banks

1. Transforming Public Sector Banks
State Bank Of India
A Success Story
Presented By:
M S Verma, Former Chairman State Bank of India

2. 2
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

3. 3
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

4. 4
WHAT DIFFERENTIATES SBI?
Organisationstructure
State Bank of India
CorporateGovernance
CorporateLeadership
InternalControls
ProductInnovation
HumanResources

5. 5
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

6. 6
ORGANISATION STRUCTURE
• 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
Organisationstructure
State Bank of India
CorporateGovernance
CorporateLeadership
InternalControls
ProductInnovation
HumanResources

7. 7
ORGANISATION STRUCTURE
Business Group Strategic 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
Organisationstructure
State Bank of India
CorporateGovernance
CorporateLeadership
InternalControls
ProductInnovation
HumanResources

8. 8
ORGANISATION STRUCTURE
•Investment
Banking
•Funds
Management
•Primary
Dealership
•Factoring
•Credit Cards
•Insurance
•Credit Bureau
State Bank of India
Corporate Centre
Corporate Banking
Group
International Banking
Group
Development &
Personal Banking
Network
Commercial
Network
Mid-sized
corporates,
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
Leasing
SBU
Focus on
Infrastructre
& Capital
intensive
projects
National Banking
Group
Associates &
Subsidiaries
7 Associate
Banks
100% owned
banking
subsidiary
Non-Banking
Subsidiaries &
Affiliates
Local Head
Offices
Organisationstructure
State Bank of India
CorporateGovernance
CorporateLeadership
InternalControls
ProductInnovation
HumanResources
Customer Focused Organisation Structure

9. 9
CORPORATE 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
Organisationstructure
State Bank of India
CorporateGovernance
CorporateLeadership
InternalControls
ProductInnovation
HumanResources

10. 10
CORPORATE 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
Organisationstructure
State Bank of India
CorporateGovernance
CorporateLeadership
InternalControls
ProductInnovation
HumanResources

11. 11
CORPORATE 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
Organisationstructure
State Bank of India
CorporateGovernance
CorporateLeadership
InternalControls
ProductInnovation
HumanResources

12. 12
CORPORATE 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
Organisationstructure
State Bank of India
CorporateGovernance
CorporateLeadership
InternalControls
ProductInnovation
HumanResources

13. 13
CORPORATE 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
Organisationstructure
State Bank of India
CorporateGovernance
CorporateLeadership
InternalControls
ProductInnovation
HumanResources

14. 14
INTERNAL 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
Organisationstructure
State Bank of India
CorporateGovernance
CorporateLeadership
InternalControls
ProductInnovation
HumanResources

15. 15
INTERNAL 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
Organisationstructure
State Bank of India
CorporateGovernance
CorporateLeadership
InternalControls
ProductInnovation
HumanResources

16. 16
PRODUCT 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
Organisationstructure
State Bank of India
CorporateGovernance
CorporateLeadership
InternalControls
ProductInnovation
HumanResources

17. 17
HUMAN 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
Organisationstructure
State Bank of India
CorporateGovernance
CorporateLeadership
InternalControls
ProductInnovation
HumanResources

18. 18
HUMAN 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
Organisationstructure
State Bank of India
CorporateGovernance
CorporateLeadership
InternalControls
ProductInnovation
HumanResources

19. 19
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

20. 20
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

21. www.statebankofindia.com
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