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

Transforming Public Sector Banks
State Bank Of India
A Success Story
Presented By:
M S Verma, Former Chairman State Bank of India
HISTORICAL PERSPECTIVE
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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
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HISTORICAL PERSPECTIVE
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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
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Human Resources
Product Innovation
Internal Controls
Corporate Leadership
Corporate Governance
Organisation structure
WHAT DIFFERENTIATES SBI?
State Bank of India
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STATE BANK GROUP
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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
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Human Resources
Internal Controls
Product Innovation
Corporate Leadership
Organisation structure
Corporate Governance
State Bank of India
ORGANISATION STRUCTURE
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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
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Human Resources
Internal Controls
Product Innovation
Corporate Leadership
Organisation structure
Corporate Governance
State Bank of India
ORGANISATION STRUCTURE
Business Group Strategic Business Units
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Corporate Banking
Group
Corporate Accounts Group Project
Finance Group & Leasing Group
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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)
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International Banking Foreign Offices(an SBU) , Global
Merchant Banking, Global Link Office
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Associates &
Subsidiaries
Associate Banks, Subsidiaries of SBI
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Human Resources
Internal Controls
Product Innovation
Corporate Leadership
Organisation structure
Corporate Governance
State Bank of India
ORGANISATION STRUCTURE
Customer Focused Organisation Structure
State Bank of India
Corporate Centre
Corporate Banking
Group
International Banking
Group
Project
Finance SBU
Corporate
Accounts
Group
Leasing
SBU
Focus on
Infrastructre,
Telecom,
Transport &
Hydrocarbon
financing
Dedicated
focus on
Top
Focus on
Infrastructre
& Capital
intensive
projects
Corporates
Local Head
Offices
7 Associate
Banks
Development &
Personal Banking
Network
Commercial
Network
Mid-sized
corporates,
large SSIs
& Agri.
Associates &
Subsidiaries
National Banking
Group
SSIs/
Agriculture
/Small
business
Government
Business
Personal
customers
High networth
Individuals
100% owned
banking
subsidiary
Non-Banking
Subsidiaries &
Affiliates
•Investment
Banking
•Funds
Management
•Primary
Dealership
•Factoring
•Credit Cards
•Insurance
•Credit Bureau
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Human Resources
Internal Controls
Product Innovation
Corporate Leadership
Organisation structure
Corporate Governance
State Bank of India
CORPORATE GOVERNANCE
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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
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Human Resources
Internal Controls
Product Innovation
Corporate Leadership
Organisation structure
Corporate Governance
State Bank of India
CORPORATE GOVERNANCE
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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
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Human Resources
Internal Controls
Product Innovation
Corporate Leadership
Organisation structure
Corporate Governance
State Bank of India
CORPORATE GOVERNANCE
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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
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Human Resources
Internal Controls
Product Innovation
Corporate Leadership
Organisation structure
Corporate Governance
State Bank of India
CORPORATE LEADERSHIP
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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
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Human Resources
Internal Controls
Product Innovation
Corporate Leadership
Organisation structure
Corporate Governance
State Bank of India
CORPORATE LEADERSHIP
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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
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Human Resources
Internal Controls
Product Innovation
Corporate Leadership
Organisation structure
Corporate Governance
State Bank of India
INTERNAL CONTROLS
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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
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Human Resources
Internal Controls
Product Innovation
Corporate Leadership
Organisation structure
Corporate Governance
State Bank of India
INTERNAL CONTROLS
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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
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Human Resources
Internal Controls
Product Innovation
Corporate Leadership
Organisation structure
Corporate Governance
State Bank of India
PRODUCT INNOVATION
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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
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Human Resources
Internal Controls
Product Innovation
Corporate Leadership
Organisation structure
Corporate Governance
State Bank of India
HUMAN RESOURCES
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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
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Human Resources
Internal Controls
Product Innovation
Corporate Leadership
Organisation structure
Corporate Governance
State Bank of India
HUMAN RESOURCES
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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
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 Systematic evaluation of the impact of training
AREAS OF CONCERN
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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
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CONCLUSION
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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
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 Development of human resource is critical
Thank You
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