transforming public sector banks state bank of india a success story presented by: m s verma, former...
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Transforming Public Sector BanksTransforming Public Sector Banks
State Bank Of IndiaA Success Story
Presented By: M S Verma, Former Chairman State
Bank of India
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HISTORICAL PERSPECTIVE HISTORICAL PERSPECTIVE HISTORICAL PERSPECTIVE HISTORICAL PERSPECTIVE
• Banks nationalised in 1969
• By early 1990s accounted for 90% of country’s banking business
• By 1992 had over 60,000 branch offices
• Highly regulated and protected environment
• Failed to measure up to international benchmarks of strength and efficiency
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HISTORICAL PERSPECTIVEHISTORICAL PERSPECTIVEHISTORICAL PERSPECTIVEHISTORICAL PERSPECTIVE
• Financial sector reforms initiated in 1991
• Public Sector Banks (‘PSBs’) post losses for the first time as a group in the first year of reforms
• State Bank of India (‘SBI’) and its 7 subsidiaries continued to post profits
• By 1995-’96 several other PSBs also improved their profitability
• Wide variations in competitive efficiency of PSBs persists even today
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WHAT DIFFERENTIATES SBI?WHAT DIFFERENTIATES SBI?WHAT DIFFERENTIATES SBI?WHAT DIFFERENTIATES SBI?
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State Bank of India
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Hum
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STATE BANK GROUPSTATE BANK GROUPSTATE BANK GROUPSTATE BANK GROUP
• State Bank Group – a financial conglomerate of: SBI – Over 9,000 Branches
One of the world’s largest branch networks 7 Associate Banks – Over 4,000 Branches Banking Subsidiaries
1 in India2 wholly-owned (outside India)2 joint ventures (outside India)
7 Non-Banking Subsidiaries
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ORGANISATION STRUCTUREORGANISATION STRUCTUREORGANISATION STRUCTUREORGANISATION STRUCTURE
• Adapting with time First Restructuring (1971)
market segmentationAnnual performance budgeting
Second Restructuring (1980)modular structurecontrolling offices nearer to operating units for
better control Comprehensive Review of Structure
Processes & Roles (1994 – 95)strategic business unitsbusiness groups
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ORGANISATION STRUCTUREORGANISATION STRUCTUREORGANISATION STRUCTUREORGANISATION STRUCTURE
Business GroupBusiness Group Strategic Business UnitsStrategic Business Units
1 Corporate Banking Group
Corporate Accounts Group Project Finance Group & Leasing Group
2 National Banking Group
Each of the Local Head Offices constitutes a separate SBU. Branches in LHO grouped under two networks:-
a. Development & Personal Banking (Retail Banking)
b. Commercial Banking (Corporate Banking)
3 International Banking Foreign Offices(an SBU) , Global Merchant Banking, Global Link Office
4 Associates & Subsidiaries
Associate Banks, Subsidiaries of SBI
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ORGANISATION STRUCTUREORGANISATION STRUCTUREORGANISATION STRUCTUREORGANISATION STRUCTURE
•Investment Banking
•Funds Management
•Primary Dealership
•Factoring•Credit Cards•Insurance•Credit Bureau
State Bank of IndiaCorporate Centre
Corporate BankingGroup
International BankingGroup
Development &Personal Banking
Network
CommercialNetwork
Mid-sizedcorporates, large SSIs
& Agri.
SSIs/Agriculture
/Small business
Government Business
Personal customers
High net-worth
Individuals
Corporate Accounts
Group
Dedicated focus on Top
Corporates
Project Finance SBU
Focus on Infrastructre, Telecom, Transport & Hydrocarbon financing
LeasingSBU
Focus on Infrastructre & Capital intensive projects
National BankingGroup
Associates &Subsidiaries
7 Associate Banks
100% owned banking
subsidiary
Non-Banking Subsidiaries &
Affiliates
Local Head Offices
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Customer Focused Organisation Structure
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CORPORATE GOVERNANCECORPORATE GOVERNANCECORPORATE GOVERNANCECORPORATE GOVERNANCE
• SBI practiced corporate governance even before it became the ‘buzz’ word
• SBI is unique in that it has both Central Board Local Board for each Circle
• Independent directors from different walks of life – industrialists, academicians, professionals
• The Board is the highest policy making body in the bank
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CORPORATE GOVERNANCECORPORATE GOVERNANCECORPORATE GOVERNANCECORPORATE GOVERNANCE
• Contributions from these directors have been manifold: Executive Committee of the Central
Board – weekly meetings Audit Committee – supervision of total
audit function of the bank – external & internal
Asset-liability management Committee Shareholders/investors grievance
Committee – redressal of complaints
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CORPORATE GOVERNANCECORPORATE GOVERNANCECORPORATE GOVERNANCECORPORATE GOVERNANCE
• Specific tenure for independent directors
• Information flow to the directors Periodic reviews on micro & macro
functioning of the bank benchmarked against the entire banking sector
Open discussions with the top management
• Bring in the outside-in perspective Guiding the management in identifying
opportunities for the bank
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CORPORATE LEADERSHIPCORPORATE LEADERSHIPCORPORATE LEADERSHIPCORPORATE LEADERSHIP
• Planning for the future Clearly documented and transparent
management process Process for early identification of
leaders and succession planning is followed at top-management levels
• Selection system involves outside specialists thereby reducing any influences/ biases
• Constant monitoring of performance at all levels for improving effectiveness
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CORPORATE LEADERSHIPCORPORATE LEADERSHIPCORPORATE LEADERSHIPCORPORATE LEADERSHIP
• Decisions evaluated through committee process
• Clear division in functions Chairman as the Chairman of the Board
of Directors spearheads policy-making Group Executives entrusted with
operational responsibility for the SBUs attached to them
Policy planning functions with Staff functionaries at the Apex level
Similar structure in Circles
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INTERNAL CONTROLSINTERNAL CONTROLSINTERNAL CONTROLSINTERNAL CONTROLS
• Time tested systems and procedures
• SBI does not compromise with the procedures as laid down by regulators and its own internal systems Indeed, SBI has been seen by the
market as the face of the regulator
• Comprehensive Management Information and Decision Support Systems
• Constant reviews of these systems to keep pace with the dynamics of the market
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INTERNAL CONTROLSINTERNAL CONTROLSINTERNAL CONTROLSINTERNAL CONTROLS
• New systems evolved on an-on-going basis to suit changing environment Credit process – streamlining of the
sanction process through greater delegation of sanctioning powers, delayering of the credit assessment process
Committee form of decision making
• Systems Audit periodically undertaken to assess deficiency
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PRODUCT INNOVATIONPRODUCT INNOVATIONPRODUCT INNOVATIONPRODUCT INNOVATION
• Leveraging customer base to focus on Cross Selling
• Segmental focus Focus on mid-corporate, trade, housing,
consumer finance, agriculture
• Leaders in launching new products
• Innovative forms of credit – Self-Help Group, Kissan (Farmer’s) Credit Card
• Project Uptech - providing expertise and technical support to the borrowing customers in their activities
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HUMAN RESOURCESHUMAN RESOURCESHUMAN RESOURCESHUMAN RESOURCES
• Committed professional cadre• Best pool of human resources
SBI has been the source for talent for many of the foreign and private sector Banks
• Employee productivity - Performance Management System
• Transparency in personnel matter Appellate / review authority
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HUMAN RESOURCESHUMAN RESOURCESHUMAN RESOURCESHUMAN RESOURCES
• Excellent in-house training infrastructure – reputed to be the best in India and one of the best in Asia Training system synchronised with the corporate
objectives Training delivery – practical oriented
programmes, on-the-job trainings, job related Proper selection of trainers / trainees Hands-on training by deputing to the Branches Training colleges/centres in each Circle Training from the time of entry till the time for
retirement for all staff Research wing Systematic evaluation of the impact of training
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AREAS OF CONCERNAREAS OF CONCERNAREAS OF CONCERNAREAS OF CONCERN
• Government ownership acts as a constraint in raising fresh capital
• Perception as one of the brightest “family silvers” often results in political intervention delaying decisions relating to critical strategic and policy changes
• Absence of market related compensation structure for employees
• Inability to offer performance based compensation and rewards
• Inability to attract and retain best-in-class talent
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CONCLUSIONCONCLUSIONCONCLUSIONCONCLUSION• Notwithstanding its public sector nature SBI has shown
consistently strong performance, demonstrating: Being in the public sector in itself need not really be a handicap
to success It is not only possible but essential to retain a commercial
culture and competitive efficiency while attending to social and developmental objectives
Quality of governance is independent of ownership Ownership, and management roles and concerns can be kept
separate and as long as they are kept so, performance is better Long term strategy and a clear vision about market positioning
is essential Ability to provide leadership from within is important Development of human resource is critical
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