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 Bank of Calcutta (Bank of Bengal)on 2 June 1806
 It was the first joint-stock bank of British India
sponsored by the government of Bengal
 Bank of Bombay(1840) and Bank of Madras(1843)
amalgamated with Bank of Bengal as the imperial bank
of India (1921)
 To serve economy particularly rural committee act was
passed and the state bank of India was constituted on
July 1955
 Since 1973 in non-profit activity called community
services banking
 Branches of SBI
 SBI has 460000 ATMs.
 SBI has 26500 branches, inclusive of branches
that belong to its Associate banks.
 SBI alone has 13076 Branches (including the
branches of State Bank of Indore), as on 26
August 2010.

 82 foreign offices in 32 countries across the

globe
 ALCO of the bank is entrusted with the task of market risk
management.

 The ALM function comprises management of

 Management of balance sheet of the bank

 Liquidity,

 Maturity profiles of assets and liabilities

 Interest rate risks at the foreign offices.

 Deciding deposit rates and prime lending rates

 It also ensures capital adequacy.

 Monthly basis review of the interest rate and liquidity
gap positions on the banking book.

 Reviews the bank’s ALM policy and complies with the

bank’s/ RBI’s policy guidelines on an ongoing basis.

 During 2003-04, significant efforts were made to improve

the market risk management capabilities and fine-tune the
management information system.
1. Collateral Valuation and Management
Qualitative Disclosures
The objective of this Policy is to enable classification and valuation of
credit risk mitigants in a manner that allows regulatory capital
adjustment to reflect them.
Issues addressed are:
(i) Classification of credit risk mitigants
(ii) Acceptable credit risk mitigants
(iii) Documentation and legal process requirements for credit risk
mitigants
(iv) Valuation of collateral
(v) Custody of collateral
(vi) Insurance
(vii) Monitoring of credit risk mitigants
 Types of collaterals accepted
 Cash or Cash equivalent (Bank Deposits/NSCs/KVP/LIC Policy, etc.)
 Gold
 Securities issued by Central / State Governments
 Debt Securities rated BBB- or better/ PR3/P3/F3/A3 for Short-Term Debt
Instruments
 Guarantees by sovereigns and well-rated corporates,
 Fixed assets and current assets of the counterparty
 Qualified guarantors:
 Sovereign, Sovereign entities [including Bank for International Settlements
(BIS), International Monetary Fund (IMF), European Central Bank and
European Community as well as Multilateral Development Banks]
 Export Credit & Guarantee Corporation
 Credit Guarantee Fund Trust for Micro and Small Enterprises
 Public Sector Enterprises (PSEs)
 Banks and Primary Dealers with a risk weight than the Counterparty.
 Other guarantors having an external rating of AA or better.
 Quantitative Disclosures: Status as on
31.03.2010 (Amount in Rupee crores)

 The total exposure that is covered by eligible financial

collateral
Rs. 73242.54

 The total exposure that is covered by guarantees/credit

derivatives
Rs. 48315.55
2. Credit Rating
Qualitative Disclosures

Names of Credit Rating Agencies used, plus reasons for any

changes
CARE, CRISIL, ICRA and FITCH

Types of exposures for which each Agency is used

 For Exposures with a contractual maturity of less than or equal to one
year (except Cash Credit, Overdraft and other Revolving Credits),
Short-term Ratings given by approved Rating Agencies is used.
 For Domestic Cash Credit, Overdraft and other Revolving Credits
(irrespective of the period) and for Term Loan exposures of over 1
year, Long Term Ratings is used.
 For Overseas Exposures, irrespective of the contractual maturity,
Long Term Ratings given by approved Rating Agencies is used.
 Quantitative Disclosures as on 31.03.2010
(Amount in Rupee crores)
 For exposure amounts after risk mitigation subject to the
Standardised Approach, amount of a bank’s 100%
Outstanding (rated and unrated) in each risk bucket are :
Below 100% RW Rs. 752166.40
100%RW Rs. 378593.99
More than 100% Rs. 104875.77
Deducted Rs. 5882.65
Total Rs. 1241518.81
 Securitization
 Bank’s objective in relation to Securitisation activity is to
achieve improvements in leverage ratios, asset
performance & quality and to achieve desirable
investment & maturity characteristics.

 Loss on sale on transfer of assets to Special Purpose Vehicle

(SPV) shall be recognised upfront.

 Profit on sale of the securitised assets shall be amortised

over the life of the Pass Through Certificates (PTCs) assets
issued or to be issued by SPV.
 The following portfolios are covered by the Standardised Duration
approach for calculation of Market Risk:
 Securities held under the Held for Trading (HFT) and Available for Sale
(AFS) categories.
 Derivatives entered into for hedging HFT and AFS securities
 Derivatives entered into for Trading.

 Market Risk Management Department (MRMD)/Mid-Office are

responsible for identification, assessment, monitoring and
reporting of Market Risk in Treasury operations.
 Board approved Trading policies and Investment Policies with
defined Market Risk management parameters for each asset class are in
place.
 Risk monitoring is an ongoing process with the position reported to the
Top management and the Risk Management Committee of the Board at
stipulated intervals.
 Risk Management and reporting is based on parameters such as a Modified
Duration, Price Value of Basis Point (PVBP), Maximum permissible
Exposures, Net Open Position limits, Gap limits, Value at Risk (VaR) etc,
in line with the global best practices.

 Respective Foreign Offices are responsible for risk monitoring of their investment
as per the local regulatory requirements. Stop loss limit for individual investments
and exposure limits for certain portfolios have been prescribed.

 Risk Profiles are analysed and their effectiveness is monitored on an ongoing

basis.

 Forex open position limits (Daylight/Overnight), Deal wise cut-loss limits, Stop
loss limit, Profit/Loss in respect of Cross Currency trading are properly monitored
and exception reporting is regularly carried out.
 Quantitative disclosures:
Minimum Regulatory Capital requirements for market risk as on
31.03.2010 is as under:(Rs in crores)
:
Interest rate risk Rs 2,442(Including
Derivatives)

Equity position risk Rs 2510

Foreign exchange risk Rs 116 (Including Gold)
Total Rs 5068
 Policies for control and mitigation of Operational Risk

 Systematic and proactive identification, assessment,

measurement, monitoring, mitigation and reporting of the
Operational Risks is in place.

 Policy on Business Continuity Planning (BCP) is in place.

 Policy on Know Your Customer (KYC) Standards and Anti Money

Laundering (AML) Measures is in place.

 Policy on Fraud Risk Management is in place.

 Strategies and Processes –

 “Book of Instructions” having Guidelines and instructions are propagated.

 Different sanctioning powers of various levels of Officials for different types of
financial transactions
 Core Banking System (CBS).
 The process of building a comprehensive database of losses due to
Operational Risks has been initiated, to facilitate better risk management.
 Training of Staff
 Insurance
 Internal Audits
 Risk and Control Self Assessment (RCSA) process is being rolled out in domestic
branches and Centralised Processing Cells (CPCs) for identification, assessment,
control and mitigation of Operational Risks in the Bank.
 Detailed assessment of significant Operational Risks is conducted by Focus
Groups consisting of Senior Officials at Controlling Offices.
 The scope and nature of Risk Reporting and
Measurement Systems

 A system of prompt submission of reports on Frauds is in

place in the Bank.

 A comprehensive system of Preventive Vigilance has

been established in all the business units of the Group.

 For 31.03.2010, Basic Indicator Approach with capital

charge of 15% of average gross income for previous 3
years is adopted for Operational Risk.
 Qualitative Disclosures

 ALCO reviews Interest Rate Sensitivity statement on monthly basis.

 Interest rate risk in the Fixed Income portfolio of Bank’s

investments is managed through Duration analysis. Bank also
carries out Duration Gap analysis (on quarterly basis) to estimate
the impact of change in interest rates on economic value of bank’s
assets and liabilities and thus arrive at changes in Market Value of
Equity (MVE).
 The following prudential limits have been fixed for monitoring of various
interest risks:

Changes on account of Interest Maximum Impact

rate volatility (as % of Capital and
Reserve)

Changes in Net Interest Income 5%

(with 1% change in interest
rates for both assets and liabilities)
Change in Market value of Equity 20%
(with 1% change in interest rates
for assets and liabilities)
 The prudential limit aims to restrict the overall adverse impact on account
of market risk to the extent of 20% of capital and reserves, while part of
the remaining capital and reserves serves as cushion for credit and
operational risk.
 Duration Gap: The impact of interest rate changes on
the Market Value of Equity is monitored through Duration
Gap analysis by recognising the changes in the value of assets
and liabilities by a given change in the market interest rate.
The change in value of equity (including reserves) with 1%
parallel shift in interest rates for both assets and liabilities is
estimated.

 Maximum limit up to which the value of the equity

(including reserves) will get affected with 1% change in
interest rates is restricted to 20% of capital and
reserves.
 Quantitative Disclosures
 Earnings at Risk (EaR)

Assets Liabilities Impact on NII

Lending rate / Term 2156.88
yield Deposit/Borrowin
on investment g costs increases
increase by 100 bps.
by 100 bps.

 Market Value of Equity(MVE) (Rs.in

crores) As at March 2010
Amount
Impact on Market Value 592.83
of Equity (MVE)
 2007-08 2008-09 2009-10

STANDARD NPA STANDARD NPA STANDARD NPA

COAL 1060.41 11.21 1235.92 8.75 2769.84 16.12

MINING 5659.91 34.31 11243.65 82.15 5874.29 57.0
I&S 37788.9 664.45 22301.76 737.47 46798.76 1026.78
METALS 9655.94 283.45 2729.77 184.83 8649.41 364.53
GEMS 12896.2 150.53 11849.93 230.06 11085.06 530.22
ELECTRICITY 10837.5 583.83 10024.98 1638.01 8136.02 10.18
CONSTRUCTION 11008.42 281.38 16088.98 487.74 11057.82 779.67

INFRASTURCTUR 44151.36 307.51 35817.17 341.45 63438.33 630.82

E
CAPITAL 6588.35 6974.33
M ARKETS
REAL ESTATE 57870.54 64104.97
ROA gives an idea as to how efficiently management
is using its assets to generate earnings.
 There has been material deterioration in banks asset
quality over 5 quarters.
 NPL risk is highest for SBI with its NNPL comprising 16.5%
of net worth.
 With PCR at 61% bank requires additional Rs.28bn to
reach stipulated 70%.
 SBI’s B/S to grow by 18% CAGR; ROA would increase, ROE
would get diluted.
 SBI’s NIM has recovered by significant 90bps
in the past four quarters aided by

 material decline in average surplus liquidity

 significant improvement (900 bps) in the CASA ratio
 reduction in contribution of bulk term deposits and within
that high-cost deposits.
 sharp improvement in C/D ratio (900 bps)
 The LTD ratio—a bank's gross loans divided by total
deposits—indicates the percentage of a bank's loans
funded through deposits.

 An upswing in the LTD may indicate that a bank has

less of a cushion to fund its growth and to protect
itself against a sudden recall of its funding,
especially a bank that relies on deposits to fund
growth.
2008-2009
 (in crores) Upto 14 15 to 29 days Over 3 Over 6 Over 1 yr Over 3 yr & Over 5 Yrs Total
days 28 to 3 months & months & & upto 3 upto 5yrs
days months upto 6 upto 1yr yrs
months
Deposits 83690.4 14592.9 37853.31 56627.41 86114.19 181909.61 102864.77 178420.5 742073.
3 13
Borrowings 12362.18 5531.82 10490.96 8523.6 4384.83 9173.88 3052.88 193.53 53713.6
8
Foreign 31287.61 9152.31 14704.28 15303.09 14831.34 17878.41 6550.34 1677.01 111384.
Currency 39
Liability

Total 127340.1 29277.0 63048.55 80454.1 105330.36 208961.9 112467.99 180291.1 907171.
Outflow 9 6 2

Advances 87221.68 8026.04 33299.25 26620.89 19452.19 240706.9 42276.2 84900.05 542503.
2
Investment 18024.74 4494.75 21733.42 7848.99 6777.18 32238.61 60331.76 124504.5 275953.
s 95
Foreign 28940.13 7332.46 29855.55 19109.41 5943.45 17732.69 11663.61 11379.36 131956.
Currency 66
Assets

Total 134186.5 19853.2 84888.22 53579.29 32172.82 290678.2 114271.57 220783.9 950413.
Inflow 5 5 81
Gap 6846.36 - 21839.67 -26874.81 -73157.54 81716.3 1803.58 40492.86 43242.6
9423.81 1

Cumulative 6846.36 -2577.45 19262.22 -7612.59 -80770.13 946.17 2749.75 43242.61

Gap
Gap % to 5.4% -32.2% 34.6% -33.4% -69.5% 39.1% 1.6% 22.5% 4.8%
total
Output
2009-2010
(in crores) 1 day 2 to 7 8 to 14 15 to 28 29 days over 3 Over 6 Over 1 Over 3 Over 5 Total
days days days to 3 months & months & yr & yr & Yrs
months upto 6 upto 1yr upto 3 upto
yrs 5yrs
Deposits 19136.9 23515.2 27061.7 20483.9 43403.06 64260.77 90342.06 262985.1 135539.1 117388. 804116.
7 3 3 8 8 2 13 23
Borrowin 3569.9212079.22786.39 4802.38 19350.31 10058.28 5485.78 6793.2 5535.16 32550.9 103011.
gs 8 6
Foreign 18796.8 5661.653980.66 6790.08 27311.98 20193.38 20468.81 15065.98 9552.04 946.74 128768.
Currency 2 14
Liability

Total 41503.7 41256.0 33828.7 32076.4 90065.35 94512.43 116296.65 284844.3 150626.3 150885. 1035896
Outflow 1 8 8 4 6 2 85

Advances 43973.6 12572.3 39713.3 8888.53 33914.61 35494.45 27616.38 275367.6 59944.08 94429.0 631914.
6 6 5 6 7 15
Investme 135.56 245.22 219.58 1802.52 10415.07 7991.92 6095.1 51770.22 59533.46 147581. 285790.
nts 42 07
Foreign 30336.6 1154.84 3140.2 6536.37 25802.73 24648.61 9814.2 15229.77 14071.49 11433.6 142168.
Currency 7 5 53
Assets

Total 74445.8 13972.4 43073.1 17227.4 70132.41 68134.98 43525.68 342367.6 133549.0 253444. 105987
Inflow 9 2 3 2 5 3 14 2.8
Gap 32942.1 - 9244.35 - -19932.94 -26377.45 -72770.97 57523.29 - 102558. 23976.7
8 27283.6 14849.0 17077.29 29 8
6 2
Cumulati 32942.1 5658.52 14902.8 53.85 -19879.09 -46256.54 -119027.51 -61504.22 -78581.51 23976.78
ve Gap 8 7

Gap % to 79.4% -66.1% 27.3% -46.3% -22.1% -27.9% -62.6% 20.2% -11.3% 68.0% 2.3%
total
Output
 Under Basel III the Tier II Capital should be ideally between 7-9%

 In the year 2010, SBI had 9.45% of Tier I Capital

 Capital conservation buffer of common equity will be 2.5 percent of

assets, bringing the total Tier I capital requirement to 7 percent.

 Another provision of Basel III will require them to build a separate

“countercyclical buffer” of between zero and 2.5 percent when
the credit markets are booming