Analysis of Risk and its Management in Indian

Banks: A Case of SBI Bank

INTRODUCTION OF THE PROJECT

 Analysis of Risk and its Management is important for each

organization built up in a sector. Banking industry is one of the
most rising economies as risk exposure has expanded in this sector
in different ways.
 Risk Management refers to the exercise or practice of forecasting
the potential risk thus analysing and evaluating those risks and
taking some corrective measures to reduce or minimize those risks.
 A decision made by the organization related to investments, they
try to find out the number of financial risk attached with it.
 In order to minimise this risk to investments, fund managers and
investors practice or exercise risk management.
 Minimising risks help in creating value for the shareholders and
attaining the objective of the organization.
TYPES OF RISK

Credit Risk

Market Risk

Operational Risk

Liquidity Risk

Enterprise Risk
BANKING INDUSTRY IN INDIA
 Banking in India in the modern sense originated in the last decades of the 18th
century. The first banks were Bank of Hindustan (1770-1829) and The General
Bank of India, established 1786 and since defunct.
 Indian Banking Industry currently employees 11,75,149 employees and has a total
of 10,9,811 branches in India and 171 branches in abroad & manages an aggregate
deposit of 67,504.54 billion (Rs) and bank credit of 52,604.59 billion (Rs).
 The net profit of the banks operating in India was 1027.51 billion (Rs) against a
turnover of 9,148.59 billion (Rs).
  During FY07–19, deposits grew at a CAGR of 11.11 per cent and reached US$
1.86 trillion by FY19. Deposits as of Feb 2020, stood at Rs 132.35 lakh crore (US$
1,893.77 billion).
 The total equity funding of microfinance sector grew at the rate of 42 year-on-year
to Rs 14,206 crore (US$ 2.03 billion) in 2018-19.
HISTORY OF STATE BANK OF INDIA

 The origin of the State Bank of India goes back to the first decade of
the eighteen century with the establishment of the Bank of Calcutta
in Calcutta on 2 June 1806. Three years later the bank received its
charter and was re-designed as the Bank of Bengal (2 January 1809).
 A unique institution, it was the first joint-stock bank of British India
sponsored by the Government of Bengal.
 The Bank of Bombay (15 April 1840) and the Bank of Madras (1
July 1843) followed the Bank of Bengal.
 These three banks merged in 1921 to form the Imperial Bank of
India, & Imperial Bank of India was turn on State Bank of India.
 On 1st July 1955, State Bank of India was constituted under the
State Bank of India Act 1955, for the purpose of taking over the
undertaking and business of the Imperial Bank of India.
 OVERVIEW OF STATE BANK OF
INDIA
 State Bank of India, the country's largest commercial Bank in terms of
profits, assets, deposits, employees strength of about 3 lakh and over
22,010 branches.
 SBI with a 23% market share in assets, besides a share of one-fourth of the
total loan and deposits market.
 In the financial year 2018-19, its revenue was ₹2.79644
trillion (US$39 billion) and net income was ₹8.62
billion (US$120 million).
 Growing leaps and bounds, enjoying the loyalty of over 43 Crore
customers, with an eternal objective: Banking Beyond Business
 SBI offers a wide range of retail and corporate banking, and other related
financial solutions.
 The treasury activities include government and other securities
transactions, and money market and forex operations.
 CREDIT RATING OF SBI
 Credit rating is an analysis of the
credit risks associated with a
financial instrument or a financial
RATINGS RATING AGENCY
entity.
 A rating is assigned to an Baa2/P2/Stable Moody's
instrument by a credit rating
agency after a comprehensive
analysis of business risks, BBB-A3/Stable S&P
financial risks, management
quality and ability to service debt. BBB-F3/Stable Fitch
 It is a detailed report based on the
financial history of borrowing or 'AAA/Stable' CRISIL
lending and credit worthiness. It
helps in assessing the solvency of
the entity. 'CARE AAA' CARE

AAA Stable ICRA

 CAPITAL ADEQUACY RATIOS OF SBI
CAPITAL ADEQUACY RATIOS AS ON 31.12.2019

  CET 1 (%) Tier 1 (%) Total (%)

SBI Group 10.86 12.21 14.31
State Bank of India 10.18 11.59 13.73

 The capital adequacy ratio SBI (Mauritius) Ltd. 22.51 22.51 23.33
(CAR) is a measurement of a State Bank of India (Canada) 13.56 13.56 15.3
bank's available capital
expressed as a percentage of a State Bank of India (California) 15.7 15.7 16.71
bank's risk-weighted credit Commercial Indo Bank LLC,
exposures.
Moscow 71.74 71.74 71.74
 It is used to protect depositors
and promote the stability and Bank SBI Indonesia 20.48 20.48 20.96
efficiency of financial systems Nepal SBI Bank Ltd. 13.18 13.18 14.61
around the world. 
Bank SBI Botswana Ltd. SBI
 Higher the bank’s capital (UK) Ltd. 24.76 24.76 26.02
adequacy ratio, the higher the
degree of protection of SBI (UK) Ltd. 12.26 12.26 15.73
depositor's assets.
PRODUCTS AND SERVICES OFFERED
BY SBI

 Accounts:  Cards:
 Savings
 Debit
 Current
 Deposits:  Credit
 Recurring Deposits  Cash Management
 Time Deposits
 Loans:
 Remittance
 Home Loan  Bill Payments
 Vehicle Loan
 Tax Payments
 Loans against Property
 Personal Loan  E-Payment
 Loans to Senior Citizens  Mobile Banking
 Education Loan
 Mortgages Loan
 Internet Banking
 Agriculture Loan  Online Banking
IMPACT OF COVID-19 ON
BANKING INDUSTRY & ON STATE
BANK OF INDIA
 Banks to witness spike in credit costs, non-performing assets in 2020.
 Humongous losses in the financial markets of up to Rs 56.22 trillion in the
month due to this pandemic.
 Rise in provisions and fall in revenues will hurt banks’ profitability,
leading to a deterioration of capitalization.
 Increased volatility and decline in prices across many asset classes have
impacted the trading books of banks and consequently, the capital
allocated to address such market and counterparty credit risks.
 Industry is standstill as there is no earning and regulators encouraging
banks to invest in order to revive the economy.
 Good impact is extensive use to digital channels by the general public thus
inculcating habit of using these channels for small and big payments.
 Loans and Non Performing Loans of the banking industry will be affected
which will act on earnings. 
SUSTAINABILITY OF BUSINESS

 Impact of Covid-19 on SBI bank is temporary in nature.

 Impact will be of 4-6 months as regulators will be supporting the
bank.
 Banks are having sufficient reserve and capital to sustain their
business.
 Government are supporting by capital, insurance and policies.
 Many of the loans are exempted from the Covid-19 relief for the
customers, this will help bank to earn some income for
sustainability.
SUSTAINABILITY ANALYSIS

 Bank is committed to environment protection and contributes positively to

reduce the carbon footprint.
 Responsible interaction with environment to avoid depletion and degeneration of
natural resources and maintain long term quality of the environment is a priority
for bank.
 Bank has contributed ` 3.57 crore in the following areas for:
 (a) Acquiring solar power plant, solar lamp, solar water heater, solar street
lamps.
 (b) Purchase, commissioning & maintenance of solar power plants.
 The Bank has actively participated in Renewable Energy projects, including
wind power, solar roof top and hydro projects, amongst others, for sustainability.
 Bank has taken several initiatives for a better and cleaner environment. Under
the Green initiative and cleanliness drive, your Bank has discontinued printing
of transaction slips for 43 types of unsuccessful transactions. It has installed
solar panels on around 2,400 ATM sites.
SBI INITIATIVES

 Waste to gold
 SBI Corbett
 Swachh Belur Math
 Beat Plastic Pollution
 SBI Green Marathon
 Tree plantations
 Maintenance of parks and gardens
 Donating battery operated
vehicles
 CONTINGENCY PLANNING

1. Important resources of SBI:

a) Deposits
b) Investments
c) Employees
d) Customers
e) Capital
f) Machinery
g) IT

2. Key risks
the major threat in today’s scenario is COVID-19.
Because of the lockdown from the last 45 days
everyone is suffering. These will affect the above
resources in many ways.
3. Contingency Plan
 Regulator: RBI announced a series of measures to combat pandemic to keep the financial system and
financial markets sound, liquid and smoothly functioning so that finance keeps flowing to all
stakeholders, especially those that are disadvantaged and vulnerable and risk is minimized.
 Clients: Bank assures all depositors that there deposits are safe in any bank. Bank should help
customers in a cash crunch, by suspending payments on loans and fees on transaction services.
 Employees: For the safety of its customers, the bank has provided protective gears, such as masks,
sanitizers and soaps across the branches with thermal scanner at its offices. The bank has set up a
helpline number manned by doctors and psychologists to assist its staff and employees to deal with the
coronavirus outbreak as well as stress and anxiety. Salary will be paid to staff with incentives until the
nationwide lockdown ends.
 Engagement with employees, customers and others
-information regarding the covid-19 must be sent to workers through normal messages.
-information accessible not only on banking websites, but also in online and mobile banking channels
-teleconferencing and video conferencing should be encouraged for the employees
-work from home arrangements if possible
4. Distributing the plans
 All the information including safety measures should be accessed by every employees and
stakeholders.
 The senior leader must interact once in a week with the employees and motivate them to
cope up with the current situation.
 The soft copy of the rules (plans) must be shared through mails or WhatsApp or from
website.
 Every one must follow the guidelines and maintain social distancing in the time of such crisis.

5.Maintain each plan

 The company must record the feedback from the customers.
 It must Up To Date itself from govt’s rules and regulations.
 Must engage with each other through online platform.
STEPS TAKEN BY SBI FOR
CUSTOMERS
 SBI passes on the entire 75 bps repo rate cut to its borrowers availing loans, with
this revision, SBI's EBR & RLLR come down by 75 bps, i.e. 01st April' 2020 as
under: EBR reduced to 7.05% p.a from 7.80% p.a; RLLR reduced to 6.65% p.a
from 7.40% p.a.
 SBI has extended moratorium of 3 months to all borrowers on all instalments and
interest/EMIs on Term Loans falling due between 01.03.2020 to 31.05.2020.
 State Bank of India has decided to waive ATM Service Charges for all ATM
transactions made on SBI ATMs and Other Bank ATMs on account of exceeding
free number of transactions up to 30th June 2020.
 The country’s largest lender, SBI has reduced the interest rate on all staff loans
(housing, education, vehicle, computer and personal) by 1%.
STEPS TAKEN BY SBI FOR EMPLOYEES

 The extra day’s salary will be paid to frontline staff until the nationwide lockdown
ends.
 The bank reimburses expenses incurred by employees on Covid-19 tests. If anyone
tested positive, the bank will bear the treatment expenses. In the event of the death
of any permanent employee due to Covid-19, a cash compensation of Rs 20 lakh
will be paid to the family.
 The State Bank of India, the country’s largest lender has become the first bank to
roll out an emergency credit facility in the time of the coronavirus pandemic for
borrowers affected by the outbreak.