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Definition of bank:-

According to Oxford English Dictionary, Bank is, An establishment for custody of money received from or on behalf of, its customers. Its essential duty is the payment of the orders given on it by the customers, its profit mainly from the investment of money left unused by them

Banking Regulation Act, 1949 (Sec. 5(c)), has defined the banking company as, Banking Company means any company which transacts business of banking in India. According to Section 5B, banking means the accepting of deposit of money from the public for the purpose of leading or investment, which are repayable on demand or otherwise and are withdraw able by cheque, draft, and order or otherwise.

INTRODUCTION TO SBI The State Bank of India is a govt. sector bank. The evolution of State Bank of India can be traced back to the first decade of the 19th century. It began with the establishment of the Bank of Calcutta in Calcutta, on 2 June 1806. The bank was redesigned as the Bank of Bengal, three years later, on 2 January 1809. It was the first ever joint-stock bank of the British India, established under the sponsorship of the Government of Bengal. Subsequently, the Bank of Bombay (established on 15 April 1840) and the Bank of Madras (established on 1 July 1843) followed the Bank of Bengal. These three banks dominated the modern banking scenario in India, until when they were amalgamated to form the Imperial Bank of India, on 27 January 1921. In order to serve the economy as a whole and rural sector in particular, the All India Rural Credit Survey Committee recommended the formation of a state-partnered and state-sponsored bank. Hence the committee proposed the takeover of the Imperial Bank of India, and integrating with it, the former state-owned or state-associate banks. Subsequently, an Act was passed in the Parliament of India in May 1955. As a result, the State Bank of India (SBI) was established on 1 July 1955. Later on, the State Bank of India (Subsidiary Banks) Act was passed in 1959. The State Bank of India emerged as a pace-setter, with its operations carried out by the 480 offices comprising branches, sub offices and three Local Head Offices, inherited from the Imperial Bank. Instead of serving as mere repositories of the community's savings and lending to creditworthy parties, the State Bank of India catered to the needs of the customers, by banking purposefully.

Strategic Evolution of SBI

Strategy can be defined as the periodic changes a business must introduce to its structure and operations in order to ensure continuity in the face of environmental changes. The strategic evolution of a business can thus be understood in terms of major social institutions such as the State, the market, community or civil society and their interrelationships that may have a bearing on its working and thereby the achievement of the principle objectives of its establishment. Historians recognize moments of profound change when the balance of power or influence shifts between these institutions. The SBI is a dynamic organization and has been continuously changing its form to adapt to its environment. Here, we have examined its vicissitudinal nature with respect to three key environmental factors:

Ownership and governance Business processes Structures and systems

On the basis of the following, the evolution of the Indian economy can be divided in the following phases :

Shifting relationships in India - the state and the economy

Mission statement:
To retain the banks position as the premier Indian financial services. It also aims to be a group with world class standards and significant global business commitments to excellence in customer, shareholder and employee satisfaction so as to play a leading role in expanding and diversifying financial services while continuing emphasis on its development banking role.

To be a premier Indian financial services group with global perspective, world class standard of the efficiency and professionalism and also its core institutional values, To retain its position in the country as a pioneer in developing countries, It also aims to maximize its shareholders value through high sustained earnings per share, To become an institution with a culture of mutual care and commitment. It also focuses on a pleasant working environment to have continuous learning opportunities.

Excellence in customer service Profit orientation Belonging and commitment to bank Fairness in all dealings and relations Risk taking and innovations Team playing Learning and renewal Integrity Transparency and discipline in policies and systems

Overview of various Avatars of SBI

With the view of adapting to the extra-institutional changes mentioned above and maintaining continuity, SBI has continuously rechristened itself. Following is a list of major strategic changes introduced at the bank. These have been dealt with in detail in successive paragraphs.

Key Areas of Operations

The business operations of SBI can be broadly classified into the key income generating areas :Such as National Banking, International Banking, Corporate Banking, & Treasury operations.


CHAPTER 2. Generic strategies adopted by State Bank of India:

Institution for advanced learning: to provide state of the art training in financial products to middle level and senior level executives.

`Internal consultant/change agent: to act as a catalyst for change in attitudes and orientation of banking staff and to provide expertise and consultative support Feedback supplier: to capture and structure feedback from trainees and from the market Think tank: to provide expert and inform suggestions, model business strategies, analysis of market developments from a banker perspective. Research and development role: to carry out research on contemporary subjects that are relevant to the banks short term and medium term and operational needs and policy formulation Overlapping staff training centers: to validate and closely monitor the staff training centers in seven circles attached to the academy.


Centralization and Decentralization

It has a well defined system for decision making process. The financial decisions are taken at various levels by different officials depending upon their positions and also through committee approach.

The centralized credit processing cells are being formed at certain centers for sanction of personal segment loans and under SBI segments. Its branches source the applications and forward them to the respective credit processing sale for their consideration.

Regarding the sanction of loan each officer of the bank considers the loan proposals and takes a decision in terms of scheme of delegation of powers, on merits of proposal. If the bank needs to purchase any kind of equipment like computers or software branch managers are required to take permission from high authority.

So in term of decision making centralization is high and low decentralization wherein the managers have some powers to take decision but at a limited base.


The Restructuring
To overcome the intense competition from private and foreign banks, SBI planned a major organizational restructuring exercise.

The key aspects involved

redesigning of branches, providing alternate channels; focus on a lean structure and Technological up gradation. A business process reengineering (BPR) team was constituted in June 2003 with McKinsey & Company as consultants. The BPR's basic goal was to create an operating architecture that would facilitate service delivery of international standards.

The project objectives were defined as

increasing customer satisfaction and convenience, freeing up time for branch manager and branch staff to focus on sales and marketing, simplifying process for employees, enhancing SBI's competitiveness in the market, increasing the profitability through higher market share and improved process efficiency

New Products and Services

Apart from restructuring, SBI launched several innovative, value-added products and services to project a customer friendly image. It launched a special service for corporate customers called 'telebanking and remote login' to support transactional requests. This facility would be available at 593 branches, and remote login at 269 branches. The banks trade finance solutions, called EXIMBILLS, were intended to handle trade finance transactions efficiently and enhance the range of services provided to corporate and network branches.

In March 2004, SBI announced that it would introduce anywhere banking' facility for its customers over 9000 branches across India in the next two years. All the branches in Mumbai would provide this facility by December 2008. SBI also launched different customized loan programs to cater to various sections of society depending on income levels and repayment capabilities. Interest rates and repayment periods were tailor-made to suit the customer groups.


Alliances and Tie-Ups

To boost its business, SBI entered into several alliances and tie-ups with automobile, insurance, mutual fund, project finance and medical equipment companies.


Unlike other competitors that relied on reduced interest rates to get business, SBI extended the tenure of car loans from five to seven years, thereby lowering the monthly debt repayment burden of the loan seeker. SBI entered into a tie-up with Maruti, the largest automobile manufacturer in India, to provide loans for purchase of Maruti cars at the rate of 10.05 per cent and 11.25 per cent for three years and above three years respectively. After the scheme was introduced, SBI emerged as the largest financier for Maruti cars in India and the number of Maruti vehicles financed grew by 17 per cent in the fiscal 2003-04 over fiscal 2002-03... & TATA NANO on 2009-10 giving EMI FACALITY around low as Rs.899/- per month per lac..


The Marketing Initiatives

SBI carried out various marketing initiatives to enhance its reach. They included

segregating and targeting existing high value customers, cross sales of other products, Setting up call centers and outbound sales force to secure new customers. Plans were also made to utilize database marketing to pursue large and medium sized corporate, government and trade finance customers. Database marketing was expected to draw increased revenue from cross selling, lower costs and increased customer loyalty.

SBI also introduced various other ways of reaching out to customers like

extension of hours of work(SBI increased daily working hours by two hours and Sunday banking was introduced) and Aggressive marketing through print and television media.


Looking Ahead-Result:

SBI's restructuring exercise and growth strategies resulted in an increase in profits for the fiscal 2009-10. Net profits stood at Rs 36.81 bn for the fiscal ended 2009-10 as against Rs 31.05 bn the previous fiscal, an increase of 18.55 per cent. Operating profits stood at Rs 95.535 bn compared to Rs 77.754 bn in the fiscal 2008-09.

In spite of SBI's efforts to reduce workforce, staff costs rose by 13.3 per cent, mainly due to additional contribution to pension fund and provision for leave encashment.

The net NPA level came down from 4.5 per cent in the fiscal 2009-10 to 3.5 per cent in 2003-04. SBI aimed at 2 per cent NPA by 2009-10

Till June 2010, Two thirds of their branches were in rural and semi-urban areas and it was believed to be a profitable business,


Among the factors that will help in realizing this full potential were access to institutional credit to more farmers and appropriate quantity and quality of agriculture credit. Since the Seventies, the decadal average growth rate of the volume of short-term institutional credit to agriculture has stagnated at around 15 per cent, while the growth rate of the volume of long-term credit has in fact declined from 20.2 per cent in the 1970s to11.9 per cent in 1990s.

The government has anxiously examined the question of agriculture credit and related issues in consultation with the Reserve Bank of India (RBI), National Bank for Agriculture and Rural Development (Nabard) and commercial banks.

Among commercial banks, SBI with its vast network is well placed to fulfill the large commitments of the new government to the farm sector. In the current financial year the government targeted for a 30 per cent increase in the aggregate agricultural credit over the previous year.


On interest rate, the rates would remain stable in the short-term. There could be a revision in interest rates in the medium to long-term period. Further, any likely revision would depend on external factors than domestic factors.

Elaborating on the importance of the right tie-ups and partnerships for the bank,there are a few non-core business areas where SBI is and wherever we have partners, the global majors are our partners. For instance, in insurance, Cardiff, and for cards, GE is our partners. We are becoming a very major player in the Indian economy. For example SBI Cards we are the third largest card company and second fastest growing card company after ICICI. This is the most profitable card company in the country and SBI is doing very well.

On technological up gradation, all the 13,650 branches of the bank were fully computerized, also they increased fully integrated ATM network from 4,000 in 2004 to 6000 today across the country. SBI in its own quiet manner is trying to provide worldclass services.




SBI have set up capacity in places where they are not very strong. Its time for them to follow overall SBI philosophy of planning new branches, given the huge untapped potential. Besides, this is also the best time to benefit from their past expansion, since there is a lot of trust in SBI.

Brand SBI is very strong, while people may be generally cautious about some other brands. They can not only tap the potential better but can also provide a safe and transparent insurance alternative to the public.

The bank is entering into many new businesses with strategic tie ups - Pension Funds, General Insurance, Custodial Services, Private Equity, Mobile Banking, Point of Sale Merchant Acquisition, Advisory Services, structured products etc - each one of these initiatives having a huge potential for growth.


Some of the strategies to cope with the current scenario are listed below:

It is the part of SBI`s philosophy to open new branches .The Bank is forging ahead with cutting edge technology and innovative new banking models, to expand its Rural Banking base, looking at the vast untapped potential in the hinterland and proposes to cover 100,000 villages in the next two years. SBI is planning to hire 11,000 employees in the current fiscal. It is also focusing at the top end of the market, on whole sale banking capabilities to provide India's growing mid / large Corporate with a complete array of products and services. It is consolidating its global treasury operations and entering into structured products and derivative instruments. Today, the Bank is the largest provider of infrastructure debt and the largest arranger of external commercial borrowings in the country. It is the only Indian bank to feature in the Fortune 500 list. The Bank is changing outdated front and back end processes to modern customer friendly processes to help improve the total customer experience. With about


8500 of its own 10000 branches and another 5100 branches of its Associate Banks already networked, today it offers the largest banking network to the Indian customer. The Bank is also in the process of providing complete payment solution to its clientele with its over 8500 ATMs, and other electronic channels such as Internet banking, debit cards, mobile banking, etc. Country's largest lender, State Bank of India (SBI) has prepared a blueprint to go retail in its international operations. Such strategy would help the bank to promote its lead in syndication of loans in the overseas market, at a cheaper cost.The bank's overseas operations have been instructed to thrust more on promoting retail banking locally, SBI is assessing that by opening more branches across foreign locations and promoting retail services by mobilising deposits at interest rates as low as 3-3.5%, the bank will be able to increase its operating margins by 250-300 basis points in overseas markets where syndication opportunities arise often.SBI is expected to open seven new branches over next eight months in the United Kingdom where it operates six branches currently. Also, SBI's Washington office is expected to get upgraded as a full-fledged branch by December 2009 and plans are afoot to open more branches across North America under the control of California State chartered subsidiary of State Bank of India (California).


In response to signals from the central bank, SBI have progressively reduced their PLR from 13.75% to 12.25% during the past few months in stages, and further softening in interest rates cannot be ruled out.

SBI is introducing loan products at sub-PLR rates - in home loans at 8%, auto loans at 10%, special products for SMEs and... agriculture sector at 8%, but it may not be possible for them to reduce the interest rate beyond a certain point.

SBI is working on infrastructure sector projects, which has seen a growth of 26% in the current year. For the year 2008 the Rs 10,000 crores was sanctioned for the infrastructure projects while in the current year from April 08 to February 09 the amount sanctioned for the infrastructure project is Rs 13,000 crores,out of which project worth Rs 8000 crore is in pipeline. Despite of various viability issues the growth in this sector for SBI is been intact. With market-linked products finding fewer takers, insurance companies are launching more guaranteed products to lure investors. The latest to join the bandwagon is SBI Life insurance with SBI Smart ULIP, a product that guarantees returns based on the highest NAV recorded by the fund in the first seven years.



time(Being the oldest bank in India tracing history back to 1806) Fortune Global 500 list, and ranked 219 in 2008 Forbes Global 2000. With an asset base of $126 billion and its reach, it is a regional banking behemoth.

10000 core branches and more than 5100 branches of associate banks (subsidiaries).

extend the relationship with existing customer's Bank has umbrella of products to offer their customers, if once customer has relationship with the bank. Some Products, which SBI Bank is offering are: Retail Banking Business Banking Merchant Establishment Services (EDC Machine) Personal loans & Car loans Insurance Housing Loans

edge over private banks in terms of customer security. -SBI offers very low transition costs which attracts small customers.

and hence earnings.



some respects, is a barrier to change.

highest non performing assets (NPAs) in the industry, which stand out to be at 16.28 % (Dec 2007).

of its processes, infrastructure, centralisation, etc. tly operating at a lowest CAR(8%). Insufficient capital may restrict the growth prospects of the bank going forward.

-15 to be close to Rs50bn.

growing retail book poses higher credit risk to the bank.



SBM, etc) into SBI will create a mega bank which streamlines operations and unlocks value. -2009. This will further increase its reach.

populations offers a great opportunity to expand on foreign soil.

internationally in 32 countries like Australia, Bangladesh, etc.... and has more plans of expansion in other global markets.

her business growth.

higher Corporate demand for credit on account of capacity expansion.



Indian market due to the friendly policies adopted by the government. This can increase the level of competition and prove a potential threat for the market share of SBI bank.

has not been responsive enough to meet them on time. -urban sector, which used to be the bastion of the State Bank and other PSU banks

SBI's activities. This can be repeated in the future. uld impact retail growth of SBI and Hence slowdown in earnings growth. -take thereby Impacting earnings growth.


Porters five forces theory:

1. Threat of competitors:

Top Performing Public Sector Banks

a. b. c. d. e.

Andhra Bank Allahabad Bank Punjab National Bank Dena Bank Vijaya Bank

Top Performing Private Sector Banks a. b. c. HDFC Bank ICICI Bank AXIS Bank Kotak Mahindra Bank Centurion Bank of Punjab


Top Performing Foreign Banks a. b. c. d. e. 2. Citibank Standard Chartered HSBC Bank ABN AMRO Bank

American Express Threat of new entrants: there have been many new entrants in banking sector

like yes bank 3. Threat of substitutes: investors as a substitute can always invest into the capital

markets instead of depositing in their capital in the bank. 4. Buying power of suppliers: changing policies and guidelines of RBI, interest

rates, CRR and SLR maintained by the banks as per RBI norms. 5. Buying power of customers: changing scenarios, increasing and decreasing

disposable incomes, other attractive options available to customers.


BCG THEORY: CASH COW There is a lot of growth potential for the banking industry because of increasing disposable income of customers, increasing working class, more volatility in other markets also increasing importance of savings and in this banking industry SBI has shown a growth rate of 13% with a 21 % increase in PAT standing to 62.1 cr in the FY 2008-09. Hence it can be concluded that SBI stands at cash cow in BCG matrix.



Banking sector in India has gone through a metamorphosis change in its concept perception and outlook quantitative expansion with quality has been a phenomenon in the operations of the banking system bank being a service selling show has to meet the need of the customers which vary from place to place, time to time and purpose to purpose and also at the same time it has to sustain the tough competition coming from all the four ends.

An increase in the income and saving of the urban population has raised hopes for banking institutions to fill up the gaps by catering to the need of the potential customers and also penetrate into new target markets like rural sectors through its innovative financial products like micro finance and SBI is doing the same and this has been proved by so many awards it has achieved in the recent past, State bank of India earlier known as Imperial Bank has proved its existence through introducing various innovative schemes and that also are considered as competitive in present market.

It follows a centralized system, so as to bring synchronization in the decision making process which helps the organization to create better strategies so as to focus on the overall functioning and growth prospects of the bank.



Books:Marketing Strategy by nirmalya kumar 2008 edition .

Emkay, a research paper of July 2008 Websites: