Transforming PSBs

8/6/2019 Transforming PSBs

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Transforming PublicSector BanksTransforming PublicSector Banks

State Bank Of IndiaA Success Story

Presented By:M S Verma, Former Chairman State

Bank of India


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HISTORICAL PERSPECTIVEHISTORICAL PERSPECTIVEHISTORICAL PERSPECTIVEHISTORICAL PERSPECTIVE

Banks nationalised in 1969 By early 1990s accounted for 90% of

countrys banking business

By 1992 had over 60,000 branch offices Highly regulated and protected

environment

Failed to measure up to internationalbenchmarks of strength and efficiency


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HISTORICAL PERSPECTIVEHISTORICAL PERSPECTIVEHISTORICAL PERSPECTIVEHISTORICAL 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 alsoimproved their profitability

Wide variations in competitive efficiency ofPSBs persists even today


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WHAT DIFFERENTIATES SBI?WHAT DIFFERENTIATES SBI?WHAT DIFFERENTIATES SBI?WHAT DIFFERENTIATES SBI?

O

rga

State Bank ofIndia

C

orp

Corp

o

Inter

nal

Pro

duc

Human


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STATE BANK GROUPSTATE BANK GROUPSTATE BANK GROUPSTATE BANK GROUP

State Bank Group a financial conglomerateof:

SBI Over 9,000 Branches

One of the worlds largest branch networks 7 Associate Banks Over 4,000 Branches

Banking Subsidiaries1 in India

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

7 Non-Banking Subsidiaries


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ORGANISATION STRUCTUREORGANISATION STRUCTUREORGANISATION STRUCTUREORGANISATION STRUCTURE

Adapting with time First Restructuring (1971)

market segmentation

Annual performance budgeting

Second Restructuring (1980)modular structure

controlling offices nearer to operating units for bettercontrol

Comprehensive Review of StructureProcesses & Roles (1994 95)strategic business units

business groups

Organisationstructure

State Bank ofIndia

CorporateGoverna

nce

CorporateLeaders

hip

InternalControls

ProductInnovation

HumanResources


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Business GroupBusiness Group Strategic Business UnitsStrategic Business Units

1 Corporate BankingGroup

Corporate Accounts Group Project FinanceGroup & Leasing Group

2 National BankingGroup

Each of the Local Head Offices constitutes

a separate SBU. Branches in LHOgrouped under two networks:-

a. Development & Personal Banking(Retail Banking)

b. Commercial Banking (CorporateBanking)

3 International Banking Foreign Offices(an SBU) , Global MerchantBanking, Global Link Office

4 Associates &Subsidiaries

Associate Banks, Subsidiaries of SBI


State Bank ofIndia

CorporateGoverna

nce

CorporateLeaders

hip

InternalControls

ProductInnovation

HumanResources


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InvestmentBanking

Funds

ManagementPrimary

DealershipFactoringCredit CardsInsuranceCredit Bureau

State Bank of IndiaCorporate Centre

Corporate Banking

Group

International Banking

Group

Development &Personal Banking

Network

Commercial

Network

Mid-sizedcorporates,large SSIs

& Agri.

SSIs/Agriculture

/Smallbusiness

GovernmentBusiness

Personalcustomers

High net-worth

Individuals

CorporateAccounts

Group

Dedicatedfocus on

Top

Corporates

Project

Finance SBU

Focus onInfrastructre,

Telecom,

Transport &

Hydrocarbon

financing

Leasing

SBU

Focus onInfrastructre

& Capital

intensive

projects

National Banking

Group

Associates &

Subsidiaries

7 Associate

Banks

100% owned

banking

subsidiary

Non-Banking

Subsidiaries &Affiliates

Local Head

Offices


State Bank ofIndia

CorporateGoverna

nce

CorporateLeaders

hip

InternalControls

ProductInnovation

HumanResources

Customer Focused Organisation Structure


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CORPORATE GOVERNANCECORPORATE GOVERNANCECORPORATE GOVERNANCECORPORATE GOVERNANCE

SBI practiced corporate governance evenbefore it became the buzz word

SBI is unique in that it has both Central Board Local Board for each Circle

Independent directors from different walksof life industrialists, academicians,professionals

The Board is the highest policy makingbody in the bank


State Bank ofIndia

CorporateGoverna

nce

CorporateLeaders

hip

InternalControls

ProductInnovation

HumanResources


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Contributions from these directors havebeen 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


State Bank ofIndia

CorporateGoverna

nce

CorporateLeaders

hip

InternalControls

ProductInnovation

HumanResources


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Specific tenure for independent directors Information flow to the directors Periodic reviews on micro & macro

functioning of the bank benchmarkedagainst the entire banking sector

Open discussions with the topmanagement

Bring in the outside-in perspective Guiding the management in identifying

opportunities for the bank


State Bank ofIndia

CorporateGoverna

nce

CorporateLeaders

hip

InternalControls

ProductInnovation

HumanResources


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CORPORATE LEADERSHIPCORPORATE LEADERSHIPCORPORATE LEADERSHIPCORPORATE LEADERSHIP

Planning for the future Clearly documented and transparent

management process

Process for early identification of leadersand succession planning is followed attop-management levels

Selection system involves outsidespecialists thereby reducing any influences/biases

Constant monitoring of performance at alllevels for improving effectiveness


State Bank ofIndia

CorporateGoverna

nce

CorporateLeaders

hip

InternalControls

ProductInnovation

HumanResources


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CORPORATE LEADERSHIPCORPORATE LEADERSHIPCORPORATE LEADERSHIPCORPORATE LEADERSHIP

Decisions evaluated through committeeprocess

Clear division in functions

Chairman as the Chairman of the Boardof Directors spearheads policy-making

Group Executives entrusted withoperational responsibility for the SBUs

attached to them Policy planning functions with Staff

functionaries at the Apex level

Similar structure in Circles


State Bank ofIndia

CorporateGoverna

nce

CorporateLeaders

hip

InternalControls

ProductInnovation

HumanResources


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INTERNAL CONTROLSINTERNAL CONTROLSINTERNAL CONTROLSINTERNAL 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 Informationand Decision Support Systems

Constant reviews of these systems to keeppace with the dynamics of the market


State Bank ofIndia

CorporateGoverna

nce

CorporateLeaders

hip

InternalControls

ProductInnovation

HumanResources


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INTERNAL CONTROLSINTERNAL CONTROLSINTERNAL CONTROLSINTERNAL CONTROLS

New systems evolved on an-on-goingbasis to suit changing environment

Credit process streamlining of the

sanction process through greaterdelegation of sanctioning powers,

delayering of the credit assessment

process

Committee form of decision making

Systems Audit periodically undertaken toassess deficiency


State Bank ofIndia

CorporateGoverna

nce

CorporateLeaders

hip

InternalControls

ProductInnovation

HumanResources


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PRODUCT INNOVATIONPRODUCT INNOVATIONPRODUCT INNOVATIONPRODUCT INNOVATION

Leveraging customer base to focus on CrossSelling

Segmentalfocus

Focus on mid-corporate, trade, housing,consumer finance, agriculture

Leaders in launching new products Innovative forms of credit Self-Help Group,

Kissan (Farmers) Credit Card Project Uptech - providing expertise andtechnical support to the borrowing customersin their activities


State Bank ofIndia

CorporateGoverna

nce

CorporateLeaders

hip

InternalControls

ProductInnovation

HumanResources


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HUMAN RESOURCESHUMAN RESOURCESHUMAN RESOURCESHUMAN RESOURCES

Committed professional cadre Best pool of human resources SBI has been the source for talent for

many of the foreign and private sectorBanks

Employee productivity - PerformanceManagement System

Transparency in personnel matter Appellate / review authority


State Bank ofIndia

CorporateGoverna

nce

CorporateLeaders

hip

InternalControls

ProductInnovation

HumanResources


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HUMAN RESOURCESHUMAN RESOURCESHUMAN RESOURCESHUMAN RESOURCES

Excellent in-house training infrastructure reputedto be the best in India and one of the best in Asia

Training system synchronised with the corporateobjectives

Training delivery practical orientedprogrammes, 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 forretirement for all staff

Research wing

Systematic evaluation of the impact of training


State Bank ofIndia

CorporateGoverna

nce

CorporateLeaders

hip

InternalControls

ProductInnovation

HumanResources


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AREAS OF CONCERNAREAS OF CONCERNAREAS OF CONCERNAREAS OF CONCERN

Government ownership acts as a constraint inraising fresh capital

Perception as one of the brightest family silversoften results in political intervention delaying

decisions relating to critical strategic and policychanges

Absence of market related compensationstructure for employees

Inability to offer performance based compensationand rewards Inability to attract and retain best-in-class talent


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CONCLUSIONCONCLUSIONCONCLUSIONCONCLUSION

Notwithstanding its public sector nature SBI has shownconsistently strong performance, demonstrating:

Being in the public sector in itself need not really be a handicapto success

It is not only possible but essential to retain a commercial

culture and competitive efficiency while attending to social anddevelopmental objectives

Quality of governance is independent of ownership

Ownership, and management roles and concerns can be keptseparate and as long as they are kept so, performance is better

Long term strategy and a clear vision about market positioningis essential

Ability to provide leadership from within is important

Development of human resource is critical


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www.statebankofindia.comwww.statebankofindia.comwww.statebankofindia.comwww.statebankofindia.com

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Transforming PSBs