After losing out market share to competitors, India’s PSU bank is slowly becoming a one-stop financial shop. By asif ahmed
One down, six more to go! That’s what O.P. Bhatt, the Chairman of State Bank of India, must have thought as he prepared himself for Herculean task in front of him. On that particular day, he was supposed to interact with the boards of SBI’s six associate banks to consider the biggest merger in the history of Indian banking industry. Of the bank’s seven associates, the merger of the State bank of Saurashtra with the parent bank had already been approved; the remaining would happen soon, thought Bhatt.
But that fateful day never came. Intense opposition from the Left parties that supported the UPA Government at the Centre, and bank trade unions forced Bhatt to never attend the crucial meeting. In fact, the meeting wasn’t held at all, and the proposed merger was indefinitely postponed. However, this is one credit that Bhatt would like more than anything else. This is despite the fact that the SBI chairman has changed the way India’s largest bank interacts with its customers.
How the times have changed for SBI in the past few years. As competition intensified, SBI was hit by falling market share, had to raise funds for expansion, and look for new avenues for growth. For instance, in 2004, the State Bank Group (SBG) accounted for 27.8% of the total banking assets, which fell to 23.3% in 2007. In terms of deposits, while SBG controlled 27.6% of deposits in 2004, the figure shrunk to 23.5% in 2007. But still, Bhatt is thinking in terms of a banking mega merger.
The reason: Bhatt knows that size matters. If SBI can become a banking and financial powerhouse, it will be in a better position to combat private and foreign players. It’s only when it becomes bigger and better will SBI be able to arrest its falling market shares in various categories. Apart from the proposed merger, Bhatt has sought organic growth for SBI in India, and other neighbouring countries. The strategy was unlike that of his predecessor, A.K. Purwar, who believed in acquisitions-related growth.
Under Purwar’s chairmanship, SBI acquired three small banks - Indonesia’s PT Bank IndoMonex, Mauritius-based Indian Ocean International Bank and Kenya’s Giro Commercial Bank. As a part of the overseas-driven strategy, SBI focused on developing foreign market that had substantial Indian population. During his tenure, SBI also made it to the coveted list of Fortune Global 500 list; he made the bank a member of the $1 billion revenues club, and was the first Indian bank to join it.
Bhatt comes from a different school, and thinks differently. According to him, the domestic market still offers immense opportunities to expand, and there are far more critical issues to be dealt with. “Overseas acquisitions can wait,” he said the day he took over as the chairman of SBI. However, Purwar’s legacy still lingers around. For example, during Bhatt’s time, SBI became the first Indian bank to open a fully-fledged branch in China. “Being India’s largest bank, it is only befitting that SBI should be the first to open a branch in mainland China,’’ said Bhatt. But this isn’t a focus area.
Keeping in line with the local mindset, Bhatt expanded the bank’s network in India. He tied up with other banks and institutions to cross-sell banking and financial products. S. K. Mishra, General Manager (Marketing and Cross-Selling Department), State Bank of India, explains, “In the Indian financial markets, mutual funds are rapidly gaining ground among retail investors due to various advantages such as professional management, diversification, and liquidity. For us, the tie-up will open up opportunities to provide our vast client base with a wider choice of products to meet their diverse financial needs and give boost to our fee-based incomes.”
Over the next three years, SBI plans to offer more financial services products like general insurance, custodian services, venture funds, wealth management, and pension-fund management. Given its size, number of branches, and growing customers’ base, it will not be difficult for the bank to woo customers for the new products. At the same time, SBI is the only Indian bank to have got the approval to manage the government’s pension fund. That, in itself, will be a big boon to future revenues and profits.
For Complete IIPM Article, Click on IIPM Article
Source : IIPM Editorial, 2008
One down, six more to go! That’s what O.P. Bhatt, the Chairman of State Bank of India, must have thought as he prepared himself for Herculean task in front of him. On that particular day, he was supposed to interact with the boards of SBI’s six associate banks to consider the biggest merger in the history of Indian banking industry. Of the bank’s seven associates, the merger of the State bank of Saurashtra with the parent bank had already been approved; the remaining would happen soon, thought Bhatt.
But that fateful day never came. Intense opposition from the Left parties that supported the UPA Government at the Centre, and bank trade unions forced Bhatt to never attend the crucial meeting. In fact, the meeting wasn’t held at all, and the proposed merger was indefinitely postponed. However, this is one credit that Bhatt would like more than anything else. This is despite the fact that the SBI chairman has changed the way India’s largest bank interacts with its customers.
How the times have changed for SBI in the past few years. As competition intensified, SBI was hit by falling market share, had to raise funds for expansion, and look for new avenues for growth. For instance, in 2004, the State Bank Group (SBG) accounted for 27.8% of the total banking assets, which fell to 23.3% in 2007. In terms of deposits, while SBG controlled 27.6% of deposits in 2004, the figure shrunk to 23.5% in 2007. But still, Bhatt is thinking in terms of a banking mega merger.
The reason: Bhatt knows that size matters. If SBI can become a banking and financial powerhouse, it will be in a better position to combat private and foreign players. It’s only when it becomes bigger and better will SBI be able to arrest its falling market shares in various categories. Apart from the proposed merger, Bhatt has sought organic growth for SBI in India, and other neighbouring countries. The strategy was unlike that of his predecessor, A.K. Purwar, who believed in acquisitions-related growth.
Under Purwar’s chairmanship, SBI acquired three small banks - Indonesia’s PT Bank IndoMonex, Mauritius-based Indian Ocean International Bank and Kenya’s Giro Commercial Bank. As a part of the overseas-driven strategy, SBI focused on developing foreign market that had substantial Indian population. During his tenure, SBI also made it to the coveted list of Fortune Global 500 list; he made the bank a member of the $1 billion revenues club, and was the first Indian bank to join it.
Bhatt comes from a different school, and thinks differently. According to him, the domestic market still offers immense opportunities to expand, and there are far more critical issues to be dealt with. “Overseas acquisitions can wait,” he said the day he took over as the chairman of SBI. However, Purwar’s legacy still lingers around. For example, during Bhatt’s time, SBI became the first Indian bank to open a fully-fledged branch in China. “Being India’s largest bank, it is only befitting that SBI should be the first to open a branch in mainland China,’’ said Bhatt. But this isn’t a focus area.
Keeping in line with the local mindset, Bhatt expanded the bank’s network in India. He tied up with other banks and institutions to cross-sell banking and financial products. S. K. Mishra, General Manager (Marketing and Cross-Selling Department), State Bank of India, explains, “In the Indian financial markets, mutual funds are rapidly gaining ground among retail investors due to various advantages such as professional management, diversification, and liquidity. For us, the tie-up will open up opportunities to provide our vast client base with a wider choice of products to meet their diverse financial needs and give boost to our fee-based incomes.”
Over the next three years, SBI plans to offer more financial services products like general insurance, custodian services, venture funds, wealth management, and pension-fund management. Given its size, number of branches, and growing customers’ base, it will not be difficult for the bank to woo customers for the new products. At the same time, SBI is the only Indian bank to have got the approval to manage the government’s pension fund. That, in itself, will be a big boon to future revenues and profits.
For Complete IIPM Article, Click on IIPM Article
Source : IIPM Editorial, 2008
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