State Bank of India 500112
Q4 2013 Earnings Call Transcript
Transcript Call Date 05/30/2013

Shailendra Maru - Associate Director, Stakeholder Relations: Thank you, Amba. Welcome to all of you on the investor call of State Bank of India hosted by Edelweiss Financial Services. Before we commence the call, I will like to request Ms. Rita, General Manager at the State Bank to read out the Safe Harbor provisions. Madam?

G. Rita - Deputy GM: Thank you, Mr. Maru. Welcome to all of you on the conference call of State Bank of India to discuss the audited FY '13 results and business update. Certain statements that may be made or discussed during the conference call maybe forward looking statements based on the current expectations of the management of State Bank of India Group. Actual results may vary from these statements. Investors are, therefore, requested to check the information independently before making any investment of other decisions. Thank you.

Back to you Mr. Maru.

Shailendra Maru - Associate Director, Stakeholder Relations: Thank you, madam. I will now request Vikas Khemani, President and Head of Wholesale Capital Market at Edelweiss to introduce the State Bank management team. Vikas, please go ahead.

Vikas Khemani - President, Co-Head Wholesale Capital Markets: Thank you, Shailendra. Good morning, good afternoon, and good evening to all the participants from all over the world. I welcome all of you to State Bank of India's investor call to discuss the audited financial year '13 earnings and other business updates. SBI's top management is represented by none other than the Chairman himself Mr. Pratip Chaudhuri under whose leadership SBI has started newer courses. He is joined by Mr. Hemant Contractor, Managing Director and Group Executive International Banking Group; and Mr. Krishna Kumar, Managing Director and Group Executive National Banking Group; and Mr. Diwakar Gupta the Managing Director and CFO. Also Mr. S. Vishwanathan Managing Director Group Executive Associate and Subsidiaries and other top executive of the SBI.

I would like to thank on behalf of Edelweiss team the top management of the SBI for taking time out and giving us opportunity to host the call for market investors from all over the world.

Now without taking much of the time, let me hand over the call to Mr. Chaudhuri for the opening remarks and free flow conversation will all of you. Thank you. Over to you sir.

Pratip Chaudhuri - Chairman: Welcome to the conference call. Good morning, good afternoon, and good evening to everybody. I will just spend about few minutes giving a summary of the results and as we see it. Firstly, the profits of the bank on a consolidated basis at INR 179 billion is up about 17% from last year, which is INR 153 billion and on a standalone basis it is INR 141 billion compared to INR 117 billion, 20% up.

Why we put the consolidated in front, because State Bank of India apart from being a bank is also a holding company, which has substantial liquidity holding in five banks and one life insurance company, asset management company, investment bank, et cetera, et cetera. So about 30% of the equity of the bank is working in its associates and subsidiaries in order to give a full view of the earnings thereof, we thought it is important to present to you the consolidated and also at times some of the subsidiaries may not be doing well. So if we don't bring that to the fore, it may give to rise to (indiscernible) giving that whether the bad part is being shadowed in the subsidiaries.

This (India) was relatively in a low growth mode in this year and which has reflected on the results of most of the companies. Yet, relatively speaking as of today State Bank of India's profits are at number four, just behind ONGC, Reliance and the newcomer there is Coal India, but all these are resource companies and when you see Coal India in a way are monopolies. So in the free market space, we think State Bank of India is the largest profit making company, be it standalone, be it on a consolidated basis.

Broadly the results have been, I would say a mixed bag. The earnings, the operating profit are relatively flat; that is because a part of the funds about INR 400 billion – INR 40,000 crores, which was earlier in the pension funds and was accounted for by the bank as interest free, whereas the income on those assets were counted for interest, so was taken out and put in a separate tax sheltered fund. So that is why optically the operating profit looks flat, but if we factor in for this, the operating profit would be about 8% higher, INR 30 billion is the difference we count on account of that. But there have been some significant savings in the income tax, though the operating profit is at the same level, but we have been able to make savings in the income tax and for this the credit likely goes to the CFO's office. We could shift the pension and provident fund income to a tax sheltered fund, wherein it receives its income plus exempt from tax. Earlier they had to be surrendered for tax. So the profit after tax has been higher by about 20% on a standalone basis and 17% on a consolidated basis, which we think is a significant achievement in difficulties.

And the bank operationally has been relatively sound, the net interest margins have been comfortable, rather quite good at about 3.66 on the domestic side, which is perhaps the second highest in the country and that’s 2% because the highest bank with highest net interest margin also does the credit card business, within the bank. So, credit card business has much higher interest paid and we do this credit card business outside in a subsidiary.

Be that as it may, our main difficulty or call it nemesis has been the net non-performing assets. In the first three quarters, there was a secular and continuous increase in the non-performing assets, but we’re happy to report that in the fourth quarter there was a decline in the gross NPAs. The gross NPAs declined, so generally in a quarter we used to have about increase of INR 40 billion in the NPAs and about INR 25 billion used to go for provisioning thereof.

But this year this quarter, though there was no increase in the NPA, the additional provisioning came at INR 40 billion. This is largely because the Reserve Bank’s rule that any asset which falls into D3 category regardless of the value of the underlying asset whether primary or collateral has to be provided 100%.

So we thought that we will make adequate provision because provisions do not go outside the bank and should things look better or if we’re able to realize more from the troubled assets, this amount can be later returned back in the subsequent quarters.

On the treasury portfolio, last year we had a huge loss of about equities of about INR 700 crores, about total loss was about INR 12 billion and this year we have totally stemmed that and what has happened is that we have made it a quality portfolio and we’re investing on the equity side only in the top 50, what are called the Nifty 50 stocks, which form a benchmark of stock market indices. And even on the bond side, we benefited slightly from the lower interest regime that came in towards the end of the quarter, and continuing this, the interest rates and particularly on the bonds have gone down significantly, but the benefits thereof are not whether they happen can be visible only in this financial year in the subsequent quarters.

Looking to the top line and bottom line, the deposit position continued to be very comfortable, so we mobilize deposits but we shed our dependence on high cost deposits altogether, and the entire growth in the deposits came from retail deposits at about 14%. And the loan growth has been very robust at 20%, and much of the loan growth came in the last quarter, where we took a strategic decision that we aggressively cut the rates of interest for high quality, well rated assets. And this we confined largely to assets, which are rated A or above and some lowering was done also for assets which are BBB, BBB plus with investment grade. But we have been rather indifferent, have increased the pricing, and have not given any lower pricing for non-investment grade assets. So that has been the overall stance and in all these loans we have kept a minimum fixed asset cover of 1.25, preferably 1.30, because our experience in case of delinquent account says that when we try for the resolution, if the underlying asset, even if they are industrial assets or commercial assets, the loss incidence is much lower. So we have a preference for secured assets, and going forward, we have totally recast our pricing for non-fund businesses because we think we're selling the bank cheap in the non-fund business, particularly in the guarantees and LCs and where the underlying asset cover is also weak and just for about $0.50 to $100, we stake entire $100 and in case of a delinquent situation the losses are enormous. But we now have a different kind of an approach. We're laying out, so to speak, the red carpet for the best-rated accounts, with the result the percentage of the advances, both in our large corporate and mid-corporate directed towards investment grade and above assets have increased significantly by about 10 percentage points in both of them, in the corporate account book as also in the mid corporate book.

The large corporate book held extremely well. It grew by about 40% from about INR 1,250 billion to INR 1,755 billion, an increase of 40% and the NPA there was only about 0.5%. Similarly, we had a good breakthrough in the mid-corporate also, because mid-corporate the volume growth happened at 17% and overall, the NPA position remained under control. And particularly successful has been our agri story where almost 65% of the incremental loan book is collateralized by gold, and for the first time, as you would be aware that banks have to lend 18% of their total credit to through agriculture, and if there is a shortfall in that, the banks are penalized in a way that they have to put up the balance, the shortfall amount in very low end RIDF funds, Rural Infrastructure Development Fund. So for the first time in many years, our direct agriculture lending has exceeded the benchmark of 13.5% and to that extent our contribution required for RIDF would be much lesser.

So I will conclude at this point and leave the floor open for questions, but we have re‐emerged as the leader in the auto loans category and going forward, our stance should be that we are concentrating more on the individual home loans businesses, which come with lower delinquencies, with total NPA percentages less than one and also give lot of opportunities for cross sell, particularly by way of insurance and secondly on the corporate side, we would be very aggressive in pricing, as I said, asset‐backed loans with good rating and we would rather be indifferent and even could shed some of the assets, which do not fit this category. And the capital adequacy continues to be significantly above Basel at 9.50. So this is how we are poised. And on the headcount side, we have added a small number relative to 2011 in 2013. So our staff cost has gone up only by 8%, whereas there has been a 17% increase in other costs. And much of the work which is of routine or maintenance nature, which was earlier being done by officers, is being down‐streamed to the assistants, because in our understanding, the cost of an assistant is approximately one-third of that of an officer. So the amount of work we can downstream, which was earlier done by the officers to the staff, brings significant cost advantages, and we’re also benefiting from what we always call is the demographic dividend. We have an attrition of approximately 5,000 to 7,000 employees every year, and even if we add that much number, the new employees come at much lesser costs.

So this is the backdrop, and with this, I will leave the floor for any questions that you may have or Mr. Diwakar Gupta, CFO, if you’d like to supplement any issues or any other managing directors as to…

Diwakar Gupta - Managing Director and CFO: No sir, I think it’s fine. We can just straightway get into questions.

Shailendra Maru - Associate Director, Stakeholder Relations: Amba, we will open for Q&A.

Transcript Call Date 05/30/2013

Operator: Kashyap Jhaveri, Emkay Global.

Kashyap Jhaveri - Emkay Global: I have a question on this treatment of pension last year, you mentioned that we used to club income on the pension fund in the interest income. Now, if I look at your annual report it mentions that this pension fund was being treated as deposits in our books of accounts. The interest expense on those deposits is something, which was not accounted for in the interest expense, but was part of employee expenses, is that correct to assume?

Pratip Chaudhuri - Chairman: It was kept as an interest-free account. So the bank did not pay any interest on that. It came interest-free, but the income on that got merged or amalgamated with rest of the income stream of the bank. And that is how the net interest margin came at about 4.10. But now it has been taken out. The amount of that is INR 40,000 crores or about INR 400 billion.

Kashyap Jhaveri - Emkay Global: If I look at…

Unidentified Company Speaker: One minute.

Kashyap Jhaveri - Emkay Global: Yeah. Sure.

Unidentified Company Speaker: There are two components, so you should be clear that there are two components to retirement benefits. There was a provident fund component. That was kept as a deposit in one of the branches. That was sent away to the provident fund trust. There was a pension component that could not be sent away to a trust because of some regulatory issues, and therefore it was lying at a special provision account. Now that special provision account, therefore, was not being paid interest, and the interest was not getting booked differently. It was only a provision. So what has been set out is a component of provident fund where bank has also saved interest it was paying and the pension component where the bank has just sent out cash. Had that continued with the bank, you would have had that much of higher interest income. And to that extent, your income line is depleted by the earnings on this INR 18,000 to INR 20,000, which has been sent out. Now that has been clawed back in the (stock expenses) because if we had got that income, we would have had to provide for higher pension provisions. Now, the trust earns that interest and therefore pension provisions are lower by that amount, so it is net-net neutral to operating profit. But on the NII, yes, there is an optical reduction of about 20 basis points because of this thing.

Kashyap Jhaveri - Emkay Global: Sure that's quite helpful.

Unidentified Company Speaker: Let me also tell you that in terms of tax this is very efficient. Provision being with the bank, we would have earned an offered it to tax. The trust does not have to offer its earnings to tax. To that extent, taking this earnings out of the bank actually saves the bank income tax, which today would qualify for good INR 600 crores to INR 800 crores of the (indiscernible).

Kashyap Jhaveri - Emkay Global: Actually, I had a different question on that. If I look at your pension provisions last year, they were roughly about INR 2,690 crores. Now, the interest which we would have to transfer because of the estimated rate of return on this pension fund would have been up to about INR 3,000 odd crores. So my question is that, if I look at your pension provisions, there are still about INR 2,700 crores last year. There are INR 2,200 crores this year, so why that number of FY '12 was so low when we had to transfer also interest component into that.

Unidentified Company Speaker: It has two components. The first component is an additional amount of INR 225 crores that we have provided in anticipation of the next (payment year).

Kashyap Jhaveri - Emkay Global: No, my question pertains to actually last year, not this year.

Pratip Chaudhuri - Chairman: He is saying FY '12, why was it lower. FY '13 is okay.

Unidentified Company Speaker: Effectively if I have understood the question right, what you're saying is that my provisioning this year should have been lower because now the trust is earning a lot of interest.

Kashyap Jhaveri - Emkay Global: No, actually in fact my question is that last year should have been in fact much higher than 2,650.

Pratip Chaudhuri - Chairman: The last year and this year, the difference is about INR 450 crores, INR 4.5 billion.

Kashyap Jhaveri - Emkay Global: Right, the interest component should have been fairly larger number?

Pratip Chaudhuri - Chairman: Exactly.

Unidentified Company Speaker: Last year the discount rate was high.

Unidentified Company Speaker: I mean, it is a question of interpreting whichever way – the last year's amount was right than this year should have been lower. If this year's amount is right, last year should have been higher that is the interpretation.

Pratip Chaudhuri - Chairman: He is saying that the difference between this year and last year is the interest component.

Unidentified Company Speaker: Correct.

Pratip Chaudhuri - Chairman: Which is so substantial, but is not being reflected there adequately.

Unidentified Company Speaker: Yeah.

Kashyap Jhaveri - Emkay Global: Yes, I think Mr. Chaudhuri has got it perfectly – actually perfectly right, that's the question that I have.

Unidentified Company Speaker: Yeah, so let us assume that the 2691 was right in FY '12. In that case according to you, firstly it's not 3,000 crores. If you take 8% on 20,000 crores, it is about 1,500 crores.

Kashyap Jhaveri - Emkay Global: That fund

Unidentified Company Speaker: We sent out only INR 20,000 crores. We did not send out INR 35 crores. INR 15 crores was already away.

Kashyap Jhaveri - Emkay Global: Okay, okay, okay.

Unidentified Company Speaker: So that is 1,600 crores, but this year should have been a INR 1,100 crores provision against 2,200 crores

Pratip Chaudhuri - Chairman: Last year it was as per the actuarial evaluation, this year whatever is the pension amount, we've topped it up with the 15% ad hoc increase.

Kashyap Jhaveri - Emkay Global: Okay.

Pratip Chaudhuri - Chairman: Because some of these things are still in the state of planning (indiscernible) would be the average longevity than the discount rate, there are still some divergences on that. So we said at least whatever is known last year, let it be frozen and have a 15% top up just in lines of the 15% wage increase that is planned.

Kashyap Jhaveri - Emkay Global: Okay, okay. Yeah, I think that's helpful.

Operator: Kanika Datta, Sunidhi Securities.

Kanika Datta - Sunidhi Securities: Sir, my question is on your other expenses. They have gone up quite a bit on a sequential basis, so just wanted to know what is the reason for this?

Pratip Chaudhuri - Chairman: No. Other expenses has gone up by about 30%. This reflects the average cost increase in many of the items like rents, et cetera. There is an overall inflationary environment of 9% to 10%, so that and the new build, but the stock expenses, which are generally two-thirds of the total. So the two-thirds component of the total, which was INR 169 billion, INR 170 billion has become INR 183 billion. It has increased by 8%, but you are very right, the other expenses from 90 has gone to about 110. Mr. Krishnakumar would have a...

A. Krishna Kumar - MD and Group Executive (National Banking): Yeah, the one reason for this also is that this is one component in other expenditure, which represents the amount spent on outsourcing of activity. Now that has gone up from INR 23.9 billion to INR 30.3 billion, most of which relates to component of outsourcing. Now this has gone up, because we have outsourced, as you are aware, activities relating to maintenance and upkeep of branches, maintenance and upkeep of ATMs, and in some of the ATM, security guards are outsourced. They are not the bank's own employees. So, this is one reason, why this component has shown an increase in the last year.

Pratip Chaudhuri - Chairman: Particularly also advertisement, because we relied largely on the retail products for asset growth. Now retail products need more of a publicity related to the corporates. So the publicity expenditure is almost about 1.8 times, but I think it has helped us to position the bank well, greater familiarity and greater projection of the bank's asset (departments).

Kanika Datta - Sunidhi Securities: So, what can we assume would be the run rate going ahead for other expenses? Would it be in line to what we see in FY 2013?

Pratip Chaudhuri - Chairman: We would expect 14% to 15% increase.

Kanika Datta - Sunidhi Securities: 14% to 15% increase, okay. As far your staff expenses in the quarter, they were at about INR 56 billion. So, this includes the provision you made for wage negotiations as well, right sir?

Pratip Chaudhuri - Chairman: Yes. And also we made for five months, instead of three months.

Kanika Datta - Sunidhi Securities: Okay. This is for five months.

Pratip Chaudhuri - Chairman: Effective is from 1st November, so it was really too much on the quarter ending December, yes, you are right.

Kanika Datta - Sunidhi Securities: Okay. So it would continue at like a similar sort of rate going ahead?

Pratip Chaudhuri - Chairman: 8% would be I think more realistic estimate. The people who are having attrition are at much higher rate, and (indiscernible) coming in, and even the grade, because we're adding more in the assistant grade and fewer in the offices space.

Operator: Santosh Kamath, Franklin Templeton.

Santosh Kamath - Franklin Templeton: I wanted your view on the base rate going forward. Lately, we have seen many of the good Indian corporates have been able to borrow money from the bond market at significantly lower levels than what the bank's offering as a base rate. So what's your view on the base rate with that background?

Pratip Chaudhuri - Chairman: Base rate, we are at 9.70. Only bank lower than us is 9.60 at HDFC and ICICI at 9.75, Axis at 10. The rest of the public sector fraternity is at 10.25, some would have broken ranks and be at 10.1. So, I agree that the competition from the bond market would always be there, but relative to the bond market, the loan market has some advantages, though you're right in saying that it's more (expensive to A). The bond market is limited to AA. And in fact, even AA accounts, it's AA plus find it extremely difficult to access the bond market. But the insurance regulations don't allow them to subscribe to AA. So, therefore, the market is not that deep and big. Secondly, the minimum tenure preferably is 10 years in order to get a reasonable absolute return. We have lots of loans at 3.5, 4, 5, and 6, then the loans have the flexibility of early repayment in part or in full, which is not possible in bond. But this is something that we have lived and grown with and I was mentioning that if you look at the balance sheet of some top companies, say Power Grid or NTPC, which are capital intensive, the rupee loan book is hardly 5% or 7%. Most of it is coming from the bond book, so agree that rupee loan book has competition from bond, I think more importantly the rupee loan book also has competition from the dollar mark. So, whatever results we have achieved, it is in spite of this competition and I don't think it is getting any worse.

Santosh Kamath - Franklin Templeton: And sir, what would be your view on the deposit side, on the deposit rates?

Pratip Chaudhuri - Chairman: Yeah, deposit, my view is today we offer the lowest rate of interest at 8.75% and senior citizens at 9%. We did a bit of experimenting by lowering this rate to 8.50%, and we recalled because there was an investor backlash. And, our deposit growth in the third quarter plummeted very significantly from about something like INR 322 billion to about INR 188 billion. So we quickly retraced our steps got to 8.75 and 9. But what we have done is that we have reduced the premium for senior citizens from 0.5% to 0.25%. And, we're expecting that some resentment or some revolt, but very surprisingly that has not happened. Now it leads us to conclude that the senior citizens if they're to storm out of the bank and try the private sector banks, they would not be very successful or would not be comfortable. So we can get away by paying slightly less to senior citizens, but there are limitations. If we pay 25 basis points lower, people may accept, like it has happened in the fourth quarter on Slide 69, but if we pay 50 basis points lower, then people may storm out. But, the Post Office, the government savings rate being at 8.5%, I think that acts as a natural floor for the banks, because if the bank deposit rates go below that, the whole deposit franchise would be up for grabs or could be jeopardized.

Santosh Kamath - Franklin Templeton: So essentially, when the entire economy is waiting for lower interest rate, the largest bank is saying that it's difficult to lower rate both on the credit side and the deposit side, right?

Pratip Chaudhuri - Chairman: No, that is half the truth. The rest half is that the largest bank has the lowest rates. What matters to the customer is that the actual rate given to them, and what the largest segment of the customers that are availing is the home loan, we have the lowest rate at 9.95%, and nobody has in single digits. And 10.10% for beyond INR 30 lakhs, beyond INR 3 million. And, the car loan also our rates are the lowest. Now again, most significant or most widely is the corporate loan. There also our rates are the best and in fact the fourth quarter loan growth, which many analysts have expressed some issues on that has happened because of our aggressive lending on that. So the effective rate to the customer is that is the best in the industry, and in all TV interviews, we're saying that if anybody has not experienced that monetary policy transmission, he or she just has to shift their account to SBI and enjoy the benefits of lower rates of interest relative to competition.

Santosh Kamath - Franklin Templeton: Sir my last question would be, what would it take for these rates, both on the deposit and the credit side to significantly move down say maybe 25, 50 basis points from here. So you have been a strong...

Pratip Chaudhuri - Chairman: In my view, the deposit rate would move down if the government post office rates drop.

Santosh Kamath - Franklin Templeton: Okay.

Pratip Chaudhuri - Chairman: (If they dropped today at) 8%, then you can expect the secular drop of 0.5% in the deposit rates. And in the loan rates, it has to be either a CRR cut. Of course, if there is a deposit rate cut happens, so again we need to be preconditioned by the cut in the government savings rate. And even if the deposit rates remain stationary, if there is a CRR cut, or if RBI pays interest on the CRR impounded balance.

Santosh Kamath - Franklin Templeton: Right. So basically a repo cut, as you've been saying for some time doesn't materially impact you all.

Pratip Chaudhuri - Chairman: Does not, significantly impact. Except it gets a leg up in our bond valuation.

Operator: Sri Karthik, Espirito Santo.

Sri Karthik Velamakanni - Espirito Santo: My question is pertaining to the cyclicality or seasonality in the gross slippage number, what was observed Q4 of previous year which is FY ‘12 is that the gross slippage number is almost half from about INR 8,000 crores to INR 4,000 crores, which is also a similar trend that we’ve seen during FY ‘13. However the first three quarter of FY ‘13, we’ve seen a pick‐up in that number again. So my question essentially is whether that – how do we read into this? Should we expect numbers to again pick up from here on or should we expect the numbers to remain around INR 5,000 crores or INR 6,000 crores number?

Pratip Chaudhuri - Chairman: Broadly it would be a function of the economy, but the first quarter of FY ‘13, when we had a slippage of about INR 75 billion to my mind is an outlier. And the general trend in the next three quarters, we had total net increase of about INR 42 billion or INR 40 billion.

Sri Karthik Velamakanni - Espirito Santo: I'm actually referring to the gross increase numbers, the INR 8,000 crores odd in the Q2 and Q3, was a similar number even in FY ‘12, but that is almost half during Q4, and again started to pick up?

Pratip Chaudhuri - Chairman: Gross number, I think, mine needs to be tempered with cash recovery and upgradation, because then, as there are slippages, some of those which have slipped into the substandard category also tends to come back, and particularly in long tenors – retail loans, if you make a recovery of 1 lakh, the upgradation would be a multiple of that, could be 10 times. So the way we look at that is the two numbers, the slippages and the net increase. So, the net increase even if you exclude the write‐off, which is more of an accounting. So that is a number, which is possibly a net number, net of slippages minus the recovery and upgradation effort, but again I say that the first slippage number of INR 108 billion and INR 75 billion in net increase of Q1 was an outlier, and hopefully, we'll not have a repeat of that at least in Q1 of FY '13. But fourth quarter is always hyperactive, every year, because the CDR mechanism gets into high activity mode. And secondly, possibly we pressed all the levers for the recovery, and now having seen this good performance and especially people's confidential reports are written based on their NPA numbers at the end of the March. So maybe it is a network trend, but psychologically people are also more conscious and put the extra efforts in the last quarter. And that has particular been visible in the retail NPA. The huge recoveries and upgradation in the retail NPAs in the last quarter for us is a testimony to that, and Mr. Acharya, would you like to comment on the MCG slippage quarter wise are?

Acharya: No.

Pratip Chaudhuri - Chairman: Is that a trend or reverse to that?

Acharya: No.

Pratip Chaudhuri - Chairman: First Q1 was an outlier or...?

Acharya: Q1 was an outlier, but having said that as the Chairman says that the fourth quarter is a quarter where there is a lot of hyperactivity in the system, but for the MCG the hyperactivity is more for upgradation, but if we see the rate slippages, which you are referring to for MCG, even that was lowest in the fourth quarter compared to first quarter, second quarter, and third quarter. That was the lowest.

Sri Karthik Velamakanni - Espirito Santo: Yes. Which was also a similar trend observed in the preceding year also?

Acharya: Yes, preceding year, so otherwise, some increase will be there, but as the Chairman says, it may not be as tight as it happened last year.

Sri Karthik Velamakanni - Espirito Santo: Just one other question now. In terms of the provisioning, despite the lower net addition number, the management chose to continue to provide very conservatively and in fact it's been the highest provisioning over the last fourth quarters. Just wanted to understand the thought process behind that?

Pratip Chaudhuri - Chairman: Yeah. Actually in the first three quarters, the analyst and others have said that we understand the NPA slippage and all that, and of course, we evaluate the gross NPA, net NPA slide, we understand. But if the slippage of the NPA accretion has happened, please try to improve your provision average ratio. Don't take it to the low 60s, try to bring up to the higher 60s because provision anyway it remains within the bank and in case you think you have provided more than what it should have been necessary, you can always get a write back when the recovery has happened. And in this also, that argument has proved right that the recovery in the written of account this year has been hoping about INR 10 billion, close to INR 11 billion at INR 1,000 (FDSOs). The recovery now cuts it…

Unidentified Company Speaker: On recovery.

Pratip Chaudhuri - Chairman: And, we ran an incentive scheme for our people. 1% of the recovery that they make is given to them as an incentive, which has worked pretty well in this. So that is what's been the approach towards provisioning and Soundara, would you like to elaborate on the D3 business, the provisioning escalation.

Soundara Kumar - CGM: No actually I think it's also because of the way it is calculated when an account remains in D2 for two years, it becomes D3. And, irrespective of how much security we might be having, we have goals to make a provision of 100% on that. Second is the slippages in restructuring setting also. During Q4, we had about INR 2,300 crores of restructured assets which slipped. And as per the RBI circular, if the restructured assets slip, then they will have to be treated as NPA from the original date on which they might have become (NPA). So from a standard asset, they straight slip to D1 or a D2. So in those cases also the provision has become higher in the sense that it's about 25% or 40% depending on whether it is D1.

Pratip Chaudhuri - Chairman: Even 100% or B3?

G. Rita - Deputy GM: B3 is 100. If some of them slip to B3, because the restructuring field and the period was longer. So this has contributed to a slightly higher provision, although the NPAs in fact have gone down.

Sri Karthik Velamakanni - Espirito Santo: Just one last question from my end, regarding the restructured accounts, given the 5% provisioning norm start from FY 2014 on the flow of restructured accounts and would that act as a huge deterrent for the banks to incrementally restructure given that in addition to that there are a couple of other interest reversals as well as NPV hits and the overall provisioning on a fresh NPA is much lower compared to all these provisioning.

G. Rita - Deputy GM: Basically I think restructuring I think we have repeatedly saying restructuring in State Bank we do if the project is viable and the promoter is (credible).

Pratip Chaudhuri - Chairman: No, no provisioning impact – the provisioning impact even on restructuring is (indiscernible), so which is lower than the NPA of 15% and for us that is why Reserve Bank has positioned restructuring somewhere in the middle between a standard and a substandard. So if you take to the present positioning, the standard category assets are about INR 322 billion and we would need to make a provision of approximately 2.5% additional, no.

G. Rita - Deputy GM: No another 1%.

Pratip Chaudhuri - Chairman: 0.75%

G. Rita - Deputy GM: We've already made 2.75%. This year it is 3.75%, so it's 1% more on that.

Pratip Chaudhuri - Chairman: So another 1% provisioning for the standard assets which would be about INR 3 billion, INR 322 crores, additional provisioning on the present stock of standard assets.

Sri Karthik Velamakanni - Espirito Santo: Sir, the question is assuming...

Pratip Chaudhuri - Chairman: …policy is new 5%, but you know it's lesser of the two events. Had it become NPAs, then it would have been 15% and more importantly it is very difficult to lend any extra money to NPA because then your NPA number keeps ballooning, whereas banks are more relaxed in terms of lending to restructurers.

Unidentified Company Speaker: Yeah, just to back to what Chairman is saying, if your question was that because of the higher provisioning, we may not want to restructure. I think that is what has been answered by him, and before that by Mrs. Kumar. Restructuring is done entirely on merit. Whether it is a provisioning required for it is 2% or 2.75% or 3.75% or 5%, the restructuring decision itself has to do with the merit of restructuring rather than the impact on the balance sheet or the optical view of the accounts credit figures.

Soundara Kumar - CGM: In fact, during the current year..

Unidentified Company Speaker: Difficult situations, because it is not that you don't restructure and you can exit. So, normally the exit option is also not that freely available, and even if you want to exit, other lenders would compel you to take a huge haircut. So, restructuring at least you know, you give more time, to the company to set at 1,000 orders. Yes Soundara.

Soundara Kumar - CGM: Sir, actually there are two things. One is that diminution in fair value, which you are talking about. Now that the norms for restructuring have been made more stringent, so there are – the bank has taken a policy as well as in CDS that there will be no more of this 0% loans. There will be no lending below 0% even in restructured accounts, whether it is WCTL or FITL. They will all carry at least base rate of interest. So the diminution in fair value going forward is likely to be much lesser than what we had done during the last year. And as far as the whether the promoters contribution, it is to 15% of the loss, but now the RBI has come out very clearly, 15% of the loss or 2% of the restructured debt, whichever is higher. So to that extent, I think promoters will also, their contribution is getting higher, so the bank is a little safer there, unless it's absolutely possible, the restructuring doesn't get done.

Operator: Sumeet Hinduja, ING Investments.

Swapnil - ING Investments: This is (Swapnil) here, I dialed in for Sumeet. Sir actually we are seeing the large corporate group seeing a very good traction in SBI's results over the last three months. And I think largely this is led from the power and the telecom sector. Now there was a lot of concern around these sectors. Last year things incrementally seemed to be improving out there. Would you be able to throw some light on the quality of the book here?

Santosh Balachandran Nayar - Deputy MD and Group Executive (Corporate Banking): Yeah. This is Nayar. Quality of the book in one sentence, NPA percentage is 0.5.

Pratip Chaudhuri - Chairman: Yeah. 0.5 and 90% of the portfolio is actually rated investment grade.

Swapnil - ING Investments: And incrementally you are not seeing any issues out there to whoever you have lent.

Santosh Balachandran Nayar - Deputy MD and Group Executive (Corporate Banking): Even in the power and telecom, our exposures are largely to multi plant companies like NTPC, Power Grid, Neyveli Lignite, weakest would be DVC or Adani Power or Tata Power. On the telecom, all are through pre-2007 companies, like Airtel, Vodafone, Idea, et cetera. And other major exposures are metals, aluminum and steel because these are the sectors which consume a lot of capital. But these are also not single plant companies. These are almost like conglomerates multi plant companies. Would you like to comment?

A. Krishna Kumar - MD and Group Executive (National Banking): Yes, but having said that, there is some stress coming up in some other power plant projects, but primarily because there is a delay in land acquisitions, which has actually resulted in a cost overrun, particularly in IDC. So banks are actually coming forward in some cases to fund the cost overrun and maybe one or two cases some restructure.

Pratip Chaudhuri - Chairman: At least, stress in the power sector is not so much from inability to generate cash, because RBI has this rule that if you have – there is a time overrun, two years for infra and one year for other projects, it has to be categorized as substandard or restructure. So that is coming from there, not so much in deficit or shortfall in the cash flows. And the most stressed part of the power sector today to our mind is the gas-based power plants, which are mechanically operationally ready, but not having the supply of gas. Our exposure there is much less and only significant exposure is that former Dabhol power, which has now become Ratnagiri owned by NTPC and GAIL.

A. Krishna Kumar - MD and Group Executive (National Banking): And we have relatively very little exposure to discounts.

Pratip Chaudhuri - Chairman: Pardon me.

A. Krishna Kumar - MD and Group Executive (National Banking): Relatively less discounts.

Pratip Chaudhuri - Chairman: We have relatively lower exposure to discount, particularly the five most indebted and loss making discounts are Punjab, Rajasthan, Uttar Pradesh, Andhra Pradesh, and Tamil Nadu – Tamil Nadu. We have exposures in Uttar Pradesh and Tamil Nadu, but all of that has been made secured by the value of fixed assets.

Swapnil - ING Investments: So sir, if I understand this correctly, I mean on one hand I heard you say that there was land acquisition issues that are coming up. On the other hand there's also issues on the gas side power plants. So both of them are seeing some amount of issues is what you're saying, right?

Pratip Chaudhuri - Chairman: For example, you know NTPC's three gas-based power plants are lying closed almost. They're not operating Kawas, Anta, and Auraiya. But their generation – but that accounts for the 1,000 megawatts. Their rest of the 3,000 megawatt capacity is generating so well, they can take care of the debt of these non-functional users. Similarly most of all of our exposure have issues in some plants regarding land debt, but their cash flow within the company from other projects are so robust that our portfolio is not affected.

Operator: Vishal Goyal, UBS Securities.

Vishal Goyal - UBS Securities: I have two questions. One is on your margins, I think just to go back on your margin, basically our peak margin sir was 4.4%. I'm talking about domestic margin, sir, which went down to 4.2% in quarter four last year, and then there was a 30 bps impact because of that pension shifting. Still sir I think our margin is down to 3.48%, which is domestic from like peak of 4.4%, almost 90 bps...

Pratip Chaudhuri - Chairman: For the quarter.

Vishal Goyal - UBS Securities: Yes, quarterly margin sir. So I think there has been a 50 bps compression outside of the pension part, which I think definitely attributes to your large corporate and highly rated corporate, but from here sir how do you see this thing moving, because I think all over the year we've been kind of expecting 3.75% of margins.

Pratip Chaudhuri - Chairman: We have given the guidance of between 3.60% and 3.75%, and leaving aside the quarter, so we have ended the year with something like 3.66%, which is the second highest in the country and this in spite of the fact that we do the credit card business where the margins are much higher outside the bank in the subsidiary, and a larger part of our amount, the maximum amount that is allowed was deployed in liquid mutual funds. Our Tier 1 last year was INR 84,000 crores, INR 840 billion. But the income from there was counted as dividend, but we think if you look at the nature of income it is derived by deployment of funds. So, if we adjust for the interest in the liquid mutual funds, it’s still about 3.71% and we would give a guidance of 3.60% for the full year for the domestic margin. For the foreign offices margin I would request my colleague and Managing Director Mr. Contractor to comment.

Hemant G. Contractor - MD and Group Executive, (International Banking): This year decline in the NIMs for our foreign offices and this is quite and confirmative what's happening globally. The yield have been coming down because of the excess of liquidity and we do not expect this position to change at least for the next couple of quarters or so, because there is too much of liquidity floating around and yield have come under pressure and we would expect to see the NIMs at these level of around 1.50 at least for the next two quarters or so.

Vishal Goyal - UBS Securities: They will not deteriorate from here, correct?

Hemant G. Contractor - MD and Group Executive, (International Banking): 3.16 is the guidance, but I think the reason for NIM deteriorated – NIM has full impact. One is that our deposit gathering machinery is very efficient, our cost of deposit is about – cost of funds is about 6.37 on a blended basis, 6.29 blended basis. But where the margin compression happens, it happens largely on account of the NPAs. And our asset book, the average yield, if we compare it with our associate bank, their average cost of deposit, which is maybe more in comparison with median of the (PSB), the 7.3, 7.4 region, but their return on assets is 11% plus, because I think we have been seriously handicap by the NPA generation and along with NPA generation there is to be a huge effect on the net present value and the write back of the interest.

Pratip Chaudhuri - Chairman: If I may just add Vishal and you had asked this question on the 23rd, I think I have also given you an answer, we have expanded very, very massively in March, INR 40,000 crores, INR 41,000 crores in March, much of it in the last two weeks. Now that has not earned interest for all of that quarter, and therefore for that quarter there is a depression because of the base effect. Now that should correct itself automatically in the first quarter. So you do in a large value sheet where there are one-offs, there are (dealing) conditions in respect of NPAs, I don't think we need to worry too much about 10, 15, 20 basis point quarterly variation. We have delivered largely on what we promised in a FY '13 and as the Chairman said, we should be in a position to deliver 3.6 this year as well.

Vishal Goyal - UBS Securities: Okay and some data point basically around the pension assumptions, if you can share for FY '12 and '13, the broad like basic assumptions, wherever it is changed?

Unidentified Company Speaker: Assumptions for the pension we have taken an admission rate of 2%.

Vishal Goyal - UBS Securities: So this was the same in FY '12 as well?

Unidentified Company Speaker: Yeah absolutely. The assumptions are the same as FY '12, except for the discount rate is now this time is 8.5%. We have taken a salary escalation rate of (3.5%), the return on plan assets is taken at 8.6%, and the age of the pensioners is (76).

Pratip Chaudhuri - Chairman: What was it last year? 8.6%...

Unidentified Company Speaker: 8.76. Last year was how much?

Unidentified Company Speaker: 8.75% was the discount rate.

Pratip Chaudhuri - Chairman: 8.75%. We have taken 8.6%.

Unidentified Company Speaker: This time it's 8.6. It is a 31 year yield, 31 year paper yield.

Unidentified Company Speaker: More than (32).

Unidentified Company Speaker: Actually the portfolio is yielding more than 9%, but for the...

Unidentified Company Speaker: For calculation, for assumption.

Vishal Goyal - UBS Securities: And longevity 76?

Unidentified Company Speaker: 76.

Vishal Goyal - UBS Securities: Which is same for last year and this year as well?

Unidentified Company Speaker: Yes, yes, yes.

Operator: Bajrang Bafna, Sunidhi Securities.

Bajrang Bafna - Sunidhi Securities: Sir my first question pertains to from when we have started derecognizing the interest income from pension fund, whether it was from this quarter or from the beginning of the first quarter of FY '13?

Pratip Chaudhuri - Chairman: First quarter of...

Unidentified Company Speaker: From the first quarter of FY '13, because we sent out all the money in the first week of April 2012.

Bajrang Bafna - Sunidhi Securities: Okay. And sir my second question is out of the total restructured book of close to INR 32,000 crores, I'm talking about the standard part, how much is actually we have restructured and what portion is because of the RBI guidelines because now it is through borrower wise, so what is that breakup between the actual that we've restructured or because of the RBI guidelines, it returned amounts to the restructuring.

Unidentified Company Speaker: No, no, what is your question, are you saying how much was under the RBI dispensation and how much is ours or...?

Bajrang Bafna - Sunidhi Securities: No, no, what I'm saying is that now – earlier the restructuring was based on the facility wise and now it is based on the borrower wise.

Unidentified Company Speaker: Yeah this is borrower wise. That are all borrower wise.

Bajrang Bafna - Sunidhi Securities: Yeah, so I just want to differentiate between what is the amount which is actually we have restructured facility wise and some amount which has come because of the borrower wise guideline, can you provide that breakup?

Unidentified Company Speaker: Out of the INR 43,000 crores that you see on the slide, INR 32,000 has been restructured. The other INR 11,000 comes in as other accounts of the borrower.

Soundara Kumar - CGM: I think he wants a breakup of account, but I don't it right now.

Pratip Chaudhuri - Chairman: No, no, that's the breakup.

Soundara Kumar - CGM: No, no out of the INR 32,000....

Pratip Chaudhuri - Chairman: INR 11,000 has been added because they were the un-restructured facilities of the borrower, INR 32,000 is what actually got restructured out of INR 43,000.

Bajrang Bafna - Sunidhi Securities: No, no. That is standard or non-standard?

Soundara Kumar - CGM: Standard and (NPU). I think he wants to know, out of the INR 32,000, how much is the account which is actually restructured?

Bajrang Bafna - Sunidhi Securities: That actually got restructured and which was not restructured, but because of the borrower…

Soundara Kumar - CGM: I get your question, but I don't have that data right now. I can pass it on to you later.

Bajrang Bafna - Sunidhi Securities: Okay. And, I think in the Analyst Meet, we have given a restructuring pipeline guidance of close to INR 50 billion. I would just like to know whether we have included this Electrosteel Steel restructuring into that number, because I think the recent media news are floating that SBI has got more than INR 20 billion exposure to that ESL, which could eventually be restructured.

Shailendra Maru - Associate Director, Stakeholder Relations: Yeah. When we gave that figure, we gave INR 3,000 crores for large corporate and INR 2,000 crores for mid-corporate. This is including Electrosteel.

Operator: Kunal Shah, Edelweiss.

Kunal Shah - Edelweiss: Yes, sir. Sir, again on this margins, apart from this pension fund impact, if you can just give some clarity as to how much would be the impact on account of, say, the interest income reversal or say FITL in FY 2013 vis a vis what it was in FY 2012?

Acharya: I think FITL reversal is at about INR 1,100 crores, INR 1,200 crores.

Soundara Kumar - CGM: Then INR 1,072 crores FITL actually, that is…

Acharya: How much?

Soundara Kumar - CGM: INR 1,072 crores.

Acharya: NPV diminution also comes in the interest.

Soundara Kumar - CGM: What?

Acharya: NPV diminution also is debited to interest.

Soundara Kumar - CGM: This is only FITH, because that gets debited back to the interest account. That's about INR 1,072 crores.

Acharya: It's debited back to the interest account?

Soundara Kumar - CGM: Yeah. So that action pulls down our interest rate….

Acharya: About INR 3,000 crores.

Soundara Kumar - CGM: INR 1,072 crores.

Acharya: INR 1,072 crores is on interest reversal and the FITL and the NPV diminution also comes in.

Soundara Kumar - CGM: NPV diminution is a provision, but it is not debited to the interest, only this is getting debited to the interest.

Acharya: INR 1,100.

Soundara Kumar - CGM: INR 1,100 crores.

Kunal Shah - Edelweiss: Okay. So, how much would this be in FY ’12, if I were to look at the impact on the margins? So what would be the amount in FY ‘12 on , I don’t know, if FITL was there any?

Soundara Kumar - CGM: No, it was there, but FY ’12 it was much lower. I think it was roughly, because the..

Acharya: It was 300 or so.

Soundara Kumar - CGM: March 2012, the balance itself was only INR 1,200 crores. So, it must have been much lesser, but I can get you the numbers, but whereas this year, the provision itself is INR 1,100 crores, so almost doubled. The balance has doubled from what..

Acharya: The market suppression also happened. One is to, return the interest that has been booked during the quarter and another is the accrual stuffs.

Kunal Shah - Edelweiss: How about the NPV say diminution provisioning in this year vis‐a‐vis last year?

Soundara Kumar - CGM: This year – actually quarter four, we have made about INR 730 crores of diminution in fair value provisioning.

Acharya: And previous three quarters?

Pratip Chaudhuri - Chairman: Previous three quarters is not a very large amount.

Soundara Kumar - CGM: After December, it was..

Acharya: What is it that ballooned the provision bill.

Soundara Kumar - CGM: As of March 2013, we are holding about INR 2,000 crores, which is on account of fair value diminution. This figure keeps changing. It is not just some – there is a debit and a credit into this. Every year for every account this is reworked.

Pratip Chaudhuri - Chairman: But this is as on March 30, (2013). Do have any idea what it was on March 2012.

Soundara Kumar - CGM: On March 2102 actually as you see it is showing INR 2,100 crores, that is because that fair value diminution is reworked on all the accounts every year.

Unidentified Company Speaker: Not only that accounts, every year they go out all that…

Kunal Shah - Edelweiss: Yeah. So that could be…

Soundara Kumar - CGM: What is the difference.

Unidentified Company Speaker: I think its INR 700 crores for this quarter.

Soundara Kumar - CGM: Q4 is INR 730 crores.

Unidentified Company Speaker: About INR 1,100 crores.

Kunal Shah - Edelweiss: Okay. So the full year is INR 1,100 crores?

Unidentified Company Speaker: We can crosscheck and get back to you.

Kunal Shah - Edelweiss: Okay, okay. And so on the fee income side maybe across the industry with the investment cycle also not picking up, okay, so the loan related fee is slightly on a lower side all across. So if you can just highlight few of the steps which we would be taking in order to shore up this fee income stream and to give some (indiscernible)?

Pratip Chaudhuri - Chairman: In fact on the fee income we are lucky that the loan processing has remained stable, but on the (LC) and bank guarantee, which total accounts for about INR 25 billion, INR 26 billion, we are of the view that we are selling the banks cheap. So we have decided that there would be fewer concessions in this pricing. The card rates are 2.4% annually and for all non-investment grade accounts, it would continue at that. Reduction would be done only in case of exceptional accounts AAA or AA. So, we have significantly scaled up the charges for LC and BG. And even if in the process we are deprived of some of the income, I think, the freeing up of capital that happens is much more valuable. And LC and BG by their very nature again, as I said earlier, are low security business. I mean security cover is less, and we have now stipulated in the policy that if there is a single bank guarantee development, no new or no fresh guarantees will be issued. And similarly in case of Letter of Credit, if there is a (devolvement) and not cured within 15 days, no more LCs. So we think we are not being compensated adequately for the capital deployment in LC/BG. So, we have significantly scaled up our charges and the approach.

Kunal Shah - Edelweiss: And just...

Pratip Chaudhuri - Chairman: And the initial reaction I mean total evidence is that there was a bit of a reward by some of the customers, but the weaker rated customers below investment rates possibly found that they have no option and they drew back to the bank.

Kunal Shah - Edelweiss: If somebody wanted FITL, how much we had – may I reverse last year it was INR 255 crores...

Pratip Chaudhuri - Chairman: Reverse.

Kunal Shah - Edelweiss: During '11, '12 was INR 255 crores, whereas this year it is shorter substantially, INR 1,000.

Pratip Chaudhuri - Chairman: Santosh, would you like to say anything on the LC/BG.

Santosh Balachandran Nayar - Deputy MD and Group Executive (Corporate Banking): No LC/BG, basically it will be an minus BBB. We are not giving any consideration whatsoever, but some of the large corporates were BBB rated where we have to compete, we're competing also.

Pratip Chaudhuri - Chairman: But other income of foreign offices has gone by about 17%, Slide 9. Would Mr. Contractor like to comment on that?

Hemant G. Contractor - MD and Group Executive, (International Banking): Yeah, the other income grew by...

Pratip Chaudhuri - Chairman: 17%

Hemant G. Contractor - MD and Group Executive, (International Banking): 17% yes.

Pratip Chaudhuri - Chairman: Slide 9.

Hemant G. Contractor - MD and Group Executive, (International Banking): Yeah. And on a rupee basis it grew by 17%, and in dollar terms actually the growth was lower. It was on the order of about 5% or so in dollar term, but because the rupee depreciation this gets magnified when translated into rupees. But it's been a steady year in terms of other income. We have grown modestly there and that's largely because of the fact that there are not too many projects in the pipeline, the growth in the long term asset book has been a little muted this year. We saw a lot of growth in the trade finance, the short term financing business, but not so much in the long term book, and most of the fee income that we generate arises on account of growth in the long term asset, of which we did not see as much growth as we did in the previous year. So because of that the – but despite all that we did grow the other income book by about 17% in rupee terms and 5% in dollar terms. It's been a modest growth in terms of the…

Kunal Shah - Edelweiss: Any comment you'd like to make on the outlook?

Pratip Chaudhuri - Chairman: Outlook going forward, we do not expect a dramatic increase in other income. I mean we've grown by – I'm talking dollar terms 5%. I think we will probably average around 7% or 8% in dollar terms going forward in the current year.

Kunal Shah - Edelweiss: Okay. And the other question is on this diesel loans. Okay, so there are some – maybe with the one-year performance coming on well, there will be some write backs, which would be happening on the provisioning. So how much has been done in FY '13, and so what has been pending for FY '14?

Pratip Chaudhuri - Chairman: The write backs and provision?

Acharya: Yeah, about INR 110 crores is what we got back on diesel.

Kunal Shah - Edelweiss: Okay, and so how much will be pending now…

Pratip Chaudhuri - Chairman: Some provisioning still remaining, about INR 300 crores which will come in this year.

Acharya: It would be reverse this year because the home loan portfolio is having a NP of 0.5, so there is no delinquencies.

Kunal Shah - Edelweiss: Yeah.

Acharya: But so much of these loans were originated, I think in 2009-2010, and I will say complete three years and they come out of the diesel category that could beat the provision cover – provision would be available back to the bank.

Kunal Shah - Edelweiss: And so on capital efficiency, whatever tests we were taking in terms of say ECGC cover, okay, as well as getting the guarantees on say some of the smaller category loans or say undrawn commitment. So are you almost done in terms of utilizing the entire capital efficiency and its getting reported in the current year's Tier 1 or there is still some scope left out there?

Acharya: No, basically the capital efficiency and conservation measures were about enforcing better integrity in the accounting and allocation of capital. So, we had a very large benefit last year about INR 58,000 crores, which translated to 91 basis points on capital. This year obviously the low hanging fruit was gone, so with the same rigor we were able to achieve about INR 23,000 crores and that is about 20 basis points. I think largely we are done but we will continue to keep doing this exercise because on the delivery platform there can always be some chances where some securities are missed out from being tagged, some financial performance guarantees are classified as financial guarantees so on so forth. So we will continue to do that, but yes you are right, largely the benefit that had to come out of it has been done.

Pratip Chaudhuri - Chairman: But I think we would continue on other front again on the non‐fund side, the LC and BG where INR 100 of asset gets a return of 0.3, 0.4. I think we will be less enthusiastic about those businesses. So, even if it involves some sacrifice of revenue, I think capital freed up would be proportionately much higher. Again our emphasis on high quality assets, investment grade assets, we think going forward would make us more optimally usage of capital.

Kunal Shah - Edelweiss: Okay. And sir, on the overseas subsidiary if you can just give out as to kind of – I think that was a news item on this California subsidiary that we want to say in terms of improving the operations and what would be the outlook on say some of the other international operations if you look at it on the – say the Europe side and all?

Pratip Chaudhuri - Chairman: Yeah. So SBI California was – there was some news item there in one of the financial dailies sometime back about the consent order, which the bank had received from the regulators at SBIC regulator. No, essentially what this means is that, they want us to tighten up in a few areas relating to asset quality one, then in the overall structure of the bank, the staffing pattern and things like that. And then there is no penalty or anything of that sort and no restrictions as such on the operations of the bank. But following a regulatory examination, which was done some time back, they were of the view that we needed to tighten up in a few areas. So that's what the consent order is. And we've been given a certain timeframe within which to abide by the recommendation. So all that is going on. We made a lot of structural changes at the bank, lot of staffing changes at the bank and things like that. And we're quite optimistic of complying in terms of the consent order.

Unidentified Company Speaker: But I think, overall aggregate basis the foreign subsidiaries, except for Nepal, which is really lower as we know in terms of – when you convert into dollar, is a big, big challenge. And that is why we are going much slower in terms of expanding the subsidiary footprint, even if we have to expand the foreign office footprint, it would be largely by way of branches. A, they are capital wise less efficient; B, they have a high cost structure, supervising structure and given our skills, it is not very profitable on that basis. We have a slide on foreign subsidiaries?

Unidentified Company Speaker: No.

Operator: Alpesh Mehta, Motilal Oswal.

Alpesh Mehta - Motilal Oswal: First question is regarding the quarterly movement of FITL, the interest reversal that would have taken place for FY '13 if you have that number?

Pratip Chaudhuri - Chairman: Soundara, you have that?

Soundara Kumar - CGM: Quarterly movement, I mean, I can…

Unidentified Company Speaker: Aggregate numbers.

Alpesh Mehta - Motilal Oswal: You have the full year number. I believe you gave number of INR 1,100 crores?

Soundara Kumar - CGM: Yeah, 1100.

Alpesh Mehta - Motilal Oswal: But on a quarterly basis what was the impact?

Soundara Kumar - CGM: Quarter one, it is INR 81 crores.

Alpesh Mehta - Motilal Oswal: Okay.

Soundara Kumar - CGM: And this is the addition, I'm saying.

Alpesh Mehta - Motilal Oswal: Yeah, the net impact on the P&L every quarter.

Soundara Kumar - CGM: Yeah. Quarter two was INR 274 crores.

Alpesh Mehta - Motilal Oswal: Okay.

Soundara Kumar - CGM: And, quarter three is INR 197 crores. And, quarter four is INR 520 crores.

Alpesh Mehta - Motilal Oswal: Okay. And this large part, when we do this FITL, nothing is – we have to create the provisions as well. If you're taking a debit or credit to interest income, there should be same entry on the provision side as well, if I'm not wrong, right?

Soundara Kumar - CGM: There is an account called (LICARA), which is sundry liabilities on interest capitalized on account of restructured accounts. So whatever is debited to FITL in order to get interest credited to the account of the customer, the same amount we debit interest account again, and then a provision is made in the (LICARA) account.

Alpesh Mehta - Motilal Oswal: Provision is made in the (LICARA) account, okay. Secondly, could you throw some light on this Ratnagiri power plant, because in between there were some news report that it might have to get restructured again, so what's the current status now?

Pratip Chaudhuri - Chairman: Ratnagiri now – after that meeting with the power ministry, they have recommended (a lot) allocating the minimum gas, so right now it is going on as it was going earlier, low key, just about surviving, just about generating enough to meet their commitment.

Alpesh Mehta - Motilal Oswal: Okay. But in case if it has to be restructured second time, it has to be classified as NPA if I am not wrong, because of the second time restructuring.

Pratip Chaudhuri - Chairman: It might be, but Ratnagiri guys have...

Acharya: We will get a dispensation from UPA because it is being run by two most respected and reputed PSUs and it became restructured in order that to avoid what the government some sovereign debt obligation. So we are hopeful of getting a special dispensation on this.

Alpesh Mehta - Motilal Oswal: And sir the last question from my side, if you can offer some comments on this. There were some news items in between that you're likely to get an extension. If you would like to throw any comment on that?

Pratip Chaudhuri - Chairman: Yes. In fact I saw the news. I was wondering what is the source, so that is very strange, but history if you go – no Chairman of SBI has worked beyond 60. I am proceeding on that basis.

Alpesh Mehta - Motilal Oswal: Okay, but there cannot be an exception this time, right, or there can be?

Pratip Chaudhuri - Chairman: Thank you for your good wishes.

Acharya: If you hear something Alpesh, let all of us know.

Shailendra Maru - Associate Director, Stakeholder Relations: Thank you very much friends. That was the last question from Alpesh, and we do end on a lighter note as such. I'll now request Nirav Sheth, Head of Institutional Equities at Edelweiss to offer his closing comments. Nirav?

Nirav Sheth - Head of Institutional Equities at Edelweiss: Thank you, Shailendra. I would like to thank you personally and on behalf of Edelweiss Financial Services Chairman, Sri Chaudhuri; Managing Director, Mr. Contractor, Mr. Krishna Kumar, Mr. Gupta, Mr. Vishvanathan; and the entire top management of State Bank of India for sparing their time and discussing the issues at length in a candid and a fair manner. I'm sure this will help all of us in better understanding the strength of this august institution has and the challenges it faces currently. We look forward to having such conversations in the future as well. Finally, I would also like to thank all the investors for participating in the call. Thank you very much.

Pratip Chaudhuri - Chairman: Thank you.