Banking on Modern Times

Samar Pal Singh, a resident of Bhuj, Gujarat, opened a pension account at State Bank of India after taking premature retirement from the defence services many years ago. SBI was then among the state-owned banks mandated to disburse pensions. But he soon began to chafe at the quality of its customer service. While private banks such as HDFC Bank and ICICI Bank were racing forward introducing new technological tools and offering customers a dizzying array of services, SBI seemed to him to be just plodding along.

But, in fact, SBI was changing. In 1992, it had just one fully-computerised branch – in Nariman Point, South Mumbai. In the next 10 years, it managed to computerise nearly 4,000 odd branches. By 2004, it completed its computerisation drive by connecting all its 9,000 odd branches. “The computerisation task was something like repairing a car engine while it is running,” says Diwakar Gupta, the bank’s Managing Director. Today, SBI boasts 14,000 plus computerized branches, apart from a balance sheet size of `13.35 trillion.

Internet banking initiatives also started in the first decade of this century. Today, customers like Singh have no need to use their cheque book. A click of a mouse takes care of their banking needs. SBI now has 8.96 million Internet banking customers out of the 153.9 million savings bank account holders. Over 22,000 SBI ATMs across the country serve customers round the clock.

There is traction in SBI’s other services, too. In 1997, it tied up with GE Caps for a joint venture in credit cards. Today, this venture has 2.3 million customers and an asset base of half a billion dollars. The same goes for the life insurance venture where SBI Life is among the top three in premium income. “The diversification strategy has been paying rich dividends,” says Gupta, whose bank aggresively cross-sells nonbanking products through its branches. With a wide range products and technology in place, the bank has been giving its rivals a run for their money. A far cry frompredictions that a state-run bank would get hurt by increasing private sector competition.

When O.P. Bhatt took over as Chairman in 2006, he took biggies like HDFC Ltd and ICICI Bank head on in retail loans. Bhatt’s five-year tenure saw the bank launching teaser home loan rates where borrowers were lured with an attractive eight per cent rate for the first three years followed by a fixed rate. The teaser loan drive even forced the home loan giant HDFC to play copycat. “We are today the largest player in home loan segment, both in volume and incremental growth,” says Gupta.

Under new Chairman Pratip Chaudhuri, the 215,000-employee bank is rock solid despite the slowing economy. In 2011/12 , SBI topped in terms of growth in operating profits at 24 per cent as against 14-16 per cent recorded by ICICI Bank and HDFC Bank Ltd. The asset quality, however, has been deteriorating, though it is not yet a cause for concern. Net non-performing assets have risen from 1.78 per cent in 2007/08 to 1.82 per cent in 2011/12. “It’s cyclical ,” says Gupta.

Overall, there seems to be no threat to SBI’s numero uno position. The bank today boasts `10.43 trillion deposits, operating profit of `31,574 crore and a balance sheet of `13.35 trillion. (A trillion equals one lakh crore.) Today, Singh, the Bhuj customer, regularly gets calls from private sector banks offering him products and services. They have not yet succeeded in luring him away. SBI, too, knows and understands that customers will move away if the bank slips in services.

Gupta lists two big challenges in the years to come. The first is on the human resource front. “We have to be a more productive and leaner organisation,” says Gupta. The other big challenge is intelligent use of the next wave of technology.

Still, it is clear the so-called sleeping giant is on the prowl. ANAND ADHIKARI