L4 Provisions, Contingent Liabilities and Contingent
Assets:
14.1 I n conformity with AS 29, "Provisions, Contingent Liabilities and Contingent Assets", issued by the Institute of Chartered Accountants of India, the Bank recognises provisions only when it has a present obligation because of a past event, and would result in a probable outflow of resources embodying economic benefits will be required to settle the obligation, and when a reliable estimate of the amount of the obligation can be made.
14.2 No provision is recognised for:
i. any possible obligation that arises from past events and the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Bank; or
ii. any present obligation that arises from past events but is not recognised because:
a. it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or
b. a reliable estimate of the amount of obligation cannot be made.
Such obligations are recorded as Contingent Liabilities. These are assessed at regular intervals and only that part of the obligation for which an outflow of resources embodying economic benefits is probable, is provided for, except in the extremely rare circumstances where no reliable estimate can be made.
14.3 Provision for reward points in relation to the "EnterpriseWide Loyalty Programme" of the Bank is being provided for on actuarial estimates.
14.4 Provisions for onerous contracts are recognised when the expected benefits to be derived by the Bank from a contract are lower than the unavoidable costs of meeting the future obligations under the contract. The provision is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. Before a provision is established, the Bank recognises any impairment loss on the assets associated with that contract.
14.5 Contingent Assets are not recognised in the financial statements.
15 Bullion Transactions:
The Bank imports bullion including precious metal bars on a consignment basis for selling to its customers. The imports are typically on a back-to-back basis and are priced to the customer based on price quoted by the supplier. The Bank earns a fee on such bullion transactions. The fee is classified under commission income. The Bank also accepts deposits and lends gold, which is treated as deposits/ advances as the case may be with the interest paid/ received classified as interest expense/ income. Gold Deposits, Metal Loan Advances and closing Gold Balances are valued at available Market Rate as on the date of Balance Sheet.
16 Special Reserves:
Revenue and other Reserve include Special Reserve created under Section 36(i)(viii) of the Income Tax Act, 1961. The Board of Directors of the Bank has passed a resolution approving creation of the reserve and confirming that it has no intention to make withdrawal from the Special Reserve.
17 Share Issue Expenses:
Share issue expenses are charged to the Share Premium Account.
18 Cash and Cash equivalents:
Cash and cash equivalents include Cash and Balances with RBI, Balances with Banks and money at call and short notice.
RBI vide Circular No. DBR.No.BP.BC.83/21.06.201/2015-16 dated 1st March 2016, has given discretion to banks to consider Revaluation Reserve, Foreign Currency Translation Reserve and Deferred Tax Asset for purposes of computation of Capital Adequacy as CET- I capital ratio. The Bank has exercised the option in the above computation.
$ During the financial year 2022-2023, the Bank has allotted 400 equity shares of H1/- each for cash at a premium of H158/-per equity share out of 7,93,630 shares (issued as a part of Right Issue-2008) allotment of which was held in abeyance for resolution of title dispute. Out of the total subscription of H63,600/- received, H400/- was transferred to Share Capital Account and H63,200/- to Share Premium Account. As on 31st March 2024 allotment of 7,93,230 shares is held in abeyance.
- Bank's LCR comes to 129.02% based on daily average position of three months (Q4 FY2024) and remained above the minimum regulatory requirement of 100%. Average HQLA held during the quarter was H13,13,148 Crore, with 96.50% being Level 1 assets. Level 2A and Level 2B assets constitute 2.84% and 0.66% of total HQLA, respectively. Government Securities constituted 94.34% of Total Level 1 Assets. During the quarter, the weighted average HQLA level got reduced by H94,877 Crore primarily on account of decline in excess SLR balance. Further, the weighted average net cash outflows position remained almost at the same level with a negligible fall by H4,104 Crore during the quarter. Derivative exposures are considered insignificant due to almost matching inflows and outflows position. During the quarter, LCR for USD (significant Foreign Currency constituting more than 5% of the Balance Sheet of the Bank) was at 413.69%, on an average.
- Liquidity Management in the Bank is driven by the ALM Policy of the Bank and regulatory prescriptions. The Domestic and International Treasuries are apprising the liquidity position to the Asset Liability Management Committee (ALCO) of the Bank. The ALCO has been empowered by the Bank's Board to formulate the Bank's funding strategies to ensure that the funding sources are well diversified and is consistent with the operational requirements of the Bank. All the major decisions of ALCO are being reported to the Bank's Board subsequently. Besides daily/monthly LCR reporting, Bank also prepares daily Structural Liquidity statements to assess the liquidity needs of the Bank on an ongoing basis.
- The Bank has been maintaining HQLA mainly in the form of SLR investments over and above the mandatory requirements. Retail deposits constitute major portion of total funding sources, which are well diversified. Management is of the view that the Bank has sufficient liquidity cover to meet its likely future commitments.
ii. Consolidated LCR
- The RBI through a supplementary guideline issued on March 31, 2015 had stipulated the implementation of LCR at a consolidated level from January 1, 2016 and accordingly, LCR has been computed at Group level. The entities covered in the Group LCR are SBI and seven Overseas Banking Subsidiaries (OBS) - Commercial Indo Bank LLC, Moscow, Nepal SBI Bank Ltd., State Bank of India (California), SBI Canada Bank, State Bank of India (Mauritius) Ltd, PT Bank SBI Indonesia and State Bank of India (UK) Ltd. and one Non Banking Subsidiary (NBS) - SBI Cards and Payment Services Ltd.
- SBI Group LCR comes to 130.62% as on 31st March 2024 based on average of three months January, February and March 2024, which is above the minimum regulatory requirement of 100%. The Group has been maintaining HQLA mainly in the form of SLR investments over and above the mandatory requirements. Retail deposits constitute major portion of total funding sources, and such funding sources are well diversified. Management is of the view that the Bank has sufficient liquidity cover to meet its likely future short-term requirements.
Bank's NSFR comes to 113.87% as at the end of Q4 FY2024 and is above the minimum regulatory requirement of 100% stipulated in the RBI guidelines effective from 01st October 2021. As on 31st March 2024, the position of Available Stable Funding (ASF) stood at H43,75,305 Crore and Required Stable Funding (RSF) stood at H38,42,230 Crore. There was an increase in the values of total ASF and increase in the values of total RSF over 31st December 2023. ASF is defined as the portion of capital and liabilities expected to be reliable over the time horizon considered for the NSFR. RSF of a specific institution is a function of the liquidity characteristics and residual maturities of the various assets held by that institution as well as its Off-Balance Sheet (OBS) exposures.
Liquidity Management in the Bank is driven by the Bank's ALM Policy and regulatory guidelines. The Domestic and International Treasuries are reporting to the Asset Liability Management Committee (ALCO). ALCO has been empowered by the Bank's Board to formulate the funding strategies to ensure that the funding sources are well diversified and is consistent with the operational requirements of the Bank. All major decisions of ALCO are being reported to the Bank's Board periodically.
The Bank has been maintaining HQLA mainly in the form of SLR investments over and above the mandatory requirements. Retail deposits constitute major portion of total funding sources, which are well diversified. Management is of the view that the Bank has got sufficient liquidity to meet its immediate / likely future requirements.
ii) Consolidated Net Stable Funding Ratio
The RBI guidelines stipulated the implementation of NSFR at a consolidated level from December 2021 quarter and accordingly, NSFR has been computed at Group level.
The entities covered in the Group NSFR are SBI and seven Overseas Banking Subsidiaries. Commercial Indo Bank LLC, Moscow, Nepal SBI Bank Ltd., State Bank of India (California), SBI Canada Bank, State Bank of India (Mauritius) Ltd, PT Bank SBI Indonesia and State Bank of India (UK) Ltd.
SBI Group NSFR comes to 114.11% as on 31st March 2024 which is above the minimum regulatory requirement of 100%.
Available stable funding (ASF) is defined as the portion of capital and liabilities expected to be reliable over the time horizon considered by the NSFR, which extends to one year. The Required stable funding (RSF) of a specific group is a function of the liquidity characteristics and residual maturities of the various assets held by that group as well as those of its Off-Balance Sheet (OBS) exposures.
i. Securities of a face value of H1,97,965.23 Crore (Previous Year H2,19,371.58 Crore) are kept as margin with Clearing Corporation of India Limited (CCIL/NSCCL/MCX/NSEIL/BSE) towards Securities Settlement.
ii. On 25th July 2023, the Bank has incorporated a wholly owned subsidiary named SBI CDMDF Trustee Private Limited. On 3rd August 2023, the Bank has infused capital of H0.10 Crore. The company shall carry out the trusteeship services to Corporate Debt Market Development Fund (CDMDF).
iii. On 7th February 2024 the Bank has acquired 100% stake of a step-down subsidiary SBICAP Ventures Ltd. an Asset Management Company for Venture Capital Fund, for the consideration of H708.07 Crore. Earlier it was wholly owned subsidiary of SBI Capital Markets Ltd.
iv. During the year ended on 31st March 2024, the Bank has infused additional capital of H489.67 Crore in SBI General Insurance Co. Ltd., a subsidiary. The company has also allotted ESOP to employees and consequently, Bank's stake has decreased from 69.95% to 69.11%.
v. On 8th December 2023 the Bank has acquired the entire 20% stake held by SBI Capital Markets Ltd. (SBICAPS) in SBI Pension Funds Pvt. Ltd. With this the Bank's stake in SBI Pension Funds Pvt. Ltd. has increased from 60% to 80%. The consideration paid for the transaction is H229.52 Crore.
vi. On 10th May 2023, the Bank has infused proportionate share of additional capital amounting to H82.16 Crore in 8 Regional Rural Banks.
vii. During the year ended on 31st March 2024 the Bank has made provision of H123.34 Crore in respect of investment in Alternate Investment Funds (AIFs) pursuant to the RBI Circular no. DOR.STR.REC.85/21.04.048/2023-24 dated 27th March 2024.
c. Risk Exposure in Derivatives:
Qualitative Risk Exposure
i) The Bank currently deals in over the counter (OTC) interest rate and currency derivatives as also in Interest Rate Futures and Exchange Traded Currency Derivatives.
I nterest Rate Derivatives dealt by the Bank are rupee interest rate swaps, foreign currency interest rate swaps and forward rate agreements, cap, floor and collars.
Currency derivatives dealt by the Bank are currency swaps, rupee dollar options and cross-currency options.
The Bank also deals in Non-deliverable Options and Non-deliverable Forwards as permitted by RBI.
The products are offered to the Bank's customers to hedge their exposures and the Bank also enters into derivatives contracts to cover off such exposures. Derivatives are used by the Bank both for trading as well as hedging balance sheet items.
The Bank also runs option position in USD/INR, which is managed through various types of loss limits and Greek limits.
ii) Derivative transactions carry market risk i.e. the probable loss the Bank may incur as a result of adverse movements in interest rates/exchange rates and credit risk i.e. the probable loss the Bank may incur if the counterparties fail to meet their obligations. The Bank's "Policy for Derivatives" approved by the Board prescribes the market risk parameters (Greek limits, Loss Limits, cut-loss triggers, open position limits, duration, modified duration, PV01 etc.) as well as customer eligibility criteria (credit rating, tenure of relationship, limits and customer appropriateness and suitability of policy (CAS) etc.) for entering into derivative transactions. Credit risk is controlled by entering derivative transactions only with counterparties satisfying the criteria prescribed in the Policy. Appropriate limits are set for the counterparties taking into account their ability to honour obligations and the Bank enters into ISDA agreement with each counterparty.
iii) The Asset Liability Management Committee (ALCO) of the Bank oversees efficient management of these risks. The Bank's Market Risk Management Department (MRMD) identifies, measures, monitors market risk associated with derivative transactions, assists ALCO in controlling and managing these risks and reports compliance with policy prescriptions to the Risk Management Committee of the Board (RMCB) at regular intervals.
iv) The accounting policy for derivatives has been drawn-up in accordance with RBI guidelines, the details of which are presented under Schedule 17: Significant Accounting Policies (SAP).
v) Interest Rate Swaps are mainly used for hedging of the assets and liabilities.
vi) Majority of the swaps were done with First class counterparty banks.
vii) Derivative transactions comprise of swaps which are disclosed as contingent liabilities. The swaps are categorised as trading or hedging.
viii) Derivative deals are entered with only those interbank participants for whom counterparty exposure limits are sanctioned. Similarly, derivative deals entered with only those corporates for whom credit exposure limit is sanctioned. Collateral requirements for derivative transactions are laid down as a part of credit sanctions terms on a case-by-case basis. Such collateral requirements are determined based on usual credit appraisal process. The Bank retains the right to terminate transactions as a risk mitigation measure in certain cases.
i. Treasury
The Treasury Segment includes the entire investment portfolio and trading in foreign exchange contracts and derivative contracts. The revenue of the treasury segment primarily consists of fees and gains or losses from trading operations and interest income on the investment portfolio.
ii. Corporate / Wholesale Banking
The Corporate / Wholesale Banking segment comprises the lending activities of Corporate Accounts Group, Commercial Clients Group and Stressed Assets Resolution Group. These include providing loans and transaction services to corporate and institutional clients and further include non-treasury operations of foreign offices.
iii. Retail Banking
The Retail Banking Segment comprises of retail branches, which primarily includes Personal Banking activities including lending activities to corporate customers having banking relations with these branches. This segment also includes agency business and ATMs.
iv. Other Banking business
Segments not classified under (i) to (iii) above are classified under this primary segment.
II. Secondary (Geographical Segment)
i) Domestic Operations - Branches/Offices having operations in India
ii) Foreign Operations - Branches/Offices having operations outside India and offshore Banking Units having operations in India
III. Pricing of Inter-segmental Transfers
The Retail Banking segment is the primary resource mobilising unit. The Corporate/Wholesale Banking and Treasury segments are recipient of funds from Retail Banking. Market Related Funds Transfer Pricing (MRFTP) is followed under which a separate unit called Funding Centre has been created. The Funding Centre notionally buys funds that the business units raise in the form of deposits or borrowings and notionally sells funds to business units engaged in creating assets.
IV. Allocation of Expenses, Assets and Liabilities
Expenses incurred at Corporate Centre establishments directly attributable either to Corporate / Wholesale and Retail Banking Operations or to Treasury Operations segment, are allocated accordingly. Expenses not directly attributable are allocated on the basis of the ratio of number of employees in each segment/ratio of directly attributable expenses.
The Bank has certain common assets and liabilities, which cannot be attributed to any segment, and the same are treated as unallocated.
18.15. ADDITIONAL DISCLOSURES
a. Payment to Micro, Small & Medium Enterprises under the Micro, Small & Medium Enterprises Development Act, 2006:
There has been no reported cases of delayed payments of the principal amount or interest due thereon to Micro, Small & Medium Enterprises.
b. Letter of Comfort:
The Bank has given Letter of Comfort to the Governor, Bank of Indonesia for its subsidiary Bank SBI Indonesia, a foreign Subsidiary. Letter of Comfort has been given to the Minister of Finance, Ottawa, Ontario, Canada for SBI Canada Bank, a foreign Subsidiary. The consolidated amount for this letter of comfort is H2,085.13 Crore (USD 250 Mio) as at 31st March, 2024. (Previous year H2,054.25 Crore).
Bank has issued letter of Comfort of H0.71 Crore plus applicable interest and charges to MUDRA Ltd. for Nagaland Rural Bank on 22nd November 2023 for a period of three years from the date of issue till the issuance of no dues certificate by MUDRA Ltd. towards the repayment of refinance liabilities whichever is later.
c. Inter Office Accounts:
I nter Office Accounts between branches, controlling offices, local head offices and Corporate Centre establishments are being reconciled on an ongoing basis and there is no material effect on the profit and loss account of the current year.
d. Provision on accounts covered under the provisions of Insolvency and Bankruptcy Code (IBC):
As per RBI letters no. DBR.No.BP.15199/21.04.048/2016-17 and DBR. No. BP. 1906/21.04.048/ 2017-18 dated 23rd June 2017 and 28th August 2017 respectively, for the accounts covered under the provisions of Insolvency and Bankruptcy Code (IBC), the bank is holding total provision of H3,783.03 Crore (100% of total outstanding) as on 31st March 2024 (Previous Year H3,935.48 Crore {100% of total outstanding})
e. Provision for Wage Revision:
The Bank has made a total provision of H15,877.09 Crore towards arrears of wages due for revision w.e.f. 1st November 2022. On signing of the 12th Bi-partite wage settlement and 9th Joint Note on 8th March 2024, the salary was revised during the month of March 2024 and accordingly provisions of H14,134.86 Crore was utilised. The balance of H1,742.23 Crore is yet to be disbursed towards residual salary revision and ex-gratia for pensioners/family pensioners.
f. Exceptional items:
During the year ended on 31st March 2024 the Bank has recognised following as exceptional items:
a. Provision of H5,400 Crore for estimated liability on account of pension at uniform rate of 50% for all pensioners prospectively, in place of existing dual rate of calculation of pension.
b. Provision of H1,700 Crore on account of ex-gratia benefit and neutralisation of Dearness Relief to pre-November 2002 retirees and family pensioners.
g. The Central Board has declared a dividend of H13.70 per share @ 1370% for the year ended 31st March 2024.
h. Previous year figures have been regrouped/reclassified, wherever necessary, to conform to current year classification. In cases where disclosures have been made for the first time in terms of RBI guidelines/Accounting Standards, previous year's figures have not been mentioned.
Shri Vinay M. Tonse Shri Alok Kumar Choudhary Shri Ashwini Kumar Tewari Shri Challa Sreenivasulu Setty
Managing Director Managing Director Managing Director Managing Director
(Retail Business & Operations) (Risk, Compliance & SARG) (Corporate Banking & Subsidiaries) (International Banking, Global
Markets & Technology)
Directors:
Shri Ketan S. Vikamsey Shri Mrugank M. Paranjape Shri Dharmendra Singh Shekhawat Shri Prafulla P Chhajed
Smt. Swati Gupta Shri Dinesh Kumar Khara
Shri Ajay Kumar Chairman
Place: Mumbai Date: 9th May 2024
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