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Steering In The Right Way

Unlike its loans to large corporates that shrank, SBI’s loans to retail home buyers accounted for 58-59 per cent of its total retail loans with another 11-12 per cent being accounted for by automobile loans.

Photo Credit : Subhabrata Das, Umesh Goswami,

Steering In The Right Way
Steering In The Right Way

Some perceptions, particularly negative ones, live long before they live down — especially if they are about an institution. For State Bank of India (SBI), the benefits of being a proxy for the government has also been a bane in some ways. The state-run bank’s brass, in the past decade, has therefore made concerted efforts to give the bank a fundamental makeover as well as improve its customer service and appeal.

SBI is the Best Large Bank in the BW Businessworld Best Banks’ Survey 2014-15. Behind this big win is its affable and no-nonsense chairperson Arundhati Bhattacharya, who leaves few opportunities to push new initiatives to give the bank an edge and ensure it does not lag behind private sector banks in any respect. And for that Bhattacharya is also ‘The Banker of the Year’.

During the current period of low credit growth and threat of high delinquencies especially from large corporates, when most banks see succour in retail borrowers, Bhattacharya has been making every attempt to match the bank’s offerings with the technology-backed products of private banks for its 450 million customers. But for a 210-year-old bank filtering in changes down to 16,333 branches and 2,13,000 employees is no mean task.

One of the bank’s most remarkable feats in recent times is its dogged pursuit of keeping bad loans under control. Says she: “The resolution mechanism is where we have to put our efforts into. For whatever is there (NPAs), is there. We also believe some or much of it (NPAs) can be rescued because there are assets on the ground. You see core or infrastructure assets will be needed when growth picks up. You will need ports, roads, steel and refineries.”

SBI’s gross NPAs declined to 4.25 per cent as of March 2015 from 4.95 per cent a year earlier and 4.75 per cent at the end of March 2013. The bank succeeded in achieving these figures even as its loan exposure to problem areas grew. For instance, SBI’s loan to the infrastructure sector rose to Rs 1,77,253 crore in March 2015 from Rs 1,14,524 crore in 2013, and exposure to iron and steel grew to Rs 80,610 crore from
Rs 64,067 crore during the period.

The bank kept its net interest margin (NIM) higher than 3.5 per cent despite a slowdown in credit demand and rise in delinquencies. Yet, NIM fell from 3.66 per cent as of March 2013 to 3.54 per cent in March 2015.

Knowing that most state-run banks grapple with the bigger challenge of losing existing high growth customers faster than acquiring new ones, SBI’s Bhattacharya mapped out retail and digital low hanging fruits at low costs to attract the youth and the mass affluent. The bank also massively ramped up its services over mobile phones and the Internet; it set up e-galleries, overhauled branches to give them digital focus, set up SBI INTouch and IntouchLite branches; and initiated a programme to regularly train its mass variety of customers to use new gizmos.

Between 2013 and 2015, SBI’s mobile banking users rose 13.5 million from 6.2 million, giving it a leadership position among other public sector banks; During the same period, its Internet banking users grew to 22 million from 13 million and ATMs to 55,000 from 33,000.

For a bank that’s balancing profitability, efficiency with social welfare spanning across semi-literate villagers to the jet-setting youth, the task at hand was more than daunting even for the best of professionals. But under Bhattacharya’s stewardship, SBI has done exceptionally well with many firsts to its name. For instance, its tie-ups with Amazon and PayPal will facilitate payments, increase commerce, and also facilitate trans-border transactions.

Then, a recent joint venture with Reliance Industries, which has been granted a payments bank licence by the Reserve Bank of India could give a decisive edge to the bank in reaching the unbanked, under-banked and small businesses that use their own distribution network and risk management. The payments bank will help in delivering digital banking products and services and will also help in promoting adoption of digital transactions by offering simple products conveniently and at a low cost. But even before getting the digital help, SBI had made steady forays with the number of accounts through business correspondents (BC) increasing to 65.4 million from 16.2 million, and the BC channel transactions rising to Rs 38,973 crore from Rs 13,033 crore in March 2013. The bank also increased its presence in uncovered villages to 84,036 from 20,531.

Unlike its loans to large corporates that shrank, SBI’s loans to retail home buyers accounted for 58-59 per cent of its total retail loans with another 11-12 per cent being accounted for by automobile loans. Yet, in areas such as operating profit, the bank lagged behind the big three private sector banks as also in growth of net interest income.

Over the past few years, the bank has positioned itself for a future leapfrog. Much will depend on Bhattacharya’s successors now.

sumit@businessworld.in; @mediasumit

(This story was published in BW | Businessworld Issue Dated 08-02-2016)


This article was published in BW Businessworld issue dated 'Feb. 8, 2016' with cover story titled 'The BIG Guns Of Banking'



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