STATE BANK OF TRAVANCORE Directors Report

1.  The Bank''''s operations and performance

2.1 The Bank continued the process of consolidation during FY 2015-16.
While, there were not much greenfeld investment happening in the
corporate sector and with the credit of-take not picking up to the
expected levels, concerted eforts were made to reduce interest
expenditure and thereby to improve the operating proft. Conscious
eforts were made to reduce Bulk deposits, high cost deposits and
borrowings to reduce interest expenditure and thereby improve Net
Interest Income.

The bulk deposits (including CDs) have come down by over Rs.2,613 crore
during the year, and consequently the bulk deposit ratio has come down
from 13.24% as on 31st March, 2015 to 9.34% as on 31st March, 2016.

This, together with improvement of CASA and lowering of interest rates
on deposits has resulted in the cost of deposits coming down from 7.32%
as on 31st March, 2015 to 6.94% as on 31st March, 2016.

2.2 Total Business

The Total Business of the Bank stood at Rs.1,68,123 crore as on 31st
March, 2016 against Rs.1,60,984 crore as on 31st March, 2015. It
comprises of Total Deposits of Rs.1,01,119 crore and Gross Advances of
Rs.67,004 crore.

2.3 Working results and Operating Proft

The Operating Proft for the year ended 31st March, 2016 grew by 31.06%
from Rs.1,372.16 crore as on 31st March, 2015 to Rs.1,798.33 crore as on
31st March, 2016. The Net Proft for the year stood at Rs.337.73 crore as
compared to Rs.335.53 crore for FY 2014?15. The earnings per share (face
value of Rs.10) was Rs.47.50 as on 31st March, 2016 as against Rs.56.63 as on
31st March, 2015.

2.4 Dividend

The Bank declared a dividend of Rs.5 per equity share of face value Rs.10
each for the year (previous year dividend Rs.5 per equity share) to the
shareholders, entailing a total payout of Rs.35.55 crore. The dividend
payout Ratio works out to 10.53% of Net Proft.

2.5 Capital and Capital Adequacy

During the year, the Bank has allotted 1,18,50,694 equity shares of Rs.10
each fully paid up for cash at a price of Rs.400 including a Premium of
Rs.390 per equity share aggregating to Rs.474.03 crore on Rights basis to
the existing equity shareholders of the Bank in the ratio of 1(One)
fully paid-up equity share for every 5(Five) equity shares held as on
Record Date i.e. 04th March, 2015. The Bank made the allotment of the
equity shares on 13th April, 2015 against the share application money
held as on 31st March, 2015.

The Bank has also raised Rs.515 crore to augment the Capital resources by
issuing Basel III compliant Tier II bonds. These bonds are listed on
National Stock Exchange of India Ltd.

Under Basel III, the Bank''''s capital position improved from Rs.6636.65
crore as on March 31, 2015 to Rs.7317.40 crore as on March 31, 2016 and
the Capital Adequacy Ratio improved from 10.89% as on March 31, 2015 to
11.60% as on March 31, 2016 against a minimum of 9.625% stipulated by
RBI.

The Capital Adequacy Ratio under Basel II improved from

11.63% as on March 31, 2015 to 12.50% as on March 31, 2016.

2.6 Deposits

Bank''''s Aggregate Deposits showed a growth of 11.23% and stood at
Rs.1,00,473 crore as on 31st March, 2016 compared to Rs.90,328 crore in the
previous year. Total Deposits of the Bank (including Inter Bank
Deposits) grew by Rs.10,042 crore to Rs.1,01,119 crore as on 31st March,
2016 as against Rs.91,077 crore as on 31st March, 2015.

More than 50% of growth under Total Deposits came from CASA deposits,
which grew by Rs.5,073 Crore. The CASA Ratio improved from 29.79% as on
31st March, 2015 to 31.84% as on 31st March, 2016.

2.7 Advances

The Gross Advances of the Bank stood Rs.67,004 crore as at the end of
31st March, 2016 as against Rs.69,907 crore a year ago, recording a
negative growth of Rs.2,903 crore (-4.15%) due to sluggish credit of-take
coupled with macroeconomic conditions. Personal segment advance grew by
Rs.1,959 crore, SME advance grew by Rs.883 crore whereas the advance in C&I
& Agriculture segment declined by Rs.2,856 crore & Rs.2,889 crore
respectively.

The retail lending stood at Rs.35,481 crore and constituted 52.95% of the
Total Advances as at the end of 31st March, 2016.

The Credit Deposit Ratio (Gross Advance to Aggregate Deposits) stood at
66.69% as on 31st March, 2016 as against 76.76% as on 31st March, 2015.

2.8 Market Share

The Bank''''s market share in ASCB Deposits has increased from 1.05% as on
20/03/2015 to 1.08% as on 18/03/2016 (last reporting friday data of
RBI). The market share in Advances has come down from 1.06 % as on
20/03/2015 to 0.92% as on 18/03/2016. The Bank''''s All India Market share
in total business as on 18/03/2016 stood at 1.01%.

The Bank continued to maintain its position as the premier Bank in
Kerala with a market share of 19.78% in business among all Commercial
Banks (as at the end of December 2015) with a share of 13.88% of the
total branch network. In respect of NRI deposits, Bank''''s market share
in the State is 24.20% (Source: SLBC, Kerala).

2.9 Priority Sector Lending

The Bank continued to give special emphasis on lending to the priority
sector in conformity with national policies, expectations and for
fulfllment of social objectives.

Bank''''s Gross Advances to the Priority sector was Rs.27,793
crore as on 31st March, 2016 as against Rs.27,609 crore as on 31st March,
2015 and constituted 38.74% of the Adjusted Net Bank Credit against the
benchmark of 40%.

2.10 Agricultural Finance

The Bank disbursed an amount of Rs.5,681 crore under Agriculture segment
during the fnancial year 2015- 16 against the Special Agricultural
Credit Plan target of Rs.7,000 crore. Exposure to Agriculture segment
stood at Rs.9,326 crore (including RIDF) as on 31st March, 2016, which is
13.00% of Adjusted Net Bank Credit, against a benchmark of 18%.

The Bank had conducted an intensive Agricultural lending campaign,
called "HARITHOLSAVAM" from 01/07/2015 to 30/09/2015, to give thrust to
agriculture lending.

The Bank celebrated Farmers Day on Chingam 1 (17/08/2015) in
association with Krishi Bhavans and Animal Husbandry Department at
various centres. Progressive farmers were felicitated on the occasion.

The Bank ranked frst in the category of Nationalised Banks on the basis
of credit linkage to neighbourhood groups (NHGs) sponsored by
Kudumbasree Mission. The award was presented by the Hon''''ble Chief
Minister of Kerala in the 17th Anniversary Function of Kudumbasree on
03/09/2015 at Malappuram.

2.11 Lending to Micro, Small and Medium Enterprises (MSMEs)

MSMEs play a major role in the country''''s economic development. The Bank
gives due importance for the growth of this vital segment of the
economy. Total lending to MSME sector as on 31st March, 2016 stood at
Rs.12,432 crore. The lending to Micro and Small Enterprises (MSEs) stood
at Rs.9,276 crore.

The Bank received the National Conference & Excellence Award on
empowering MSME 2016 for outstanding performance in MSME Lending from
Federation of Industry Trade and Services.

Bank also received MSME Banking Excellence Awards 2015 from Chamber of
Indian Micro, Small & Medium Enterprises for Best Bank for Eco
Technology under "Emerging Banks" Category.

RTO ? Tie up arrangement

Road Transport Operators (RTO) is an important sub segment under
service segment. Outstanding under RTO segment, as on 31st March, 2016
is Rs.280 crore comprising of 7792 accounts.

Prime Minister''''s Employment Generation Programme (PMEGP)

The Bank has been actively supporting the programme to generate
employment for youth and stood frst in the State of Kerala, surpassing
the targets. The Bank fnanced 296 projects against the target of 171
projects. The total outstanding under PMEGP scheme was Rs.59 crore to
2,313 benefciaries as on 31st March, 2016.

Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE)

The Bank is a Member Lending Institution of CGTMSE which provides
guarantee cover to collateral free loans upto Rs.1 crore. The Bank made
it mandatory to cover all eligible accounts up to a limit of Rs.50 lacs
under CGTMSE. As on 31st March, 2016, 16518 accounts with limits
aggregating to Rs.758 crore stood covered under the scheme.

Specialised MSME Branches:

The Bank is having 10 specialised MSME Branches in Kerala to cater to
the needs of MSME clientele.

Loan Origination Software (LOS):

The Bank has implemented Loan Origination Software (LOS) as a process
of digitalisation of SME Loan processing mechanism. It integrates
sourcing, sanctioning and documentation processes.

Dealer Finance Scheme (e-DFS and m-DFS):

The Bank has introduced a new product as Dealer Finance Scheme to
provide credit facility to dealers of Industrial Majors for carrying
inventory. The scheme operates on the Bank Internet Banking platform.
The Bank has entered into tie up arrangement with fve Industrial Majors
in various parts of the country.

Pradhan Mantri Mudra Yojana

The Bank has implemented ''''Pradhan Mantri Mudra Yojana'''' (PMMY), a
fagship scheme of Government of India which was launched by the Hon''''ble
Prime Minister. The Bank has taken many initiatives to make the public
aware of the scheme details as per Government of India guidelines and
has made a Credit delivery of Rs.335 crore under the scheme to 19470
benefciaries.

Vizhinjam Port Package

As a novel initiative, the Bank has bundled 7 MSME products and
introduced Vizhinjam Port Package to cater to the needs of MSME
customers who would be associated with the launch of Vizhinjam
International Seaport Project.

2.12 Commercial & Institutional Finance

The Bank''''s performance under this segment stood at Rs.31,523 crore as on
31st March, 2016 as against Rs.34,379 crore as on 31st March, 2015. The
share of C&I segment to Total Advances came down from 49.18% as on 31st
March, 2015 to 47.05% as on 31st March, 2016. This segment comprises of
fnancing Manufacturing sector, Industry, Trade, Services,
Infrastructure, Corporate customers, NBFC and other institutions.

In order to have greater focus on large value advances the Bank has 15
branches under Commercial Network, which are highly specialized with
better infrastructure facilities. The Bank has opened two Mid
Corporate branches during the year which is part of Commercial Network
branches. The Total Advances of these 15 branches stood at Rs.27,456
crore as on 31st March, 2016, representing 40.98% of Total Advances of
the Bank.

Large value advances were migrated from retail branches to specialized
Commercial Business Network branches in various centers having
necessary infrastructure and expertise for better monitoring and also
to provide timely service to these customers.

2.13 Personal Segment Deposits

Deposits under Personal segment grew from Rs.71,176 crore as on 31st
March, 2015 to Rs.81,866 crore as on 31st March, 2016, thus recording a
growth of Rs.10,690 crore (15.02%). Domestic Deposits grew by Rs.4,676
crore while NRI deposits grew by Rs.6,014 crore. The share of Personal
Deposits in the Aggregate Deposits of the Bank improved from 78.80% in
2014-15 to 81.48% in 2015-16.

2.14 Personal Segment Advances

The Bank continued to be active in extending fnance to Personal
Segment, mainly by way of Housing Loans, Car Loans, Education Loans and
Gold Loans.

The Personal Segment Advances increased by Rs.1,959 crore during the
Financial Year and the level stood at Rs.20,743 crore as on 31st March,
2016, compared to Rs.18,784 crore as on 31st March, 2015.

During the year, 12767 housing loans aggregating to Rs.2,266 crore were
sanctioned and the outstanding amount stood at Rs.11,046 crore as on 31st
March, 2016. Similarly, 10264 Vehicle loans aggregating to Rs.594 crore
were sanctioned during the year and the outstanding amount stood at
Rs.1,522 crore as on 31st March, 2016.

The Bank continued to support the younger generation to pursue higher
studies by extending Education Loans under IBA Model Scheme. During the
year under review, 4409 Education Loans amounting to Rs.194 crore were
sanctioned, taking the total outstanding amount to Rs.2,048 crore as at
the end of March, 2016.

Social Banking

Central Scheme to provide Interest Subsidy on Education Loans whose
parental annual income falls within the Government stipulated ceiling
has been implemented. Subsidy amount of Rs.81.27 crore pertaining to the
education loans sanctioned by the bank was received during this year
and credited to the respective accounts of borrowers. The Bank has
integrated with Vidyalakshmi Portal ? The Government of India
initiative ? for sourcing of Education Loan application through online
facility.

2.15 Treasury Operations

Integrated Treasury performs the treasury functions of the Bank,
ensuring safety, liquidity and optimizing yields / returns from
investments, besides maintaining statutory reserve requirements.

The Gross Investments of the Bank stood at Rs.36,123 crore as on 31st
March, 2016 as against Rs.24,846 crore as on 31st March, 2015 (After
reducing RIDF/ SIDBI/ RHDF deposits as per revised guidelines of RBI).

The interest discount and dividend income from domestic investment
portfolio for the year was Rs.2,502 crore as against Rs. 2,223 crore for
the previous year. The average yield on investments was at 7.81% during
the year as compared to 7.63% during the previous year ended 31st March
2015. The Bank earned a proft of Rs.247 crore from Domestic Treasury
Operations during the year compared to Rs.236 crore during the previous
year ended 31st March 2015. The total exchange earnings from Forex
Operations during the year was Rs.94 crore as against Rs.102 crore as on
31st March, 2015.

2.16 International Banking

The Bank has 77 Authorised Dealer branches across India which
undertakes Forex transactions on behalf of customers. The Bank''''s total
Forex turnover during the year from Merchant transactions was Rs.27,187
crore ($4,103 million) compared to Rs.26,083 crore ($4,173 million)
during the previous year. Inter-Bank turnover stood at Rs.11,67,714 crore
as against Rs.7,06,094 crore during the previous year.

The export fnance extended by the Bank stood at Rs.1,984 crore. The Bank
also provides cheaper loans in foreign currency under FCNR Loan scheme.
The outlay of FCNR Loans as of 31st March, 2016 stood at $306.25
million.

The Bank has entered into an agreement with Export Credit Guarantee
Corporation of India (ECGC) to cover its export credit portfolio.
Accordingly eligible accounts have been covered with ECGC under the
Whole Turnover Packing Credit Guarantee (WTPCG) and Whole Turnover Post
Shipment Guarantee (WTPSG).

Foreign Travel Card has been introduced in 7 currencies viz. USD, EURO,
GBP, CAD, AUD, SGD and SAR.

The Bank would shortly be introducing FX-Out, an online forex product,
which will enable all branches to make remittances abroad within the
overall ceilings stipulated under Liberalised Remittance Scheme (LRS),
up to a maximum amount of Rs.10 lakhs at a time, in any of the six
currencies.

The Bank has implemented the reporting of Foreign Direct Investment and
Overseas Direct Investment through online mode to RBI.

With a view to speeding up issuing of Bank Realisation Certifcate
(issued to exporters) for claiming export incentives and as part of
message exchange initiative of Directorate General of Foreign Trade
(DGFT), the Bank issues digital transmission of Bank Realisation
Certifcate (e-BRCs) through DGFT website.

To improve the operating skills of the ofcials handling forex business,
the Bank has conducted 3 in-house training programmes, one FEDAI
workshop and a series of one day workshops at various centres.
Interactive sessions for customers were also arranged at diferent
centers of the country for clarifcation of queries of customers in
connection with forex transactions.

2.17 Cross Selling

The Bank has been constantly endeavoring to meet the fnancial
requirements of its customers by making available various insurance and
investment products. It includes Life Insurance products of SBI Life
Insurance Company Ltd., General Insurance products of SBI General
Insurance Company Ltd. and Mutual fund products of SBI Mutual fund.
Bank also ofers Credit cards of SBI Cards and extends the service of
Demat Accounts and ''''Three in one'''' Accounts in association with SBI Cap
Securities Ltd. Bank has enabled the insurance coverage to about 6 lakh
customers under the Pradhan Mantri Social Security Schemes.

The Bank earned an amount of Rs.14.37 crore (net of Taxes)

from cross selling business in FY15 ?16 as against Rs.12.59 crore during
FY 14?15, thereby recording a YoY growth of 14.14%.

2.18 Asset Quality

Despite the uncertain economic environment, the Bank continued to give
special focus to improve the quality of Assets and to ensure building
up of well performing loan portfolio. The Gross NPA level of the Bank
as on 31st March, 2016 stood at Rs.3200 crore and its percentage to Gross
Advance stood at 4.78% compared to 3.37% as on 31st March, 2015. The
Net NPA level of the Bank as on 31st March, 2016 stood at Rs.1814 crore.
The percentage of Net NPA to Net Advances was 2.77% as on 31st March,
2016 compared to 2.04% as at the end of the previous year.

A well-built monitoring mechanism for recovery has been put in place by
constituting a Board level Committee, besides a High Power Task Force
Committee with Top Executives as members to review the Non-Performing
Assets and build momentum for recovery. e-auctions has been made
mandatory for assets auction valued Rs.5 lacs and above through DRTs and
sale under SARFAESI Act to help break cartelization in auctions and
allow general public to freely participate.

As a strategic initiative to liberalize the approach of NPA recovery in
Education Loan portfolio which is not fully secured and where the
feasibility of recovery through various alternative means seems bleak,
a new liberalised OTS scheme named Karunya has been introduced for the
FY 2015-16.

The Bank is continuously engaged in providing the right kind of
rehabilitation package to sick units to ensure revival of potentially
viable sick industrial units. As on 31st March, 2016, Rehabilitation/
Restructuring packages are under implementation in respect of 299 units
with a total exposure of Rs.5,526 crore, of which, 37 units are under CDR
scheme with an exposure of Rs.2,875 crore and 39 units are under BIFR
scheme with an exposure of Rs.1,249 crore.

2.19 Government Business

The Bank maintains its status as the Principal Banker to Government of
Kerala. The Bank has been authorized by Reserve Bank of India to handle
State Government Business at 145 branches in the State of Kerala and 1
branch in Tamil Nadu. 434 Post Ofces are linked with the branches, with
a total turnover of Rs.6,443 crore. More Post Ofces are coming forward to
open their accounts with the Bank as per the Government Policy for
linking of Post cOfces with the banks. The Bank is undertaking Railway
transactions in 37 branches.

194 branches of the Bank are authorized by CBDT for collection of
Direct Taxes (134 branches in Kerala and 60 branches outside Kerala)
and 148 branches are authorized by CBEC in Kerala for Indirect Taxes.

The Bank is a Banking partner of the Government of Kerala in the
e-tender/e-procurement project. e-payment facility launched by the
Government of Kerala, through the Bank for the payment of Commercial
Taxes is well received by the business community and the Bank recorded
a Turnover of Rs.13,036 crore for FY 15 ?16. e-payment of Kerala State
Excise License Fee, Rent, Vehicle Tax, Duty, collection of petty case
penalties and import fee etc are enabled through SBT online.

Other e-payment initiatives include collection of Karnataka State
Government Taxes, Transport, Commercial and Sales Tax of Tamil Nadu and
Professional Tax and Sales Tax payment of Maharashtra State Government.
Bank also initiated collection of property tax online in selected
Corporations, Municipalities and Panchayats in the state of Kerala.

Online facility for remitting fees for UPSC examinations, CUSAT and fee
collection for Calicut University is enabled through SBT online. The
Scholarship payments of Kerala State Higher Education and Technical
Education are centrally processed by the Bank and credit given to the
benefciaries account.

The Centralized Pension Processing Cell (CPPC) handles pension
payments. As on 31st March, 2016, 148517 pensioners are being serviced
through this cell.

The Bank is having 110 currency chest branches in Kerala, one in
Karnataka and eight in Tamil Nadu with a total of 119 currency chests.
In FY 15?16, the Bank earned Commission to the tune of Rs.64.71 crore by
conducting Government business.

Linkage of Sub-Treasuries

During the year, 13 Sub-Treasuries have been linked with branches
taking the total number of branches linked to Sub-Treasuries in Kerala
to 145.

New Initiative

Sukanya Samriddhi Account: Government of India introduced a new deposit
scheme called "Sukanya Samriddhi Account" exclusively for the beneft of
the girl child, which was implemented by the Bank from June 2015. An
amount of Rs.6.71crore was mobilized from 2219 accounts upto 31st March,
2016.

Sovereign Gold Bond Scheme: Subscription to Sovereign Gold Bond Scheme
of Government of India has been done through Bank and frst tranche and
second tranche issue has been completed successfully during the period.
The Bank has mobilized an amount of Rs.1.26 crore under this scheme.

Collection of VAT/Commercial Taxes

The Bank got authorization for collection of e-payment of VAT and
Commercial Taxes of NCT of Delhi during this fnancial year.

2.20 Electronic Payment Systems

Electronic Payments of the Bank are done by the Payment and Settlement
Group located in Belapur, Navi Mumbai. All the branches of the Bank
are enabled for RTGS/ GRPT/ NEFT remittances. The total number of
outward electronic remittances for the year ended 31st March, 2016 was
1.53 crore registering an increase of 51%, over the previous year.
While, the number of transactions under RTGS recorded a growth of 9%,
GRPT outward transactions and NEFT transactions increased by 40% & 57%
respectively, during the year.

3. Marketing initiatives and development of new products

The Bank continues to play its role in facilitating customer
acquisition, retention and broadening of customer base by conducting
segment centric marketing drives.

- The salary payments of employees of most of the State Government
Departments and Corporates are disbursed through the Bank. Railway
Salary Package, Police Salary Package and KSEB Salary Package were
rolled out during the year, with attractive features to cater to the
needs of the employees.

- The Bank is the preferred Bank for almost all State Government
Departments.

- The Bank has tie-up arrangement with SBICAP Securities Ltd. for
opening Demat & Trading accounts. 5469 Demat accounts were opened
during the year.

- The Bank has also entered into tie-up arrangement with SBICAP
Securities Ltd. for sourcing Demat & Trading Accounts for NRI customers
through PIS accounts.

- Atal Pension Yojana (APY), a Government of India Scheme, to encourage
the citizens of India to save small amounts during their productive
years to enable them to draw a pension during old age, was launched in
the Bank during June, 2015. The scheme is administered by Pension Fund
Regulatory and Development Authority (PFRDA). During the Financial Year
2015-16, 12987 customers have opened APY accounts.

- PFRDA has introduced the online facility (e-NPS) for opening of NPS
accounts in order to address the tax planning of Individuals &
Corporates. The Bank is designated for this facility. The customers can
open and contribute for NPS through ''''SBT online''''. During the Financial
Year 2015-16, 460 customers have opened NPS account through online.

The following schemes were rolled out during the year.

- P&SB: Certifed Pre-Owned Car Loan Scheme, Education Loan- Smart
Scholar Scheme, SBT Kaushal Skill Loan Scheme, Housing for all(Urban):
Mission 2022, Two Wheeler Loan, Special Term Loan for setting up Solar
Plants over residential building roof for KSEB employees.

- MSME: Vizhinjam Port Package, Asset Backed Loans ?CRE, Rent Plus
Scheme, Supply Chain Finance, Used Premium Car Loan, Mudra Loan, Credit
Enhancement Guarantee Scheme and Stand up India scheme.

3.1 Honouring eminent personalities/ Institutions

Bank is honouring eminent personalities/ Institutions in various felds
every year with "Prathibha Samman Award". This year the following
eminent personalities/ Institutions have been honoured with the "SBT
Prathibha Samman Award -2015":

Sl. Eminent Personalities/
No Category Institutions honoured

1 Pravasi Indian Sri. K. Muralidharan

Person of
2 National Sri. Adoor Gopalakrishnan
Eminence

Eminent person/
3 Institution from Kerala Social Security Mission
Kerala

4. Customer Service

Customer service in the Bank is accorded top priority and every
endeavour is made to improve the quality of service to the customers
and redress their grievances.

A well-defned Customer Grievances Redressal Mechanism is put in place
in the Bank. In order to collect the grievance/ feedback from the
customers, which are a source of information for the Bank, Bank has
implemented a centralized Complaint Management System (CMS) with efect
from 05th Jan, 2015.

With the implementation of the centralized CMS, all the complaints
received from various channels are entered into the CMS. Once the
complaint is punched in CMS, an acknowledgement is generated along with
the ticket number, which is immediately communicated to the customer.
Once the resolution submitted by the branch is approved by the
controller, the complaint is closed in CMS. A message is sent to the
customer conveying the details of resolution.

The complaints which are received by way of letters are now scanned and
uploaded in the CMS and available to branch on real time for redressal
there by, saving a lot of time in resolution of grievance.

Various reports on the number of complaints received / disposed /
pending in the Bank as a whole are appraised to the Customer Service
Committee of the Board. The Standing Committee on Customer Service,
constituted pursuant to the Tarapore Committee recommendations also
reviews the quality of customer service extended in the Bank at regular
intervals. The committee examine all issues that have a bearing on the
quality of customer service provided to individual depositors and
borrowers.

While these are structured meets, the customers are free to meet the
Branch Managers / other Ofcials at Administrative Ofces to discuss
their grievances. "Open House Meet" is conducted on 15th of every
month. Top functionaries at Administrative Ofces and Branch Managers
will be present in the Branch / Ofce to meet the customers between 3.00
PM to 5.00 PM without prior appointment.

As a proactive measure, apart from acknowledging each complaint
immediately on receipt, senior ofcials at Customer Service Department
endeavor to contact the complainant personally wherever contact numbers
are available. The complaints at Head Ofce / Zonal Ofce level have been
reduced substantially. This has created a very positive efect on the
customers and is widely appreciated by them.

The Bank has also provided Toll free number 1800 270 2525 to know their
account balance and also established a call centre with toll free
number 1800 425 5566 which enables the customers and general public to
seek clarifcation on Bank''''s products, service etc. Adequate publicity
through print and visual media is ensured throughout the year.

The Bank has provided various channels to receive complaints and
grievances. These include SMS, email, missed call facility and
contacting Controllers and Zonal Heads at Zonal Ofces.

Training programmes are conducted regularly for staf on customer
service and minimizing customer grievances. Further, all staf training
programme of duration exceeding 3 days will have a session dedicated
for sensitizing the staf and imparting soft skills required for
handling irate customers. The bank conducts customer satisfaction
surveys periodically to understand customers'''' perceptions of Bank''''s
service and to identify priority areas for improvement of customer
satisfaction.

As per Reserve Bank of India, Mumbai vide their letter No.
CEPD.CO.PRS.516/13.01.01/2015-16 dated 15th July, 2015, the Bank has
now appointed the Chief Customer Service Ofcer (CCSO) (Internal
Ombudsman) w.e.f., Dec 17, 2015. In the case of complaints received by
the bank, the bank shall examine the grievance as per its Internal
Grievance Redressal Mechanism and in case the Bank decides to reject a
compliant and or decides to provide only partial relief to the
complainant, it should invariably forward such cases to the CCSO for
further examination.

5. NRI Services

The NRI deposits recorded a growth of Rs.6,014 crore during the year
thereby achieving a year end level of Rs.35,622 crore. Bank continues to
maintain the Top position among Banks in the Kerala State in NRI
deposits. As on 31st Dec, 2015, the Bank enjoys a market share of
24.20% among All Scheduled Commercial Banks (ASCB) in the State of
Kerala.

The NRI deposits constitute 35% of Bank''''s Total Deposits and 44% of the
Personal Segment Deposits.

In order to provide personalised service to the NRI Customers, Bank has
12 specialized NRI branches. 3 Relationship Managers were deputed to
the Gulf countries during the year to strengthen Bank''''s international
presence, taking the total number of Relationship Managers posted
abroad to 13.

Tie-up arrangements were established with 2 Exchange Houses in UAE
during the year, taking the total number of such tie-ups to 45. The
Bank proposes to increase the total no of tie-ups to 50 during the FY
2016-17. Inward remittance to the tune of Rs.44,000 crore (approximately)
were received through these Exchange Houses during the year.

An advanced version of the speed remittance arrangement on a real time
basis, "SBT FLASH" which started with one exchange House in 2014-15 was
extended to 32 more exchange houses this year. The facility will be
extended to the remaining Exchange Houses during FY 2016-17.

Further, in order to boost the forex income, Bank is managing two
exchange houses, M/s City Exchange, UAE and M/s Global Money Exchange,
Sultanate of Oman. In addition, Bank is maintaining a Representative
Ofce in Dubai for extending better customer service, as also to
maintain close liaison with exchange houses for improving remittance
business.

''''SBT NRI Family Card'''', a prepaid card for hassle free remittance and
rechargeable through Internet Banking was introduced in FY 15-16.

In order to reach the customers at their door step from highest level,
Managing Director and Chief General Manager (RB) paid visit to UAE and
Oman in FY 15-16.

6. Lead Bank Scheme

The Bank is undertaking Lead Bank activities in three districts of
Kerala State viz. Alappuzha, Kottayam and Pathanamthitta. The District
Credit Plans for the year 2015-16 were launched in the lead districts
during March 2015.

The Lead Banks initiated several steps for successful implementation of
DBT/ DBTL/ PMJDY/ PMMY/ APY schemes. Counseling for students seeking
educational loans, Financial Literacy seminars and Entrepreneur
development programmes for diferent target groups were also arranged in
the lead districts.

6.1 Rural Self-Employment Training Institutes (RSETIs)

The Bank has sponsored 4 RSETIs in Wayanad, Pathanamthitta, Alappuzha
and Kottayam for providing skill up-gradation trainings to the rural
youth with focus on Below the Poverty line (BPL) category.

During the current year, 3312 persons have been trained in these
RSETIs. Majority of the trainees have been successful in starting
self-employment ventures. The courses for which training is imparted
include - beautician course, ornaments manufacturing, Mobile Phone
Servicing & Repairing, aluminum fabrication, tailoring, textile
ornamentation and of-site Driving programme. Computer based programmes
like Tally, DTP and hardware servicing have also been imparted.

RSETIs also imparted EDP training to benefciaries selected under Kerala
State Entrepreneurs Development Mission (KSEDM). All the four RSETIs
have been awarded "AA" grade by Ministry of Rural Development.

6.2 Financial Literacy Centre (FLCs)

Bank has 17 Financial Literacy Centres (FLCs) in Kerala. The main
objectives of the FLCs are to provide free Financial Literacy
/Education and Credit Counselling, through face to face interaction,
with individuals /groups and educating people on proactive and early
savings, diferent banking products and services available to them from
Banks and other Financial Institutions.

7. Financial Inclusion

Financial Inclusion (FI) is delivery of banking services at an
afordable cost to the vast sections of the disadvantaged and low-income
groups. The Government of India launched ''''Prime Minister''''s Jan Dhan
Yojana'''' (PMJDY) in 2014. For this, surveys of households were conducted
to identify the excluded populations and opening of PMJDY accounts for
them. The Service Areas of the branches have been further divided into
Sub Service Areas (SSAs), depending on the number of households (1000
to 15000 Households per SSA).

The Bank has entered into a MoU with M/s CSC e-Governance Services
India Ltd., which is a Special Purpose Vehicle (SPV) setup by the
Ministry of Telecommunications and IT. As per the MoU, CSC is providing
the Business Correspondents (BCs) through IT Mission of Kerala in all
the SSAs in Kerala that are not covered by the Bank Branch network. The
Business correspondents of the Bank in Kerala, are the Akshaya
Entrepreneurs who are recruited by IT Mission, Kerala.

838 SSAs have been allotted to the Bank in Kerala and 15 FI villages in
Tamil Nadu. Of which, in Kerala 511 SSAs are covered by the Bank
Branches and 327 by Akshaya Entrepreneurs. In Tamil Nadu 10 FI villages
are covered by various Bank branches and 5 FI villages are covered by
Bank BCs.

All the BCs are working in "Kiosk Banking" Platform. "Kiosk Banking" is
application software developed by Tata Consultancy Services (TCS) for
State Bank of India and shared by SBI with all Associate Banks. It is
an internet based robust and secure biometric platform for carrying out
banking operations.

During the year, the Bank has opened 60735 accounts through the BCs.
The Kiosk Banking module is interoperable ie., transactions of other
Banks'''' customers are enabled through Aadhaar Enabled Payment System
(AEPS) and also for ATM debit card transactions. Remittances to any
account with any Bank in India are also enabled in Kiosk Banking. The
Bank customers can make loan repayment in the BC counters. All the
above services are free except for the remittances made to other Banks.

The Bank has opened 30.02 lacs No-frill accounts, of which, over 90% of
the accounts were opened in Kerala. Under the Prime Minister''''s Jan
Dhan Yojana, the Bank has opened 5.17 lacs accounts.

7.1 AADHAAR seeding to customer accounts

The Bank''''s percentage of Aadhaar seeding in all SB accounts is 46.91%.
The percentage of Aadhaar seeding in PMJDY accounts is 82.93%, which is
the highest in the country. The Aadhaar seeding in Central Government
Pensioner accounts stands at 81.33%.

7.2 Direct Beneft Transfer (DBT) ?DBTL, NACH, PFMS & ECS Transactions

The Bank has a dedicated DBT Branch at Thycaud, Thiruvananthapuram for
handling all electronic payments through Aadhaar Based Payments System
(APBS), Public Financial Management System (PFMS), Electronic Clearing
System (ECS) etc. The DBT Branch is processing most of transactions
through National Payment Corporation of India (NPCI), using the
National Automated Clearing House (NACH) platform.

The Bank is the sole Banker for payment of MGNREGA wages in the state
of Kerala.

The Bank is acting as sponsor bank to all DBT schemes like Mahatma
Gandhi National Rural Employment Guarantee Act (MGNREGA), Indira Awas
Yojana (IAY), Janani Suraksha Yojana, Directorate of Public Instruction
(DPI Students'''' Scholarships), Chief Minister''''s Distress Relief Fund and
Social Security Pension (DOP) payments.

In addition to above, the Bank is sponsor bank for payments under
Rubber Board Subsidy Scheme and Cashew Board Subsidy Scheme of the
Government of Kerala.

The branch has processed 3.88 crore of DBT/DBTL transactions amounting
to Rs.3,564 crore during the fnancial year. SMS alerts are sent on credit
of subsidy under DBT/DBTL to the benefciaries. During the year

26.48 lacs of SMS alerts were sent. No SMS charges are levied to these
customers.

On 01st Jan, 2016, Ministry of Rural Development, Government of India
launched National Electronic Financial Management System (NEFMS)
piloted in Kerala with SBT as the sponsor bank. Under the new scheme,
unskilled wage component of MGNREGA is being disbursed. During the
period the Bank has processed 34.24 lacs transactions amounting to
Rs.361.52 crore.

8. Support to Weaker Sections

8.1 Assistance to Schedule Caste/Schedule Tribes (SC/ST)

The Bank continues to give due importance to extending fnancial
assistance to meet the credit requirements of the SC/ST citizens. A
Credit Cell is functioning at Head Ofce under the control of Deputy
General Manager (MSME) for monitoring fow of credit to these
communities. Advances to SC and ST borrowers under Priority sector
aggregated to Rs.4,118 crore constituting 14.82% of priority sector
lending.

8.2 Assistance to Minority Communities (MC)

The Bank continues to give due importance in extending fnancial
assistance to meet the credit requirements of the Minority Community
borrowers. Advances to Minority Community borrowers under Priority
sector stood at Rs.11,632 crore as on 31st March, 2016, as against
Rs.10,718 crore as on 31st March, 2015, constituting 41.85% of the Bank''''s
priority sector lending.

8.3 Lending to Women

The Bank actively supported lending to women entrepreneurs. The total
lending to women entrepreneurs stood at Rs.7,406 crore covering 572368
borrowers. The exposure constitutes 10.32% of ANBC.

9. Information Technology ? Technology Up-Gradation and IT Initiatives

The Core Banking System has provided the Bank with state-of-the-art
software that has greatly enhanced the efciency of customer services,
accelerated data processing capabilities, strengthened MIS, enabled
efcient Asset Liability Management, reduced transaction cost and ofered
alternate channels to customers for transactions.

9.1 Alternate Delivery Channels

The CBS has facilitated efective implementation of Alternate Channels
viz., Automated Teller Machines

(ATMs), Cash Depositing Machine (CDM), Cash Recyclers, Internet
Banking, Mobile Banking, Green Channel Counters (GCC), Point of Sales
terminals (POS), Pre-paid cards and Self Service Kiosks (SSK). The
Internet Banking facility is recognised to be the best among its class.

9.2 ATMs

The Bank has a network of 1707 ATMs as on 31st March, 2016, out of
which, 252 are Cash Recyclers. Out of the 1707 ATMs, 1345 ATMs are in
Kerala & 362 ATMs are in other states.

The Bank''''s ATM cum Debit cards are accepted in all outlets having
Master Card /Visa/ RuPay card logo. Several facilities such as Visa
Money Transfer (VMT), SBI Credit Card payment, SBI Life Premium
payment, Mobile recharge, Mobile Banking registration and Cheque Book
order have also been enabled in the ATMs.

The Bank has a card base of 1.14 crore as on 31st March, 2016, which
translates into an increase of 15.34% over the card base as at the end
of the previous year.

9.3 Internet Banking

The Bank''''s highly secure Internet Banking platform supported by
encryption ofers utmost security to Internet Banking customers against
phishing / hacking threats and provides Intra-Bank / Inter-Bank funds
transfer facility up to a limit of Rs.500 crore per transaction for
corporate customers.

1.71 lacs new registrations were activated during the current year,
i.e, an increase of 19.62% over the registrations as at the end of
previous year. Total number of Internet Banking registrations as on
31st March, 2016 is 1042633, out of which, the number of Retail
customers is 939326 and Corporate clients is 103307. The average total
transaction per branch stood at 19991. Bank could channelize 2.33 crore
transactions during the FY 2015- 16, through Internet Banking as
against 1.71 crore transactions during the FY 2014-15. The average INB
transactions per day stood at 63905 during the FY 2015- 16 as against
47017 during the FY 2014-15.

Bank earned a commission of Rs.11.30 crore through internet banking
transactions during the fnancial year 2015-16 as against Rs.8.44 crore
during 2014-15.

Internet Banking Projects:

SBT is the pioneer in various e-banking initiatives. The Bank is
associated with the Government of Kerala as well as with Central
Government & other State Governments for various e-governance
initiatives. The major initiatives are given below:

- Bank customers can now avail the facility to pay KSEB bills without
any commission.

- Site-to-Site integration with Kerala State Electricity Board portal
for collecting electricity bill online for bank customers has been done
during the frst week of February 2016.

- Bank has rolled out a powerful fee collection interface State Bank
Collect in our Internet banking portal www.sbtonline.in. Many
educational institutions, charitable trusts, Government organisations
are presently availing this facility.

- e-payment of Tamil Nadu and Delhi commercial tax is enabled for Bank
customers.

- Bank has a strong online shopping platform with the support of
thirteen aggregators ofering merchant transactions with nearly 8000
websites.

- SBI General Insurance Co Ltd premium payment option and SBI Life
Insurance Co Ltd payment of renewal premium is enabled.

- Online SB account opening, online nomination registration, Online OD
account opening, ATM PIN Generation, Pre-Paid Card registration and
top-up are enabled through Internet Banking.

9.4 Mobile Banking

State Bank Freedom: New version of Mobile Banking Application State
Bank Freedom is made available for all kinds of handsets.

Mobile Banking provides customers with another safe, secure, fast and
convenient channel for banking transactions. The services provided
include enquiry services, funds transfer, IMPS, Demat account services,
bill payment, mobile top-up, DTH recharge, M-commerce etc. The daily
limit for MBS transaction is Rs.50,000 for aggregate of funds transfer &
transactions involving purchase of goods & services, within an overall
calendar month limit of Rs.2,50,000. Services like Mobile Top up, DTH
recharge and IMPS (Inter Bank Mobile Payment System) also called as
Immediate Payment System makes the transaction simple and faster and
are available 24X7 even on holidays.

Besides existing facilities, Open and operate FD/RD facility, Feedback
and Refer a Friend options are included in new version. IMPS is made
live in INET (Internet) Channel for better availability.

State Bank Anywhere Associate Banks: State Bank Anywhere Associate
Banks is a mobile application to operate Internet Banking. Presently,
the application is available for Android and Apple iPhone users.
Customer can use their active Retail - Internet Banking credentials to
login to the application. This application does not need any separate
registration.

SBT Quick: An SMS/Missed Call based service enabled with following
features. Customers can register/deregister this service by sending an
SMS "REGSBT Account Number / DREG Account Number" to
09223488888 from the mobile number recorded in CIF.

- Balance Enquiry: Give a missed call or send SMS ''''bal'''' to 09223766666
to receive the account balance as SMS.

- Mini Statement: Give a missed call or send SMS ''''bal'''' to 09223866666
to receive the account statement as SMS.

- ATM card blocking: SMS ''''block last 4 digits of ATM card
number'''' to 567676.

9.5 Other Software Initiatives and Value Added Applications

Following are the major in-house software developments.

- Web portal for Depositors Education Awareness Fund Scheme (DEAF) -
DEAF Scheme is initiated by RBI for custody of unclaimed amount. This
application is developed to provide an interface to report unclaimed
balances with the branches.

- NREGA - EFMS Payment System - Payment System for NREGA.

- Public Interface to check status for MoneyTrans remittance -
currently only Exchange Company can check the status of the amount
remitted via Money Trans this interface will be available in public
website so that customers can directly check the status.

- Virtual Fee Counter - A service portal for collection of fee through
ECS debit.

- Vidyalakshmi portal - Vidyalakshmi is a portal for eligible students
seeking Education Loan. The portal has been developed and maintained by
NSDL e-Governance Infrastructure Limited. As on date, 28 Banks have
integrated their systems with Vidyalakshmi Portal. Education Loan
schemes of these Banks are activated on Vidyalakshmi LIVE portal. Our
Bank was enabled on 30/11/2015 in the NSDL Vidyalakshmi Portal and
students can now apply for Education Loan Schemes ofered by our Bank
though Vidyalakshmi Portal.

- Home Listing Builders'''' Interface- A module for Builders to view and
respond to customer''''s queries.

- Online Mudra Shishu application form: New Online portal for customers
to apply for Mudra Shishu loan. Provision has been given to Applicant
for tracking the status of application

Social Media

The Bank is having dedicated page/channel in Facebook, Twitter and
YouTube with special emphasis to embrace the new generation customers.
All major products are now promoted through social media also. Customer
feedback/ information exchanges are also obtained through this media.

10. Business Process Re-Engineering (BPR) Initiatives

With the objective of improving performance and enhancing customer
service to global standards, the Bank has embarked on implementation of
various BPR initiatives by leveraging on its core competencies, state
of the art technology and redesigned operating architecture:

- RASMECCCs for appraisal and sanction of loans in PSB Retail and Small
& Medium Enterprises segments are functioning at 10 major centres. This
has enabled the Bank to reduce the response time in these centres,
thereby improving the level of customer satisfaction.

- Stressed Assets Resolution Centres (SARC) are functioning at seven
centres for more focused attention on recovery of stressed assets and
to upgrade the quality of assets.

- Trade Finance Central Processing Centres (TFCPC), aimed at ensuring
efcient and uniform handling of transactions related to inland and
foreign trade and Bank Guarantees by experienced personnel are
functioning at Ernakulam and Chennai linking 70 branches.

- Multi Product Sales Teams (MPST) are functioning at 11 centres. MPSTs
are supporting RASMECCC linked branches in marketing specifc products.

- Currency Administration Cells (CAC) are functioning

at 24 centres linking 362 branches for better cash management, out of
which, 2 CACs were set up this year. All the CACs have been merged with
parent branch for efective monitoring and follow up.

- A Liability Central Processing Centre (LCPC) is functioning at
Thiruvananthapuram to provide back ofce support to branches, in opening
and servicing of liability accounts such as Savings Bank and Current
Deposit Accounts. The Centre provides pre-generated Welcome Kits to the
linked branches consisting of ATM cards and cheque books. This
facilitates the customers to operate the accounts immediately after
opening the account. Issue of Cheque Books has been centralized and
issued through the centre.

- Pension processing is centralized at Centralised Pension Processing
Centre (CPPC) functioning at Thiruvananthapuram. All pension paying
branches are linked to the centre. The Centre ensures accuracy in
pension calculations, timely disbursement of pension and quick
settlement of transactions.

- A Centralised Clearing Processing Centre (CCPC) is functioning at
Thiruvananthapuram for processing of both inward and outward clearing
cheques. Branches in Kerala are linked to the centre. The Bank has
migrated fully to CTS scenario. All branches are processing cheques
through the linked regional grids of NPCI.

- "SBT CARE" an in-house customer care centre of the Bank at
Thiruvananthapuram, manned by the Bank''''s own staf was setup during the
year, in order to provide better service to the Banks'''' customers and to
the general public by way of information on product and services,
support and guidance on banking matters, redressal of issues faced by
customers etc., to supplement the existing Contact Centre at Bengaluru.

- Door step Banking is functioning at Thiruvananthapuram, Ernakulam and
Chennai. This facilitates cash pick up to corporate & leading business
establishments from their door steps.

- Dedicated ATM Cash Replenishment Van for replenishing cash in ATMs
are functioning at Thiruvananthapuram, Kollam, Kottayam, Ernakulam,
Palakkad and Kozhikode centres.

- Loan Origination Software (LOS) for processing PSB Retail Loan
applications through a web based utility is enabled in all branches
during the year. LOS for Agri and SME loans has also been introduced
during the year.

- Loan Lifecycle Management System (LLMS) for processing loans of above
Rs.5 crore was rolled out in March, 2016. The objective of the LLMS
application is to cover all the activities involved in end-to-end
credit process with focus on high value credit to track the health of
advances at all levels and to make available the required alerts on the
portfolios to all functionaries across the Bank.

The above major BPR initiatives implemented by the Bank are
contributing to the improvement of overall efciency, service delivery,
customers'''' convenience and business growth.

11. Internal Control Systems & Supervision

11.1 Integrated Risk Management

Bank''''s risk management philosophy is based on clear and timely
identifcation of various types of risks, accurate risk assessment and
measurement procedures and continuous monitoring. Integrated Risk
Management facilitates the Bank to have a holistic view of the risk
management. The risk from the major business lines of the Bank is
identifed and monitored. The distribution of possible losses is mapped
mainly under Credit, Market, Operational and Liquidity risks. The range
and distribution of losses/possible losses are quantifed on the basis
of stressed scenario analysis and capital requirement for the Bank is
assessed through Internal Capital Adequacy Assessment Process (ICAAP)
exercise. The risk capital assessed through ICAAP is also subjected to
periodical review through back testing.

Modular structure under Integrated Risk Management has various
divisions focused on management of specifc risks, viz. Asset Liability,
Market Risk, Credit Risk, Operational Risk and Information Systems
Security. The risk management architecture of the Bank consists of the
Board of Directors at the top having overall responsibility to
implement Risk Management Systems in the Bank. To this efect, Risk
Management Committee of the Board supervises the overall risk
management functions of the Bank. In line with the modular structure of
Integrated Risk Management, there are various risk management
committees to have focused attention on various risks, viz. Asset
Liability Management Committee (ALCO), Market Risk Management Committee
(MRMC), Credit Risk Management Committee (CRMC), and Operational Risk
Management Committee (ORMC). The General Manager (Risk Management) is
designated as the Chief Risk Ofcer (CRO). The Integrated Risk
Management Department headed by Deputy General Manager is responsible
for the overall daily management of risks at macro level. For
management of various risks, Bank has put in place various policies and
procedures.

For Credit Risk management, the Bank has a well- structured credit
review process with due emphasis on assessing the risk profle of the
counter party through internal rating mechanism. These ratings are
reviewed by independent risk rater and rating validation committees.
The Bank has also introduced validation of credit proposals by Chief
Risk Ofcer of the Bank from risk angle. Migration of internal rating
and external rating of borrowers are reviewed annually, besides
quarterly review of internal rating for an exposure of Rs.5 crore and
above. External rating is made mandatory for borrowers with specifc
exposure limit. Bank has also put in place various exposure limits ?
for single borrower, group of borrowers, specifc sectors, industries
etc. ? as per prudential exposure norms and as stipulated under Bank''''s
internal policies.

In order to mitigate the risk due to currency induced credit risk, the
Bank had implemented RBI guidelines to capture the un-hedged foreign
currency exposure of borrower entities. With a view to ensuring efcient
use of capital, the concept of Return on Capital Charge (ROCC) has been
implemented. Bank has initiated steps for introducing Risk Adjusted
Return on Capital (RAROC) of borrower entities for risk based pricing.
Bank takes up regular reviews of its various industry portfolios to
review industry outlook and initiate proactive measures suitably.
Credit Risk Assessment Systems followed by the Bank are reviewed
periodically to incorporate market changes. For retail loans, Bank uses
a risk scoring model. The Bank is presently following Standardized
Approach for Credit Risk.

The Bank is estimating capital charges for Operational Risk under Basic
Indicator Approach. Other risk prone operational areas of the Bank''''s
business are monitored and proactive actions for improvement are
initiated in consultation with other departments like Inspection
department, Systems & Procedures department, Frauds Prevention
Monitoring & Recovery department etc.

Market Risk is managed through adherence to various policies, in the
conduct of the investment and trading activities along with compliance
to various risk limits like position limits, stop loss limits, Value at
Risk (VaR), Management Action Trigger (MAT) and Cut Loss Triggers
(CLT), etc through constant monitoring of the risk positions. The
policies are reviewed periodically keeping in view regulatory changes,
business requirements and market developments. Presently the Bank has
adopted Standardized Duration approach for Market risk.

The Bank is closely monitoring the roadmap for migration to advanced
approaches under Basel norms. In this direction, Integrated Risk
Management Department has been conducting various programmes to
disseminate the risk management knowledge to the operating units. This
has resulted in better awareness among the operating staf about the
various risks, importance of accurate data for computation of capital
charge, need for capital conservation, and in general better risk
management orientation.

11.2 Asset Liability Management (ALM)

Asset Liability Management system has been implemented in the Bank,
since April 1, 1999, as per the Reserve Bank of India guidelines on ALM
and Liquidity Risk Management. As per the Bank''''s ALM Policy, the Asset
Liability Management Committee (ALCO) is authorized to evolve
appropriate systems and procedures for ongoing identifcation and
analysis of liquidity and market risks and to prescribe parameters for
efcient management of these risks. The ALCO headed by Managing Director
meets regularly to review and monitor the same.

Liquidity and interest rate risks are identifed, measured and monitored
by the ALCO through the prescribed statements, viz. Statement of
Structural Liquidity, Statement of Short Term Dynamic Liquidity,
Statement of Interest Rate Risk Sensitivity (Traditional and Duration
Gap methods), Stress Testing on Liquidity and Earnings, Liquidity
Coverage Ratio, other Basel III Liquidity Returns etc. ALCO discusses
these statements in detail and takes corrective actions whenever
necessary. As per the Bank''''s ALM Policy, a Contingency Funding Plan is
reviewed on a quarterly basis. Bank''''s Benchmark Lending Rates (Base
Rate and BPLR) and Card Rates for Deposits are discussed and decided by
the ALCO. The ALCO also discusses the economic developments and
monitors the changes in the market on an ongoing basis.

11.3 Information Security

Information Systems Security Cell (ISSC) monitors and supervises the
Information Systems with the goal to maintain its confdentiality,
integrity and availability at a level appropriate to Bank''''s targeted
Business. Information Security Policy of the Bank is the guiding
principle for the functioning of the ISSC. The information security
initiatives and analysis are discussed and reviewed by the Information
Security Committee (IS Committee).

All the servers and public facing URLs are integrated with State
Bank-SOC. Real time monitoring and generation of log and audit trail
are taking place. Vulnerability Assessment and Penetration Testing
exercise is being carried out for mitigation, complying with the
periodicity stipulated by the Reserve Bank of India.

Various initiatives to bring awareness among staf/ customers regarding
information security are also undertaken.

Progress in implementation of Gopalakrishna Committee recommendations:

IS Committee reviews the progress in implementing the recommendations
of the Working Group on Information Security, Electronic Banking,
Technology Risk Management and Cyber Frauds under the Chairmanship of
Shri G.Gopalakrishna. At present, 182 of the 201 applicable
recommendations are implemented in the Bank where as it was 146 on 31st
March, 2015. The progress is also reviewed in the periodic CISO
Conference of State Bank Group Entities and Chief Risk Ofcers Meet of
Associate Banks of SBI.

11.4 Credit Policy and Procedure Department

In order to have a centralized approach and proper coordination among
various development departments, Credit Policy and Procedure Department
(CPPD) has been set up in the Bank. The department is vested with the
responsibility of formulation and review of various credit related
policies and procedures of the Bank and also to keep track of RBI/SBI
directives in the matter.

The department came out with Loan Policy, Forensic Audit Policy, Hand
book of Pre-sanction and Post sanction ? Due diligence in advances and
Credit manual apart from contributing signifcantly towards
strengthening systems and procedures by providing clarifcations on
various credit related issues and guidance to feld level functionaries.

11.5 Inspection and Supervision

Internal Audit/ inspection is an independent appraisal of operations of
various Systems and Controls within an organization to determine
whether acceptable policies and procedures designed to add value and
improve an organization''''s objectives are followed and resources are
used efciently and economically. Inspection and Audit Department at
Head Ofce monitors various risk parameters by conducting regular
Internal Inspection, Information System Audit, Compliance Audit of
Branches and System Audit of various Head Ofce Departments and Modules.

Apart from the above, the Bank has put in place an efective
institutional mechanism for Risk Based Supervision through RBS Cell in
the Inspection Department. As envisaged by the Regulator, the Bank has
adopted Risk Focused Internal Audit (RFIA) under RBS since 1st April,
2003. Based on the guidelines on Internal Audit issued by Government of
India, Bank''''s Inspection & Audit Policy has been suitably modifed. The
Bank has also incorporated the RBI guidelines on Information System
Audit in the IS Audit Policy.

Subsequent to migration to Core Banking, and constant up-gradation in
technology, corresponding changes have been brought in, especially in
the area of Audit Rating, Audit Report Formats, grouping of branches,
sampling norms and periodicity of inspection. Various user friendly
formats have been introduced for RFIA, FEMA Audit, IS Audit, Concurrent
Audit etc. The Bank has introduced Online Audit Report Processing
System (OARPS) for RFIA and Credit Audit for automated reporting and
processing.

In order to instill knowledge and to improve the quality of various
reports, the Bank is imparting training for the existing and newly
joined inspecting ofcials in the area of RFIA, IS Audit and Concurrent
Audit. Further, to improve the adherence to the systems and procedures,
the Bank has introduced Dynamic Rating System in terms of which penalty
of negative marking is awarded for false compliance submitted by the
branches. The auditee units are grouped into diferent categories and
diferent scoring models are used for each group based on the risk
assessment.

11.6 Credit Audit

Credit Audit is done to ensure that the Bank''''s laid down policies in
the area of credit appraisal, sanction and loan administration are
complied with and an independent review of credit risk associated with
the borrowal accounts is made. The marks awarded by the credit auditors
are normalized by the internal auditors under Credit Risk Management to
arrive overall risk rating of the branch.

The Bank conducted Credit Audit of 1229 accounts (having limits of Rs.2
crore and above, both fund based and non-fund based) with total
exposure of Rs.49,077 crore, covering the pre-sanction, post sanction
compliance and follow up aspects.

Monthly reports of performance are regularly submitted to the Audit
Committee of the Executives for information and the quarterly review
reports are being submitted to the Audit Committee of the Board.

11.7 Inter-Ofce Reconciliation

Bank has completed reconciliation of Inter Branch accounts for the
period from 01st Apr, 2015 to 30th Sep, 2015. Bank achieved 100%
reconciliation of debit and credit entries for this period, which is in
conformity with RBI stipulations.

11.8 Compliance

The Bank ensures timely compliance in submission of various statutory
and regulatory returns and also prompt replies to references received
from the Government of India / Reserve Bank of India and other
institutions viz., State Bank of India, Indian Banks Association etc.
The Compliance Ofcer monitors the Compliance function efectively on an
on-going basis to ensure that regulatory guidelines issued by RBI, GOI
& other regulatory authorities are duly captured in the Bank''''s policies
and laid down instructions and that they are complied with at all
levels. The Compliance Ofcer further apprises the Audit Committee of
the Board and the Group Compliance Ofcer of material breaches.

Realising paramount importance of the Compliance Function in the
Corporate Governance, steps have been initiated for re-engineering of
the compliance function and the Bank is in the process of roll out of
the same.

The Compliance Department also provides secretarial services to the
Central Public Information Ofcer, who deals with requests under the
Right to information Act, 2005.

Under the Right to Information Act 2005, the Bank has handled 749 RTI
applications till 31st March, 2016. The Deputy General Manager
(Compliance) is also designated as one of the Appellate Authorities
under the above Act and the Bank has handled 105 appeals till 31st
March, 2016.

11.9 KYC Norms & AML/ CFT Measures

The Bank has put in place a Board approved revised policy and
procedural guidelines on Know Your Customer (KYC)/ Anti Money
Laundering (AML)/Combating of Financing of Terrorism (CFT) measures in
line with the master policy and subsequent guidelines issued by Reserve
Bank of India. A dedicated KYC-AML Cell is functioning in the Head Ofce
to oversee the compliance of KYC/AML/CFT guidelines.

In terms of the policy, the branches are to obtain Customer
identifcation data including photograph, identity proof and address
proof, while opening the new accounts. Customer acceptance and
Customer identifcation are the most important pre-requisites in the
opening of new acc

CIN: U67190WB2003PTC096617. Trading in Commodities is done through our Group Company Dynamic Commodities Pvt. Ltd. The company is also engaged in Proprietory Trading apart from Client Business.
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Disclaimer: There is no guarantee of profits or no exceptions from losses. The investment advice provided are solely the personal views of the research team. You are advised to rely on your own judgment while making investment / Trading decisions. Past performance is not an indicator of future returns. Investment is subject to market risks. You should read and understand the Risk Disclosure Documents before trading/Investing.

Disclosure: We, Dynamic Equities Private Limited are also engaged in Proprietory Trading apart from Client Business. In case of any complaints/grievances, clients may write to us at compliance@dynamiclevels.com

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