state bank of india project

7/29/2019 state bank of india project

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CHAPTER 1.

INTRODUCTION.

Definition of bank:-

According to Oxford English Dictionary, Bank is, An establishment for custody of

money received from or on behalf of, its customers. Its essential duty is the payment of

the orders given on it by the customers, its profit mainly from the investment of money

left unused by them

Banking Regulation Act, 1949 (Sec. 5(c)), has defined the banking company as,

Banking Company means any company which transacts business of banking in India.

According to Section 5B, banking means the accepting of deposit of money from the

public for the purpose of leading or investment, which are repayable on demand or

otherwise and are withdraw able by cheque, draft, and order or otherwise.


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INTRODUCTION TO SBI

The State Bank of India is a govt. sector bank. The evolution of State Bank of India can

be traced back to the first decade of the 19th century. It began with the establishment of

the Bank of Calcutta in Calcutta, on 2 June 1806. The bank was redesigned as the Bank

of Bengal, three years later, on 2 January 1809. It was the first ever joint-stock bank of

the British India, established under the sponsorship of the Government of Bengal.

Subsequently, the Bank of Bombay (established on 15 April 1840) and the Bank of

Madras (established on 1 July 1843) followed the Bank of Bengal. These three banks

dominated the modern banking scenario in India, until when they were amalgamated to

form the Imperial Bank of India, on 27 January 1921.

In order to serve the economy as a whole and rural sector in particular, the All India

Rural Credit Survey Committee recommended the formation of a state-partnered and

state-sponsored bank. Hence the committee proposed the takeover of the Imperial Bank

of India, and integrating with it, the former state-owned or state-associate banks.

Subsequently, an Act was passed in the Parliament of India in May 1955. As a result, the

State Bank of India (SBI) was established on 1 July 1955. Later on, the State Bank of

India (Subsidiary Banks) Act was passed in 1959. The State Bank of India emerged as a

pace-setter, with its operations carried out by the 480 offices comprising branches, sub

offices and three Local Head Offices, inherited from the Imperial Bank. Instead of

serving as mere repositories of the community's savings and lending to creditworthy

parties, the State Bank of India catered to the needs of the customers, by banking

purposefully.


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Strategic Evolution of SBI

Strategy can be defined as the periodic changes a business must introduce to its structure

and operations in order to ensure continuity in the face of environmental changes. The

strategic evolution of a business can thus be understood in terms of major social

institutions such as the State, the market, community or civil society and their

interrelationships that may have a bearing on its working and thereby the achievement of

the principle objectives of its establishment.

Historians recognize moments of profound change when the balance of power or

influence shifts between these institutions. The SBI is a dynamic organization and has

been continuously changing its form to adapt to its environment. Here, we have examined

its vicissitudinal nature with respect to three key environmental factors:

Ownership and governance

Business processes

Structures and systems


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On the basis of the following, the evolution of the Indian economy can be divided in the

following phases :

Shifting relationships in India - the state and the economy


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Mission statement:

To retain the banks position as the premier Indian financial services. It also aims to be a

group with world class standards and significant global business commitments to

excellence in customer, shareholder and employee satisfaction so as to play a leading role

in expanding and diversifying financial services while continuing emphasis on its

development banking role.

Vision:

To be a premier Indian financial services group with global perspective, world class

standard of the efficiency and professionalism and also its core institutional values, To

retain its position in the country as a pioneer in developing countries, It also aims to

maximize its shareholders value through high sustained earnings per share, To become an

institution with a culture of mutual care and commitment. It also focuses on a pleasant

working environment to have continuous learning opportunities.


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Values:

Excellence in customer service

Profit orientation

Belonging and commitment to bank

Fairness in all dealings and relations

Risk taking and innovations

Team playing

Learning and renewal

Integrity

Transparency and discipline in policies and systems


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Overview of various Avatars of SBI

With the view of adapting to the extra-institutional changes mentioned above and

maintaining continuity, SBI has continuously rechristened itself. Following is a list of

major strategic changes introduced at the bank. These have been dealt with in detail in

successive paragraphs.


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Key Areas of Operations

The business operations of SBI can be broadly classified into the key income generating

areas :-

Such as National Banking, International Banking, Corporate Banking, & Treasury

operations.


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AWARDS AND RECOGNITION


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CHAPTER 2.

Generic strategies adopted by State Bank of India:

Institution for advanced learning: to provide state of the art training in financial

products to middle level and senior level executives.

`Internal consultant/change agent: to act as a catalyst for change in attitudes and

orientation of banking staff and to provide expertise and consultative support

Feedback supplier: to capture and structure feedback from trainees and from the

market

Think tank: to provide expert and inform suggestions, model business strategies,

analysis of market developments from a banker perspective.

Research and development role: to carry out research on contemporary subjects

that are relevant to the banks short term and medium term and operational needs

and policy formulation

Overlapping staff training centers: to validate and closely monitor the staff

training centers in seven circles attached to the academy.


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Centralization and Decentralization

It has a well defined system for decision making process. The financial decisions are

taken at various levels by different officials depending upon their positions and also

through committee approach.

The centralized credit processing cells are being formed at certain centers for sanction

of personal segment loans and under SBI segments. Its branches source the

applications and forward them to the respective credit processing sale for their

consideration.

Regarding the sanction of loan each officer of the bank considers the loan proposals

and takes a decision in terms of scheme of delegation of powers, on merits of

proposal. If the bank needs to purchase any kind of equipment like computers or

software branch managers are required to take permission from high authority.

So in term of decision making centralization is high and low decentralization wherein

the managers have some powers to take decision but at a limited base.


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The Restructuring

To overcome the intense competition from private and foreign banks, SBI planned a major

organizational restructuring exercise.

The key aspects involved

redesigning of branches,

providing alternate channels;

focus on a lean structure and

Technological up gradation.

A business process reengineering (BPR) team was constituted in June 2003 with

McKinsey & Company as consultants. The BPR's basic goal was to create an

operating architecture that would facilitate service delivery of international standards.

The project objectives were defined as

increasing customer satisfaction and convenience,

freeing up time for branch manager and

branch staff to focus on sales and marketing,

simplifying process for employees,

enhancing SBI's competitiveness in the market,

increasing the profitability through higher market share and improved process

efficiency


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New Products and Services

Apart from restructuring, SBI launched several innovative, value-added products and

services to project a customer friendly image. It launched a special service for corporate

customers called 'telebanking and remote login' to support transactional requests. This facility

would be available at 593 branches, and remote login at 269 branches.

The banks trade finance solutions, called EXIMBILLS, were intended to handle trade finance

transactions efficiently and enhance the range of services provided to corporate and network

branches.

In March 2004, SBI announced that it would introduce anywhere banking' facility for its

customers over 9000 branches across India in the next two years. All the branches in

Mumbai would provide this facility by December 2008. SBI also launched different

customized loan programs to cater to various sections of society depending on income levels

and repayment capabilities. Interest rates and repayment periods were tailor-made to suit the

customer groups.


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Alliances and Tie-Ups

To boost its business, SBI entered into several alliances and tie-ups with automobile,

insurance, mutual fund, project finance and medical equipment companies.

Auto.Finance

Unlike other competitors that relied on reduced interest rates to get business, SBI

extended the tenure of car loans from five to seven years, thereby lowering the monthly debt

repayment burden of the loan seeker. SBI entered into a tie-up with Maruti, the largest

automobile manufacturer in India, to provide loans for purchase of Maruti cars at the rate

of 10.05 per cent and 11.25 per cent for three years and above three years respectively.

After the scheme was introduced, SBI emerged as the largest financier for Maruti cars in

India and the number of Maruti vehicles financed grew by 17 per cent in the fiscal 2003-04

over fiscal 2002-03... & TATA NANO on 2009-10 giving EMI FACALITY around low as

Rs.899/- per month per lac..


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The Marketing Initiatives

SBI carried out various marketing initiatives to enhance its reach. They included

segregating and targeting existing high value customers,

cross sales of other products,

Setting up call centers and outbound sales force to secure new customers.

Plans were also made to utilize database marketing to pursue large and medium

sized corporate, government and trade finance customers.

Database marketing was expected to draw increased revenue from cross selling,

lower costs and increased customer loyalty.

SBI also introduced various other ways of reaching out to customers like

extension of hours of work(SBI increased daily working hours by two hours and

Sunday banking was introduced) and

Aggressive marketing through print and television media.


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Looking Ahead-Result:

SBI's restructuring exercise and growth strategies resulted in an increase in profits for the

fiscal 2009-10. Net profits stood at Rs 36.81 bn for the fiscal ended 2009-10 as against Rs

31.05 bn the previous fiscal, an increase of 18.55 per cent. Operating profits stood at Rs

95.535 bn compared to Rs 77.754 bn in the fiscal 2008-09.

In spite of SBI's efforts to reduce workforce, staff costs rose by 13.3 per cent, mainly due

to additional contribution to pension fund and provision for leave encashment.

The net NPA level came down from 4.5 per cent in the fiscal 2009-10 to 3.5 per cent in

2003-04. SBI aimed at 2 per cent NPA by 2009-10

Till June 2010, Two thirds of their branches were in rural and semi-urban areas and it

was believed to be a profitable business,


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Among the factors that will help in realizing this full potential were access to institutional

credit to more farmers and appropriate quantity and quality of agriculture credit. Since

the Seventies, the decadal average growth rate of the volume of short-term institutional

credit to agriculture has stagnated at around 15 per cent, while the growth rate of the

volume of long-term credit has in fact declined from 20.2 per cent in the 1970s to11.9 per

cent in 1990s.

The government has anxiously examined the question of agriculture credit and related

issues in consultation with the Reserve Bank of India (RBI), National Bank for

Agriculture and Rural Development (Nabard) and commercial banks.

Among commercial banks, SBI with its vast network is well placed to fulfill the large

commitments of the new government to the farm sector. In the current financial year the

government targeted for a 30 per cent increase in the aggregate agricultural credit over

the previous year.


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On interest rate, the rates would remain stable in the short-term. There could be a revision

in interest rates in the medium to long-term period. Further, any likely revision would

depend on external factors than domestic factors.

Elaborating on the importance of the right tie-ups and partnerships for the bank,there

are a few non-core business areas where SBI is and wherever we have partners, the global

majors are our partners. For instance, in insurance, Cardiff, and for cards, GE is our

partners. We are becoming a very major player in the Indian economy. For example SBI

Cardswe are the third largest card company and second fastest growing card company

after ICICI. This is the most profitable card company in the country and SBI is doing very

well.

On technological up gradation, all the 13,650 branches of the bank were fully

computerized, also they increased fully integrated ATM network from 4,000 in 2004 to

6000 today across the country. SBI in its own quiet manner is trying to provide world-

class services.


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CHAPTER 3.

SBI`S STRATEGIES IN THE CURRENT

SCENARIO

SBI have set up capacity in places where they are not very strong. Its time for them to

follow overall SBI philosophy of planning new branches, given the huge untapped

potential. Besides, this is also the best time to benefit from their past expansion, since

there is a lot of trust in SBI.

Brand SBI is very strong, while people may be generally cautious about some other

brands. They can not only tap the potential better but can also provide a safe and

transparent insurance alternative to the public.

The bank is entering into many new businesses with strategic tie ups - Pension Funds,

General Insurance, Custodial Services, Private Equity, Mobile Banking, Point of Sale

Merchant Acquisition, Advisory Services, structured products etc - each one of these

initiatives having a huge potential for growth.


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Some of the strategies to cope with the current scenario are

listed below:

It is the part of SBI`s philosophy to open new branches .The Bank is forging

ahead with cutting edge technology and innovative new banking models, to

expand its Rural Banking base, looking at the vast untapped potential in the

hinterland and proposes to cover 100,000 villages in the next two years. SBI is

planning to hire 11,000 employees in the current fiscal.

It is also focusing at the top end of the market, on whole sale banking

capabilities to provide India's growing mid / large Corporate with a complete

array of products and services. It is consolidating its global treasury operations

and entering into structured products and derivative instruments. Today, the Bank

is the largest provider of infrastructure debt and the largest arranger of external

commercial borrowings in the country. It is the only Indian bank to feature in the

Fortune 500 list.

The Bank is changing outdated front and back end processes to modern customer

friendly processes to help improve the total customer experience. With about


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8500 of its own 10000 branches and another 5100 branches of its Associate Banks

already networked, today it offers the largest banking network to the Indian

customer. The Bank is also in the process of providing complete payment solution

to its clientele with its over 8500 ATMs, and other electronic channels such as

Internet banking, debit cards, mobile banking, etc.

Country's largest lender, State Bank of India (SBI) has prepared a blueprint to go

retail in its international operations. Such strategy would help the bank to

promote its lead in syndication of loans in the overseas market, at a cheaper

cost.The bank's overseas operations have been instructed to thrust more on

promoting retail banking locally, SBI is assessing that by opening more branches

across foreign locations and promoting retail services by mobilising deposits at

interest rates as low as 3-3.5%, the bank will be able to increase its operating

margins by 250-300 basis points in overseas markets where syndication

opportunities arise often.SBI is expected to open seven new branches over next

eight months in the United Kingdom where it operates six branches currently.

Also, SBI's Washington office is expected to get upgraded as a full-fledged

branch by December 2009 and plans are afoot to open more branches across

North America under the control of California State chartered subsidiary of State

Bank of India (California).


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In response to signals from the central bank, SBI have progressively reduced

their PLR from 13.75% to 12.25% during the past few months in stages, and

further softening in interest rates cannot be ruled out.

SBI is introducing loan products at sub-PLR rates - in home loans at 8%, auto

loans at 10%, special products for SMEs and... agriculture sector at 8%, but it

may not be possible for them to reduce the interest rate beyond a certain point.

SBI is working on infrastructure sector projects, which has seen a growth of 26%

in the current year. For the year 2008 the Rs 10,000 crores was sanctioned for the

infrastructure projects while in the current year from April 08 to February 09 the

amount sanctioned for the infrastructure project is Rs 13,000 crores,out of which

project worth Rs 8000 crore is in pipeline. Despite of various viability issues the

growth in this sector for SBI is been intact.

With market-linked products finding fewer takers, insurance companies are

launching more guaranteed products to lure investors. The latest to join the

bandwagon is SBI Life insurance with SBI Smart ULIP, a product that guarantees

returns based on the highest NAV recorded by the fund in the first seven years.


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SWOT ANALYSIS:

Strengths:

time(Being the oldest bank in India tracing history back to 1806)

Fortune Global 500 list, and ranked

219 in 2008 Forbes Global 2000. With an asset base of $126 billion and its reach,

it is a regional banking behemoth.

10000 core branches and more than 5100 branches of associate banks

(subsidiaries).

extend the relationship with existing customer's Bank has umbrella of products to

offer their customers, if once customer has relationship with the bank. Some

Products, which SBI Bank is offering are: Retail Banking Business Banking

Merchant Establishment Services (EDC Machine) Personal loans & Car loans

Insurance Housing Loans

edge over private banks in terms of customer security.

-SBI offers very low transition costs which attracts small

customers.

and hence earnings.
http://en.wikipedia.org/wiki/Fortune_Global_500http://en.wikipedia.org/wiki/Forbes_Global_2000http://en.wikipedia.org/wiki/Forbes_Global_2000http://en.wikipedia.org/wiki/Fortune_Global_500


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WEAKNESSES:

some respects, is a barrier to change.

highest non performing assets (NPAs) in the industry, which stand out to be at

16.28 % (Dec 2007).

of its processes, infrastructure, centralisation, etc.

tly operating at a lowest CAR(8%). Insufficient capital may restrict

the growth prospects of the bank going forward.

-15 to be close

to Rs50bn.

growing retail book poses higher credit risk to the bank.


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OPPORTUNITIES:

SBM, etc) into SBI will create a mega bank which streamlines operations and

unlocks value.

-2009. This will further

increase its reach.

populations offers a great opportunity to expand on foreign soil.

internationally in 32 countries like Australia, Bangladesh, etc.... and has more

plans of expansion in other global markets.

her business growth.

higher

Corporate demand for credit on account of capacity expansion.


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THREATS:

Indian market due to the friendly policies adopted by the government. This can

increase the level of competition and prove a potential threat for the market share

of SBI bank.

has not been responsive enough to meet them on time.

-urban sector, which

used to be the bastion of the State Bank and other PSU banks

SBI's activities. This can be repeated in the future.

uld impact retail growth of

SBI and

Hence slowdown in earnings growth.

-take

thereby

Impacting earnings growth.


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Porters five forces theory:

1. Threat of competitors:

Top Performing Public Sector Banks

a.

b.

c.

d.

e.

Andhra Bank

Allahabad Bank

Punjab National Bank

Dena Bank

Vijaya Bank

Top Performing Private Sector Banks

a.

b.

c.

HDFC Bank ICICI

Bank AXIS Bank

Kotak Mahindra Bank

Centurion Bank of Punjab


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Top Performing Foreign Banks

a.

b.

c.

d.

e.

2.

Citibank

Standard Chartered

HSBC Bank

ABN AMRO Bank

American Express

Threat of new entrants: there have been many new entrants in banking sector

like yes bank

3. Threat of substitutes: investors as a substitute can always invest into the capital

markets instead of depositing in their capital in the bank.

4. Buying power of suppliers: changing policies and guidelines of RBI, interest

rates, CRR and SLR maintained by the banks as per RBI norms.

5. Buying power of customers: changing scenarios, increasing and decreasing

disposable incomes, other attractive options available to customers.


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BCG THEORY: CASH COW

There is a lot of growth potential for the banking industry because of increasing

disposable income of customers, increasing working class, more volatility in other

markets also increasing importance of savings and in this banking industry SBI has

shown a growth rate of 13% with a 21 % increase in PAT standing to 62.1 cr in the FY

2008-09. Hence it can be concluded that SBI stands at cash cow in BCG matrix.


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Conclusion:

Banking sector in India has gone through a metamorphosis change in its concept

perception and outlook quantitative expansion with quality has been a phenomenon in the

operations of the banking system bank being a service selling show has to meet the need

of the customers which vary from place to place, time to time and purpose to purpose and

also at the same time it has to sustain the tough competition coming from all the four ends.

An increase in the income and saving of the urban population has raised hopes for

banking institutions to fill up the gaps by catering to the need of the potential customers

and also penetrate into new target markets like rural sectors through its innovative

financial products like micro finance and SBI is doing the same and this has been proved

by so many awards it has achieved in the recent past, State bank of India earlier known as

Imperial Bank has proved its existence through introducing various innovative schemes

and that also are considered as competitive in present market.

It follows a centralized system, so as to bring synchronization in the decision making

process which helps the organization to create better strategies so as to focus on the

overall functioning and growth prospects of the bank.


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BIBLIOGRAPHY

Books:-

Marketing Strategy

by nirmalya kumar

2008 edition .

Emkay, a research paper of July 2008

Websites:

www.sbi.co.in
http://www.sbi.co.in/http://www.sbi.co.in/

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state bank of india project