State bank of India (SBI), the country’s largest lender, has survived and thrived through many an upheaval in its 217-year history. What stands out is the contribution of its leaders, especially after the nationalisation of banks. Take, for instance, D.N. Ghosh in the mid-1980s, who incubated SBI Asset Management Company; it is now the third-largest mutual fund house in terms of assets under management. Janki Ballabh, who helmed SBI at the turn of the century, laid the foundations of SBI Life Insurance that is today the largest private sector life insurer in India. Then came A.K. Purwar and O.P. Bhatt, who laid the foundations of consumer banking, which has now grown to account for over 40 per cent of SBI’s total loan mix.
By the time Arundhati Bhattacharya reached the corner room, competition from private sector banks had increased manifold. Under her leadership, SBI transformed into a customer-centric and tech-savvy bank to protect its market share. Her successor, Rajnish Kumar took her work forward by developing the bank’s super-app YONO. Current Chairman Dinesh Kumar Khara is consolidating the digital gains made by his predecessors, and also setting up the foundations for green finance.
The success of SBI—with a balance-sheet size of Rs 52 lakh crore ($675 billion) till September 2022—can be traced back to the efforts of its many leaders. Recognising the vital role played by SBI in India’s banking history and its achievements, the jury of the BT-KPMG Best Banks and Fintechs Survey 2021-22 decided to confer on it the Special Jury Award for Consistent Transformation. So, what is SBI’s secret sauce?
“The organisation’s stability comes from a focus on creating a future-ready business model,” says a consultant with a Big Four consulting firm. And with a cadre of officers who are mostly taken on at the probationary officer (PO) level, SBI in recent decades has had a chairman who has come up through the ranks. Khara, whose tenure will end in October 2023, also joined SBI as a PO in 1984. Interestingly, having its own cadre of officers has not only helped the bank, but also the wider banking industry in the sense that it has now become a factory for producing industry leaders. For instance, YES Bank’s current MD & CEO Prashant Kumar; the country’s largest depository NSDL’s MD & CEO Padmaja Chunduru; and World Bank’s MD & Group CFO Anshula Kant are all SBI veterans.
A lot of the credit for its strength in grooming industry leaders goes to the continuous reinvention of HR policies to make its personnel more performance oriented. For instance, under Bhattacharya, SBI underwent a complete HR overhaul with the help of consultant BCG. The new changes introduced during her time included building specialisation in areas like tech, cybersecurity, risk management, a new appraisal system and building and nurturing its leadership pipeline at all levels. But that is not to say that the bank is averse to tapping the best talent from outside. SBI hired Charanjit Attra—who had stints with EY India and ICICI Securities—as its CFO in October 2020, and appointed Nitin Chugh—who earlier headed Ujjivan Small Finance Bank—as its Deputy MD & Head of Digital Banking in March 2022.
The bank’s retail journey has taken a major step forward with the segment now accounting for 42 per cent of its loan mix, and providing its loan portfolio with a lot of stability. Another notable aspect of SBI is its comfortable CASA (current account-savings account) ratio of 44.72 per cent despite offering one of the lowest interest rates in the industry. One reason for this is the strategic move SBI made in the past two years when there was not enough credit growth happening. The bank kept its deposits engine running by raising money and deploying the surplus in treasury operations. It is this wisdom and drive of its leaders that has stood SBI in good stead over the years, and positioned it to fund its next phase of credit growth while rival banks grapple with the challenges of mobilising low-cost deposits.
While some other banks have moved in and out of the Reserve Bank of India’s prompt corrective action framework in the past two decades, SBI has never dropped off the cliff. Instead, it has kept growing its loan book and also absorbed the shocks that have come its way—like its gross non-performing assets that climbed to 10.91 per cent after the RBI’s asset quality review; SBI brought it down to 3.52 per cent by September 2022. The bank is also not heavily reliant on the agri and SME segments, as they are more prone to defaults, and its corporate exposure is primarily to A+ rated companies. SBI also seamlessly absorbed its five associated banks two and a half years ago despite its already huge size.
Another area that has played out very well is digital, where its banking app YONO (you only need one) has generated a lot of buzz. Launched five years ago, YONO offers digital banking solutions and an online marketplace. It also has YONO Krishi that integrates over a dozen online mandis and provides agri info, and credit and investment solutions. It has also created YONO Business to cater to SMEs. There is also a plan to make YONO a neutral marketplace, so that other banks can offer their services on it.
While the app brings in the business, the bank’s subsidiaries are also doing their bit. They have consistently performed well and continue to create significant value for the bank. The way its subsidiaries are scaling up, soon SBI’s non-banking businesses will provide a nice cushion in case of any adverse performance on the banking front. Under Khara, SBI is also taking concrete steps to create a framework for green finance that is still evolving in India.
In all, SBI has played a crucial role in growing India’s banking sector and the overall economy. And as the country’s economy marches towards the $5-trillion target, SBI will have ample opportunity to continue building its legacy.
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