Transforming Public

Sector Banks

State Bank Of India

A Success Story
Presented By:
M S Verma, Former Chairman State
Bank of India
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 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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agr O

pr o C

opr o C
India

l anr et nI
State Bank of

c udor P

na mu H
WHAT DIFFERENTIATES SBI?

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STATE 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 India
 2 wholly-owned (outside India)
 2 joint ventures (outside India)

 7 Non-Banking Subsidiaries

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 S t at e Ba nk of
India

ORGANISATION STRUCTURE
sl ort no Cl anr et nI

s ecr uose R na mu H
noi t avonnI t c udor P
pi hsr edaeL et ar opr o C
er ut curt s noi t asi nagr O

ec nanr ev o Get ar opr o C

• Adapting with time

 First Restructuring (1971)
 market segmentation
 Annual performance budgeting

 Second Restructuring (1980)

 modular structure
 controlling offices nearer to operating units for better
control
 Comprehensive Review of Structure
Processes & Roles (1994 – 95)
 strategic
business units
 business groups

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 S t at e Ba nk of
India

ORGANISATION STRUCTURE
sl ort no Cl anr et nI

s ecr uose R na mu H
noi t avonnI t c udor P
pi hsr edaeL et ar opr o C
er ut curt s noi t asi nagr O

ec nanr ev o Get ar opr o C

Business Group Strategic Business Units

1 Corporate Banking Corporate Accounts Group Project Finance
Group Group & Leasing Group

2 National Banking Each of the Local Head Offices constitutes

Group 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 & Associate Banks, Subsidiaries of SBI

Subsidiaries
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 S t at e Ba nk of
India

ORGANISATION STRUCTURE
sl ort no Cl anr et nI

s ecr uose R na mu H
noi t avonnI t c udor P
pi hsr edaeL et ar opr o C
er ut curt s noi t asi nagr O

ec nanr ev o Get ar opr o C

Customer Focused Organisation Structure

State Bank of India

Corporate Centre

Corporate Banking International Banking National Banking Associates &

Group Group Group Subsidiaries

Local Head
Project Corporate Leasing Offices 100% owned Non-Banking
Accounts 7 Associate
Finance SBU banking Subsidiaries &
Group SBU Banks subsidiary Affiliates

Focus on Dedicated Focus on • Investment

Development &
Infrastructre, focus on Infrastructre Commercial Banking
Personal Banking
Telecom, Top & Capital Network
Network • Funds
Transport & intensive Management
Corporates
Hydrocarbon projects • Primary
financing Dealership
Mid-sized SSIs/
corporates, Agriculture Government Personal • Factoring
large SSIs Business customers • Credit Cards
/Small
& Agri. business • Insurance
• Credit Bureau

High net- 8
worth
Individuals
 S t at e Ba nk of
India

CORPORATE GOVERNANCE
sl ort no Cl anr et nI

s ecr uose R na mu H
noi t avonnI t c udor P
pi hsr edaeL et ar opr o C
er ut curt s noi t asi nagr O

ec nanr ev o Get ar opr o C

• 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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 S t at e Ba nk of
India

CORPORATE GOVERNANCE
sl ort no Cl anr et nI

s ecr uose R na mu H
noi t avonnI t c udor P
pi hsr edaeL et ar opr o C
er ut curt s noi t asi nagr O

ec nanr ev o Get ar opr o C

• 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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 S t at e Ba nk of
India

CORPORATE GOVERNANCE
sl ort no Cl anr et nI

s ecr uose R na mu H
noi t avonnI t c udor P
pi hsr edaeL et ar opr o C
er ut curt s noi t asi nagr O

ec nanr ev o Get ar opr o C

• 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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 S t at e Ba nk of
India

CORPORATE LEADERSHIP
sl ort no Cl anr et nI

s ecr uose R na mu H
noi t avonnI t c udor P
pi hsr edaeL et ar opr o C
er ut curt s noi t asi nagr O

ec nanr ev o Get ar opr o C

• 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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 S t at e Ba nk of
India

CORPORATE LEADERSHIP
sl ort no Cl anr et nI

s ecr uose R na mu H
noi t avonnI t c udor P
pi hsr edaeL et ar opr o C
er ut curt s noi t asi nagr O

ec nanr ev o Get ar opr o C

• 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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 S t at e Ba nk of
India

INTERNAL CONTROLS
sl ort no Cl anr et nI

s ecr uose R na mu H
noi t avonnI t c udor P
pi hsr edaeL et ar opr o C
er ut curt s noi t asi nagr O

ec nanr ev o Get ar opr o C

• 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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 S t at e Ba nk of
India

INTERNAL CONTROLS
sl ort no Cl anr et nI

s ecr uose R na mu H
noi t avonnI t c udor P
pi hsr edaeL et ar opr o C
er ut curt s noi t asi nagr O

ec nanr ev o Get ar opr o C

• 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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 S t at e Ba nk of
India

PRODUCT INNOVATION
sl ort no Cl anr et nI

s ecr uose R na mu H
noi t avonnI t c udor P
pi hsr edaeL et ar opr o C
er ut curt s noi t asi nagr O

ec nanr ev o Get ar opr o C

• 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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 S t at e Ba nk of
India

HUMAN RESOURCES
sl ort no Cl anr et nI

s ecr uose R na mu H
noi t avonnI t c udor P
pi hsr edaeL et ar opr o C
er ut curt s noi t asi nagr O

ec nanr ev o Get ar opr o C

• 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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 S t at e Ba nk of
India

HUMAN RESOURCES
sl ort no Cl anr et nI

s ecr uose R na mu H
noi t avonnI t c udor P
pi hsr edaeL et ar opr o C
er ut curt s noi t asi nagr O

ec nanr ev o Get ar opr o C

• 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 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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 CONCLUSION
• 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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Thank You

www.statebankofindia.com
www.statebankofindia.com