INTRODUCTION

Merger refers to two companies joining (usually through the exchange of shares) to become one. Acquisition
occurs when one company, the buyer, purchases the assets or shares of another company, the seller, paying in
cash, stock or other assets of value to the seller.

A merger occurs when a company finds a benefit in combining business operations with another company, in a
way that will contribute to increased shareholder value. It is similar in many ways to an acquisition, which is why
the two actions are so often grouped together as mergers

In the pure sense of the term, a merger happens when two firms, often of about the same size, agree to go forward
as a single new company rather than remain separately owned and operated. This kind of action is more precisely
referred to as a "merger of equals."

Merger of SBI with its 5 associate banks and Bharatiya Mahila Bank which took place on 1 April, 2017 is the
largest merger in history of Indian Banking Industry. The research has been conducted to know from where the
journey of SBI to reach this point of success where post- merger it is at 45th position among top banks of the
world.
Merger of SBI with its 5 associates namely State Bank of Hyderabad (SBH ),State Bank of Bikaner and Jaipur
(SBBJ), State Bank of Mysore(SBM), State Bank of Travancore (SBT),), State Bank of Patiala (SBP) and
Bharatiya Mahila Bank took place on 1 April, 2017. Shri Arun Jaitely is confident that the bank will become
global player due to this step of its merger with its five associate banks and Smt. Rajnish kumar, Chairperson of
SBI, expects that profits of Bank shall increase by Rs. 3000 crore in upcoming 3years.

Merger

Merger is a combination of two or more companies into one company. In India, we call mergers as amalgamations,
in legal parlance. The acquiring company, (also referred to as the amalgamated company or the merged company)
acquires the assets and the liabilities of the target company (or amalgamating company). Typically, shareholders of
the amalgamating company get shares of the amalgamated company in exchange for their existing shares in the
target company. Merger may involve absorption or consolidation

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Types of Merger

Horizantal merger
A horizontal merger involves merger of two firms operating and competing in the same kind of business activity.
Forming a larger firm may have the benefit of economies of scale. But the argument that horizontal mergers occur
to realize economies of scale are not true horizontal mergers is regulated for their potential negative effect on
expectation. Many as potentially creating monopoly power on the part of the combined firm enabling it to engage
in anticompetitive practices also believe horizontal mergers.
Vertical mergers
Vertical mergers occur between firms in different stages of production operation. In oil industry, for example,
distinctions are made between exploration, and productionrefining and marketing to ultimate customer. The
efficiency and affirmative rationale of vertical integration rests primarily in the costliness of market exhange.
Conglomerate

A merger between firms that are involved in totally unrelated business activities. There are two types of
conglomerate mergers: pure and mixed. Pure conglomerate mergers involve firms with nothing in common, while
mixed conglomerate mergers involve firms that are looking for product extensions or market extensions.

Co-Generic Merger

Co-generic merger is a kind in which two or more companies in association are some way or the other related to
the production processes, business markets, or basic required technologies. It includes the extension of the product
line or acquiring components that are all the way required in the daily operations. This kind offers great
opportunities to businesses as it opens a hue gateway to diversify around a common set of resources and strategic
requirements.

Benefits of Mergers

It is believed that mergers and acquisions are strategic decisions leading to the maximization of a
company’s growth by enhancing its production and marketing operations. They have become popular in the recent
times because of the enhanced competition, breaking of trade barriers and globalization of business. A number of
reasons are attributed for the occurrence of merger and acquisitions. For example, it is suggested that mergers and
acquisition are intended to

1) Limit Competition
2) Achiever diversification
3) Overcome the problem of slow growth and profitability in one’s own industry
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 4) Utilize under-utilized resources-human and physical and managerial skills.
5) Gain economies of scale and increase.
6) Circumvent government regulations.

A number of benefits of mergers are claimed. All of them are not real benefits. Following are the motives and
advantages of mergers and acquisition.

1) Maintaining or accelerating a company’s growth, particularly when the internal growth is constrained due
to paucity of resources.
2) Enhancing profitability, through cost reduction resulting from economies of scale, operating efficiency and
synergy.

Reducing tax liability because of the provision of setting –off accumulated losses and unabsorbed depreciation of
one company against the profits of another .

Advantages

1) If the public shareholders get a value higher than the market price they are benefited, at least, in the short run.

2) The owner – managers and professional managers can run the companies without the fear of losing control from
as hostile takeover

3) LBO’s help to restructure the companies, basically weeding out inefficient and incompetent management.

Disadvantages

1) As a LBO usually result in a very high portion of debt, servicing of the debt becomes a great financial strain for
the company in the post-LBO period.

2) Since the management resorts to assets stripping and jettisoning of the subsidiaries to reduce the debt burden
after and LBO, it might weaken the company in the long run.

3) Continuity and stability will be adversely affected when bankers and stock market experts start running
manufacturing enterprise.

The most recent and largest merger in the history of banking industry was of State Bank of India with its 5
associate banks namely State Bank of Bikaner and Jaipur (SBBJ), State Bank of Hyderabad (SBH), State Bank of
Mysore(SBM), State Bank of Patiala(SBP), State Bank of Travancore(SBT) and Bharatiya Mahila Bank. It was on
1st April 2017 that "the SBI opened as 'one bank' and will continue to operate in the same manner as before, post-

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merger" - Bhattacharya told the media. Shares of State Bank of India (SBI) and its listed associate banks (State
Bank of Bikaner, State Bank of Mysore and State Bank of Travancore) gained 3-13 percent on the back of
approval from the cabinet for their merger

At 09:27 hrs, the next day after approval, State Bank of India was quoting at Rs 273.20, up Rs 4.55, or 1.69
percent on the BSE. SBBJ was quoting at Rs 752.45, up 4.80 percent, SBM was trading at Rs 589 up 4.87 percent
and State Bank of Travancore was quoting at Rs 590.10, up 5.38 percent. The rest two associate banks —State
Bank of Patiala and State Bank of Hyderabad — are unlisted. The merger will bring nearly a quarter of all
outstanding loans in India’s banking sector to SBI’s books. Founded in 1806, Bank of Calcutta was the first Bank
established in India, and over a period of time, evolved into State Bank of India (SBI). SBI represents a sterling
legacy of over 200 years. It is the oldest commercial Bank in the Indian subcontinent, strengthening the nation’s
trillion dollar economy and serving the aspirations of its vast population. The Bank is India’s largest commercial
Bank in terms of assets, deposits, branches, number of customers and employees, enjoying the continuing faith of
millions of customers across the social spectrum. SBI, headquartered at Mumbai, provides a wide range of
products and services to individuals, commercial enterprises, large corporate , public bodies and institutional
customers through its various branches and outlets, joint ventures, subsidiaries and associate companies. SBI
merged with its associate banks in order to have increased balance sheet and economies of scale. With this merger:
SBI has entered into the league of top 50 global banks.

 It has now 24,017 branches and 59,263 ATMs serving over 42 crore customers

 SBI is now a banking behemoth with an asset book of Rs 37 lakh crore.

 The merged entity will have one-fourth of the deposit and loan market, as the SBI's market share will increase
from 17% to 22.5-23%.

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REVIEW OF LITERATURE

A STUDY ON MERGER

Lubatkin (2018) in this study analysed the findings of various studies that have investigated either directly or
indirectly the question, “Do mergers provide real benefits to the acquiring firms?”, which resulted in the
suggestion that acquiring firms might benefit from merging because of technical, monetary and diversification
synergies. listed several reasons given by chief executive officers (CEOs) to justify a merger or acquisition, which
include: to obtain synergies, economies of scale, cost savings, increased products, and rationalisation of
distribution channels.

Harari (2017) in this study analysed on cost efficiency, economies of scale, and the scope of the Taiwanese
banking industry, specifically focusing on how bank mergers affect cost efficiency, and concluded that bank
merger activity is positively related to cost efficiency.

Simkowitz and Monroe (2016), in a study titled “A Discriminat Analysis Function for Conglomerate Targets”
used multiple discriminant analysis (MDA) to study conglomerate target firms merged in 1968. Data from the
COMPUSTAT tapes for 25 non-merged firms and 23 merged firms were used to construct the discriminant
function. A holdout group of 23 firms was used to test the discriminant function derived from the analysis groups.
24 variables were selected to provide a quantitative measure of (1) growth, (2) size, (3) profitability, (4) leverage,
(5) dividend policy, (6) liquidity, and (7) stock market characteristics. Of the original 24 variables, seven high
market activity, price earnings ratio, past three years’ dividends, growth in equity, sales, loss carryover, and the
ratio of the last three years’ dividends to common equity were found to be significant.

Weston and Mansinghka (2015) in this study analysis on “Tests of the Efficiency Performance of Conglomerate
Firms” and studied the pre- and post-merger performance of conglomerate firms, and found that their earning
rates significantly underperformed in those control sample group, but after 10 years, there were no significant
differences observed in performance between the two groups. The development in earnings performance of the
conglomerate firms was explained as evidence for successful achievement of defensive diversification.

Pinches and Mingo (2014), in a study entitled “A Multivariate Analysis of Industrial Bond Ratings” applied
factor analysis to classify 51 log-transformed financial ratios of 221 firms for four cross sections six years apart.
The study identified seven factors viz., return on investment, capital intensiveness, inventory intensiveness,
financial leverage, receivables intensiveness, short-term liquidity, and cash position. These factors explain 78% to
92% (depending on the year) of the total variance of the 51 financial ratios. Moreover, the correlations for the
factor loadings and the differential R-factor analysis indicate that the ratio patterns are reasonably stable over time.

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Ikeda and Do (2013), in a study “The Performance of Merging Firms in Japanese Manufacturing Industry during
1964 – 1975” examined the financial performance of 49 merging corporate firms in the Japanese manufacturing
industries over the period from 1964 to 1975. The study performance was tested on parameters, such as,
profitability, efficiency, firm growth, and research and development. The study reported financial performance
results for two time periods: three years and five years, which indicate that the profitability was higher in the five
year period, showing increase for 25 corporate firms than that of for 19 firms in the three year period.

Azhagaiah and Sathishkumar (2012), in a study “A Study on the Short-run Profitability of Acquirer Firms
in India” attempted to study the impact of M&As on the short-term post-merger profitability (P) across industries
in India with a sample of 10 corporate firms each in four major industries which have undergone M&As in the
same industry (related merger) during the period 2004 to 2007 with an objective of comparing the post-merger P
using appropriate P measures (ratios) and compared the mean P of acquiring firms for three years before merger
and three years after merger by use of t–test. The study indicated that the P (in

terms of P measures namely Operating Profit, Gross Profit, and Net Profit) is increased after merger for the
Information Technology Industry, Real Estate & Infrastructure Management Industry, and Pharmaceutical &
Healthcare Industry, and hence it was concluded that there is a significant improvement on the short-run post-
merger P of acquiring firms across industries in India except Banking and Finance Industry.

Indhumathi et al. (2011), in an analysis “The Effect of Mergers on Corporate Performance of Acquirer and
Target Companies in India” attempted to compare the performance of the acquiring and target firms before and
after the period of M&As by using ratio analysis and two samples paired t-test during the study period of three
years before and three years after M&As. The study was limited to a sample of 13 firms that underwent M&As
during 2002-2005. The study analysed the financial performance of sample firms from the viewpoint of
profitability, liquidity, leverage, and activity. The study found that M&As were not successfully facilitated to
improve the activity and profitability variables by all the firms. From the overall analysis, it was found that the
acquiring firms increased shareholders’ wealth, that is, increased the returns for the investment after the M&As
event.

Azhagaiah and Sathishkumar (2011), in a study “Corporate Restructuring and Firms’ Performance: An
Empirical Analysis of Selected Firms Across Corporate Sectors in India” analysed the impact of M&As in the
short- run period, viz., compared the firms’ performance three years prior to M&As, and three years immediately
after M&As covering an overall period from 2004 to 2010. The sample units (firms) drawn were based on the list
of firms that ventured into the M&As process with the help of the comprehensive list provided during the calendar

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year 2007. Fifty-two corporate firms underwent M&As activities, out of which 12 firms were only considered for
analysis based on full-fledged data availability.

Gurusamy and Radhakirishnan (2010), in a study “Merger and Acquisitions – An Empirical Study on Pre-and
Post-acquisition Performance of Selected Indian Corporate Sector Enterprises” analysed the impact of M&As on
the performance of selected corporate sector enterprises in four industries groups (chemicals drugs and fertilizers
industry, basic metal industry, IT and telecom industry, and manufacturing of machinery and equipment industry)
in India. The study has used secondary data to analyse the pre-and post–M&As performance of the 117 acquiring
firms and for this purpose the data collected spans over 12 years ranging from 1994-95 to 2005-06. The study
used statistical tools, namely, trend analysis, one way ANOVA, factor analysis, and cluster analysis. The study
proved that the post-acquisition performance of the acquiring firms’ profitability, assets utilization, debt
utilization, cost utilization, liquidity, and capital structure had not uniformly changed in all the sample industries.
The horizontal, vertical, and conglomerate M&As had no uniform impact to change the post-acquisition
performance of the sample industries. However, horizontal M&As have greater influence in improving the post-
acquisition performance when compared with the other two types of M&As, namely, vertical and conglomerate.
Mishra and Chandra (2010), in a work entitled “Mergers, Acquisitions, and Firms Performance: Experience of
Indian Pharmaceutical Industry” attempted to examine the impact of M&As on the financial performance of Indian
pharmaceutical firms. The sample for the study consisted of a set of 52 listed drugs and pharmaceutical firms over
the period from 2000-01 to 2007-08. The study used descriptive statistics and multiple regression analysis to
measure

Kumar (2009), in a study entitled “Post-merger Corporate Performance: An Indian Perspective” examined the
post-merger OP of a sample of 30 acquiring firms involved in M&As activities during 1999 – 2002 in India. The
study attempted to identify synergies, if any, resulting from mergers. The study used accounting data to examine
M&As–related gains to the acquiring firms. It was found that post-merger profitability, assets turnover, and
solvency of the acquiring firms showed no improvement when compared with pre-merger values.

Lau et al. (2008), in a study entitled “Accounting Measures of Operating Performance Outcomes for Australian
Mergers” examined the OP of merged firms, compared to the performance of the pre-merger targets and acquirers,
with a sample of 72 Australian mergers during 1999 – 2004. Performance measures used in the study were
profitability, cash flow, efficiency, leverage, and growth. Such measures were used to proxy for the success of the
M&As, which is defined in terms of an improvement in each merged firm’s industry adjusted OP between the pre-
and post-merger period. The study provided some evidence that M&As improved post-merger OP.

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Cabanda and Pascual (2007), in a study entitled “Merger in the Philippines: Evidence in the Corporate
Performance of William, Gothong, and Aboitiz (WG&A) Shipping Companies” analysed the financial and OP of
Philippine shipping firms resulting from the M&As event, based on the economic-finance perspective. The study
covered three periods of analysis: (i) three years prior to merger, (ii) three years immediately after merger for the
short-run analysis, and (iii) seven years after the merger for the long-run analysis. The study covered the period
from 1994 to 2003, and applied the conventional accounting and financial approaches for analysing the effects of
M&As on firm performance. The study showed that pre-and post-merger values obtained show mixed results.
Some measures of firm performance, such as, acid test ratio, total asset turnover, and net revenues suggest
statistically significant gains in the long-run. Other performance indicators, such as, net income, return on assets,
return on sales, return on equity, net profit margin, capital expenditure, capital expenditure / sales, and capital
expenditure / total assets did not show significant gains after M&As in the short-run. The study finally concluded
that mergers in the Philippine shipping industry do not lead to improved performance in both the short-run as well
as in the long-run.

Pazarskis Collins et al. (2006), in a study entitled “Exploring the Improvement of Corporate Performance
after Mergers – The Case of Greece” examined, empirically, the impact of M&As on the OP of M&As–involved
firms in Greece. The study used financial and non-financial characteristics, and the post-merger performance of 50
Greek firms, listed at the Athens Stock Exchange that executed at least one merger or acquisition from 1998 to
2002. Selected accounting variables (financial characteristics) were used to measure OP and compare pre-and
post-merger firm performance for three years before M&As and three years after M&As. The results were then
evaluated on the basis of certain non-financial characteristics (type of merger, method of evaluation and payment),
and financial characteristics (a set of seven selected financial ratios). The main finding of the study was that there
was strong evidence that the profitability of a firm that performed an M&As decreased due to the M&As event.

Ehsan et al. (2005), in their study “Performance Measurement in Corporate Governance: Do Mergers Improve
Managerial Performance in the Post-Merger Period?” assessed the effect of M&As activity on the performance of
USA firms. The study sample of 45 pairs of merged firms, over a period of five years pre-and post-merger, were
tested. The study used data envelopment analysis (DEA) to determine the managerial efficiency impact of the
merger by comparing the combined efficiency of the acquired and the acquiring firm prior to the merger with the
efficiency of the merged firm during the post-merger period. The study findings indicated that the managerial
efficiency of a majority (82%) of sample firms had improved in the post-merger period.

Beena (2004), in a study “Towards Understanding the Merger Wave in the Indian Corporate Sector – A
Comparative Perspective” analysed the pre-and post-merger performance of a sample of 115 acquiring firms in the

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manufacturing sector in India, during 1995 – 2000, using a set of financial ratios and paired two samples t-test.
The study could not find any evidence of improvement in the financial ratios during the post-merger period, as
compared to the pre-merger period for the acquiring firms. In short, the number of merging firms-which is less
than 10% of all firms in the industry-overall performance is far better than that of the others and their own pre-
merger period performance, thereby leading to conclude that if the industry is able to transfer a part of its
improved performance due to consolidation to the consumers in the form of a price reduction and a better quality
of drugs, it would be a welcome sign; and on the other hand if it leads to increased market power and consequent
price rise, then it would deserve special attention

Ramaswamy and Waegelein (2003),in a study analysis “Firm Financial Performance Following Mergers”
tested the long-term post-merger financial performance of merged firms in Hong Kong to determine relationships
between post-merger performance and firm size, the compensation plan, method of payment, and industry type.
The study sample consisted of 162 merging firms from 1975 to 1990, and the analysis covered five years pre-and
post-merger (using operating cash flow returns on market value of assets as the measure of performance). The
study concluded that there is a positive significant improvement in the post-merger performance; there is a
significant association between post-merger performance and differences in the relative sizes of the combining
firms; firms acquiring comparatively larger firms have a more difficult time digesting those firms and in
effectively integrating them into the firm’s operation; firms with long-term compensation plans have more positive
post-merger financial

performance; firms in dissimilar industries “conglomerate mergers” experienced better post-merger financial
performance than that of the firms in similar industries. M&As from 1983 to 1990 experienced poor post-merger
performance in comparison to those before 1983. Therefore, the study is an extensive one that not only determined
the effect of M&As on long-term performance but pinpointed factors behind such performance.

Ming and Hoshino (2002), in an article “Productivity and Operating Performance of Japanese Merging
Firms: Keiretsu-related and Independent Mergers” examined the effects of M&As on the firms’ OP using a sample
of 86 Japanese corporate mergers between 1970 and 1994. The success of M&As was tested based on their effects
on efficiency, profitability, and growth. The study used total productivity as an indicator of the firm’s efficiency or
productivity, return on assets and return on equity as indicators of the firm’s profitability, and sales and growth in
employment to indicate the firm’s growth rate. The results reveal insignificant negative change in productivity,
significant downward trend in profitability, significant negative effect on the sales growth rate, and downsize in
the workforce after M&As. In general, the study concluded that M&As have a negative impact on firms’
performance in Japan.

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NEED OF THE STUDY

A company that merges to diversify may acquire another company in a seemingly unrelated industry in order to
reduce the impact of a particular industry's performance on its profitability. Companies seeking to sharpen focus
often merge with companies that have deeper market penetration in a key area of operations.

Mergers can give the acquiring company an opportunity to grow their market share without having to really earn it
by doing the work themselves - instead, they buy a competitor's business for a price. Usually, these are
called horizontal mergers.

OBJECTIVES OF THE STUDY

Being the largest amalgamation in history of Indian Banking Industry it attracts attention towards following
objectives

 To analyze the performance of the Banks after merger in terms of leverage ratios.

 To find out the impact of merger on Banks operating profit ratios

 To deter mine the effect of mergers on efficiency and activity ratios of banks.
 To evaluate the banks performance in terms of Liquidity ratio parameters
 To find out the effects of merger on shareholders & general public
SCOPE OF THE STUDY
 The study covers a period of five years from 2014 to 2018. There are several reasons for selecting this
period.
 During the past 5 years the Bank has gone global as a result the company has witnessed many economic
and political changes.
 Company has undergone rapid changes in the past 5 years due to many policy decisions relating to capital
markets, banking sector & licensing policy.

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DATA COLLECTION TECHNIQUE
All the data are collected from the secondary sources from the banks announced financial statements. All the data
are annual and secondary in nature .Annual bank level data are obtained from the published annual accounts
(balance sheet and profit and loss account) in annual reports of individual banks ,collected mainly from the
statistical tables relating to banks in India ,and report on trend and progress of bank in India for the financial year
2017-2018 ,available on the official web sites of reserve bank of India.

Secondary data is collected from

 Websites
 Journals
 Text books
LIMITATIONS

 The study was conducted with the available data and the analysis made on it.
 The study is limited to the mergers under State Bank Of India .
 Due to the limited period of study it may not be detailed.
 Lack of expertise being a trainee in analyzing the data.
 Getting valid data was a problem due to the sensitivity of the data provided
Statistical Tools

I have used accounting tools like leverage ratios and liquidity ratios
o Debt equity ratio
o Equity per share
o Return on net worth
o Capital adequacy ratio
o Current ratio

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INDUSTRY PROFILE

INTRODUCTION

A bank is a financial institution that accepts deposits and channels those deposits into lending activities. Banks
primarily provide financial services to customers while enriching investors. Government restrictions on financial
activities by banks vary over time and location. Banks are important players in financial markets and offer services
such as investment funds and loans. In some countries such as Germany, banks have historically owned major
stakes in industrial corporations while in other countries such as the United States banks are prohibited from
owning non-financial companies. In Japan, banks are usually the nexus of a cross-share holding entity known as
the keiretsu. In France, bank assurance is prevalent, as most banks offer insurance services (and now real estate
services) to their clients.

India’s banking sector is constantly growing. Since the turn of the century, there has been a noticeable upsurge in
transactions through ATMs, and also internet and mobile banking.

Following the passing of the Banking Laws (Amendment) Bill by the Indian Parliament in 2012, the landscape of
the banking industry began to change. The bill allows the Reserve Bank of India (RBI) to make final guidelines on
issuing new licenses, which could lead to a bigger number of banks in the country. Some banks have already
received licenses from the government, and the RBI's new norms will provide incentives to banks to spot bad
loans and take requisite action to keep rogue borrowers in check.

Over the next decade, the banking sector is projected to create up to two million new jobs, driven by the efforts of
the RBI and the Government of India to integrate financial services into rural areas. Also, the traditional way of
operations will slowly give way to modern technology.

Market size

Total banking assets in India touched US$ 1.8 trillion in FY14 and are anticipated to cross US$ 28.5 trillion in
FY15.

Bank deposits have grown at a compound annual growth rate (CAGR) of 21.2 per cent over FY13–14. Total
deposits in FY14 were US$ 1,274.3 billion.

Total banking sector credit is anticipated to grow at a CAGR of 18.1 per cent (in terms of INR) to reach US$ 2.4
trillion by 2018.

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In FY14, private sector lenders witnessed discernable growth in credit cards and personal loan businesses. HDFC
Bank witnessed 141.6 per cent growth in personal loan disbursement in FY14, as per a report by Emkay Global
Financial Services. Axis Bank's personal loan business also rose 49.8 per cent and its credit card business
expanded by 31.1 per cent.

Investments

Bengaluru-based software services exporter Mphasis Ltd has bagged a five-year contract from Punjab National
Bank (PNB) to set up the bank’s contact centres in Mangalore and Noida (UP). Mphasis will provide support for
all banking products and services, including deposits operations, lending services, banking processes, internet
banking, and account and card-related services. The company will also offer services in multiple languages.

Microfinance companies have committed to setting up at least 30 million bank accounts within a year through
tie-ups with banks, as part of the Indian government’s financial inclusion plan. The commitment was made at a
meeting of representatives of 25 large microfinance companies and banks and government representatives, which
included financial services secretary Mr GS Sandhu.

Export-Import Bank of India (Exim Bank) will increase its focus on supporting project exports from India to
South Asia, Africa and Latin America, as per MrYaduvendraMathur, Chairman and MD, Exim Bank. The bank
has moved up the value chain by supporting project exports so that India earns foreign exchange. In 2012–14,
Exim Bank lent support to 85 project export contracts worth Rs 24,255 crore (US$ 3.96 billion) secured by 47
companies in 23 countries.

Government Initiatives

The RBI has given banks greater flexibility to refinance current long-gestation project loans worth Rs 1,000crore
(US$ 163.42 million) and more, and has allowed partial buyout of such loans by other financial institutions as
standard practice. The earlier stipulation was that buyers should purchase at least 50 per cent of the loan from the
existing banks. Now, they get as low as 25 per cent of the loan value and the loan will still be treated as ‘standard’.

The RBI has also relaxed norms for mortgage guarantee companies (MGC) enabling these firms to use
contingency reserves to cover for the losses suffered by the mortgage guarantee holders, without the approval of
the apex bank. However, such a measure can only be initiated if there is no single option left to recoup the losses.

SBI is planning to launch a contact-less or tap-and-go card facility to make payments in India. Contact-less
payment is a technology that has been adopted in several countries, including Australia, Canada and the UK,

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where customers can simply tap or wave their card over a reader at a point-of-sale terminal, which reads the card
and allows transactions.

SBI and its five associate banks also plan to empower account holders at the bottom of the social pyramid with a
customer call facility. The proposed facility will help customers get an update on available balance, last five
transactions and cheque book request on their mobile phones.

Road Ahead

India is yet to tap into the potential of mobile banking and digital financial services. Forty-seven per cent of the
populace havebank accounts, of which half lie dormant due to reliance on cash transactions, as per a report. Still,
the industry holds a lot of promise.

India's banking sector could become the fifth largest banking sector in the world by 2020 and the third largest by
2025. These days, Indian banks are turning their focus to servicing clients and enhancing their technology
infrastructure, which can help improve customer experience as well as give banks a competitive edge.

Exchange Rate Used: INR 1 = US$ 0.0163 as on October 28, 2014

The level of governmentregulation of the banking industry varies widely, with countries such as Iceland, having
relatively light regulation of the banking sector, and countries such as China having a wide variety of regulations
but no systematic process that can be followed typical of a communist system.

The oldest bank still in existence is Monte deiPaschi di Siena, headquartered in Siena, Italy, which has been
operating continuously since 1472.

History

Origin of the word

The name bank derives from the Italian word banco "desk/bench", used during the Renaissance by Jewish
Florentine bankers, who used to make their transactions above a desk covered by a green tablecloth. However,
there are traces of banking activity even in ancient times, which indicates that the word 'bank' might not
necessarily come from the word 'banco'.

In fact, the word traces its origins back to the Ancient Roman Empire, where moneylenders would set up their
stalls in the middle of enclosed courtyards called macella on a long bench called a bancu, from which the words

14
banco and bank are derived. As a moneychanger, the merchant at the bancu did not so much invest money as
merely convert the foreign currency into the only legal tender in Rome that of the Imperial Mint.

The earliest evidence of money-changing activity is depicted on a silver drachm coin from ancient Hellenic colony
Trapezus on the Black Sea, modern Trabzon, c. 350–325 BC, presented in the British Museum in London. The
coin shows a banker's table (trapeza) laden with coins, a pun on the name of the city.

In fact, even today in Modern Greek the word Trapeza (Τράπεζα) means both a table and a bank.

Traditional banking activities

Banks act as payment agents by conducting checking or current accounts for customers, paying cheques drawn by
customers on the bank, and collecting cheques deposited to customers' current accounts. Banks also enable
customer payments via other payment methods such as telegraphic transfer, EFTPOS, and ATM.

Banks borrow money by accepting funds deposited on current accounts, by accepting term deposits, and by issuing
debt securities such as banknotes and bonds. Banks lend money by making advances to customers on current
accounts, by making installment loans, and by investing in marketable debt securities and other forms of money
lending.

Banks provide almost all payment services, and a bank account is considered indispensable by most businesses,
individuals and governments. Non-banks that provide payment services such as remittance companies are not
normally considered an adequate substitute for having a bank account.

Banks borrow most funds from households and non-financial businesses, and lend most funds to households and
non-financial businesses, but non-bank lenders provide a significant and in many cases adequate substitute for
bank loans, and money market funds, cash management trusts and other non-bank financial institutions in many
cases provide an adequate substitute to banks for lending savings to.

Entry regulation

Currently in most jurisdictions commercial banks are regulated by government entities and require a special bank
license to operate.

15
Usually the definition of the business of banking for the purposes of regulation is extended to include acceptance
of deposits, even if they are not repayable to the customer's order—although money lending, by itself, is generally
not included in the definition.

Unlike most other regulated industries, the regulator is typically also a participant in the market, i.e. a government-
owned (central) bank. Central banks also typically have a monopoly on the business of issuing banknotes.
However, in some countries this is not the case. In the UK, for example, the Financial Services Authoritylicenses
banks, and some commercial banks (such as the Bank of Scotland) issue their own banknotes in addition to those
issued by the Bank of England, the UK government's central bank.

Accounting for bank accounts

Bank statements are accounting records produced by banks under the various accounting standards of the world.
Under GAAP and IFRS there are two kinds of accounts: debit and credit. Credit accounts are Revenue, Equity and
Liabilities. Debit Accounts are Assets and Expenses. This means you credit a credit account to increase its
balance, and you debit a debit account to decrease its balance.

This also means you debit your savings account every time you deposit money into it (and the account is normally
in deficit), while you credit your credit card account every time you spend money from it (and the account is
normally in credit).

However, if you read your bank statement, it will say the opposite—that you credit your account when you deposit
money, and you debit it when you withdraw funds. If you have cash in your account, you have a positive (or
credit) balance; if you are overdrawn, you have a negative (or deficit) balance.

The reason for this is that the bank, and not you, has produced the bank statement. Your savings might be your
assets, but the bank's liability, so they are credit accounts (which should have a positive balance). Conversely, your
loans are your liabilities but the bank's assets, so they are debit accounts (which should also have a positive
balance).

Where bank transactions, balances, credits and debits are discussed below, they are done so from the viewpoint of
the account holder—which is traditionally what most people are used to seeing.

16
Economic functions

1. Issue of money, in the form of banknotes and current accounts subject to cheque or payment at the
customer's order. These claims on banks can act as money because they are negotiable and/or repayable on
demand, and hence valued at par. They are effectively transferable by mere delivery, in the case of
banknotes, or by drawing a cheque that the payee may bank or cash.
2. Netting and settlement of payments – banks act as both collection and paying agents for customers,
participating in interbank clearing and settlement systems to collect, present, be presented with, and pay
payment instruments. This enables banks to economic on reserves held for settlement of payments, since
inward and outward payments offset each other. It also enables the offsetting of payment flows between
geographical areas, reducing the cost of settlement between them.
3. Credit intermediation – banks borrow and lend back-to-back on their own account as middle men.
4. Credit quality improvement – banks lend money to ordinary commercial and personal borrowers (ordinary
credit quality), but are high quality borrowers. The improvement comes from diversification of the bank's
assets and capital which provides a buffer to absorb losses without defaulting on its obligations. However,
banknotes and deposits are generally unsecured; if the bank gets into difficulty and pledges assets as
security, to raise the funding it needs to continue to operate, this puts the note holders and depositors in an
economically subordinated position.
5. Maturity transformation – banks borrow more on demand debt and short term debt, but provide more long
term loans. In other words, they borrow short and lend long. With a stronger credit quality than most other
borrowers, banks can do this by aggregating issues (e.g. accepting deposits and issuing banknotes) and
redemptions (e.g. withdrawals and redemptions of banknotes), maintaining reserves of cash, investing in
marketable securities that can be readily converted to cash if needed, and raising replacement funding as
needed from various sources (e.g. wholesale cash markets and securities markets).

Law of banking

Banking law is based on a contractual analysis of the relationship between the bank (defined above) and the
customer—defined as any entity for which the bank agrees to conduct an account.

The law implies rights and obligations into this relationship as follows:

1. The bank account balance is the financial position between the bank and the customer: when the account is
in credit, the bank owes the balance to the customer; when the account is overdrawn, the customer owes
the balance to the bank.
17
 2. The bank agrees to pay the customer's cheques up to the amount standing to the credit of the customer's
account, plus any agreed overdraft limit.
3. The bank may not pay from the customer's account without a mandate from the customer, e.g. a cheque
drawn by the customer.
4. The bank agrees to promptly collect the cheques deposited to the customer's account as the customer's
agent, and to credit the proceeds to the customer's account.
5. The bank has a right to combine the customer's accounts, since each account is just an aspect of the same
credit relationship.
6. The bank has a lien on cheques deposited to the customer's account, to the extent that the customer is
indebted to the bank.
7. The bank must not disclose details of transactions through the customer's account—unless the customer
consents, there is a public duty to disclose, the bank's interests require it, or the law demands it.
8. The bank must not close a customer's account without reasonable notice, since cheques are outstanding in
the ordinary course of business for several days.

These implied contractual terms may be modified by express agreement between the customer and the bank. The
statutes and regulations in force within a particular jurisdiction may also modify the above terms and/or create new
rights, obligations or limitations relevant to the bank-customer relationship.

Some types of financial institution, such as building societies and credit unions, may be partly or wholly exempt
from bank license requirements, and therefore regulated under separate rules.

The requirements for the issue of a bank license vary between jurisdictions but typically include:

1. Minimum capital
2. Minimum capital ratio
3. 'Fit and Proper' requirements for the bank's controllers, owners, directors, and/or senior officers
4. Approval of the bank's business plan as being sufficiently prudent and plausible.

Types of banks

Banks' activities can be divided into retail banking, dealing directly with individuals and small businesses;
business banking, providing services to mid-market business; corporate banking, directed at large business entities;
private banking, providing wealth management services to high net worth individuals and families; and investment

18
banking, relating to activities on the financial markets. Most banks are profit-making, private enterprises.
However, some are owned by government, or are non-profit organizations.

Central banks are normally government-owned and charged with quasi-regulatory responsibilities, such as
supervising commercial banks, or controlling the cash interest rate. They generally provide liquidity to the banking
system and act as the lender of last resort in event of a crisis.

Types of retail banks

 Commercial bank: the term used for a normal bank to distinguish it from an investment bank. After the
Great Depression, the U.S. Congress required that banks only engage in banking activities, whereas
investment banks were limited to capital market activities. Since the two no longer have to be under
separate ownership, some use the term "commercial bank" to refer to a bank or a division of a bank that
mostly deals with deposits and loans from corporations or large businesses.
 Community Banks: locally operated financial institutions that empower employees to make local decisions
to serve their customers and the partners.
 Community development banks: regulated banks that provide financial services and credit to under-served
markets or populations.
 Postal savings banks: savings banks associated with national postal systems.
 Private banks: banks that manage the assets of high net worth individuals.
 Offshore banks: banks located in jurisdictions with low taxation and regulation. Many offshore banks are
essentially private banks.
 Savings bank: in Europe, savings banks take their roots in the 19th or sometimes even 18th century. Their
original objective was to provide easily accessible savings products to all strata of the population. In some
countries, savings banks were created on public initiative; in others, socially committed individuals created
foundations to put in place the necessary infrastructure. Nowadays, European savings banks have kept their
focus on retail banking: payments, savings products, credits and insurances for individuals or small and
medium-sized enterprises. Apart from this retail focus, they also differ from commercial banks by their
broadly decentralized distribution network, providing local and regional outreach—and by their socially
responsible approach to business and society.
 Building societies and Landsbanks: institutions that conduct retail banking.
 Ethical banks: banks that prioritize the transparency of all operations and make only what they consider to
be socially-responsible investments.
 Islamic banks: Banks that transact according to Islamic principles.

19
Types of investment banks

 Investment banks "underwrite" (guarantee the sale of) stock and bond issues, trade for their own accounts,
make markets, and advise corporations on capital market activities such as mergers and acquisitions.
 Merchant banks were traditionally banks which engaged in trade finance. The modern definition, however,
refers to banks which provide capital to firms in the form of shares rather than loans. Unlike venture capital
firms, they tend not to invest in new companies.

Both combined

 Universal banks, more commonly known as financial services companies, engage in several of these
activities. These big banks are very diversified groups that, among other services, also distribute
insurance— hence the term bancassurance, a portmanteau word combining "banque or bank" and
"assurance", signifying that both banking and insurance are provided by the same corporate entity.

Other types of banks

 Islamic banks adhere to the concepts of Islamic law. This form of banking revolves around several well-
established principles based on Islamic canons. All banking activities must avoid interest, a concept that is
forbidden in Islam. Instead, the bank earns profit (markup) and fees on the financing facilities that it
extends to customers.

20
Competitor Analysis:

The main competitors of State Bank of India in India are Bank of India, SBI Bank, and Union Bank of India.

SBI bank is the second largest private sector bank in India and has well reputation over the industry. Increase in
the number of banks will increase the rivalry since all these banks compete for the same customers and resources.
State Bank of India has to face a competitive rivalry from all these banks and thus to plan its activities accordingly.

SBI being the government's de-facto banker has the upper hand in collecting taxes or public investments (PPF).
SBI Bank on the other hand makes the best use of its private (largely foreign) ownership and international
presence.

SBI has had more than a century's presence in India's banking space. Thus SBI has major share in this sector. But
given the scale of fragmentation in Indian banking, credit must be given to SBI's ability to retain the share. SBI has
commanded double the share of the second largest player in the sector. SBI Bank on the other hand, has been the
pioneer of retail banking in India. SBI has commanded double the share of the second largest player in the sector.
SBI Bank on the other hand, has been the pioneer of retail banking in India.

SBI has maintained NIMs in excess of 2.6% over the past decade. On the contrary, that of SBI has crossed 2.5%
just once in the past 8 years. Thus the former has concentrated on high margin business.

Comparing the sales per share of SBI over SBI are 665.4%.The net sales are about 387.4%. Also the total revenues
are 265.6% times. Where as gross profit is about 158.6%.

21
STATE BANK OF INDIA PROFILE

The State Bank of India (SBI) is an Indian multinational, public sector banking and financial services company. It
is a government-owned corporation headquartered in Mumbai, Maharashtra. The company is ranked 216th on
the Fortune Global 500 list of the world's biggest corporations as of 2017. It is the largest bank in India with a 23%
market share in assets, besides a share of one-fourth of the total loan and deposits market.

The bank descends from the Bank of Calcutta, founded in 1806, via the Imperial Bank of India, making it the
oldest commercial bank in the Indian subcontinent. The Bank of Madras merged into the other two "presidency
banks" in British India, the Bank of Calcutta and the Bank of Bombay, to form the Imperial Bank of India, which
in turn became the State Bank of India in 1955. The Government of India took control of the Imperial Bank of
India in 1955, with Reserve Bank of India (India's central bank) taking a 60% stake, renaming it the State Bank of
India. In 2008, the government took over the stake held by the Reserve Bank of India.

History

Fig No.1

A 2005 stamp dedicated to the State Bank of India

Fig No .2

Share of the Bank of Bengal, issued 13 May 1876

22
Fig No.3

Seal of Imperial Bank of India

The roots of the State Bank of India lie in the first decade of the 19th century when the Bank of Calcutta later
renamed the Bank of Bengal, was established on 2 June 1806. The Bank of Bengal was one of three Presidency
banks, the other two being the Bank of Bombay (incorporated on 15 April 1840) and the Bank of
Madras (incorporated on 1 July 1843). All three Presidency banks were incorporated as joint stock companies and
were the result of royal charters. These three banks received the exclusive right to issue paper currency till 1861
when, with the Paper Currency Act, the right was taken over by the Government of India. The Presidency banks
amalgamated on 27 January 1921, and the re-organised banking entity took as its name Imperial Bank of India.
The Imperial Bank of India remained a joint stock company but without Government participation.

Pursuant to the provisions of the State Bank of India Act of 1955, the Reserve Bank of India, which is India's
central bank, acquired a controlling interest in the Imperial Bank of India. On 1 July 1955, the Imperial Bank of
India became the State Bank of India. In 2008, the Government of India acquired the Reserve Bank of India's stake
in SBI so as to remove any conflict of interest because the RBI is the country's banking regulatory authority.

In 1959, the government passed the State Bank of India (Subsidiary Banks) Act. This made eight banks that had
belonged to princely states into subsidiaries of SBI. This was at the time of the first Five Year Plan, which
prioritised the development of rural India. The government integrated these banks into the State Bank of India
system to expand its rural outreach. In 1963 SBI merged State Bank of Jaipur (est. 1943) and State Bank of
Bikaner (est.1944).

SBI has acquired local banks in rescues. The first was the Bank of Bihar (est. 1911), which SBI acquired in 1969,
together with its 28 branches. The next year SBI acquired National Bank of Lahore (est. 1942), which had 24
branches. Five years later, in 1975, SBI acquired Krishnaram Baldeo Bank, which had been established in 1916
in Gwalior State, under the patronage of Maharaja Madho Rao Scindia. The bank had been the Dukan Pichadi, a
small moneylender, owned by the Maharaja. The new bank's first manager was Jall N. Broacha, a Parsi. In 1985,
23
SBI acquired the Bank of Cochin in Kerala, which had 120 branches. SBI was the acquirer as its affiliate, the State
Bank of Travancore, already had an extensive network in Kerala.

There has been a proposal to merge all the associate banks into SBI to create a single very large bank and
streamline operations.

The first step towards unification occurred on 13 August 2008 when State Bank of Saurashtra merged with SBI,
reducing the number of associate state banks from seven to six. On 19 June 2009, the SBI board approved the
absorption of State Bank of Indore. SBI holds 98.3% in State Bank of Indore. (Individuals who held the shares
prior to its takeover by the government hold the balance of 1.7%.).

The acquisition of State Bank of Indore added 470 branches to SBI's existing network of branches. Also, following
the acquisition, SBI's total assets will approach ₹10 trillion. The total assets of SBI and the State Bank of
Indore were ₹9,981,190 million as of March 2009. The process of merging of State Bank of Indore was completed
by April 2010, and the SBI Indore branches started functioning as SBI branches on 26 August 2010.

On 7 October 2013, Arundhati Bhattacharya became the first woman to be appointed Chairperson of the
bank. Mrs. Bhattacharya received an extension of two years of service to merge into SBI the five remaining
associated banks.

Operations
SBI provides a range of banking products through its network of branches in India and overseas, including
products aimed at non-resident Indians (NRIs). SBI has 16 regional hubs and 57 zonal offices that are located at
important cities throughout India.

Fig No.4

Main Branch of SBI in Mumbai

24
SBI acquired the control of seven banks in 1960. They were the seven regional banks of former Indian princely
states. They were renamed, prefixing them with 'State Bank of'. These seven banks were State Bank of Bikaner
and Jaipur (SBBJ), State Bank of Hyderabad (SBH), State Bank of Indore (SBN), State Bank of
Mysore (SBM), State Bank of Patiala (SBP), State Bank of Saurashtra (SBS) and State Bank of Travancore(SBT).
All these banks were given the same logo as the parent bank, SBI.

The plans for making SBI a single very large bank by merging the associate banks started in 2008, and in
September the same year, SBS merged with SBI. The very next year, State Bank of Indore (SBN) also merged. In
the same year, a subsidiary named Bharatiya Mahila Bank was formed. The negotiations for merging of the 6
associate banks (State Bank of Bikaner and Jaipur, State Bank of Hyderabad, State Bank of Mysore, State Bank of
Patiala, State Bank of Travancore and Bharatiya Mahila Bank) by acquiring their businesses including assets and
liabilities with SBI started in 2016. The merger was approved by the Union Cabinet on 15 June 2016. The State
Bank of India and all its associate banks used the same blue Keyhole logo. The State Bank of
India wordmark usually had one standard typeface, but also utilized other typefaces.

On 15 February 2017, the Union Cabinet approved the merger of five associate banks with SBI. What was
overlooked, however, were different pension liability provisions and accounting policies for bad loans, based on
regional risks.

Fig No.5

State Bank of India Mumbai LHO

The 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 were merged with State Bank of India with
effect from 1 April 2017.

Non-banking subsidiaries

Apart from five of its associate banks (merged with SBI since 1 April 2017), SBI's non-banking subsidiaries
include:

25
 SBI Capital Markets Ltd
 SBI Cards & Payments Services Pvt. Ltd. (SBICPSL)
 SBI Life Insurance Company Limited

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.

Other SBI service points

As of 31 March 2017, SBI group (including associate banks) has 59,291 ATMs.

Since November 2017, SBI also offers an integrated digital banking platform named YONO.

Listings and shareholding

As on 31 March 2017, Government of India held around 61.23% equity shares in SBI. The Life Insurance
Corporation of India, itself state-owned, is the largest non-promoter shareholder in the company with 8.82%
shareholding.

Shareholders Shareholding

Promoters: Government of India 61.23%

FIIs/GDRs/OCBs/NRIs 11.17%

Banks & Insurance Companies 10.00%

Mutual Funds & UTI 8.29%

Others 9.31%

Total 100.0%

26
The equity shares of SBI are listed on the Bombay Stock Exchange, where it is a constituent of the BSE
SENSEX index,and the National Stock Exchange of India, where it is a constituent of the CNX Nifty.Its Global
Depository Receipts(GDRs) are listed on the London Stock Exchange.

Employees

Fig No.6

State Bank Institute of Credit, Risk and Management, Gurgaon

SBI is one of the largest employers in the country with 209,567 employees as on 31 March 2017, out of which
there were 23% female employees and 3,179 (1.5%) employees with disabilities. On the same date, SBI had
37,875 Scheduled Castes (18%), 17,069 Scheduled Tribes (8.1%) and 39,709 Other Backward Classes (18.9%)
employees. The percentage of Officers, Associates and Sub-staff was 38.6%, 44.3% and 16.9% respectively on the
same date. Around 13,000 employees have joined the Bank in FY 2016–17. Each employee contributed a net
profit of ₹511,000 (US$7,100) during FY 2016–17

Recent awards and recognition.

 SBI was ranked 232nd in the Fortune Global 500 rankings of the world's biggest corporations for the year
2016.
SBI was 50th most trusted brand in India as per the Brand Trust Report 2013, an annual study conducted by Trust
Research Advisory, a brand analytics company and subsequently, in the Brand Trust Report 2014, SBI finished as
India's 19th most trusted brand in India

27
Company Analysis

SBI Ltd Merged with SBI Bank

Second largest Bank in India is now formally in place. RBI has given approval for the reverse merger of SBI Ltd
with its banking arm SBI Bank. SBI Bank with Rs 1 lakh crore asset base banks is second only to State Bank of
India, which is well over Rs 3 lakh crore in size. RBI also cleared the merger of two SBI subsidiaries, SBI
Personal Financial Services and SBI Capital Services with SBI Bank. The merger is effective from the appointed
dated of March 30, 02, and the swap ratio has been fixed at two SBI shares for one SBI Bank share.

Reserve Bank, approval is subject to the following conditions:

(i)Compliance with Reserve Requirements the SBI Bank Ltd. would comply with the Cash Reserve Requirements
(under Section 42 of the Reserve Bank of India Act, 1934) and Statutory Liquidity Reserve Requirements (under
Section 24 of the Banking Regulation Act, 1949) as applicable to banks on the net demand and time liabilities of
the bank, inclusive of the liabilities pertaining to SBI Ltd. from the date of merger. Consequently, SBI Bank Ltd.
would have to comply with the CRR/SLR computed accordingly and with reference to the position of Net
Demand and time liabilities as required under existing instruction
(ii) Other Prudential Norms SBI Bank Ltd. will continue to comply with all prudential requirements, guidelines
and other instructions as applicable to banks concerning capital adequacy, asset classification, and income
recognition and provisioning, issued by the Reserve Bank from time to time on the entire portfolio of assets and
liabilities of the bank afterthe merger
(iii) Conditions relating to Swap Ratio as the proposed merger is between a banking company and a financial
institution, all matters connected with shareholding including the swap ratio, will be governed by the provisions of
Companies Act, 1956, as provided. In case of any disputes, the legal provisions in the Companies Act and the
decision of the Courts would apply.
(iv) Appointment of Directors the bank should ensure compliance with Section 20 of the Banking Regulation Act,
1949, concerning granting of loans to the companies in which
directors of such companies are also directors. In respect of loans granted by SBI Ltd. to companies having
common directors, while it will not be legally necessary for SBI Bank Ltd. to recall the loans already granted to
such companies after the merger, it will not be open to the bank to grant any fresh loans and advances to such
companies after merger. The prohibition will include any renewal or enhancement of existing loan facilities. The
restriction contained in Section 20 of the Act ibid, does not make any distinction between professional directors
and other directors and would apply to all directors.

28
(v) Priority Sector Lending considering that the advances of SBI Ltd. were not subject to the requirement
applicable to banks in respect of priority sector lending, the bank would, after merger, maintain an additional 17
per cent over and above the requirement of 40 per cent, i.e., a total of 50 per cent of the net bank credit on the
residual portion of the bank's advances. This additional 17 per cent by way of priority sector advances will apply
until such time as the aggregate priority sector advances reaches a level of 40 per cent of the total net bank credit
of the bank. The Reserve Bank’s existing instructions on sub-targets under priority sector lending and eligibility of
certain types of investments/funds for reckoning as priority sector advances would
Apply to the bank.
(vi) Equity Exposure Ceiling of 5% the investments of SBI Ltd. acquired by way of project finance as on the date
of merger would be kept outside the exposure ceiling of 5 per cent of advances towards exposure to equity and
equity linked instruments for a period of five years since these investments need to be continued to avoid any
adverse effect on the viability or expansion of the project. The bank should, however, mark to market the above
instruments and provide for any loss in their value in the manner prescribed for the investments of the bank. Any
incremental accretion to the above project-finance category of equity investment will be reckoned with in the 5
percent ceiling for equity exposure for the bank
(vii) Investments in Other Companies the bank should ensure that its investments in any of the companies in
which SBI Ltd. had investments prior to the merger are in compliance with Section 19 (2) of Banking Regulation
Act, 1949, prohibiting holding of equity in excess of 30 per cent of the paid-up share capital of the company
concerned or 30 per cent of its own paid-up Share capital and reserves whichever is less
(viii) Subsidiaries (a) While taking over the subsidiaries of SBI Ltd. after merger, the bank should ensure that the
activities of the subsidiaries comply with the requirements of permissible activities to be undertaken by a bank
under Section 6 of the Banking Regulation Act,1949 and section 19(1) of the act ibid.
(b) The takeover of certain subsidiaries presently owned by SBI Ltd. by SBI Bank Ltd. will be subject to approval,
if necessary, by other regulatory agencies, viz., IRDA, SEBI, NHB, etc.
(ix) Preference Share Capital Section 12 of the Banking Regulation Act, 1949 requires that capital of a banking
company shall consist of ordinary shares only (except preference share issued before 1944). The inclusion of
preference share capital of Rs. 350 crore (350 shares of Rs.1 crore each issued by SBI Ltd. prior to merger), in the
capital structure of the bank after merger is, therefore, subject to the exemption from the application of the above
provision of Banking Regulation Act, 1949, granted by the Central Government in terms of Section 53 of the act
for a period of five years.

x) Valuation and Certification of the Assets of SBI Ltd &SBI Bank Ltd. should ensure that fair valuation of the
assets of the SBI Ltd. is carried out by the statutory auditors to its satisfaction and that required provisioning

29
requirements are duly carried out in the books of SBI Ltd. before the accounts are merged. Certificates from
statutory auditors should be obtained in this regard and kept on records.

State Bank of India has 157 foreign offices in 32 countries across the globe.

Board of Directors
 Pratap Chaudhari ( Chairman)
He joined SBI as probationary officer 37 years ago. Gradually became the Deputy Managing Director prior
to taking the position as chairman. He is also credited with the merger of State Bank of Saurashtra in
2008.The low profile banker was in charge of SBI’s International Banking business.
 Hemant G. Contractor (Managing Director)
Hemant G. Contractor is Managing Director, Group Executive (International Banking), Whole-Time
Director of State Bank Of India since 7, April 2011. Prior to this which he was Deputy Managing Director
& Chief Financial Officer. He has background in Treasury, Credit and Corporate Banking, besides
overseas experience in Bahrain. He was earlier posted as Deputy Managing Director & Group Executive
(Corporate Banking) and Chief General Manager, Chandigarh Circle.
 Kumar, A. Krishna
Shri. A. Krishna Kumar is Managing Director, Group Executive - National Banking, Whole-Time Director
of State Bank Of India., since 7, April 2011. Prior to this appointment, he was Deputy Managing Director
(Information Technology) He has domain in the areas of Credit, Operations and IT, besides overseas
experience at Chicago, USA. He has earlier worked as Chief General Manager, Mid Corporate Group and
Chief General Manager, Patna Circle.
 Choksi Dileep
Shri. Dileep C. Choksi is Non-Executive Director of State Bank Of India., since 24, June 2008. He is a
Director re-elected by the Shareholders for three years. He is a practising Chartered Accountant since 36
years and is the Chief Mentor of C3 Advisors P. Ltd. and promoter of Universal Trustees P. Ltd. and
director in several companies including World Tax Service India P. Ltd. He is also a qualified Cost
Accountant and Lawyer and was a in establishing Deloitte, of which he was the Joint Managing Partner.
He has been a visiting faculty at Bankers Training College, Reserve Bank of India and Jamnalal Bajaj
Institute of Management Studies, Mumbai.

30
 Amin, Deepak

Shri. Deepak Ishwarbhai Amin is Non-Executive Director of State Bank of India. He is a Director
nominated by the Central Government u/s 19(d) of SBI Act, w.e.f. 24th January 2012, for a period of three
years. Shri Amin holds a B.Tech. in Computer Science & Engineering from IIT, Mumbai and MS in
Computer Science from University of Rhode Island, USA. He is the co-founder and CEO of Covelix, Inc, a
Seattle and India based international software consulting. Also the founder and CEO of vJungle, Inc, a web
services software infrastructure company, which was acquired by Streamserve, Inc.

 Gokarn, Subir

Dr. Subir Vithal Gokarn is Non-Executive Director - Nominee of Reserve Bank ofIndia of State Bank of
India., with effect from August 4, 2011. He is Deputy Governor, Reserve Bank of India.

 Iyengar, Parthasarthy

Shri. Parthasarathy Iyengar is Non-Executive Director of State Bank of India., since 25, June 2011. Shri.
Iyengar holds Post graduate degrees in Engineering and Management (Management Information Systems)
from USA. He has more than 25 years of experience in the field of Information Technology in U.S and
India. He is Vice President and Distinguished Analyst in Gartner, a world IT research and advisory
services entity and currently its Regional Research Director in India.

 Malhotra, Rashpal

Shri. Rashpal Malhotra is Non-Executive Director of State Bank Of India., since 10, May 2011. He is the
Founder Director of Centre for Research in Rural and Industrial Development (CRRID), Chandigarh and
presently its Executive Vice-Chairman. Earlier, Shri Malhotra was a Director on the Boards of Allahabad
Bank and Bank of India.

 Mittal, D.

Shri. D. K. Mittal is Non-Executive Director - Nominee of GOI of State Bank of India with effect from
August 03, 2011. He is is Secretary, Financial Services, Ministry of Finance, Govt. of India

31
 Mohapatra, Jyoti

Shri. Jyoti Bhushan Mohapatra is Workman Employee Director of State Bank of India., effective
November 21, 2011. He is Special Assistant, State Bank of India.

 Sundaram, D.

Shri. D. Sundaram is Non-Executive Director of State Bank of India., since 13, January 2009. He is
Director re-elected by the Shareholders u/s 19(c) of SBI Act, w.e.f 25th June 2011, for a period of three
years. He is Vice Chairman and Managing Director of TVS Capital Funds Limited. He is a professionally
qualified Accountant (FICWA) and carries a experience in the area of Finance and Accounting. He held
many important positions in Hindustan Unilever Ltd. (HUL) group as Vice-Chairman & CFO, Corporate
Accountant, Commercial Manager and Treasurer, Finance Member, TOMCO Integration Team, and
Finance Director, Brooke Bond Lipton India Ltd. He had also held various positions in Unilever Ltd.,
London as Commercial Officer for Africa and Middle East and Senior Vice President – Finance, Central
and Middle East Group.

 Venkatachalam, S.

Shri. S. Venkatachalam is Non-Executive Director of State Bank of India., since 24, June 2008. He is a
Director re-elected by the Shareholders u/s 19(c) of SBI Act, w.e.f. 25th June 2011, for three years. He is a
practising Chartered Accountant and was employed with Citi Group and Citibank NA India Organisation
in the Senior Management Cadre for a period of 31 years in various capacities

32
Various sectors in SBI:

PERSONAL BANKING:

State Bank of India offers a wide range of services in the Personal Banking Segment which are indexed here.

SBI Term Deposits SBI Loan For Pensioners

SBI Recurring Deposits Loan Against Mortgage Of Property

SBI Housing Loan Loan Against Shares & Debentures

SBI Car Loan Rent Plus Scheme

SBI Educational Loan Medi-Plus Scheme

SBI Personal Loan Rates Of Interest

Experience a whole new world of banking at our newly opened Personal Banking Branches (PBBs)- often dubbed
boutique branches by others. Customer friendly knowledgeable staff will cater to your financial requirements with
speed and efficiency. Do visit one and find out for yourself.

AGRICULTURAL/RURAL

State Bank of India caters to the needs of agriculturists and landless agricultural labourers through a
network of 8750 rural and semi-urban branches. Apart from the branches, there are 428 Agricultural Development
Branches which also cater to agriculturists. They have portfolio of 64,000 crs in agricultural advances covering
around 80 lac accounts.

Our branches have covered a whole gamut of agricultural activities like crop production , horticulture ,
plantation crops, farm mechanization, land development and reclamation, digging of wells, tube wells and
irrigation projects, forestry, construction of cold storages and godowns, processing of agri-products, finance to
agri-input dealers, allied activities like dairy , fisheries, poultry, sheep-goat, piggery and rearing of silk worms.
Special agri specialists also have been appointed to handle different agri projects.

33
Agriculture Business Unit has four departments headed by Deputy General Managers. :-

1. Agri Business, Planning, Monitoring and Market Intelligence.

2. Corporate and Institutional Relationship.

3. Product Development and Marketing.

4. RRBs & Lead Bank Department.

With a collective effort of Govt. and the people, we are set forth to continue growth in the rural and agri
development and become the ‘Banker to Every Indian’.

NRI SERVICES

State Bank of India is the bank of choice for Indians wherever they live. With its vast network of over 14,500
domestic branches, 53 dedicated NRI Branches in India, 173 Foreign Offices in 34 countries, Correspondent
Banking relations with 475 global banks and tie up with 26 Exchange Houses and 5 Banks across Middle East,
NRIs can enjoy “anywhere – anytime”banking facilities.

The product suite for NRIs ranges from Bank Deposits, Loans and Remittances to Investments, Online Equity
Trading, Structured Products, Mutual Funds and Insurance.

INTERNATIONAL BANKING

International banking services of State Bank of India are delivered for the benefit of its Indian customers, non-
resident Indians, foreign entities and banks through a network of 173 offices/branches in 33 countries as on 05th
Mar 2012, spread over all time zones. The network is augmented by a cluster of Overseas and NRI branches
within India and correspondent links with over 483 banks, the world over. Bank's Joint Ventures and Subsidiaries
abroad further underline the Bank's international presence.

The services include corporate lending, loan syndications, merchant banking, handling Letters of Credit and
Guarantees, short-term financing, collection of clean and documentary credits and remittances.

Spreading its arms around the world, the SBI’s International Banking Group delivers the full range of cross-border
finance solutions through its four wings – the Domestic division, the Foreign Offices division, the Foreign
Department and the International Services division.

34
The bank has a network of 163offices/branches in 33 countries spanning all time zones. The SBI’s international
presence is supplemented by a group of Overseas and NRI branches in India and correspondent links with
over 483 leading banks of the world. SBI’s offshore joint ventures and subsidiaries enhance its global stature.

CORPORATE BANKING

SBI is a one shop providing financial products / services of a wide range for large , medium and small customers
both domestic and international

Working Capital Financing

 Assistance extended both as Fund based and Non-Fund based facilities to Corporate, Partnership firms,
Proprietary concerns
 Working Capital finance extended to all segments of industries and services sector such as IT

Term Loans :

To support capital expenditures for setting up new ventures.

Deferred Payment Guarantees:

To support purchase of capital equipments.

Corporate Loans:

For a variety of business related purposes to corporates.

Export Credit: To Corporates / Non Corporates

The Corporate Banking Group consists of dedicated Strategic Business Units that cater exclusively to specific
client groups or specialize in particular product clusters. Foremost among these specialized groups is the Corporate
Accounts Group (CAG), focusing on the prime corporate and institutional clients of the country’s biggest business
centers. The others are the Project Finance unit and the Leasing unit.

35
GOVERNMENT BUSINESS:

State Bank of India's linkage with Government business is widespread. No wonder that out of 9315 branches in
India, about 7000 branches are conducting Government Business. The large network of our branches provides
easy access to the common man to deposit the following Government dues and pension payments.

SERVICES

Listed on the left are Services, SBI offers to its customers.

 Domestic treasury
 Broking services
 Revised service charges
 ATM service
 Internet banking
 E-pay
 E-rail
 Safe deposit locker
 Micro codes
 Foreign inward remittances

Financial performance of the company:

The total share capital of SBI has increased at a greater rate in 2012 than that in previous years. The cash and
balances with RBI has decreased to a as compared to previous year.
The general trend of net profit was seen that it had a growth till ’10 but saw a dip in ’11 however it rose back again
in ’12. It was 9,166.05, 8,264.52 and 11,707.29 respectively.

Operating Expenses have reduced to some extent. The deposits and borrowings have reduced. Also the gross value
of investments in India has decreased by 0.91 times and that outside India have changed very meagrely. The net
profit has increased 1.25 times as compared to previous years.

36
SWOT Analysis:

Strengths

SBI is the largest bank in India in terms of market share, revenue and assets.

As per recent data the bank has more than 13,000 outlets and 25,000 ATM centres

in the current FY2012.

SBI has the first mover advantage in commercial banking service and inclination towards new age banking
services.

Weakness

Lack of proper technology driven services, traditional approach in spite of modernization when compared to
private banks.

Employees show reluctance to solve issues quickly due to higher job security and customers’ waiting period is
long when compared to private banks

A great expense on rented buildings, employees salaries.

Many Govt accounts are shifted to private banks for ease of operations.

Opportunities

SBI’s merger with five more banks namely State Bank of Hyderabad, State bank of Patiala, State bank of Bikaner
and Jaipur, State of bank of Travancore and State bank of Mysore are in approval stage will result in expansion of
market share.

SBI is planning to expand and invest in international operations due to good inflow of money from Asian Market

The bank has scope to develop its technologies and software to improve customer relation.

Threats

Reduction in market share due to competition from banks like SBI, HDFC, AXIS Bank.

FDIs allowed in banking sector is increased to 49% , this is a major threat to SBI as people tend to switch to
foreign banks for better facilities and technologies in banking service.

37
Customers shifting to private banks due to better facilitation.

Net profit of the year has decline from 9166.05 in the year FY 2010 to 7,370.35 in the year FY2011

Shareholding and Liquidity:

Reserve Bank of India is the largest shareholder in the bank with 59.7% stake followed by overseas
investors including GDrs with 19.78% stake. Indian financial institutions held 12.3% while Indian public held just
8.2% of stock. RBI is the monetary authority and having majority share holding. Now the government is rectifying
the above error by transferring RBI’s holding to itself.

Transformation Journey in State Bank of India

The State Bank of India, the country’s oldest Bank and a premier in terms of balance sheet size, number of
branches, market capitalization and profits is today going through a momentous phase of Change and
Transformation – the two hundred year old Public sector behemoth is today stirring out of its Public Sector legacy
and moving with an agility to give the Private and Foreign Banks a run for their money.

The bank is entering into many new businesses with strategic tie ups – Pension Funds, General Insurance,
Custodial Services, Private Equity, Mobile Banking, Point of Sale

Merchant Acquisition, Advisory Services, structured products etc – each one of these initiatives having a huge
potential for growth.

It is also focusing at the top end of the market, on whole sale banking capabilities to provide India’s growing mid
/ large Corporate with a complete array of products and services. It is consolidating its global treasury operations
and entering into structured products and derivative instruments. Today, the Bank is the largest provider of
infrastructure debt and the largest arranger of external commercial borrowings in the country. It is the only Indian
bank to feature in the Fortune 500 list.

The Bank is changing outdated front and back end processes to modern customer friendly processes to help
improve the total customer experience. With about 8500 of its own 10000 branches and another 5100 branches of
its Associate Banks already networked, today it offers the largest banking network to the Indian customer. The
Bank is also in the process of providing complete payment solution to its clientele with its over 21000 ATMs, and
other electronic channels such as Internet banking, debit cards, mobile banking, etc.

38
With four national level Apex Training Colleges and 54 learning Centres spread all over the country the Bank is
continuously engaged in skill enhancement of its employees. Some of the training programes are attended by
bankers from banks in other countries.

The bank is also looking at opportunities to grow in size in India as well as Internationally. It presently has 173
foreign offices in 33 countries across the globe. It has also 7 Subsidiaries in India – SBI Capital Markets, SBICAP
Securities, SBI DFHI, SBI Factors, SBI Life and SBI Cards - forming a formidable group in the Indian Banking
scenario. It is in the process of raising capital for its growth and also consolidating its various holdings.

Throughout all this change, the Bank is also attempting to change old mindsets, attitudes and take all employees
together on this exciting road to Transformation. In a recently concluded mass internal communication programme
termed ‘Parivartan’ the Bank rolled out over 3300 two day workshops across the country and covered over
130,000 employees in a period of 100 days using about 400 Trainers, to drive home the message of Change and
inclusiveness. The workshops fired the imagination of the employees with some other banks in India as well as
other Public Sector Organizations seeking to emulate the programme.

Bank of Hyderabad merged with SBI Bank

Bank of Hyderabad which was one of the oldest private bank in India merger with the largest bank by market
capitalization. This merger happened in the year 2017. This merger added the strength of the acquirer bank. SBI
bank the largest private bank by market capitalization acquired Bank of Hyderabad in 2017.

The two had proposed a share ratio 1:4.72, which means BOR shareholders, will gain one share of SBI Bank for
every 4.72 shares of BOR. SBI Bank –Bank of Hyderabad merger is the seventh voluntary merger in Indian
banking sector, u/s 44A of the Banking Regulation Act, 1949. This is the SBI Bank’s fourth acquisition after
Sangli Bank. The background of the merger can be traced to the regulatory intervention of SEBI and RBI on Bank
of Hyderabad. In the recent past, mergers and acquisitions are on a steady rise in the financial sector caused by
regulatory interventions of the State and also due to business environmental reasons. Between 2000 and 2017, the
size of the largest bank in the world has grown near to fourfold by it’s assets from about US $0.64 trillion to US
$2.2 trillion which is almost double the size of GDP of India. Synergies arising from geographical diversification,
increased efficiency, cost savings and economies of scale are the motivation drivers behind bank mergers across
the world.M&As have become a major strategic tool for achieving the same and it is imperative to avoid the
possibilities of small banks from becoming the target of huge foreign banks which are expected to come to India.
Based on the motives, merger deals are grouped into 3 categories viz, Voluntary Merger, Compulsory Merger and
Universal Banking Model

39
TARGET of SBI

For the year 2014-15, SBI is targeting 25 per cent and 22 per cent growth in deposits and advances respectively.

As per rough estimates, the growth was not as high as expected during the last financial year, at 18 per cent and
15-16 per cent, mainly due to the general economic scenario, as said by Mr Krishna.

As SBI had surplus liquidity, meeting credit targets for the current financial year would be a problem, he added.

During last year, the growth of the SME and farm sector portfolios was in the range of 18 per cent to 22 per cent,
while mid corporate and retail segments showed ‘sluggish' growth.

ABOUT LOGO

THE PLACE TO SHARE THE NEWS ...……

SHARE THE VIEWS ……

Togetherness is the theme of this corporate loge of SBI where the world of banking services meet the ever
changing customers needs and establishes a link that is like a circle, it indicates complete services towards
customers. The logo also denotes a bank that it has prepared to do anything to go to any lengths, for customers.

The blue pointer represent the philosophy of the bank that is always looking for the growth and newer, more
challenging, more promising direction. The key hole indicates safety and security.

MISSION STATEMENT:

To retain the Bank’s position as premiere Indian Financial Service Group, with world class standards and
significant global committed to excellence in customer, shareholder and employee satisfaction and to play a
leading role in expanding and diversifying financial service sectors while containing emphasis on its development
banking rule.
40
Data Analysis:

Table No.1

Balance sheet of State Bank of India as on 31 march 2018

Balance Sheet of SBI Bank

Mar '17 Mar '18

12 months 12 months
Capital and Liabilities: Rs in Cr.
Total Share Capital 220.36 196.82
Equity Share Capital 220.36 196.82
Share Application Money 742.67 23.54
Preference Share Capital 0 0
Reserves 5,635.54 1,092.26
Revaluation Reserves 0 0
Net Worth 6,598.57 1,312.62
Deposits 32,085.18 16,378.21
Borrowings 49,218.66 1,032.79
Total Debt 81,303.77 17,418.00
Other Liabilities & Provisions 16,207.58 1,012.97
Total Liabilities 174,179.92 19,736.59
Mar '17 Mar '18

12 months 12 months
Assets
Cash & Balances with RBI 1,774.47 1,231.66
Balance with Banks, Money at Call 18,018.88 2,362.03
Advances 47,034.87 7,031.46
Investments 35,891.08 8,186.86
Gross Block 4,494.29 589.68
Accumulated Depreciation 254.94 208.55
Net Block 4,239.35 381.13
Capital Work In Progress 0 19.23
Other Assets 4,158.28 524.23
Total Assets 174,179.93 19,736.60
Contingent Liabilities 37,707.48 12,561.17
Bills for collection 3,062.52 2,516.71
Book Value (Rs) 265.74 65.5

41
Table No.2

Profit and loss account of State Bank of India as on 31 march 2018

Profit & Loss account of SBI Bank

Mar '17 Mar '18

12 months 12 months
Income Rs in Cr.
Interest Earned 2,151.93 1,242.13
Other Income 589.26 220.34
Total Income 2,741.19 1,462.47
Expenditure
Interest expended 1,558.92 837.67
Employee Cost 147.18 51.71
Selling and Admin Expenses 203.85 179.3
Depreciation 64.09 36.76
Miscellaneous Expenses 499.69 255.46
Preoperative Exp Capitalized 0 0
Operating Expenses 613.42 324.15
Provisions & Contingencies 301.39 129.08
Total Expenses 2,473.73 1,290.90

12 months 12 months
Net Profit for the Year 267.45 171.57
Extraordinary Items 0 0
Profit brought forward 0.83 0.8
Total 268.28 172.37
Preference Dividend 0 0
Equity Dividend 44.07 44.07
Corporate Dividend Tax 4.5 4.5
Per share data (annualized)
Earning Per Share (Rs) 12.14 8.72
Equity Dividend (%) 20 20
Book Value (Rs) 265.74 65.5
Appropriations
Transfer to Statutory Reserves 191 182.5
Transfer to Other Reserves 0 0
Proposed Dividend/Transfer to Govt 48.57 48.57
Balance c/f to Balance Sheet 19.56 0.83
Total 259.13 161.9

42
 0
1000
1500
2000
2500
3000

500
Profit & Loss account of SBI Bank

income of SBI
Income
Interest Earned

INTERPRETATIONS
Other Income
Total Income
Expenditure
Interest expended
Employee Cost
Selling and Admin Expenses
Depreciation
Miscellaneous Expenses
Preoperative Exp Capitalized
Operating Expenses
Provisions & Contingencies
Total Expenses

Net Profit for the Year

43
Extraordinary Items
Profit brought forward
Chart No.2 Profit and Loss account of State Bank of India

Total
Preference Dividend
Equity Dividend
Corporate Dividend Tax
Per share data (annualized)
Earning Per Share (Rs)
Equity Dividend (%)
Book Value (Rs)
Appropriations
Transfer to Statutory Reserves
Transfer to Other Reserves
Proposed Dividend/Transfer to Govt
Balance c/f to Balance Sheet
Total
Series3
Series2
Series1

Net profit for the year 2017 was 267.45 and in the year 2018 171.57, there was decrease in profit in 2018.
In the year 2017 expenses are 2473.73 and in the year 2018 it was 1290 , there was less expenses in 2018.
In the year 2017 the total income of SBI was 2741.19 ,and in yhe year 2018 it was 1462.47 there was decrease in
Table no.3 Ratios analysis of State Bank of India

RATIOS 2017 2018

EPS 8.72 12.14

RETURN ON ASSETS 1.8 1.8

RETURN ON NET WORTH 13.94 6.76

ASSET TURNOVER 2.47 0.6

CAR 18.57 18.44

DEBT-EQUITY 12.71 5.48

CURRENT RATIO 0.03 0.17

Data Interpretation
EPS(equity per share) In the year 2017 the EPS of the company was 8.72 and in the year 2018 it was
12.14. There was an increase in the EPS, which means company is more sufficient to pay dividends to its
shareholders as compare to after merger.

In the year 2017 Return on net worth was 13.94 and in the year 2018 it was 6.76. There is a decrease in
Return on net worth which means in the year 2017 company had more competition than compare to in the
2018.

In the year 2017 the company had more debt i.e. 12.71 than compare to in the year 2018 i.e. 5.48. It
means in the year 2017 company had less owners stock.

In the year 2017 CurrentRatio was 0.03 and in 2018 it was 0.17. It means in 2017 the bank was lesser
efficient to pay liabilities compare to the 2018.

In the year 2017 assets turnover ratio was 2.47 and in the 2018 it was 0.60Asset turnover ratio is the ratio
of a company's sales to its assets.

In 2017 Capital Adequacy Ratio was 18.57 & in 2002 i.e. after merger is 18.44 which is pretty good
balance of Capital adequacy ratio

44
COMPARISON OF BALANCE SHEET

LIABILITY SIDE

Table No 4 changes in pre and post merger of State Bank of India

CAPITAL RESERVE/ DEPOSITS BORROWING CURRENT

SURPLUS LIABILITY
/PROVISIO
N

PRE- 192 1919 36730 1468 1270

MERGER

POST 192 2480 42590 1400 1700

MERGER

% NIL +29% +16% -5% +39%

CHANGE

INTERPRETATION

Reserves and surplus of pre merger SBI was 1919,and the post merger SBI was 2480 ,there was an increase in
reserves and surplus with 29%.
Deposits of premerger SBI was 36730 and post merger SBI it was 2480 ,there was an increase in deposites with
16%.
Borrowings of premerger SBI was 1468 and post merger it was 1400 , there was a decrease in borrowing after
merger.

45
Chart no 2 Pre and post merger of liabilities of SBI

45000

40000

35000

30000

25000
CAPITAL
RESERVE/ SURPLUS
20000 DEPOSITS
BORROWING
CURRENT LIABILITY/ PROVISION
15000

10000

5000

0
PRE- MERGER POST- % CHANGE
MERGER

-5000

46
ASSETS SIDE
Table No 5 changes in pre and post merger of State Bank of India

CASH/ INVES ADVAN DEFE- RECEI- NET INTAN-

BANK TMEN RRED VABLE FIXED GIBLE
TS -CE/ TAX S ASSET ASSET
LOAN LIAB.
PRE- 3329 17426 18953 99 1300 446 32
MERGER

POST- 4400 19300 22957 24 1220 445 16

MERGER

% +32% +11% +21% -76% -6% -0.3% -50%

CHANGE

INTERPRETATION

Cash and bank balance of pre merger SBI was 3329 and post merger SBI it was 4400, there was increase in cash
and bank balance of after merger with 32%.

Fixed assets of pre merger SBI was 446 and post merger it was 445 ,there was a decrease in fixed assets with
0.3%.

Investment of premerger of SBI was 17426 and post merger SBI it was 19300 , there was an increase on
investment with 11%.

47
Chart No 3 Pre and post merger of assets of SBI

25000

20000

15000

PRE- MERGER
10000 POST- MERGER
% CHANGE

5000

0
-CE/ LOAN
LIAB.
CASH/ INVES ADVAN DEFE- RECEI- NET FIXED INTAN-
BANK TMEN TS RRED TAX VABLE S ASSET GIBLE
-5000 ASSET

48
FINDINGS

 The finding of the study are expected to be a great use effect profitability in a significant way .Thus ,more
emphasis can be laid on those factors which are positively associated with profitability and an effort can be
made to constrain the factor which effect profitability in a positive or negative way in the financial
performance of bank before and after merger.
 It was found that interest expended to interest earned has reduced during the period of the study .
 It was found that other income to total income has substantially increased from 1.55 in premerger period
to12.14 in post merger period reveals diversification of investment .
 Operating expenses to total income has reduced by 17.23 during the period .
 Net profit mergin has decreased in 2017when compare to 2018 this indicates negative impact of mergers
on the profitability of the bank which may be due to decline in income.
 It was found that there was an increase in cash and bank balance after the merger with 32%.
 It was found that the fixed assets of SBI before merger was 446 and after merger it was 445 there was an
decrease in fixed assets with 0.3%.
 It was found that investment of SBI before merger was 17426and after merger it was 19300 there was an
increase in investment with 11% after merger.

49
SUGGESTION

 Assets turn over ratio is the ratio of the company‘s sales to its assets .it is an efficiency ratio
which tells how successfully the company is using its assets to generate revenue .
 The profitability has decline not because of decrease in non interest income and other
income and increase in operating expenses but because of increase in interest expended
,ineffective utilization of assets and loan ,and reduced interest income.
 The result of analysis of the merger of State Bank Of India with its associative banks .it reveals that SBI
does not shows the significant improvement in the financial performance of the post merger period .
 I would like to suggest that investor that not to invest in SBI because SBI is showing negative impact of
merger on profitability of the bank which may be decline in income .
 The acquirers need to identify appropriate target that has complimentary fit within the acquirers own
organizational structure, product portfolio and work culture. Post merger integration issues may be One
significant reason for failure of Merger to improve long term operating and financial performance of
acquirer companies.
 As Machi (2005) suggests, organization structure with similar management problems, cultural system and
structure will facilitate the effectiveness of communication pattern and improve the company's capabilities
to transfer knowledge and skills.

50
CONCLUSION

The result of the analysis of the merger of State B ank Of India with its associative banks .SBI
reveals that the State Bank Of India doest not shows the significant improvement in the financial
performance of the post merger period .thre are some financial parameter have shown significant
improvement during the post merger period ,but most of the parameters have not shown
significant improvement .There has beenpositive impact of profitability of the bank.

Mergers is a useful tool for the growth and expansion in any Industry and the Indian Banking Sector is no
exception. It is helpful for the survival of the weak banks by merging into the larger bank. This study shows the
impact of Mergers in the Indian Banking sector and two cases have been taken for the study as sample to examine
the as to whether the merger has led to a profitable situation or not. For this purpose, a comparison between pre
and post-merger performance in terms of Net Profit Margin, Return on Assets, Return on Equity, Earning per
Share, Debt Equity Ratio of SBI. In case SBI there is no significant improvement in the performance after the
merger as the merger was mainly in the interest of the public. In the initial stage, after merging, there may not be a
significant improvement due to teething problems but later they may improve upon.

Thus it can be concluded from the study that the positive impact of merger may accure in last year i.,e in long run
as the present study is limited to 2017-2018of pre and post merger of SBI.

51
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S

56
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