SBI comes of age

Banking elephant learns to dance

It’s not often that one sees an organisation hiring a cricket stadium to showcase its technological prowess. But State Bank of India (SBI) did just that and the presence of India Inc’s leading lights at Mumbai’s Brabourne Stadium on Sunday evening was an acknowledgement of the coming of age of India’s largest bank, albeit a state-owned one. The bank has brought all its 13,000 branches under what is known as core banking solution (CBS), making it one of the largest banks in Asia to have a single CBS platform. But technology is just one chapter in the story of how the elephant has started dancing. The country’s largest lender has been adding 1,000 ATMs per month over the last year (the largest such rollout in the world); it plans to nearly treble its branch network to 50,000 in the next 10 years; and it will roll out services in 50,000 unbanked villages by March — a classic case of how the “Banker to the Nation” has been leveraging technology as well as physical presence to tap economic opportunities. In the process, it has come up with a stellar performance on several fronts. For example, its market share in incremental growth in home loans was as high as 84 per cent in April-October 2009. The bank has also become the largest player in auto loans, with a market share of around 15 per cent. Even with a large employee base of over 200,000, business per employee has gone up from Rs 2.99 crore in 2005-06 to Rs 5.56 crore and profit per employee has more than doubled from Rs 2.17 lakh to Rs 4.74 lakh. The bank saw its market share in advances grow, though its share in deposits has declined of late.

When he took over in July 2006, SBI Chairman OP Bhatt’s blueprint for regaining the lost glory of the bank had a wide range of must-dos: Win back the middle class and high net worth customers who had deserted it, build a global treasury, dominate in the small and medium enterprises space and gain leadership in emerging new businesses such as private equity, pensions and general insurance. To his credit, Bhatt has achieved all that. The biggest change, of course, has been in the mindset of its employees. These are great achievements considering that the government had expressed fear four years ago that going by the loss of market share, SBI could lose its top slot to a private sector challenger. Many say that Mr Bhatt has been plain lucky as his term coincided with the global meltdown, which saw companies moving back towards public sector banks. Depositors felt their money would be safer with banks backed by the government. What also helped matters was that risk-averse private banks had more or less stopped lending once the financial crisis hit. It is also a fact that the flight of deposits to public sector banks was a double-edged sword for SBI. It is stuck with high-cost deposits which saw its net interest margin taking a hit in recent months. There are many other challenges, the biggest being capital to enable the bank to pursue a 25 per cent growth strategy. In the absence of equity dilution, which the law restricts, the bank will be unable to meet the target. Over to the government.