State Bank of India (SBI) is India's biggest bank and probably one of the country's most enduring brand names. It has a branch network of 16,801, an ATM network of 53,871 (including those of associate banks), about 200,000 employees and is banker to millions of Indians. Over the years, and especially in the 70s when the government of India strengthened its hold on the banking system, it became a trend-setter among nationalised banks in introducing products and services, and bankrolling some of India's largest industrial projects.
"We have been partners in nation building and take our role in building the nation very proudly. We have played our part efficiently," says Arundhati Bhattacharya, chairman and the first woman to head the bank.
However when it comes to Gen-Next, SBI does not appear aspirational enough, as Bhattacharya admits. That is largely due to issues on service delivery, which the bank is working on.
As a signature bank with antecedents that stretch back to colonial India (SBI grew out of the Imperial Bank of India), SBI represented both the upside and downside of public sector banking. Today, it faces considerable competition from smaller, leaner and nimbler private competitors, but 40 years ago, there was no doubt that it bestrode the Indian banking world like a colossus.
It was in the 70s that the bank divided its business based on customer segments. These comprised personal banking, small scale banking, large corporate banking, agriculture banking and international banking. Divisions were created in branches under branch managers. Depending on the business volume, some branches had two or three divisions, while some of the bigger ones had all the divisions. This made it easy for customers to conduct their transactions, since each division functioned like a standalone branch.
Another first by SBI was setting up full-fledged specialised branches to cater to different customer segments, such as personal banking branches, non-residential Indian branches, large corporate branches, branches for high net worth individuals and so on.
SBI was also the first to bifurcate its lending books into large corporate, mid-corporate, small and medium enterprises and so on. "We were able to devise products catering to the different segments," Bhattacharya says.
The first agriculture development branch was set up in Palakkad district, in Kerala, also in the 70s. The bank focused on agriculture in a big way since that was the need of the country at that time.
In the 80s, SBI started classifying some sticky loans as non-performing assets (NPAs) and began provisioning for these. In the mid-'90s, SBI started giving credit scores for corporate loans based on the balance sheet of the companies and offering differential rates. Corporations that received a high rating were given loans at marginally lower rates than others. Later, it became mandatory for banks to follow the credit ratings given by specialised agencies such as Crisil before sanctioning loans.
In the early 2000s, SBI started the centralised processing of loans, thereby making branches only delivery channels for accepting loan applications. Loan proposals were processed at the central offices or zonal offices. This ensured faster sanctioning and disbursal of loans. It also did away with the need to have personnel who were experts in credit appraisal at the branches. Branch staff was freed up for marketing and could be deployed to source business.
In the late 90s, SBI was among the first nationalised banks to offer consumer durable loans. These were loans for television, personal computers and other electronic items. It was also among the first to offer credit cards, through its joint venture with GE. It was also the first, and probably is still the only one, to offer gold deposit scheme, where customers can deposit their gold with the bank and earn interest on it.
It also successfully made its presence felt in the auto loan segment, aggressively tying up with auto manufacturers and dealers to offer on the quick loans at low rates. As on September 2014, SBI had a portfolio of Rs 1,48,502 crore home loan and an auto loan portfolio of Rs 28,879 crore.
Nationalised banks, however, woke up to the growth potential in the retail home loan segment only after private sector peers. Even among public sector banks, SBI was slow to catch on to the trend, admit former officials. Under the tenure of O P Bhatt, it introduced several innovations in the home loan segment, which helped it increase its market share. For instance, the teaser fixed-cum-floating rate home loans were first launched by SBI around 2009. Several other banks and housing finance companies followed the example and came out with their own versions. These loans had a fixed rate for the first two to five years after which they became floating rate loans. But the product came for criticism from the regulator on the grounds that it was misleading customers. So, banks, including SBI, had to discontinue these.
Thanks to its wide network and customer base, it has access to a huge amount of low cost deposits. This allows it to retail loans at low rates and garner market share.
Despite being a nationalised bank, SBI has matched its younger and more tech-savvy private sector peers in issuance of debit cards, setting up point-of-sales terminals and ATMs. Some of its innovations include drive-through ATMs and floating ATMs, an attempt make these available even in remote locations. According to the SBI website, as on June, the bank has a 22 per cent market share in debit card spends over POS and e-commerce.
It has also made huge strides in internet and mobile banking. As on September, the bank had 1.99 crore internet banking users and 1.15 crore mobile banking users.
"We see huge amounts of transactions through our internet and mobile banking platforms. We also have a tie-up with Flipkart for our debit card and we saw a huge amount of e-commerce through our website," Bhattacharya says.
The bank also has a robust kiosk model to cater to the rural banking segment. For staff training, the bank uses an electronic platform which can support 10,000 users at a time.
When the sectors like asset management and insurance sectors were opened, SBI took the opportunity to diversify its. It set up the asset management SBI Mutual Fund in 1987, the life insurance subsidiary in 2001 and the general insurance subsidiary in 2008.
"We are present in all areas and our products are the best. Even in digital technology, our offerings are ahead of time. We want to better this. The question is how to motivate our staff to offer better customer service. It is due to this that delivery of services seems to be a problem," says Bhattacharya. As SBI readies for the next 40 years in an era of nano-second banking, this might be its biggest challenge yet.