SBI creates foundation for group CSR activities
18 May 2015 11:18 PM GMT
The nation’s largest lender State Bank of India (SBI) has created a separate company, SBI Foundation, to carry out its massive CSR initiatives and hopes to get it “running” from July. “We have been spending over 1 per cent of our profit on CSR even before the new law on corporate social responsibility (CSR), mandating every company to spend 2 per cent of its profit on such activities, came into effect. This is despite the fact that we are not legally bound to do so as we are not governed by the Companies Act.
“So, to streamline our CSR activities and better target our efforts, we’ve decided to create a new company called SBI Foundation. We hope to get the foundation running from July 1,” general manager in-charge of CSR and change management at SBI, Vinod Pande said.Incidentally, July 1 is the foundation day of the bank, which was started as Bank of Calcutta in June 1806. He said in fiscal 2104, the bank had spent Rs 115 crore on CSR, on a profit of Rs 10,891 crore, which was Rs 6 crore more than its 1 <g data-gr-id="32">per cent</g> profit.
Pande said the SBI Foundation has already been registered under Section 8 of the Companies Act, 2013, which applies to non-profit companies or organisations and will be headquartered in Mumbai.
The foundation has already taken an office in the 22-storey Air India Tower in the city, where the bank has taken four floors. When asked about <g data-gr-id="28">management</g> structure of the foundation, he said the bank chairperson Arundhati Bhattacharya will be the chairman of the foundation and will have a full-time managing director and chief executive.
That apart, SBI has eight foreign banking subsidiaries -- State Bank of India California, SBI Canada, SBI Mauritius, Nepal SBI Bank, State Bank of India Botswana, Bank SBI Indonesia, Bank of Bhutan, and Commercial Indo Bank. The bank also has seven non-banking subsidiaries -- SBI Capital Markets, SBI Funds Management, SBI Global Factors, SBI Cards & Payments Services, SBI DFHI, SBI General Insurance Company, SBI Pension Funds -- and three joint ventures -- SBI Life Insurance Company, SBI General Insurance Company and SBI-SG Global Securities, says the State Bank’s website.
The State Bank and its five associate banks are registered under a separate Act of Parliament, the SBI Act. Pande said once the foundation is registered and starts working, SBI and its five <g data-gr-id="48">associates</g> banks as well its arms will carry out their CSR work via the foundation.
Pande said he expects that the total outgo from the group will be more than Rs 200 crore this fiscal. Except the associate banks, all of these subsidiaries will have to spend 2 <g data-gr-id="39">per cent</g> of their profits on CSR as they are governed by the Companies Act, he said, adding that the bank has already received approval from the Reserve Bank for setting up the company. The new Companies Act mandates firms to mandatorily spend or set aside 2 per cent of their net profit for CSR. But this is not applicable to other commercial banks as they are under the Banking Regulation Act, which does not mandate this. Pande said the bank will be hiring some experts from outside through lateral hiring on contract basis (as the highly unionised SBI cannot hire people from outside on the rolls), but most of the staff will be from the bank on deputation.
Companies’ P&L accounts to have separate CSR Expenditure head
Companies will have to disclose their CSR Expenditure as a separate head in their profit and loss statements, accounting regulator ICAI has said. Besides, if a company spends more than the mandatory two <g data-gr-id="105">per cent</g> of profit for Corporate Social Responsibility (CSR), the excess amount can not be carried forward for any set off against future CSR expenses. In its detailed guidance note on accounting for expenditure on CSR activities, the ICAI (Institute of Chartered Accountants in India) has also also said that no provision needs to be made in the financial statements for any shortfall in the amount that was expected to be spent on CSR.
However, if a company has already undertaken certain CSR activity for which a liability has been incurred by entering into a contract, a provision needs to be made in the financial statement for the amount representing the extent to which the CSR activity was completed in the year. The Note also makes it clear that CSR expenditure is to be recognised as an expense by debiting the profit and loss account, putting to rest the confusion on whether such expenses could get adjusted as an appropriation from reserves.
Under the new Companies Act, a company needs to spend at least 2 <g data-gr-id="98">per cent</g> of its three-year-average net profit on CSR if it has a minimum net worth of Rs 500 crore, or turnover of Rs 1,000 crore or a net profit of Rs 5 crore.
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