Nistha | Governance | Corporate Governance

Transforming Public Sector Banks

State Bank Of India
A Success Story
Presented By:

M S Verma, Former Chairman State Bank of India

HISTORICAL PERSPECTIVE

• • • • •

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

2

HISTORICAL 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 also improved their profitability Wide variations in competitive efficiency of PSBs persists even today 3 .

Organisation structure Corporate Governance Corporate Leadership Internal Controls Product Innovation Human Resources 4 WHAT DIFFERENTIATES SBI? State Bank of India .

STATE BANK GROUP • 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 5 .

State Bank of India Corporate Governance Organisation structure Corporate Leadership Product Innovation Human Resources Internal Controls ORGANISATION STRUCTURE • 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 6 .

Commercial Banking (Corporate Banking) 3 4 International Banking Foreign Offices(an SBU) . Branches in LHO grouped under two networks:a. Global Merchant Banking. Subsidiaries of SBI 7 .State Bank of India Corporate Governance Organisation structure Corporate Leadership Product Innovation Human Resources Internal Controls ORGANISATION STRUCTURE Business Group Strategic Business Units 1 2 Corporate Banking Group National Banking Group Corporate Accounts Group Project Finance Group & Leasing Group Each of the Local Head Offices constitutes a separate SBU. Global Link Office Associates & Subsidiaries Associate Banks. Development & Personal Banking (Retail Banking) b.

Telecom. Transport & Hydrocarbon financing Dedicated focus on Top Corporates Focus on Infrastructre & Capital intensive projects Commercial Network Development & Personal Banking Network Mid-sized corporates.State Bank of India Corporate Governance Organisation structure Corporate Leadership Product Innovation Human Resources Internal Controls ORGANISATION STRUCTURE Customer Focused Organisation Structure State Bank of India Corporate Centre Corporate Banking Group International Banking Group National Banking Group Associates & Subsidiaries Project Finance SBU Corporate Accounts Group Leasing SBU Local Head Offices 7 Associate Banks 100% owned banking subsidiary Non-Banking Subsidiaries & Affiliates Focus on Infrastructre. large SSIs & Agri. SSIs/ Agriculture /Small business Government Business Personal customers • Investment Banking • Funds Management • Primary Dealership • Factoring • Credit Cards • Insurance • Credit Bureau 8 High networth Individuals .

State Bank of India Corporate Governance Organisation structure Corporate Leadership Product Innovation Human Resources Internal Controls CORPORATE GOVERNANCE • • • • 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. professionals The Board is the highest policy making body in the bank 9 . academicians.

State Bank of India Corporate Governance Organisation structure Corporate Leadership Product Innovation Human Resources Internal Controls CORPORATE GOVERNANCE • 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 10 .

State Bank of India Corporate Governance Organisation structure Corporate Leadership Product Innovation Human Resources Internal Controls CORPORATE GOVERNANCE • • • 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 11 .

State Bank of India Corporate Governance Organisation structure Corporate Leadership Product Innovation Human Resources Internal Controls CORPORATE LEADERSHIP • • • 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 12 .

State Bank of India Corporate Governance Organisation structure Corporate Leadership Product Innovation Human Resources Internal Controls CORPORATE LEADERSHIP • • 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 13 .

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 14 .State Bank of India Corporate Governance Organisation structure Corporate Leadership Product Innovation Human Resources Internal Controls INTERNAL CONTROLS • • • • Time tested systems and procedures SBI does not compromise with the procedures as laid down by regulators and its own internal systems  Indeed.

State Bank of India Corporate Governance Organisation structure Corporate Leadership Product Innovation Human Resources Internal Controls INTERNAL CONTROLS • • 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 15 .

consumer finance. housing. agriculture Leaders in launching new products Innovative forms of credit – Self-Help Group. Kissan (Farmer‟s) Credit Card Project Uptech . trade.providing expertise and technical support to the borrowing customers in their activities 16 .State Bank of India Corporate Governance Organisation structure Corporate Leadership Product Innovation Human Resources Internal Controls PRODUCT INNOVATION • • • • • Leveraging customer base to focus on Cross Selling Segmental focus  Focus on mid-corporate.

State Bank of India Corporate Governance Organisation structure Corporate Leadership Product Innovation Human Resources Internal Controls HUMAN RESOURCES • • • • 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 17 .

State Bank of India Corporate Governance Organisation structure Corporate Leadership Product Innovation Human Resources Internal Controls HUMAN RESOURCES • 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 18  Systematic evaluation of the impact of training .

AREAS OF CONCERN • • • • • 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 19 .

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. performance is better  Long term strategy and a clear vision about market positioning is essential  Ability to provide leadership from within is important 20  Development of human resource is critical . and management roles and concerns can be kept separate and as long as they are kept so.CONCLUSION • Notwithstanding its public sector nature SBI has shown consistently strong performance.

statebankofindia.Thank You www.com .

Sign up to vote on this title
UsefulNot useful