RESEARCH REPORT SUMMER INTERNSHIP PROGRAM SUBMITTED BY: SAUBHAGYA KUMAR SAHOO ID NO.: SI/SK-161 SUBMITTED TO: PLACEMENT CELL NEW DELHI INSTITUTE OF MANAGEMENT NEW DELHI (APPROVED BY AICTE) AND GULF BULLS SECURITIES PVT LTD FARIDABAD, HARYANA NEW DELHI INSTITUTE OF MANAGEMANT Page 1 (Approved by AICTE) 61-62 Tughlakabad Institutional Area NewDelhi-110062
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Today in the banking sector every bank nationalized or private are striving to reach the pinnacle.Though in the national scenario the Govt./Nationalized banks are leading bank in the
metropolitan context the private banks are leading both in business as well as service.
STATE BANK OF INDIA has built its leadership by making itself as India’s largest commercial
bank having largest retail lender with great brand image, high market capitalization and also to
find place in the fortune global 500 list.
The Broad objective of the project is to analysis the movement of SBI share and trade in future
by taking into consideration the present economic scenario, movement of banking sector and
how much the SBI share is sensitive with the upcoming news and global effect. It gives a clear
picture about the movement of SBI share in different condition which helps the investors,
brokerage houses to invest in future.
This study is basically divided into five major parts. The first part of the report includes the
current economic scenario of India. The second part deals with the banking Industry and its
comparison with other industries. The third part includes the Introduction of State bank of India.The fourth part is related to historical analysis, upcoming and Global effect of SBI shares. The
last part deals with limitations, conclusion and suggestions.
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Gulf bulls Securities Pvt. Ltd. a Company registered under the Companies Act, 1956 .Gulf bulls
is a professionally managed group headed by the directors, having vast experience in the stock
market. Besides the core promoters, the group is having its full fledged teams headed by young
and dynamic professionals like chartered accountants, company secretaries, MBAs, IT
professionals etc. to handle the various divisions of the company.
The Company has a balanced mix of revenues from emerging markets and is well positioned toleverage the growth potential offered by these markets. GBS provides investors a robust platform
to trade in Equities in NSE, BSE, and Derivatives in NSE. With its ability to evolve with the
changing environment the Company has been able to put itself to the forefront of stock broking
activities. With its network spreading across various parts of India, it has made a distinct mark
among the stock broking houses and high net worth corporate as well as individuals.
The company research team tracks the economy, industries and companies and provides the
latest information and analysis. The company content offers financial information, analysis,
investment guidance, news & views, and is designed to meet the requirements of everyone from
a beginner to a savvy and well-informed trader.
BUSINESS
• Equity
• Derivatives
• IPO
• Insurance
• Mutual Funds
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The Company Vision is to grow the business and make their presence across the World.
ECONOMIC SCENARIOWORLD ECONOMY
“United Nations Department of Economic and Social affairs (DESA) said the world economy isexpected to shrink by 2.6% in 2009 according to the pessimistic scenario of the forecast presented in January 09.
Source: The Economic Times DT 29.05.09
RECENT GROWTH TRENDS IN GLOBAL ECONOMY
Improving vital signs across the Globe from US GDP to Japanese factory output and Britishhouses prices hopes that the World economy was responding after months in intensive care.
USA
The US economy shrank 5.7% from the first quarter of 2008, less than the previous estimate of 6.1% and slightly worse than market expectations for a 5.5% fall.
JAPAN
The factory output rose to 5.2% in April, the biggest jump in more than half a century and
manufactures forecast further gains.
SOUTH KOREA
The industrial output expanded for a fourth straight month.
GERMAN
Retail sales showed a 0.5% month rise in April 09 while private consumption for the first quarter raised a similar amount despite a 3.8% contraction in GDP.
BRITAIN
The house prices registered a surprise rise in May-09 the second time in three months.
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Over the last couple of decades, India has established itself as one of the fastest growing
economies in the world. India is also advancing towards the economical growth .The economy
has moved decisively to a higher growth phase. There is no doubt that the economy has moved
to a higher growth plane, with growth in GDP at market price exceeding 8 percent in every year
since 2003-04.
The economy of India is as diverse as it is large, with a number of major sectors including
manufacturing industries, agriculture, textiles and handicrafts, and services. Agriculture is a
major component of the Indian economy, as over 66% of the Indian population earns its
livelihood from this area.
The Indian economy entered the financial year 2008-09 with a buoyant growth rate. The average
growth rate during the recent four years namely 2004-05 to 2007-08 has been at record levelclose to 9 per cent when compared to the average growth rate of 5.6 per cent recorded during the preceding four years. There has been a moderation in the growth in the current year due to thefallout of the global crisis. Compared to other emerging economies, India has several strengthsthat can help mitigate the adverse effects of global financial crisis. The Government has takenseveral measures in this direction and the economy is expected to return to the high growthtrajectory.
FISCAL POLICY
• The union budget 2008-09 was presented with fiscal deficit estimated at 2.5% of
GDP and revenue deficit at 1% of GDP.
• The gross market borrowings for the current fiscal year 2008-09 pegged at Rs
3,06,000 crore, the Government has tripled its open market borrowing from the
original Rs 1,33,000 crore thus pushing up the fiscal deficit from 2.5% to 6%.
• A higher deficit and consequent borrowing by the Government will crowd the private
sector out and make an interest rate cut tough.
• The government on an average has been borrowing Rs 838.56 crore daily from the
open market to fund its fiscal deficit.
• 10 year government security shot up by 7 Bps to 6.36% on budget day itself.
• The movement in bond prices shows that the market is not comfortable with the
Government borrowing.
• The change in bond prices both short and long term is indicative of the cost of funds
in the banking system.
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The fiscal policy for the year 2009-10 will continue to be guided by the objectives of keeping theeconomy on the higher growth trajectory amidst global slowdown by creating demand through
increased public expenditure in identical sectors.
The medium term objective will be to revert to the path of fiscal consolidation at the earliest,
with improvement in the economic situation.
“India Inc can now forget about cheap credit because the cash strapped the credit market by
borrowing heavily from the banking system.”
Source: India Today DT 02.03.09 on Interim Budget.
The doubling of fiscal deficit may place pressure on interest rates unless accommodating policy
measures are taken. Even the fall in interest rates however, will be muted due to the government
massive borrowing.
Source: India Today DT 02.03.09 by Falguni Nayer, Managing Director Kotak Investment
Banking.
TAX
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The strength, resilience and stability of the country’s external sector arereflected by various indicators. These include a steady accretion to reserves,moderate levels of current account deficit, changing composition of capital
inflows, flexibility in exchange rates, sustainable external debt levels withelongated maturity profile and an increase in capital inflows.
CURRENT ACCOUNT
The current account Balance is Deficit by 22332 cr in absolute value in the period (Apr–Dec)
2008-09 as compared to a Deficit of 17034 cr in the last year from (Apr-Dec) 2007-08.
IMPORT
The import is increased by 225809 in US $ million in absolute value in the period (Apr–Dec)
2008-09 as compared to 171718 in US $ million in the last year from (Apr-Dec) 2007-08.
EXPORT
The import is increased by 131990 in US $ million in absolute value in the period (Apr–Dec)
2008-09 as compared to 112737 in US $ million in the last year from (Apr-Dec) 2007-08.
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The FDI worth $11 billion flowed into the country between Oct 08 and March 09. In the full
fiscal (FY 09) FDI was almost flat at $ 13.8 billion. Out of the $33.6 billion FDI in the FY 09
only a third was invested in the second half while a bulk of it entered during the first half. This is
the first time since 1999 fiscal which recorded FDI at $ 2.5 billion and FII at a negative $61
million, that FDI inflows have offset FII outflows by such a huge margin.
YEAR Rs in crore
2001-02 6130
2002-03 5035
2003-04 4322
2004-05 6051
2005-06 8961
2006-07 22826
2007-08 34362
2008-09 33619
Source: The Economic Times DT 31.05.09
SPECIAL ECONOMIC ZONES
Another major policy issue in the trade sector which created a lot of heat was that of SEZs. TheSEZ Act, 2005, supported by SEZ Rules, came into effect on February 10, 2006. The main
objectives of the SEZ Act are generation of additional economic activity, promotion of exportsof goods and services, promotion of investment from domestic and foreign sources, creation of employment opportunities and development of infrastructure facilities. Various incentives andfacilities are offered to both – units in SEZs for attracting investments into SEZs (including
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foreign investment) as well as for SEZ developers. These incentives and facilities areexpected to trigger a large flow of foreign and domestic investment in SEZs, particularly ininfrastructure and productive capacity, leading to generation of additional economic activity andcreation of employment opportunities. The SEZ Rules provide for different minimum landrequirements for Different classes of SEZs. Every SEZ is divided into a processing area where alone the SEZunits are set up and a non-processing area where the supporting infrastructure is to be created.
Developers of special economic zones (SEZ) and units inside such zones can from now on claimrefunds of taxes paid on all input services, regardless of whether the services are used inside or outside tax-free zones.
Source: The Economic Times DT 06.03.09.
Developers can set up 2 or more adjacent SEZs and merge them without worrying about the area
limit of 5000 hectares.
Source: The Economic Times DT 29.05.09.
INTERNATIONAL MONEYTARY FUND (IMF)
At present India has a shareholding of 1.91% in IMF with a quota of $4158.20 million in SDRS.
India may contribute $10-11 billion to the IMF as its contributions to the $500 billion that the
global institution is raising from 20 powerful nations for lending crisis stricken countries.
Source: The Economic Times DT 09.04.09.
PER CAPITAL INCOME
The per capital monthly income of an average Indian has for the first time crossed the Rs 3,000mark on current price levels. The per capital figures may look a bit less impressive when
adjusted for inflation, reached only Rs 25,494 against Rs 25,661 per annum estimated in Feb-09.
Source: The Economic Times DT 30.05.09.
MACROECONOMIC FRAMEWORK STATEMENT
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During the year 2008-09 annual real GDP growth (at constant 1999-2000 prices) is 6.7 per centas compared to the growth rate of 9.1 per cent during 2007-08. The nominal growth rates of GDP
at current market prices during the respective years are 14.9 per cent and 14.4 per cent. As suchthe GDP at current market prices for the year 2008-09 stands at Rs.54,26,277 crore as againstRs.47,23,400 crore in 2007-08. Due to the prevailing uncertainty in the world economy, the realGDP growth has been assumed at 7 per cent in 2009-10. After factoring in inflation expectation,the GDP growth (at current market prices) for 2009-10 is assumed at 11 per cent. Thus the GDP
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for the year 2009-10 (at current market prices) is set at Rs.60, 21,426 crore. In the following twoyears, with the assumption that economy will start showing signs of revival, the real GDP growthhas been assumed at 8 and 9 per cent respectively. After factoring in medium term inflationexpectation, the GDP growth at current market prices is projected at 13 per cent and 13.4 per cent respectively for 2010-11 and 2011-12.
The Eleventh Plan envisages rapid growth in employment opportunities while ensuring
improvement in the quality of employment. The employment generation strategy of the Eleventh
Plan is also predicated on the reduction of underemployment and the movement of surplus
labour in agriculture sector to higher wage and more gainful employment in non-agriculturalsector. Employment in manufacturing is expected to grow at 4 per cent while construction and
transport and communication are expected to grow at 8.2 per cent and 7.6 per cent, respectively.
The projected increase in total labour force during the Eleventh Plan is 45 million. As against
this, 58 million employment opportunities would be created in the Eleventh Plan. This would be
greater than the projected increase in labour force leading to a reduction in the unemployment
rate to below 5 per cent.
YEAR UNEMPLOYMENT RATE (%)
2002 8.8
2003 8.8
2004 9.5
2005 9.2
2006 8.9
2007 7.8
2008 7.2
INFLATION
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Inflation measured in terms of the WPI, were in the range of 3.8-6.9 per cent in 2003-04, 4.3-8.7 per cent in 2004-05, 3.3-5.7 per cent in 2005-06, 3.7-6.7 per cent in 2006-07 and 3.1-8.0 per cent during April-March 2007-08. The current fiscal year started with inflation at close to 8 per cent and reached double digits in the first week of June. It rose to a high of 12.9 per cent in thefirst week of August and continued to be over 12 per cent in September. In October 2008 it camedown to below 12 per cent and subsequently witnessed a sharp fall into single digit in the firstweek of November 2008. It has continued to decline since then except for a brief upswing in mid
January 2009 and as of the week ending January 31, 2009 was 4.39 per cent.
CENTRAL LOAN OUTSTANDING AGAINST EACH STATE IN CRORE
AS ON 31ST MARCH
STATE NAME DEBT
UP 21049
AP 15226
WB 14254
GUJARAT 10640
KARNATAKA 9700
MP 9380
ORISSA 8681
MAHARASHTRA 8504
BIHAR 8215
RAJASTHAN 7672
TN 7486
KERALA 5982
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The growth in the Indian Banking Industry has been qualitative than quantitative and it isexpected to remain the same in the coming years. The country’s middle class accounts for over 320 million people. In correlation with the growth of the economy, rising income levels,increased standard of living and affordability of banking products are promising factors for continued expansion. The Indian banking industry is in the middle of an IT revolution, focusingon the expansion of retail and rural banking. Players are becoming increasingly customer- centricin their approach, which has resulted in innovative methods of offering new banking productsand services. Banks are now realizing the importance of being a big player and are beginning to
focus their attention on merger and acquisitions.
The favorable economic condition including the sustained acceleration in the pace of growth inindustrial sector, buoyancy in services sector and sharp spurt in real estate sector together again
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facilitated rise in the advances of the banking sector. But now the public sector banks have alsowoken up with the market potential aggressively brought down their NPA levels and improvedtheir capital Adequacy ratios and scaled up their fee based income as well. As a result we findthat in the quarter ended June 2007 the Public sector banks reported better 45% growth in net profit than 35% growth registered by private sector banks. But on an overall perspective, adecent 43% growth in profits by the banking sector as a whole is quite credible. Many banks arehopeful of effecting significant NPA recoveries due to Securitization Act. Recoveries from the NPAs which have been provided for add to the other income. Thus going forward costcontainment and recovery management are the key challenges facing Indian banks to remaincompetitive.
STRUCTURE
The Indian banking system can be classified into nationalized banks, private banks andspecialized banking institutions. The industry is highly fragmented with 30 banking unitscontributing to almost 50% of deposits and 60% of advances. The Reserve Bank of India is theforemost monitoring body in the Indian Financial sector. It is a centralized body that monitorsdiscrepancies and shortcomings in the system.
Industry estimates indicate that out of 274 commercial banks operating in the country, 223 banks are in the public sector and 51 are in the private sector. These private sector banks include24 foreign banks that have begun their operations here. The specialized banking institutions that
include cooperatives, rural banks, etc. form a part of the nationalized banks category. There areabout 67,000 Branches of Scheduled banks spread across India. As far as the present scenario isconcerned the Banking Industry in India is going through a transitional phase.
Based on the projections made in the India vision 2020 prepared by the planning commissionand the Draft 10th plan, the report forecasts that the pace of expansion in the balance-sheets of banks is likely to decelerate. The total assets of all scheduled commercial banks by end March2010 is estimated at Rs 40, 90,000 crores.
SEVERAL MEASURES INITIATED BY THE RESERVE BANK OF INDIA BETWEENNOVEMBER 2008 AND JANUARY 2009.
Several measures initiated by the RBI have resulted in banks reducing their deposit rates between November 2008 and January 2009. The range for deposit rates for public sector banksvaried from 5.25 to 8.5 per cent, foreign banks at 5.25 to 7.75 per cent and private sector banksat 4 to 8.75 per cent.
GOVERNMENT INITIATIVES• Bank rate cuts announced in the stimulus packages.
• Cash withdrawals from bank will not attract tax from April 1, 2009 following abolition of the banking cash transaction tax (BCTT) in the Union Budget 2008-09.
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• Inter-ATM usage transaction became free of charges effective April 1, 2009.
• Affidavit and photo should be enough for opening saving account.
• RBI has increased minimum value for high value clearing to Rs 5 lakh from May-09further to Rs 10 lakh by August and will be withdrawn completely by Nov-09.
•
An India owned company is one where the beneficial foreign ownership is less than 50%and where the right to appoint the board is with resident Indians.
EVENTS
In the post-crisis quarter caused due to collapse of Lehman Brothers, large corporate like Infosysmoved their deposits to State Bank of India (SBI), the country's largest bank. Infosys hasrevealed that it transferred deposits of nearly US$ 200.61 million from ICICI Bank to SBI lastyear.
Source: Annual Policy for 2008-09 of Reserve Bank of India
INNOVATIONS IN BANKING INDUSTRY
Over the years, the banking sector in India has seen a number of changes. Most of the banks
have begun to take an innovative approach towards banking with the objective of creating more
value for customers, and consequently the banks. Some of the significant changes in the Indian banking sector are discussed below:
• Technology for Value Creation:
Banks began to use technology to provide better quality of services at greater speed. Internet banking and mobile banking made it convenient for customers to do their banking fromgeographically diverse places.
• Rural India Catching Up:
With a majority of the Indian population living in rural areas, rural banking forms a vitalcomponent of the Indian banking system. Banks also sharpened their focus on rural markets andintroduced a variety of services geared to the special needs of their rural customers.
• Banking Beyond Banking:
While traditionally, banking meant 'borrowing and lending', in the latter part of the 20th century,the word took on a different meaning altogether. Banks no longer restricted themselves totraditional banking activities, but explored newer avenues to increase business and capture newmarkets.
• The Changing Face of Banking:
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Many analysts predict still more revolutionary changes in the banking sector in India. Thechief of these are likely to be the concept of Universal Banks and the introduction of Smart Cardtechnology.
• Breakthrough in Funds Transfer:
Real Time Gross Settlement (RTGS) system is an electronic funds transfer system designed to
allow the real time settlement of interbank payments in a fully secure environment. It enablescompanies to transfer outstanding funds between banks in real time, thus allowing them to settle payments instantaneously and manage their working capital better. It is also expected to savesignificant amounts of money in interest payments on floating funds lying in banks.
BARRIER TO ENTRY
• The RBI prescribed a new minimum capital requirement (Rs 100 crores) for banks to be
considered for a license.
• Foreign ownership of Indian banks limited to 49% for healthy banks, 74% for banks
identified as distressed.
• State required to maintain minimum ownership of 51% of designated banks.
• India had strict entry restrictions for new banks.
• To maintain paid up capital of at least Rs 1 billion.
• To list shares on stock exchanges.
• To fulfill priority sector credit requirements.
• To have a ceiling of one percent of total voting rights held by a single foreign holder.
• Not to set up a subsidiary or mutual funds for at least three years.
• Use modern infrastructure facilities to provide good customer service.
• Foreign bank can operate either through wholly owned subsidiary through branches or
through a subsidiary with a foreign investment below 74% in an Indian private bank.
COMPETITION NATURE
There are several other challenges and issues that the banking industry face in the changingglobal scenario. Apart from their traditional banking functions, Indian banks have now startedoffering several value added product and services both in the wholesale as well as retail bankingsegments. Hence there is an increased demand for quality manpower for marketing and sales
operations. Though, at present, the interest rates are low due to the efforts of the government totame the current economic crisis, in normal circumstances Indian banks face stiff competitionfrom global banks. The levels of services rendered by the Indian banks still leave a lot more to bedesired. Only those banks which are able to meet the enhanced expectations of the costumers
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will be able to survive in the churning that the sector is undergoing currently. The bankinginstitutions on their parts should find out new ways and means in terms of mergers &acquisitions and developing new business models to tap new markets. Banks should beencouraged to use technology and other innovative measures to tap the lower income and ruralmarkets.
Private sector banks and foreign banks have become price takers. The range of Prime LendingRates of public sector banks is 14.5-15.5 per cent, while private sector banks have a higher rangeof 15.0-17.5 per cent and foreign banks even higher at 17.0-18.5 per cent. Most public sector banks have a ceiling on spreads at 4.5 percentage points above the PLR, while private sector andforeign banks have typically ceilings of 5.0 and 6.25 percentages points over PLR, respectively.This means that the highest interest rate charged by public sector banks is 20.0 per cent, while private sector and foreign banks charge up to 22.5 per cent and 24.75 per cent, respectively. Theforeign banks as a group account for less than 10.0 per cent of total business of scheduledcommercial banks in terms of deposits but have about 20.0 per cent share of profits. The pictureis similar in case of private sector banks. There are explanations including quality of service. Butthe real issue is the market structure.
THE CREDIT SCENARIO
JAN08 JAN09
Bank Credit 21.4% 24.0%
Non-Food bank credit 22.0% 23.9%
Flow of Resources from Banking
Sector to Commercial Sector 21.7% 23.4%
Incremental Credit-Deposit Ratio 63.1% 81.4%
Scheduled Commercial Banks
Credit to the Commercial Sector 23.1% 27.0%
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The roots of the State Bank of India rest the first decade of 19th century , when the bank of Calcutta , later renamed the Bank of Bengal, was established on 2 June 1806. The Bank of Bengal and two other Presidency banks, namely, the Bank of Bombay (incorporated on 15 April1840) and the Bank of Madras (incorporated on 1 July 1843). All three Presidency banks wereincorporated as joint stock companies, and were the result of the royal charters. These three banks received the exclusive right to issue paper currency in 1861 with the paper Currency Act, aright they retained until the formation of the Reserve Bank of India. The Presidency banksamalgamated on 27 January 1921, and the reorganized banking entity took as its name ImperialBank of India. The Imperial Bank of India continued to remain a Joint stock company.
Pursuant to the provisions of the State Bank of India Act (1955), the Reserve Bank of India,
which is India’s central bank, acquired a controlling interest in the Imperial Bank of India. On 30April 1955 the Imperial Bank of India became the State Bank of India.
In 1959 the Government passed the State Bank of India (Subsidiary Banks) Act, enabling theState Bank of India to take over eight former State-associated banks as its subsidiaries. On Sept13, 2008, State Bank of Saurashtra, one of its Associate Banks, merged with State Bank of India.
State Bank of India(SBI) is India’s largest commercial bank. SBI has a vast domestic network of over 16000 branches and commands one fifth of deposits and loans of all scheduled commercial bank in India. It is the only Indian bank to feature in the top 100 world banks in the FortuneGlobal 500 rating and various other rankings. Today state bank of India (SBI) has spread its armsaround the world and has a network of branches spanning all time zones.SBI’s InternationalBanking Group dilivers the full range of cross-border finance solutions through its four wings
the Domestic division, the foreign offices division, the Foreign Department and the InternationalServices division.SBI is the largest commercial bank in India in terms of profits, assets ,deposits, branches and employees, It has segregated its core business operations as Tressury operations.Corporate Banking Group , National Banking Group, International Banking Group, Associatesand Subsidiaries, Asset Quality and Information Technology.
SBI plays a vital role in providing working capital and term finance to the Indian industry. Dueto its large network of branches ,SBI has been able to garner a large chunk of deposits from therural sector. It is also a leader in the international banking business.
The state Bank Group includes a network of seven banks, and several non-banking subsidiariesoffering merchant banking services, fund management, factoring services, primary dealership ingovernment securities, credit cards and insurance.
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2. State Bank of Mysore3. State Bank of Indore4. State Bank of Patiala5. State Bank of Travancore6. State Bank of Bikaner and Jaipur 7. State Bank of Hyderabad
STATE BANK OF MYSORE
State Bank of Mysore was established in the year 1913 as Bank of Mysore Ltd. under the patronage of the erstwhile Govt. of Mysore, at the instance of the banking committee headed by
the great Engineer-Statesman, Late Dr. Sir M.Visvesvaraya. Subsequently, in March 1960, theBank became an Associate of State Bank of India. State Bank of India holds 92.33% of shares.
The Bank has a widespread network of 671 branches (as on 31.01.2009) and 20 extensioncounters spread all over India which includes 6 specialized SSI branches, 4 Industrial Finance branches, 3 Corporate Accounts Branches, 4 specialized Personal Banking Branches, 10Agricultural Development Branches, 3 Treasury branches, 1 Asset Recovery Branch and 7Service Branches, offering wide range of services to the customers.
State Bank of Indore popularly known as Indore Bank in Malwa Region, originally known asBank of Indore Ltd. was incorporated under a special charter of his highness MaharajaTukojirao Holker-III, the then ruler of this region.
In terms of State Bank of India (Subsidiary Banks) Act, 1959 the Bank of Indore Ltd. became asubsidiary of State Bank of India w.e.f. 1st January 1960 and was renamed as State Bank of Indore. The Bank acquired business of the Bank of Dewas Ltd. in 1962 and the Dewas Senior Bank Ltd. in 1965 and was up-graded to class 'A' category bank in 1971.
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State Bank of Travancore (SBT) was originally established as Travancore Bank Ltd. in 1945sponsored by the erstwhile Princely State of Travancore. Under a special statute of the IndianParliament (SBI subsidiary Banks Act 1959) it has been made an Associate of the State Bank of India and a member of the State Bank Group, the largest banking group in India.
MANAGEMENTCOMMITTEE
NAME DESIGNATION
Shri O.P. Bhatt Chairman
Mr. A K JagannathanManagingDirector
Mr. Mathur K NanjundaGeneral
Manager
STATE BANK OF BIKANER AND JAIPUR
One of the well-known banks of Rajasthan, State Bank of Bikaner and Jaipur came into being in1963 after the merger of State Bank of Bikaner and State Bank of Jaipur. Headquartered atJaipur, the bank has around 844 branches, spread all over the India. This technology driven bank has got all its branches migrated to Core Banking Solution (CBS) during 2005-06 and is providing Internet banking facilities to its customers.
MANAGEMENTCOMMITTEE
NAME DESIGNATION
Shri O.P. Bhatt Chairman
Shri Arun ShandilyaManagingDirector
STATE BANK OF HYDERABAD
A subsidiary of State Bank of India, State Bank of Hyderabad was established as HyderabadState Bank on 8 August 1941. The Bank started its operations with the distinction of being thecentral bank of the princely state of Hyderabad, covering the present-day Telangana region of Andhra Pradesh, Hyderabad-Karnataka of Karnataka and Marathwada of Maharashtra, when itwas established. Apart from functioning as a commercial bank, it managed Osmania Sikka (thecurrency of Hyderabad in those days) and managed public debt as well. The first branch of theBank was established at Gun foundry, Hyderabad on 5 April 1942.
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Hyderabad State Bank conducted the takeover of the assets and liabilities of the HyderabadMercantile Bank Ltd. in 1953. It was in the same year, when the Bank started its Governmentand Treasury business as an agent of the Reserve Bank of India. In 1956, the RBI took over theBank. Since then, Hyderabad State Bank came to be known as State Bank of Hyderabad (SBH),which was the subsidiary of RBI during the period. On 1 October 1959, SBH became asubsidiary of the State Bank of India.
MANAGEMENTCOMMITTEE
NAME DESIGNATION
O. P. Bhatt Chairman
Amitabha GuhaManagingDirector
Madhavi Sharma Director
Jiban Goswami Director
S. A. Thimmiah DirectorGajendra SinghRajukhedi Director
I. Ram Reddy Director
M Harshavardhan Director
FOREIGN SUBSIDIARIES:
• State Bank of India International (Mauritius) Ltd.
• State Bank of India (California).
• State Bank of India (Canada).
• INMB Bank Ltd, Lagos
STATE BANK OF INDIA INTERNATIONAL (MAURITIUS) LTD.
State bank of India International (Mauritius) Ltd is one of the first offshore banks to beestablished in Mauritius in 1990, with a paid up capital of USD 10 Million. The Bank has had aconsistent record of having earned profits since its very first year of operations. SBIIML with theexpertise of its management and personnel, is customer focused, and offers to all its clients, allover the world, high quality, cost effective professional services and innovative products.
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State Bank of India (California), a wholly owned subsidiary in California is a California StateChartered Bank and a member of the Federal Deposit Insurance Corporation. With four fullservice branches and a money transfer office, the Bank caters to the Banking needs of thecommunity, ethnic and non-ethnic alike, through various deposit and loan schemes. The Bank also provides Internet Banking, Tele-Banking, ATM service and Credit Cards.
MANAGEMENT
COMMITTEENAME DESIGNATION
Ms Neena BansilPresident &CEO
STATE BANK OF INDIA (CANADA)
State Bank of India (Canada) - a wholly owned subsidiary of State Bank of India - has beenoperating in Canada at four locations Toronto, Vancouver, Surrey and Mississauga, extendingvarious facilities to the Indians settled in Canada such as remittance of funds through a network of over 9000 offices of State Bank of India, the largest commercial bank in India and through the branches of its Associate Banks. SBI(C) has also been instrumental in fostering trade ties between India and Canada by extending financial, advisory and logistic support to Canadian and
Indian corporate.MANAGEMENTCOMMITTEE
NAME DESIGNATION
P NandakumaranPresident &CEO
INMB BANK LTD, LAGOS
A subsidiary of SBI, INMB Bank Ltd, (formerly Indo-Nigerian Merchant Bank Ltd) wasincorporated on 26.11.1981 under the Banking Act, 1969. The principle activity of the Bank is providing Banking Services, mainly to corporate clients. Such services include the granting of
SBICAP undertakes merchant banking activities, advisory services, project appraisal, creditsyndication and securities broking. SBICAP’s current focus is on infrastructure project advisoryand syndication mandates, particularly in sectors, such as, urban infrastructure and power, whichare reckoned as the growth drivers. The other focus areas are public issues of equity, book- building issues, debt placements, broking, and sales and distribution.
SBI FUNDS MANAGEMENT PVT LTD (SBI FUNDS)
SBI FUNDS is the Asset Management Company (AMC) set up for managing the affairs of SBIMutual Fund.
SBI DFHI LTD (SBI DFHI)
SBI DFHI, a Primary Dealer (PD), undertakes trading in Government and Non-Governmentsecurities, in the Debt Markets. SBI DFHI Ltd came into existence in April 2004 with theamalgamation of Discount and Finance House of India (DFHI), a subsidiary of RBI & SBI GiltsLtd, a subsidiary of SBI. It is a major participant in the wholesale Debt Market both in thePrimary and Secondary Market segment with an outright turnover of Government Securities andTreasury Bills.
SBI FACTORS AND COMMERCIAL SERVICES PVT LTD (SBI FACTORS)
SBI Factors, a subsidiary of State bank of India (SBI) is one of the leading factoring companies
in India was established in February 1991 with the primary objective to provide domestic
factoring services to Small and Medium Enterprises (SMEs). SBI and its Associates Banks hold
70% stake in SBI Factors.
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1998 saw a new vista opening for the Indian credit card users. GE Capital Services, the largestissuer of private label credit cards in the world and State Bank of India, the largest Indian bank created two companies to address the market: namely, SBI Cards and Payment Services Ltd.(SBICPSL) and GE Capital Business Process management Services ltd. (GECBPMSL). The joint venture was set up to leverage the Brand equity, customer relationship and the unparallelednetwork of SBI and the technological processes and service capabilities of GE Capital to offer you products that are value for money and supported by quality and service.
JOINT VENTURES:
SBI LIFE INSURANCE COMPANY LTD (SBI LIFE).
SBI LIFE undertakes the business of life insurance and annuity in relation to all or any kinds of assurance. SBI LIFE leveraged the strength of its parent bank and its group. SBI and itsAssociate Banks became the Corporate Agents of SBI LIFE. SBI LIFE is now selling itsinsurance products through 2,400 branches of SBI Group.
PROFILE OF SHRI O.P.BHATT CHAIRMAN STATE BANK OF INDIA
Born on 7th March 1951, Mr. Om Prakash Bhatt started his banking career as a probationaryofficer with state bank of India in 1972. Mr. O.P.Bhatt has during his long career of 36 yearswith SBI, held several important assignments in India and abroad. He was the projectcoordinator for the Bank’s computerization project form where he moved on to RegionalManager at Jaipur and then as Executive Secretary to the then Chairman of the SBI Group. AsChairman, Mr. Bhatt is not only the Chief Executive of India’s largest commercial bank., he isalso the Head of the entire State Bank Group which consists of 7 domestic and 4 international banking subsidiaries, besides 5 non- banking subsidiaries and 1 joint Ventures. Besides chairingthese companies, Mr. Bhatt is also the chairman of the Banking and Financial InstitutionsCommittee of FICCI, Director on the board of several other companies like EXIM Bank andGIC and a member of the Boards of ICRIER, XLRI, IBPS, IDRBT, KVIC and National
cooperative Development Corporation.
STATE BANK OF INDIA
HISTORY
1806: The origin of State Bank of India was back to 1806 when the Bank of Calcutta (later
called the Bank of Bengal) was established.
1809: The Bank receives a charter from the imperial government and changes its name to Bank of Bengal.
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1840: A sister bank, Bank of Bombay, is formed. 1843: Another sister bank is formed: Bank of Madras, which, together with Bank of Bengal andBank of Bombay become known as the presidency banks, which had the right to issue currencyin their regions.
1861: The Presidency Banks Act takes away currency issuing privileges but offers incentives to begin rapid expansion, and the three banks open nearly 50 branches among them by the mid-1870s.
1876: The creation of Central Treasuries ends the expansion phase of the presidency banks.
1921: The presidency banks are merged to form a single entity, Imperial Bank of India.
1955: The Nationalization of Imperial Bank of India results in the formation of the State Bank of India, which then becomes a primary factor behind the country's industrial, agricultural, and rural
development.
1969: The Indian government establishes a monopoly over the banking sector.
1995: SBI Commercial and International Bank Ltd. are launched as part of SBI's stepped-upinternational banking operations.
1998: SBI launches Credit cards in partnership with GE Capital.
2002: SBI networks 3,000 branches in a massive technology implementation. 2004: A networking effort reaches 4,000 branches.
2008 : State Bank of India has received the Reserve Bank of India’s approval in Nov for the proposed joint venture company with Society General Securities Services (SGSS), for offeringcustodial and related services in India.
State Bank of India has signed a Joint venture agreement with Insurance Australia Group in Novto form a Joint venture company which will be engaged in General Insurance business in India.
State Bank of India was adjudged the best bank of 2008 by London based 'The Banker' magazineof the Financial Times Group.
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2009 : SBI has come out with special home loan rates for new borrowers at 8%- applicable for one year.
State Bank of India (SBI), a large financial services group operating in the banking industry, hasentered into an agreement with Telecom firm Tata Communications Ltd and C-Edge for the roll-out and management of 500 ATMs.
Tata Motors has appointed the country's largest lender, the State Bank of India (SBI) as anExclusive Booking agent for Nano.
The US based Reputation Institute ranked SBI among the Top 50 in a list of the world’s 200most Reputable Companies.
AWARS AND RECOGNITION DURING THE PAST 12 MONTHS
• Only Indian bank to find a place in the Fortune Globe 500 list.
• In the Forbes 2000 lists of largest companies in the world.• Awarded the “Bank of the year 2008 –India” by the Banker Magazine London.• Awarded “Best Bank” and “Most preferred Home loan” by Outlook Money Awards 08.• Won “Most preferred Bank” and “Most preferred Brand for Home loan” CNBC
consumer Awards Sep 08.
PROFILE
SBI MANAGEMENT
NAME DESIGNATIONShri Om PrakashBhatt Chairman
Shri S.k.Bhattacharyya
ManagingDirector
Shri R. Sridharan DirectorDr. Ashok
Jhunjhunwala Director
Shri Dileep C. Choksi DirectorShri S.Venkatachalam Director
Shri. D. Sundaram DirectorDr. Deva NandBalodhi Director
Prof. Mohd.Salahuddin DirectorDr. VasanthaBharucha Director
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Dr. Rajiv Kumar DirectorShri ArunRamanathan DirectorSmt. ShyamalaGopinath DirectorShri Ashok Chawla
Director
KEY FIGURES
Face Value(Rs) 10.00PE ratio 13.29 02/06/09EPS(Rs) 43.23 March 09Sales(Rs crore) 17342.39 March 09 Net profit margin(%) 11.67 March 08Last dividend(%) 290.00 11/05/09Return on average equity 13.72 March 08
QUARTERLY RESULT (Rs Crore)
Particular March 09 Dec 08 Sep 08 June 08 March 08
SLR is the amount a commercial bank needs to maintain in the form of cash, gold or govt
approved securities (Bonds) before providing credit to its customers. SLR rate is determined andmaintained by the RBI in order to control the expansion of bank credit.EFFECT ON BANKING SECTOR
Any change in this rate affects Government borrowing programme as banks purchase
Government securities for meeting there SLR requirements. Banks can thus sell their surplus
securities and use the consideration for giving more loans.
EFFECT ON SBI SHARE PRICE
Date SLR (O) SLR (N) Date Share Closing Price
06.11.08 1215.35
08.11.08 25.0 24.0 07.11.08 1249.25
10.11.08 1301.55
From the above figure it is clear that whenever there is a decrease in SLR the SBI share price
increases.
INFLATION
Inflation is a rise in the general level of prices of goods and services in an economy over a periodof time.
EFFECT ON BANKING SECTOR
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Inflation reduces bank lending to private sector. Inflation is negatively associated with real
money market rates, real Treasury bill rates and real time deposit rates. As the inflation increases
the real rate of return on these instruments falls. Inflation has a dramatic negative impact on the
profitability of banks. The net interest margins, net profits, rate of return on equity and value
added by the banking sector all decline in real terms as inflation rises.
EFFECT ON SBI SHARE PRICE
Date Previous Date Changes12.03.09 910.90 13.03.09 953.05
20.03.09 953.55 19.03.09 968.20
23.03.09 1023.45
26.03.09 1093.80 27.03.09 1125.35
The Inflation is reduced to 2.43% on 13.03.09, 0.44% on 20.03.09 and 0.27% on 27.03.09.
So from the above figure it is clear that whenever there is a decrease in inflation the closing
share price of SBI increases.
GROSS DOMESTIC PRODUCT (GDP)
The total market value of all final goods and services produced in a country in a given year,
equal to total consumer, investment and government spending, plus the value of exports, minus
the value of imports.
EFFECT ON BANKING SECTOR
The increase in demand due to high GDP growth rates helps the corporate to show larger profits.Thus, more and more money is invested in buying stocks-by individuals, Indian corporate and
foreign institutions-leading to a sustained bullish run. So the bank turnover is mainly affected by
the GDP growth.
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It is very difficult to collect the information about the economy and Industry as the Economic
Survey Report of the last year will be announced by the Finance Department on 3rd of July 2009.
CURRENT FINANCIAL DATA:-
It is very difficult to get the accurate financial data for the year 2008-09 because most of the
companies have not announced their unaudited balance sheet.
HISTORICAL DATA: -
As the share market is very sensitive with the upcoming news and global effect it is necessary to
collect the important event occurred in the past date wise which is not available correctly in any
web site.
MOVEMENT OF SHARE:-
The Major movement of share is mainly based on FDI and FII. The election result wasannounced on 16th May 09 and the Government is still not clear about which sector and up to
which percentage they allow FDI and FII. The SBI share is within 30 shares of Sensex and 50
Shares of Nifty and maintaining nearly Beta value equal to one so it is very difficult to do an
analysis of banking sector with other sector.
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The operating profit of SBI was increased by 37% as compared to last year due to the
introduction of home loan at 8 percent for one year. Due to this scheme many customers are
jump from other Banks to SBI to avail the lower rate of interest which forces some Banking
Institution like HDFC has started charging borrowers up to 3 percent of the outstanding loan if they decide to prepay their loans by borrowing from other lenders.
As the economy is developing in the world and coming out of recession also the US market is
recovering very fast and our Government is also stable so it is the right time for the investor to
invest in the SBI shares both for the long term and short term period.
But during the analysis I found that the investors those are interested in short term investment i.e.
Intraday or Delivery for few days should watch the upcoming news and Global effect regularly
as SBI shares are more sensitive with the effects mentioned below.
UPCOMING EFFECT
PLR
The RBI may standardize the way banks calculate their prime lending rates the bench mark to fix
the floating components of loans and bar them from lending below their respective PLRs. The
decision can be expected by July end. After that no banks can lend the money below PLRs. So
after announcement it will definitely affect the SBI shares because now SBI is the only bank who
is providing home loan at 8 percent rate of interest.
Source: The Economic Times DT 09.06.09.
FDI
According to (FDI notification in government parlance) 2 and 3 of 2009 the firm that has more
than 50 percent foreign investment whether by way of direct investment or portfolio holdings or
foreign currency debentures would be considered Foreign owned. But currently the ICICI is
holding 64 percent and HDFC is holding 74 percent of foreign investment. The RBI asking DIPP
(the agency set the foreign investment policy) and after the announcement of norms definitely
we can find a drastic change in the movement of banking shares.
Source: The Economic Times DT 28.04.09.
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By looking into the last year performance of SBI i.e. the growth in profit, reduced in NPA percentage, highest market capture and strong hold in the Market by providing different scheme
to customer time to time I am suggesting that it is the right time for the investors to invest in the
SBI shares for both short and long term period.
JUNE -09
ACTION: BUY
TARGET PRICE: Rs
STOP LOSS PRICE: Rs
AUG -09
ACTION: BUY
TARGET PRICE: Rs
STOP LOSS PRICE: Rs
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