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History:

State Bank of India (SBI) is an Indian multinational, public sector banking and financial services company.
It is a government-owned corporation with its headquarters in Mumbai, Maharashtra. On 1st April,
2017, State Bank of India, which is India's largest Bank merged with five of its Associate Banks (State
Bank of Bikaner & Jaipur, State Bank of Hyderabad, State Bank of Mysore, State Bank of Patiala and
State Bank of Travancore) and Bharatiya Mahila Bank with itself. This is the first ever large scale
consolidation in the Indian Banking Industry. With the merger, State Bank of India will enter the league
of top 50 global banks with a balance sheet size of ₹33 trillion, 278,000 employees, 420 million
customers, and more than 24,000 branches and 59,000 ATMs. SBI's market share will increase to 22
percent from 17 per cent. It has 198 offices in 37 countries; 301 correspondents in 72 countries. The
company is ranked 232nd on the Fortune Global 500 list of the world's biggest corporations as of 2016.

The bank traces its ancestry to British India, through the Imperial Bank of India, to the founding, in 1806,
of the Bank of Calcutta, making it the oldest commercial bank in the Indian subcontinent. Bank of
Madras merged into the other two "presidency banks" in British India, Bank of Calcutta and Bank of
Bombay, to form the Imperial Bank of India, which in turn became the State Bank of India in 1955.
Government of India owned the Imperial Bank of India in 1955, with Reserve Bank of India (India's
Central Bank) taking a 60% stake, and renamed it the State Bank of India. In 2008, the government took
over the stake held by the Reserve Bank of India.

State Bank of India has 20% market share in deposits and loans among Indian commercial banks.
As of 2014–15, the bank had 191 overseas offices spread over 36 countries having the largest
presence in foreign markets among Indian banks. It has branches in Singapore,
Moscow, Colombo, Dhaka, Frankfurt, Hong Kong, Tehran, Johannesburg, London, Los Angeles,
Male in the Maldives, Muscat, Dubai, New York, Osaka, Sydney, and Tokyo. It has offshore
banking units in the Bahamas and Bahrain, and representative offices in Myanmar, Bhutan
and Cape Town
Apart from its five associate banks, SBI also has the following non-banking subsidiaries:

 SBI Capital Markets Ltd


 SBI Funds Management Pvt Ltd
 SBI Factors & Commercial Services Pvt Ltd
 SBI Cards & Payments Services Pvt. Ltd. (SBICPSL)
 SBI DFHI Ltd
 SBI Life Insurance Company Limited
 SBI General Insurance
In March 2001, SBI (with 74% of the total capital), joined with BNP Paribas (with 26% of the
remaining capital), to form a joint venture life insurance company named SBI Life Insurance
company Ltd. In 2004, SBI DFHI (Discount and Finance House of India) was founded with its
headquarters in Mumbai
SBI NPA Ratios:
NPA Ratios : Mar’17 Mar’16
(in Crores) (in Crores)
i) Gross NPA 112,342.99 98,172.80
ii) Net NPA 58,277.38 55,807.02
i) % of Gross NPA 6.90 6.50
ii) % of Net NPA 3.71 3.81
Return on Assets % 0.41 0.46

Dealing with NPAs involves two sets of policies

1. Relating to existing NPAs

2. To reduce fresh NPA generation.

As far as old NPAs are concerned, a bank can remove it on its own or sell the assets to
AMCs to clean up its balance sheet. For preventing fresh NPAs, the bank itself should adopt
proper policies.

Causes for Non-Performing Assets:

A strong banking sector is important for a flourishing economy. The failure of the banking
sector may have an adverse impact on other sectors. The Indian banking system, which was
operating in a closed economy, now faces the challenges of an open economy. On one hand
a protected environment ensured that banks never needed to develop sophisticated
treasury operations and Asset Liability Management skills. On the other hand a combination
of directed lending and social banking relegated profitability and competitiveness to the
background. The net result was unsustainable NPAs and consequently a higher effective cost
of banking services. One of the main causes of NPAs into banking sector is the directed
loans system under which commercial banks are required a prescribed percentage of their
credit to priority sectors. As of today nearly 7 percent of Gross NPAs are locked up in 'hard-
core' doubtful and loss assets, accumulated over the years.

There are several reasons for an account becoming NPA. They are:

Internal factors:

1. Funds borrowed for a particular purpose but not use for the said purpose.

2. Project not completed in time.

3. Poor recovery of receivables.

4. Excess capacities created on non-economic costs.


5. Inability of the corporate to raise capital through the issue of equity or other debt
instrument from capital markets.

6. Business failures.

7. Diversion of funds for expansion, modernization, setting up new projects, helping or


promoting sister concerns.

8. Willful defaults, siphoning of funds, fraud, disputes, management disputes, mis-


appropriation etc.,

9. Deficiencies on the part of the banks viz. in credit appraisal, monitoring and follow-ups,
delay in settlement of payments, subsidiaries by government bodies etc.,

External factors:

1. Sluggish legal system

2. Scarcity of raw material, power and other resources.

3. Industrial recession.

4. Shortage of raw material, raw material, input price escalation, power shortage, industrial
recession, excess capacity, natural calamities like floods, accidents.

5. Failures, non payment, over dues in other countries, recession in other countries,
externalization problems, adverse exchange rates etc.

6. Government policies like excise duty changes, Import duty changes etc.,

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