Presented by : Arpan Biswas, MBA (Day), IISWBM

State Bank of India (SBI) SBI) The name of the organization is State Bank Of India (SBI). State Bank of India (SBI) is the largest Indian banking and financial services company (by turnover and total assets) with its headquarters in Mumbai, India. SBI provides a range of banking products through its vast network of branches in India and overseas, including products aimed at non-resident Indians (NRIs). SBI has 16,000 branches,14 Local Head Offices and 57 Zonal Offices that are located at important cities throughout the country. It also has around 130 branches overseas.

History of State Bank Of India : Year 1955 : On 1st July,1955,State Bank of India Act---State Bank of India was constituted for the purpose of taking over the general banking business of the Imperial Bank of India including foreign exchange, merchant banking and mutual funds. Year 1959-1960 : Under State Bank of India (Subsidiary Bank) Act State Bank of Hyderabad become the first subsidiary of SBI. During this period, State Bank of Jaipur, State Bank of Bikaner, State Bank of Indore, State Bank of Travancore, State Bank of Mysore, State Bank Patiala and State Bank of Saurashtra became subsidiaries of SBI.

Year 1962-1969 : The Bhor State Bank Ltd, Bank of Aundh Ltd, Bank of Behar Ltd were Amalgamated with the Bank . Branch in London become bankers to the Indian High Commission--taking over the functions till then performed by the office of RBI.

The way State Bank Of India has grown and developed : Year 1972-1999 :
Merchant banking division for promotional needs of the corporate sector. social and cultural needs of villages---the bank launched an integrated rural developement programme aimed to the credit needs agricultural activities, village industries, housing and social activities. SBI launched self employment scheme, for providing self-employment to educated unemployed youth. SBI Green Card--- an agricultural credit card to give greater liquidity and flexibility to farmers in procuring agricultural inputs. SBI signed an exclusive agreement with the world's largest payment system - Visa International - for payment cards in India. `Convenience Banking' SBI, the first public sector bank to offer its `savings bank' account holders the benefits of fixed deposits (higher interest rates) and current accounts (overdraft facility).

Year 2000-2010 : Core Banking Solution--interest was invited in July 2000, and the actual implementation was started in August 2003--the first branch of the bank was put on TCS' B NCS core banking solution. International credit cards for doctors--the first of its kind in the country, offering facilities including special discounts on medical equipment and personal loans from GE countrywide. The government has chosen State Bank of India (SBI) for channelizing government credit to other countries which runs into billions of dollar . UIDAI project--SBI has signed a pact with Unique Identification Authority of India (UIDAI) to work as a registrar for the UID registration of residents--the first bank to take up the UIDAI project .

Net Profit 10000 8000 6000 4000 2000 0 Mar'07 Mar'08 Mar'09 Mar'10 Mar'11 10 8 6 4 2 0 Mar'07

Cash Deposit Ratio

Mar'08

Mar'09

Mar'10

Mar'11

Cash Deposit Ratio 10 8 6 4 2 0 Mar'07 Mar'08 Mar'09 Mar'10 Mar'11

SBI provides a wide range of banking products & service through its vast network of branches in India and overseas. Deposits  Current Account  Saving Bank Account  Term Deposits  Demat Account

 Loan & Advance  Housing Loan  Property Loan  Car Loan  Educational Loan  Personal Loan  Loan to Pensioners  Credit Khazana  Loan Against Shares/Debentures  Loan For ESOPS  Festival Loans

NRI services Agricultural Banking Corporate Banking SME Service  Broking Service  ATM Services  Internet Banking  E-Pay  E-Rail  Safe Deposit Locker

Values SBI Creates

SBI provides financial securities to their customer by their Depository products. SBI fulfills financial requirements to their customer by Loan & Advance products. SBI provides value to their stakeholders by maximizing their wealth. It helps customer to save lots of time for banking operation through ATM service, Internet Banking etc. SBI provides value to the Indian economy and helps to stay with the momentum of growth.

SBI s organizational mission: To retain the banks position as the premier Indian financial services. Group with world class standards and significant global business commitment to excellence in customer, shareholder and employee satisfaction and to play a leading role in the expanding and diversifying financial services sector while continuing emphasis on its development banking role.

FLEXIBILITY HUMAN RESOURCE MODEL OPEN SYSTEMS MODEL

Goal Values : Human Resource Goal Values : Growth, Resource Development Sub-Goals FOCUS ,Training Acquisition : Cohesion, Morale Sub-Goals Flexibility, Evaluation INTERNAL PROCESS MODEL Goal Values : Stability, Equilibrium Sub-Goals : RATIONAL GOAL MODEL Goal Values : Readiness, : External

Information Productivity, Efficiency, Profit Sub-Goals : Planning, Goal Setting EXTERNAL

Management, Communication INTERNAL

From the mission statement, it is evident that the organisation creates value by means of Open Systems Model which is illustrated in the following way: Open Systems Model Inputs: Talented Employees, asset base of $352 billion and $285 billion in deposits. Market share among Indian commercial banks of about 20% in deposits and loans Sub-goals /Throughputs: Vast network of branches in India and overseas (16,000 branches). SBI has 14 Local Head Offices and 57 Zonal Offices. It also has around 130 branches overseas. Flexibility, Readiness, External Evaluation Outputs: Productivity, Profit, Growth. The State Bank of India is the largest of the Big Four banks of India Environment: Fairness, Honesty and Courtesy towards its clients, employees, vendors and society at large. 29th most reputed company in the world according to Forbes. SBI is the only bank featured in the coveted "top 10 brands of India (The Economic Times)

Organization s major problems or issues:

State Bank of India (SBI) is countries largest lender and has the highest brand value among others banks. It has several problems:
 Being a public sector undertaking SBI has to follow some rules and regulations and it can t take independent decisions.  As it is a bureaucratic organization it is very difficult to have control over each and every section of the organization.  Their mode of operations is not as flexible as compared to the other privet sector banks like ICICI, HDFC, and HSBC etc.  Facility provided by the bank is not adequate enough to compete with the rivals.

 The bank s products are standard, not customized according to customers needs.

Continued ..
 In SBI the administrative overhead is very high as compared to other private sector banks. Being PSU they have to maintain a standard level of salary across all the levels of employees.  Being a PSU they have to maintain NO-Frill accounts though they are not profitable.  VRS problem is also very serious as the average age of the bank s employees is very high as compared to private sector banks.  Now the NPA of SBI is more than 6%. A high level of NPAs suggests high probability of a large number of credit defaults that affect the profitability and net-worth of banks and also erodes the value of the asset.

There are several challenges today for SBI:

 The average age of the employees is much higher than the average age of the private sector banks of India, and these old aged employees are not flexible enough. This is one of the main hindrances for making any change to bring operational efficiency.  It has largest number of ATMs but most of them did not work. These leads to customer grievances and many times they switch over to competitors.  As discussed being PSU their administrative overhead is much higher, and these leads to higher costs.

Continued

..

 Their products are standardized so they failed to attract the customers which have different needs.  The competition from other PSU is increasing every day.  As foreign players came with better technology, better mode of operation and with huge capital gives them ability to attract corporate customers.  SBI has a very little presence in outside India for that they did not have a global brand and for that they are not able to attract the foreign customers and NRIs.

Most of the public sector and old private sector banks (classified as traditional banks and the foreign and new private sector banks (classified as modern banks) for the purpose of present study)

According to RBI we have this information: ***

Table 2: Employee Cost Rates (Per cent) Employee Cost to Operating Expenses Year Employee Cost to Total Business Employee Cost to Total Assets

Traditional Banks 2 71.78 72.20 71.81 72.28 74.23 71.52 70.13 68.42 66.92 65.26 60.99 58.63

Modern Banks 3 30.41 29.52 27.64 30.07 27.79 29.36 26.49 26.96 27.39 30.43 34.35 35.53

Traditional Banks 4 1.45 1.33 1.34 1.30 1.30 1.15 1.09 1.04 0.99 0.95 0.79 0.68

Modern Banks 5 0.57 0.55 0.63 0.63 0.63 0.63 0.63 0.64 1.23 1.14 0.80 0.88

Traditional Banks 6 2.05 1.90 1.88 1.80 1.98 1.62 1.57 1.49 1.39 1.35 1.13 0.96

Modern Banks 7 0.81 0.78 0.79 0.75 0.69 0.55 0.60 0.62 0.64 0.69 0.87 0.92

1 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

These diagram shows gradually the operating costs of modern banks has decrease per employee as compare to traditional banks. Along with that operating cost to total business shows a decline in case of modern than traditional. That s leads to lower profitability and higher administrative overhead.

The Goals of SBI : Win back the middle class, Rebuild a profitable wholesale bank, Build a global treasury, Dominate the small and medium enterprise space, Work on smart global expansion and Gain leadership in emerging new businesses such as private equity, pensions and general insurance.

The Path Ahead : At a macro level, SBI would likely be a key beneficiary of the economy returning back to a potential growth path through rising demand for loans as the economy rebounds to higher activity levels. Further, SBI could raise its productivity in the long run through potential mergers with its subsidiary banks and through revenue/cost synergies. With this, the number of SBI associates would come down to five. Further with a continued rebound in capital market activity and the life insurance and AMC, the business is picking up steam. Whatever the case, it is evidently clear that though the stock is looking a little expensive today, it is and will remain a blue-chip till the India story holds good. If the economy is back on the fast track, the banking system will have to show a robust growth led by none other than this banking behemoth.

The Road Map For Resurrection In order to improve service, the solution lay in de-clogging branches and adapting technology. Along with branch expansion, SBI set up ATMs and mini branches in far flung areas that improved cost-efficiencies for the bank. But this was not enough. In order to match up to the acumen of private sector banks, the bank needed to reach out to the high net worth individuals (HNIs). The bank would now appoint relationship managers who would not only help lower the burden on the branch network but also try to open up new markets focused on the affluent initially and high net worth individuals in a few months.

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