 318071.63 2007 351993.53 Page 73

BANCASSURANCE HAS BEEN APPLIED IN STATE BANK OF INDIA

% of commission from cross selling to total income: Particulars Commission from cross selling Total income % of commission from cross selling to total income 2005 157213.93 17253495.36 0.91 2006 318071.63 18156082.16 1.75 2007 351993.53 25481107.46 1.38

Percentage of commission from cross selling to total income

2 % of commission from cross selling to total income 1.8 1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0 2005 2006 Years 2007
0.91 1.75 1.38

% of commission from cross selling to total income

The percentage of commission from cross selling to total income for the year 2005 is 0.91%, for the year 2006 it is 1.75% and for the year 2007 it is 1.38%. The contribution of commission from cross selling to the total income is less. % of commission from cross selling to total miscellaneous income: Particulars Commission from cross selling Total miscellaneous income % of commission from cross selling to total miscellaneous income 2005 157213.93 621000 25.32 2006 318071.63 903000 35.22 2007 351993.53 1282000 27.46

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Percentage of commission from cross selling to total miscellaneous income

% of commission from cross selling to total miscellaneous income 40 35 30 25 20 15 10 5 0 2005 2006 Years 2007
25.32 27.46 35.22

% of commission from cross selling to total miscellaneous income

The percentage of commission from cross selling to total miscellaneous income for the years 2005, 2006 and 2007 are 25.32%, 35.22% and 27.46% respectively. The percentage of commission from cross selling to total miscellaneous income is increasing.

Cross selling is advantageous to the bank when two customer accounts are compared i.e. one who has taken bancassurance( loan+ insurance) with another customer who has taken only loan: Here, I have compared the customer who has taken housing term loan plus an insurance policy with another customer who has taken only loan on his house. Customer with loan: Loan amount Annual interest rate Loan period in years BABASAB PATIL Rs.2958000 10.75% 20 Page 75

BANCASSURANCE HAS BEEN APPLIED IN STATE BANK OF INDIA Number of payments per year Scheduled payment Scheduled number of payments Actual number of payments Total interest Customer with bancassurance: Loan amount Premium Annual interest rate Loan period in years Number of payments per year Scheduled payment Scheduled number of payments Actual number of payments Total interest (4249313.38+203990.03) The customer who has taken a loan plus insurance of Rs.3100000 for 20 years, would pay Rs.4453303.41. The customer who has not taken insurance would pay Rs.4249313.38 in 20 years. So the net increase in interest payment to the bank is Rs.203990.03 (4453303.414249313.38). It is not only advantageous to the bank but it is also beneficial to the dependents of the customer, if he takes loan with insurance. Because, in the above example, if something happens to that customer who has taken housing term loan, then insurance policy will take care of that loan. The house will remain to the legal heirs of that customer. But this benefit is not available to another customer who has taken only the loan. Rs.3100000 (2958000+142000) Rs.142000 10.75% 20 12 Rs.31472.10 (30030.47+1441.63) 240 240 Rs.4453303.41 12 Rs.30030.47 240 240 Rs.4249313.38

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BANCASSURANCE HAS BEEN APPLIED IN STATE BANK OF INDIA In addition, I have also prepared a questionnaire to the bank employees to know whether they are involved in the activity of bancassurance, and to know their opinion about the activity of cross selling to the given set of questions. The questionnaire has been affixed in the annexure. This questionnaire has been filled up by 30 employees of the bank. Then the collected data has been put in SPSS and pie charts have been drawn.

2. Are you involved in the activity of bancassurance?

Valid

YES NO Total

Frequency 22 8 30

Percent 73.3 26.7 100.0

Valid Percent 73.3 26.7 100.0

Cumulative Percent 73.3 100.0

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NO 8.00 / 26.7%

YES 22.00 / 73.3%

INTERPRETATION: Out of total 30 bank employees surveyed, 73.3% employees are involved in the activity of bancassurance and remaining 26.7% employees are not involved in the activity of bancassurance. It is observed that, major portion of the employees are involved in the activity of bancassurance.

3. Have you been given any training for cross-selling (bancassurance)?

Frequency 8 14 22 Percent 36.4 63.6 100.0 Valid Percent 36.4 63.6 100.0 Cumulative Percent 36.4 100.0

Valid

YES NO Total

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YES 8.00 / 36.4%

NO 14.00 / 63.6%

INTERPRETATION: Out of 22 employees, 36.4% employees have been given training for cross-selling and remaining 63.6% employees have not been given any training for cross-selling. It is observed that, major portion of the employees have not been given training for cross-selling. 4. Is the activity of bancassurance helping in the diversification of revenue to the bank?
Frequency 21 1 22 Percent 95.5 4.5 100.0 Valid Percent 95.5 4.5 100.0 Cumulative Percent 95.5 100.0

Valid

YES NO Total

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NO 1.00 / 4.5%

YES 21.00 / 95.5%

INTERPRETATION: Out of 22 employees, 95.5% employees told that bancassurance is helping in the diversification of revenue to the bank and remaining 4.5% employees say that it is not helping in the diversification of revenue to the bank It is observed that, major portion of the employees told that bancassurance is helping in the diversification of revenue to the bank. 5. Do you feel, cross-selling is increasing the customer loyalty to the bank?
Frequency 21 1 22 Percent 95.5 4.5 100.0 Valid Percent 95.5 4.5 100.0 Cumulative Percent 95.5 100.0

Valid

YES NO Total

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NO 1.00 / 4.5%

YES 21.00 / 95.5%

INTERPRETATION: Out of 22 employees, 95.5% employees say that bancassurance is increasing the customer loyalty to the bank and remaining 4.5% employees told that it is not increasing the customer loyalty to the bank. It is observed that, major portion of the employees told that bancassurance is increasing the customer loyalty to the bank. 6. In your opinion, is cross-selling increasing the total other income of the bank?
Frequency 20 2 22 Percent 90.9 9.1 100.0 Valid Percent 90.9 9.1 100.0 Cumulative Percent 90.9 100.0

Valid

YES NO Total

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NO 2.00 / 9.1%

YES 20.00 / 90.9%

INTERPRETATION: Out of 22 employees, 90.9% employees told that bancassurance is increasing the total other income of the bank and remaining 9.1% employees told that it is not increasing the total other income of the bank. It is observed that, major portion of the employees told that bancassurance is increasing the total other income of the bank. 7. In your opinion, is this activity (bancassurance), increasing your productivity?
Frequency 20 2 22 Percent 90.9 9.1 100.0 Valid Percent 90.9 9.1 100.0 Cumulative Percent 90.9 100.0

Valid

YES NO Total

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NO 2.00 / 9.1%

YES 20.00 / 90.9%

INTERPRETATION: Out of 22 employees, 90.9% employees told that bancassurance is increasing their productivity and remaining 9.1% employees told that it is not increasing their productivity. It is observed that, major portion of the employees opine that bancassurance is increasing their productivity.

8. Do you feel, your work content is enriched by the activity of cross-selling?

Frequency 18 4 22 Percent 81.8 18.2 100.0 Valid Percent 81.8 18.2 100.0 Cumulative Percent 81.8 100.0

Valid

YES NO Total

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NO 4.00 / 18.2%

YES 18.00 / 81.8%

INTERPRETATION: Out of 22 employees, 81.8% employees say that their work content is enriched by the activity of bancassurance and remaining 18.2% employees told that work content is not enriched by the activity of bancassurance. It is observed that, major portion of the employees told that their work content is enriched by the activity of bancassurance.

For the last question, i.e. advantages of bancassurance, the employees told the following things: It will increase the income of the bank a well as the income of the bank staff by providing them the incentive for cross-selling. No NPA on account of death of the borrower because entire outstanding loan amount will be reimbursed by the insurance company.

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BANCASSURANCE HAS BEEN APPLIED IN STATE BANK OF INDIA With the existing staff bank can do insurance business also. No extra manpower is required. The bank staff will be motivated when there is no further scope in their career progression. Bancassurance will bring in more customers to the bank. I have also discussed with the branch manager about the activity of bancassurance in the branch. He told the following things: - In Hindwadi branch, the activity of cross selling started in the year 2005. - For the initial two years, the activity was aggressive. But from 2007, taking bancassurance has been made optional for the customers. If the customers are interested in taking the insurance along with loan, they can take. - For the bank staff, involvement in the activity of bancassurance is optional. - The Certified Insurance Facilitators (CIF) who collects Rs.1 lakh premium, they will be given 1 gram gold. - The CIFs who cross Rs.50 lakhs premium, they will be given a chance to travel to Singapore. - The CIFs who cross Rs.1 Crore premium, they will be given a chance to travel to Singapore with their family for a period of one week. - The CIFs who reach Rs.5 Crore premium, that branch manager and CIF will be given a chance to travel to Singapore. According to him the advantages of bancassurance are: Bank can become financial supermarket for the customers. The CIFs are being recognized for their performance which improves motivational level. In the age of reduction in remittance business, bancassurance is one way of offsetting the loss of other income. Bank gets captive customers who are in need of insurance. The brand name of SBI can be leveraged to get more customers.

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BANCASSURANCE HAS BEEN APPLIED IN STATE BANK OF INDIA From the view point of Insurer: - Insurance company also gets the benefits, some of which are listed below; The insurer can increase their volume of business through banking distribution channel and gain better. It can solve the difficulties arising out of price competition which has driven down the margins and increased the compensation demand of successful agents. Through agents the insurer can only sell fewer and larger policies to a more up scale client. Mainly middleclass income holders who comprise the bulk of bank customers get very little attention. By using bank channel the insurer can capture much of its under served market. By cutting cost insurers can serve better to the customer in terms lower premium rate and better risk coverage through product diversification. Insurers can exploit the banks' wide network of branches for distribution of products. The penetration of banks' branches into the rural areas can be utilized to sell products in those areas. Customer database like customers' financial standing, spending habits, investment and purchase capability can be used to customize products and sell accordingly. Since banks have already established relationship with customers, conversion ratio of leads to sales is likely to be high. Further service aspect can also be tackled easily. From the customers' view point:Product innovation and distribution activities are directed towards the satisfaction of the needs of the customer. Bancassurance model assists customers in terms of reduced price, diversified products quality products, in time and doorstep service. Comprehensive financial advisory services under one roof. i.e., insurance services along with other financial services such as banking, mutual funds, personal loans etc. The risk will be reduced for the customer. In case of default, the property will remain to his legal heirs. BABASAB PATIL Page 86

BANCASSURANCE HAS BEEN APPLIED IN STATE BANK OF INDIA Enhanced convenience on the part of the insured. Easy accesses for claims, as banks are a regular go. Customers can get innovative and better product ranges.

RBI AND IRDA GUIDELINES ON BANCASSURANCE

As a response to the desire of commercial banks for entering the insurance sector, the Reserve Bank of India (RBI) has come out with detailed guidelines on the entry norms of commercial banks for diversifying into insurance. According to the RBI norms, there are three options open to banks wanting to enter the insurance arena. Financially strong banks, subject to eligibility norms, will be permitted to set up joint ventures for undertaking insurance business with risk participation. The maximum equity contribution such a bank would hold in the joint venture would normally be 50 per cent of the paid-up capital of the insurance company. However, a higher level of equity contribution may be permitted, subject to divestment of equity within the prescribed period. As per present indications, the largest public sector bank, State Bank of India, will be allowed to hold more than 50 per cent of the equity of an insurance venture, while other public sector banks like Bank of Baroda and Corporation Bank can hold up to 50 per cent of the equity. The eligibility criteria for joint venture participation will be as under, as on March 31, 2000: * The net worth of the bank should not be less than Rs.500 crores, * The CRAR of the bank should not be less than 10 per cent, * The level of Non Performing Assets (NPAs) should be reasonable, * The bank should have net profit for the last three continuous years,

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BANCASSURANCE HAS BEEN APPLIED IN STATE BANK OF INDIA * The track record of the performance of subsidiaries, if any, of the bank concerned should be satisfactory. Banks that are not eligible as joint venture participants can make investments up to 10 per cent of the net worth of the bank or Rs.50 crores, whichever is lower, in the insurance company for providing infrastructure and services support. Such participation shall be treated as an investment and should be without any contingent liability for the bank. Finally, any scheduled commercial bank will be permitted to undertake insurance business as agent of insurance companies on fee basis, without any risk participation. Further, subsidiaries of banks will also be allowed to undertake distribution of insurance products on agency basis. Several public sector banks like Bank of India, Punjab National Bank and Syndicate Bank have expressed a desire to enter the business of distribution of insurance products. Private sector banks such as HDFC Bank and ICICI Bank will be involved in insurance selling as their associate companies are involved in promoting insurance ventures. Foreign banks are also keyed up to become involved in the distribution of insurance products. The guidelines issued by RBI on bank participation in insurance ventures are quite comprehensive and make a great deal of sense. There are basically three options available to banks to enter the insurance sector, namely, As a promoter, As a strategic investor and As a corporate agent for selling insurance policies.

It may be added here that the RBI has also come out with detailed guidelines for diversification into the insurance area in the case of non-banking finance companies (NBFCs). All NBFCs registered with RBI that satisfy the eligibility criteria will be permitted to set up a joint venture company for undertaking insurance business with risk participation. NBFCs like Sundaram Finance, Kotak Mahindra Finance and HDFC have become promoters of insurance ventures. Further, any NBFC registered with RBI having BABASAB PATIL Page 88

BANCASSURANCE HAS BEEN APPLIED IN STATE BANK OF INDIA net owned funds of Rs.2 crores would be permitted to undertake insurance business as agents of insurance companies on fee basis, without any risk participation. Following the issuance of Government of India Notification dated August 3, 2000, specifying Insurance as a permissible form of business that could be undertaken by banks under Section 6(1)(o) of the Banking Regulation Act, 1949, RBI issued the guidelines on Insurance business for banks. 1) Any scheduled commercial bank would be permitted to undertake insurance business as agent of insurance companies on fee basis, without any risk participation. The subsidiaries of banks will also be allowed to undertake distribution of insurance product on agency basis. 2) Banks which satisfy the eligibility criteria will be permitted to set up a joint venture company for undertaking insurance business with risk participation, subject to safeguards. The maximum equity contribution such a bank can hold in the joint venture company will normally be 50 per cent of the paid up capital of the insurance company. On a selective basis the Reserve Bank of India may permit a higher equity contribution by a promoter bank initially, pending divestment of equity within the prescribed period (see Note 1 below). 3) In cases where a foreign partner contributes 26 per cent of the equity with the approval of Insurance Regulatory and Development Authority/Foreign Investment Promotion Board, more than one public sector bank or private sector bank may be allowed to participate in the equity of the insurance joint venture. As such participants will also assume insurance risk, only those banks which satisfy the criteria given in paragraph 2 above, would be eligible. 4) A subsidiary of a bank or of another bank will not normally be allowed to join the insurance company on risk participation basis. Subsidiaries would include bank

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BANCASSURANCE HAS BEEN APPLIED IN STATE BANK OF INDIA subsidiaries undertaking merchant banking, securities, mutual fund, leasing finance, housing finance business, etc. 5) Banks which are not eligible for joint venture participant as above, can make investments up to 10% of the net worth of the bank or Rs.50 crore, whichever is lower, in the insurance company for providing infrastructure and services support. Such participation shall be treated as an investment and should be without any contingent liability for the bank. 6) All banks entering into insurance business will be required to obtain prior approval of the Reserve Bank. The Reserve Bank will give permission to banks on case to case basis keeping in view all relevant factors including the position in regard to the level of non-performing assets of the applicant bank so as to ensure that nonperforming assets do not pose any future threat to the bank in its present or the proposed line of activity, viz., insurance business. It should be ensured that risks involved in insurance business do not get transferred to the bank and that the banking business does not get contaminated by any risks which may arise from insurance business. There should be arms length relationship between the bank and the insurance outfit. Additional Notes: 1. Holding of equity by a promoter bank in an insurance company or participation in any form in insurance business will be subject to compliance with any rules and regulations laid down by the IRDA/Central Government. This will include compliance with Section 6AA of the Insurance Act as amended by the IRDA Act, 1999, for divestment of equity in excess of 26 per cent of the paid up capital within a prescribed period of time. 2. Latest audited balance sheet will be considered for reckoning the eligibility criteria. 3. Banks which make investments under paragraph 5 of the above guidelines, and later qualify for risk participation in insurance business (as per paragraph 2 of the

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BANCASSURANCE HAS BEEN APPLIED IN STATE BANK OF INDIA guidelines) will be eligible to apply to the Reserve Bank for permission to undertake insurance business on risk participation basis. The Insurance Regulatory and Development Authority (IRDA) guidelines for the bancassurance are: 1) Each bank that sells insurance must have a chief insurance executive to handle all the insurance activities. 2) All the people involved in selling should under go mandatory training at an institute accredited by IRDA and pass the examination conducted by the authority. 3) Commercial banks, including cooperative banks and regional rural banks, may become corporate agents for one insurance company. 4) Banks cannot become insurance brokers. Insurance Agency Business/ Referral Arrangement The banks (includes SCBs and DCCBs) need not obtain prior approval of the RBI for engaging in insurance agency business or referral arrangement without any risk participation, subject to the following conditions: i. ii. The bank should comply with the IRDA regulations for acting as composite corporate agent or referral arrangement with insurance companies. The bank should not adopt any restrictive practice of forcing its customers to go in only for a particular insurance company in respect of assets financed by the bank. The customers should be allowed to exercise their own choice. iii. The bank desirous of entering into referral arrangement, besides complying with IRDA regulations, should also enter into an agreement with the insurance company concerned for allowing use of its premises and making use of the existing infrastructure of the bank. The agreement should be for a period not exceeding three years at the first instance and the bank should have the discretion to renegotiate the terms depending on its satisfaction with the service or replace it by another agreement after the initial period. Thereafter, the bank will be free to sign a longer term contract with the approval of its Board in the case of a private sector

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BANCASSURANCE HAS BEEN APPLIED IN STATE BANK OF INDIA bank and with the approval of Government of India in respect of a public sector bank. iv. As the participation by a banks customer in insurance products is purely on a voluntary basis, it should be stated in all publicity material distributed by the bank in a prominent way. There should be no linkage either direct or indirect between the provision of banking services offered by the bank to its customers and use of the insurance products. v. The risks, if any, involved in insurance agency/referral arrangement should not get transferred to the business of the bank.

FUTURE PROSPECTS OF BANCASSURANCE IN SBI

According to a recent sigma study, bancassurance is on the rise, particularly in emerging markets. Worldwide, insurers have been successfully leveraging bancassurance to gain a foothold in markets with low insurance penetration and a limited variety of distribution channels. Bancassurance, the provision of insurance services by banks, is an established and growing channel for insurance distribution, though its penetration varies across different markets. Europe has the highest bancassurance penetration rate. In Asia, bancassurance is gaining in popularity, particularly in China, where restrictions have been eased. The research shows that social and cultural factors, as well as regulatory considerations and product complexity, play a significant role in determining how successful bancassurance is in a particular market.

The outlook for bancassurance remains positive. While development in individual markets will continue to depend heavily on each countrys regulatory and business environment, bancassurers could profit from the tendency of governments to privatize health care and pension liabilities. In emerging markets, new entrants have successfully employed BABASAB PATIL Page 92

BANCASSURANCE HAS BEEN APPLIED IN STATE BANK OF INDIA bancassurance to compete with incumbent companies. Given the current relatively low bancassurance penetration in emerging markets, bancassurance will likely see further significant development in the coming years. SBI Life Insurance is uniquely placed as a pioneer to usher bancassurance into India. The company has been extensively utilizing the SBI Group as a platform for cross-selling insurance products along with its numerous banking product packages such as housing loans, personal loans and credit cards. SBI has distinct advantage of having access to over 100 million accounts and which provides it a vibrant and largest customer base to build insurance selling across every region and economic strata in the country. In 2004, the company reported to have become the first company amongst private insurance players to cover 30 lakh lives. Interestingly, in respect of new (life) business bancassurance business channel is even greater than the size of direct business by the insurers at 2.17 per cent. Even in respect of LIC around 1.25 per cent of the new business is through bancassurance. This speaks for itself the rate at which the bancassurance becoming an important channel of distribution of insurance products in India. There are future prospects for bancassurance because the Indian insurance sector has plenty of growth opportunities for the private insurers to capitalize on. A recent survey conducted by the Max New York-NCAER India Financial Protection pointed out that in spite of the awareness about life insurance among Indians, close to 78%, the penetration levels remained unimpressive. The survey also indicated that more than half of the population (51%) preferred to keep their surplus in bank deposits, while 36% of the population was comfortable in keeping their deposits at home. Only 2% of the Indian population invested their savings in buying life insurance policies. Apart from these reasons, there are other reasons for future growth which are mentioned below; Integration of the financial service industry in terms of banking, securities business and insurance is a growing worldwide phenomenon. The Universal Banking is evolving on these lines in India. Banks are the key pillars of Indias financial system. Public have immense faith in banks. People have trust in SBI. BABASAB PATIL Page 93

BANCASSURANCE HAS BEEN APPLIED IN STATE BANK OF INDIA SBI enjoys considerable goodwill and access in the rural regions. SBI is having enormous retail customer base. Banks world over have realized that offering value-added services such as insurance, helps to meet client expectations. Competition in the Personal Financial Services area is getting `hot in India. Banks seek to retain customer loyalty by offering them a vastly expanded and more sophisticated range of products. Insurance distribution helps to increase the fee-based earnings of the bank to a considerable extent. Insurance activities contribute significantly to banks total domestic retail revenues. Fee-based selling helps to enhance the levels of staff productivity in the bank. This is vitally important to bring higher motivation levels in the bank. Bank can put its energy into the `small-commission customers that insurance agents would tend to avoid. Banks entry in distribution helps to enlarge the insurance customer base rapidly. This helps to popularize insurance as an important financial protection product. Bank can play a major role in developing a viable healthcare programme in India. Only 2.5 million people have access to healthcare facilities. There is a growing demand for healthcare products which banks can distribute (and facilitate administration). Emerging Trends

Though bancassurance has traditionally targeted the mass market, bancassurers have begun to finely segment the market, which has resulted in tailor-made products for each segment. The quest for additional growth and the desire to market to specific client segments has in turn led bancassurers to shift away from using a standardized, single channel sales approach to adopting a multiple channel distribution strategy. The bancassurers are also beginning to focus exclusively on distribution.

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BANCASSURANCE HAS BEEN APPLIED IN STATE BANK OF INDIA In some markets, face-to-face contact is preferred, which tends to favor bancassurance development. Nevertheless, SBI is thinking to start direct marketing and Internet banking as tools to distribute insurance products. New and emerging channels are becoming increasingly competitive, due to the tangible cost benefits embedded in product pricing or through the appeal of convenience and innovation.

Finally, the marketing of more complex products has also gained ground in some countries, alongside a more dedicated focus on niche client segments and the distribution of non-life products. The drive for product diversification arises as bancassurers realize that overreliance on certain products may lead to undue volatility in business income. Nevertheless, bancassurers have shown a willingness to expand their product range to include products beyond those related to bank products. Strategic Challenges These developments are expected to challenge traditional bancassurers in the following ways:- Creating an environment of top level involvement of bank management. - Bringing relevance, motivation and skill development at the operating level at bank branches. - Resolving possible conflicts of interest between the bank and the insurer. - Setting up distribution procedures consistent with the manual systems in the banks. - Establishing credible service level agreements between the bank and the insurer. - Increasing sales of non-life products, to the extent those risks are retained by the banks, require sophisticated products and risk management. - Banks will have to be prepared for possible disruptions to client relations arising from more frequent non-life insurance claims. Currently, 21 branches of SBI are engaged in selling the products of SBI Life. With a vast network of 65,000 branches, the bank is planning to sell its products through at least 100 branches by the year-end. To successfully adopt the bancassurance model, SBI Life would initiate the process of training the bank staff for the Certified Insurance Officers BABASAB PATIL Page 95

BANCASSURANCE HAS BEEN APPLIED IN STATE BANK OF INDIA programme covering a training of 100 hours on insurance. The new product portfolio includes pure endowment, critical illness, pension product, housing loan mortgage and also life insurance linked to Kisan Credit Cards. Issues to be tackled The difference in working style and culture of the banks and insurance sector needs greater appreciation. Insurance is a business of solicitation unlike a typical banking service, it requires great drive to sell/ market the insurance products. It should, however, be recognized that bancassurance is not simply about selling insurance but about changing the mindset of a bank. Moreover, in India since the majority of the banking sector is in public sector and which has been widely disparaged for the lethargic attitude and poor quality of customer service, it needs to refurbish the blemished image. There are also glitches in the system of bancassurance strategy in the form of conflict of interests, as some of the products offered by the banks, viz., term deposits and other products which are mainly aimed at long term savings/ investments can be very similar to that of the insurance products. Banks could as well feel apprehension about the possibility of substitution effect between its own products and insurance products and more so, as a number of insurance products in India come with an added attraction of tax incentives. In case the Bancassurance is fully integrated with that of the banking institution, it is suitable only for larger banks; however, it has other allied issues such as putting in place proper risk management techniques relating to the insurance business, etc. As there is a great deal of difference in the approaches of selling of insurance products and the usual banking services- thorough understanding of the insurance products by the bank staff coupled with extra devotion of time on each customer BABASAB PATIL Page 96

BANCASSURANCE HAS BEEN APPLIED IN STATE BANK OF INDIA explaining in detail of each products intricacies is a prerequisite. Moreover, insurance products have become increasingly complex over a period of time, due to improvisation over the existing products as well as due to constant innovation of new products, emanating from the excessive competition adding to even more difficulties in comprehension of the products and marketing by the bank staff. These can result in resistance to change and leading to problems relating to industrial relations. Unlike, the banking service, there is no guarantee for insurance products that all efforts that a bank staff spends in explaining to a customer would clinch the deal due to the very nature of the insurance products. This frustration of the bank staff has the danger of spill over effect even on their regular banking business. Bankers in India are extremely nave in insurance products as there were no occasions in the past for the bankers to deal in insurance products; therefore they require strong motivation of both monetary and non monetary incentives. Given the roles and diverse skills brought by the banks and insurers to a Bancassurance tie up, it is expected that road to a successful alliance would not be an easy task. Some more issues that are to be addressed are: 1. The tie-ups need to develop innovative products and services rather than depend on the traditional methods. The kinds of products the banks would be allowed to sell are another major issue. For instance, a complex unit-linked life insurance product is better sold through brokers or agents, while a standard term product or simple products like auto insurance, home loan and accident insurance cover can be handled by bank branches. 2. There needs to be clarity on the operational activities of the bancassurance i.e., who will do the branding, will the insurance company prefer to place a person at the bank branch, or will the bank branch train and put up one of its own people, remuneration of these people. BABASAB PATIL Page 97

BANCASSURANCE HAS BEEN APPLIED IN STATE BANK OF INDIA 3. Even though the banks are in personal contact with their clients, a high degree of proactive marketing and skill is required to sell the insurance products. This can be addressed through proper training. 4. There are hazards of direct competition to conventional banking products. Bank personnel may become resistant to sell insurance products since they might think they would become redundant if savings were diverted from banks to their insurance subsidiaries. With the financial reforms and technological revolution embracing the financial system, there has been a great deal of flexibility in the mind set of people to accept change. The above outlined problems need not, however, deter the banking sector to embark on bancassurance as any form of resistance from the bank employees could be tackled by devising an appropriate incentive system commensurate with intensive training to the frontline bank staff.

Factors that appear to be critical for the success of bancassurance: 1. Strategies consistent with the bank's vision, knowledge of target customers' needs, defined sales process for introducing insurance services, simple yet complete product offerings, strong service delivery mechanism, quality administration, synchronized planning across all business lines and subsidiaries, complete integration of insurance with other bank products and services, extensive and highquality training, sales management tracking system for reporting on agents' time and results of bank referrals and relevant and flexible database systems. 2. Another point is the handling of customers. With customer awareness levels increasing, they are demanding greater convenience in financial services. 3. The emergence of remote distribution channels, such as PC banking and Internetbanking, would hamper the distribution of insurance products through banks. 4. The emergence of newer distribution channels seeking a market share in the network. BABASAB PATIL Page 98

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OBSERVATIONS
1) Bancassurance is the process of selling insurance products through a banks network. 2) The joint venture model of bancassurance is applied in SBI. SBI Life is the joint venture between SBI and Cardif life insurance company of France. SBI provides network, Cardiff provides technology. 3) There are various individual and group insurance products marketed through SBI targeting different groups of customers. 4) Bancassurance is beneficial for the banks, because i. ii. iii. iv. It helps the bank by increasing the skills of the employees. It reduces the risk of loan becoming debt loan for the bank. Non performing assets will be reduced as it gives security to the loan amount. It increases the total other income of the bank.

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BANCASSURANCE HAS BEEN APPLIED IN STATE BANK OF INDIA 5) As per the trend line, the total income has increased after the branch took up the activity of cross selling and also there is an increase in the total miscellaneous income. 6) The proportion of total miscellaneous income in total income has been increased after the branch took up the activity of cross selling. 7) The % increase in total income in the year 2006 is low because advances have not been increased as per expectations. 8) The contribution of commission from cross selling to the total income is less. 9) The percentage of commission from cross selling to total miscellaneous income is increasing. 10) Major portion of the employees have not been given any training for cross selling. 11) Out of 30 employees, 73.3% employees are involved in the activity of bancassurance. 12) Out of 22 employees who are involved in the activity of cross selling, 90.9% employees opine that it is increasing their skills. 13) Cross selling is advantageous to the bank, when two customer accounts are compared i.e. one who has taken bancassurance with another customer who has not taken bancassurance; the bank is more benefited incase of customer who has taken bancassurance. 14) SBI is following RBI and IRDA guidelines. 15) The extensive presence of bank branches, the strong growth of insurance demand in the rural regions and closeness of the bank staff with the customers will aid bancassurance to grow in the future. 16) As per IRDA annual report 2005-06, SBI Life Insurance Company has 4413 urban Life Insurance agents and 699 rural Life Insurance agents. 17) Most of the customers who have taken bancassurance are above 35 years of age.

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SUGGESTIONS
1) Training should be given to all the employees of the branch with respect to cross selling. 2) Banks have witnessed a decline in margins in their core lending business due to falling interest rates. Insurance distribution helps to increase the fee based earnings of banks to a considerable extent. So the bank employees should try to increase the total other income of the bank by doing cross selling. 3) Bank employees should be motivated to take the training by specifying the commission amount which they are going to get after cross selling. 4) Bank employees who are involved in bancassurance should be given full knowledge of the target customers. 5) They should also be given training regarding all product offerings with the quality service delivery and administration. 6) Bank should try to facilitate online and internet payments towards insurance products. BABASAB PATIL Page 101

BANCASSURANCE HAS BEEN APPLIED IN STATE BANK OF INDIA 7) In order to attract more policy holders, the bank employees and insurance agents should promptly attend to the enquiries of policyholders. 8) All the policyholders who came under tax bracket should be provided with the necessary documents for claiming the tax concession. 9) Bank staff should make an effort to educate the public about the social security provided by the insurance policies. 10) SBI Life awareness campaign can be organized in rural and semi urban areas in order to encourage small entrepreneurs to purchase life insurance policies. 11) In order to encourage low age groups to take life insurance policies, SBI Life may come forward with novel and innovative schemes at a low premium.

CONCLUSION
With huge untapped market, insurance sector is likely to witness a lot of activity - be it product innovation or distribution channel mix. Bancassurance, the emerging distribution channel for the insurers, will have a large impact on Indian financial services industry. Traditional methods of distributing financial services would be challenged and innovative, customized products would emerge. Banks will bring in customer database, leverage their name recognition and reputation at both local and regional levels, make use of the personal contact with their clients, which a new entrant cannot, as they are new to the industry. In customer point of view, a plethora of products would be available to him. More customized products would come into existence and that too all within hands reach. Success of the bancassurance would mostly depend on how well insurers and banks understand each other's businesses and seize the opportunities presented, weeding out differences that are likely to crop up.

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BANCASSURANCE HAS BEEN APPLIED IN STATE BANK OF INDIA Bancassurance has developed its form gradually where banks at first do not carry risks and distribute insurance products for a fee and product development is left to insurance company. But gradually banks have assumed risks regarding distribution assuming full responsibility. But the proper implementation of bancassurance is still facing some problems such as, poor manpower with in the banks, detachment of branch manager, insufficient product promotion, managerial database expertise, inadequate incentives, negative attitude towards insurance etc. In order to get the full benefit of it the following steps should be taken:i) Service delivery mechanism should be strengthened. ii) Knowledge of target customer needs should be developed. iii) Extensive and high quality training should be ensured. iv) Strategies consistent with the banks vision should be developed. v) Bank's data base system should be made flexible to cope with the change. So observing the progress in India, particularly with reference to SBI, bancassurance is gaining acceptance gradually. Bank is converging towards a model of global retail financial institution offering a wide array of products creating a one stop-shop where mortgages, savings, pensions and insurance products will be available. There are costs associated with setting up a successful bancassurance network. The proper training of bank personnel to understand and market insurance schemes is vital to the success of these ventures. There is also a need to invest extensively in IT and other support systems that would provide an integrated back-end for banking and insurance services. Regulatory issues need to be addressed comprehensively and sorted out particularly with respect to competition and market structure problems. Given these changes, bancassurance and collaboration between banks and insurers has a long way to go in India.

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REFERENCES
N.D.Kapoor, Elements of Mercantile Law, Law of Insurance, Page Number 425443. Websites: www.statebankofindia.com www.sbilife.co.in www.rbi.org.in www.irda.gov.in www.google.com

Articles: Bancassurance in India Janardhan G Naik SBI Life: The new insurance behemoth Vidyut Kumar T Bancassurance Abheek Barua

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BANCASSURANCE HAS BEEN APPLIED IN STATE BANK OF INDIA Bancassurance: The most challenging insurance Distribution channel with Special reference to SBI - Amitesh Chowdhury W

ANNEXURE Questionnaire to bank staff

1. Personal Data: Name: Designation: 2. Are you involved in the activity of bancassurance? Yes [ ] No [ ] (If answer is Yes, then go to the next question. If answer is No, then thank you.) 3. Have you been given any training for cross-selling (bancassurance)? Yes [ ] bank? Yes [ ] Yes [ ] BABASAB PATIL No [ ] No [ ] Page 105 5. Do you feel, cross-selling is increasing the customer loyalty to the bank? No [ ] 4. Is the activity of bancassurance helping in the diversification of revenue to the

BANCASSURANCE HAS BEEN APPLIED IN STATE BANK OF INDIA 6. In your opinion, is cross-selling increasing the total other income of the bank? Yes [ ] Yes [ ] Yes [ ] Thank you No [ ] No [ ] No [ ] 7. In your opinion, is this activity (bancassurance), increasing your productivity? 8. Do you feel, your work content is enriched by the activity of cross-selling? 9. According to you, the advantages/benefits of bancassurance are:-

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