During my sojourn through State Bank, I received numerous appreciations and accolades. One of the noted one was the Essay Competition in March last year wherein my entry was declared the third best in entire India. I reproduce the same here. The topic was related to making State Bank the numero uno bank in the world. Please read and do provide your valuable feedback.
“Business success is less a function of grandiose predictions than it is a
result of being able to respond rapidly to real changes as they occur.”
Jack Welch, former CEO at GE & famous management guru.
State Bank of India has been the pioneer in Indian Banking Industry-pioneer
in banking practices, pioneer in products & services and pioneer in the
management & implementation. Yet the bank is not where it should have been.
Careful analysis of the top 20 banks globally indicates failure to put State
Bank at the top. Even current Finance Minister strategizes to put Indian
Banking at the world stage through mergers and acquisitions. State Bank can
look at that in a positive manner though the Bank doesn’t need an external
entity to make it a world class institution. A serious effort is needed to put
the Bank on the international radar, an effort in right direction and an effort
that converts weaknesses into Strengths and Threats into Opportunities.
State Bank group is the Premier Indian Financial Services Group. With more
than 15000 branches and 25000 ATMs, State Bank has presence in every nook and
corner of the country, customers ranging from masses to classes. As a
continuously evolving institution, the Bank possesses some inherit strengths,
weaknesses and outside opportunities and threats. It is important to understand
these before developing any strategy.
Strengths
1.
Largest bank in India in terms of
market share, revenue, assets and size
State Bank is undoubtedly largest
bank in terms of market share, revenue and assets. Although the bank had to
face stiff competition from competitors like HDFC, ICICI bank yet the strong
roots of the institution could not allow its competitors deeper penetration.
The bank is still the market leader on deposits and advances in a market where
every bank is in fierce competition for the consumer wallet. The huge network
of more than 15000 branches and 25000 ATMs allows the bank to service its
customers continuously. With presence across 32 countries, the Bank is
continuously marching ahead globally.
2.
Powerful Brand Name driven by
technology
State Bank brand name is the most
reliant and powerful across the country. The best example of it would be 2008
meltdown in economy when banks were losing business due to the global economy
crisis. State Bank’s reputation helped it in retaining the old customers and
also acquiring new ones. Even on technology front State Bank remains the
leader. The technology adopted by State Bank is later on accepted by its
competitors.
3.
Strong capital position helping
pursue growth initiatives
The balance sheet of the Bank is
huge and profitability ever increasing. The high profit figures help the bank
to invest heavily into future growth initiatives.
4.
Superior Employee quality
The Bank’s recruitment
methodology allows only meritorious to join its cadres. In addition to this,
the Bank’s internal training and learning methodology makes its employees most
wanted in the industry. No surprise the higher echelons of many banks are SBI
Alumni.
5.
Government Banking
The Bank also enjoys strong
favour from the Government because of its being banker to the government. This
allows bank access to huge business opportunities. It also brings inherently
huge level of expectations to be fulfilled.
Weaknesses
1.
Reduction in asset quality-
rising NPAs
The asset quality still remains a
point of concern for the Bank. Over the past few years the NPAs of public
sector banks have increased 50% and State Bank is no exception to it. The
rising NPAs of the Bank put pressure on income areas resulting in higher
provisioning and lesser profits.
2.
In spite of modernization, bank
still carries perception of traditional bank to new age customers
The Bank, over the past few
years, has improved across various functions. The ambience, the technology
adopted, the lesser paper work etc all have contributed to modernization. Yet
the Bank carries the image of an old bank. This discourages younger customers
from availing its services.
3.
Employees show reluctance to
change
The average age of the Bank staff
is more than 45 years. These employees are less open to change and absorb
change only after stiff opposition. This creates a conflict situation in
working environment which mars the business.
4.
High level of attrition due to
retirement of top management
This decade is proving fatal for
public sector banks since majority of employees are retiring. Reserve Bank of
India has already termed the decade 2010-2020 as “Decade of Retirements”. State
Bank is no exception to this. The enormous retirements are going to leave huge
vacuum in the higher management circle, hence impacting the decision making.
5.
Lesser per employee productivity
Although the Bank has a huge pool
of talent, yet “per employee” productivity is very less. The reason is improper
utilization of available talent which in turn is due to the underutilization of
available resource.
Opportunities
1.
Pool in talent to replace the
going top management to serve the next generation
As a consequence of huge amount
of retirements, the scope for getting new talent has improved considerably. The
Bank has a golden opportunity to change the perception of the young customers
about the bank. As a matter of importance, the replacements should be quite
experienced to meet the expectations set. Hence quantity and quality both need
to be replaced.
2.
Make better use of its CRM
Maintaining an existing customer
is more profitable than getting a new one. CRM is ,therefore, the need of the
hour. Customer Relationship Management software packages have come up and bank
needs to make use of the same.
3.
Expansion into rural/unbanked
areas
C.K.Prahlad, eminent marketing
guru, in his best seller “Fortune lies at the bottom of pyramid” emphasized the
need for developing market at the low level, a postulate proved successful by
the Bangladesh Grameen Bank through its SHG scheme. Government of India has
been very particular about the financial inclusion plan. The Bank can look at
an opportunity matching in above and develop plans to garner this market.
4.
Unexplored emerging countries
market
With the emerging BRICS economy,
the Bank needs to look beyond Europe and US market. Europe and U.S. markets
have become stagnant and under tremendous economical pressure. The developing
countries of Brazil, Russia, China and South Africa offer immense scope for
development and the Bank can look forward to these markets.
Threats
1.
Weakened economy
The 2008 meltdown is still
showing its impact on economy. Europe and U.S. markets are still recovering
from the bubble burst. Back home, the higher interest levels coupled with higher
rate for inflation is making banking tougher and State Bank is also feeling the
impact. The worsened economy is definitely a show stopper for the banking
industry in general and State Bank in particular.
2.
New bank licenses by RBI
Government of India has recently
granted its go ahead for new bank licenses. The new bank licenses are going to
impact business and talent of State Bank. The fierce competition among the
banks will lead to business losses through takeovers and talent losses through
poaching. State Bank needs to chalk out its strategy in advance to deal with
the volatile business environment .
3.
Competition from private &
foreign banks
India is a developing global
economy and new banks are aiming her for their businesses. India has almost all
the global players and list is increasing day in and day out. State Bank needs
to safeguard its business interests and talents for sustenance in this crowded
market.
4.
Global banking regulations
International banking regulations
are also making banking difficult. Regulations like Basel emphasize on higher
capital adequacy which means lesser profits for the Bank. State Bank needs to
maintain the same to come up to international standards and to do the same will
need an effort from higher echelons of the Bank.
State
Bank needs to work on its weaknesses and threats and coupled with its strengths
and opportunities can become a world class bank. This will help the Bank not
only meeting global banking standards but also becoming a global bank in
process. The global banking standards are based on best practices of banking
that support profitability, growth and enhance shareholder value. These "Best
Practices" are applicable to every area of banking as industry changes.
In
order to achieve the Best Practices, the
Bank needs efficient development of products that quickly satisfy a
more demanding customer base and build long-term customer trust. State Bank
must enhance risk management and address a broad range of regulatory changes
that require reporting with greater standardization and transparency. The Bank
will need to optimize both internal and external innovations, while seeking
operational excellence at all levels. Meeting these challenges requires new
business and Information Technology (IT) strategies that boost revenues,
improve operational efficiency, cut costs, and enhance the overall management
of business.
Banking
development strategy needs a service marketing approach. Any strategy to put
State Bank on the world map, therefore, needs to be addressed by keeping 7P’s
of service marketing in mind as also bank’s SWOT analysis.
1. Products
State
Bank has enormous range of products. It has been a pioneer in developing new
products. With the average Indian population being under 35, the products need
to be more youthful. In this perspective, the bank should give an option for
customizing the products as per buyer’s requirements. The State Bank website
can help capturing such customizations. Similarly products which can target a
niche and healthy population can be developed. For Instance Islamic Banking is
getting importance over last couple of years. A product which is a Savings
Account but with the features of a Current Account should be developed to
target the Muslim population averse to interest related products. These
products will help in getting new business and changing perception of youth
towards the Bank.
2. Price
Pricing
in a bank means interest rates. Although State Bank interest rates are best in
the industry, yet some smart pricing can help garner business with lesser
susceptibility to quality degradation. Advances with liquid securities in form
of Term deposits, NSC should be given a discount in interest rates. This will
help bank in two ways. Firstly, encourage customers to give liquid security as
collateral and secondly, by securing our advance with quick security the chance
of slipping the advance into a Non Performing Asset shall substantially be
reduced. Also in certain advances, particularly retail loans, the Bank should
mandatory take guarantee from an employee drawing salary from State Bank only.
The pricing in such cases should be flexible and at some discount for such
cases.
3. Place
and
4. Physical
Evidence
Place
& Physical evidence in Banking implies Banking Premises, location and
appearances. The Bank has invested heavily in building up ambience. Yet there
are branches which have not come up to standardization. Standardization should
be done across. Standardization means consistency in internal placement of the
staff, promotional material and customer lounges across branches. Every city
should have a model branch with main focus on high value individuals dealing
with both deposits and advances. In fact, a separate entity should be carved
out of State Bank of India that focuses on high net deposits and advances.
Pareto’s principle of 80-20 rule can be used for identification purpose which
says 80 % of business comes from 20% of customers and a focus on these 20% is a
must. Although the Bank has a mid corporate group that does focus on big
corporate yet they are meant for lending purpose only. Pareto’s principle
should be used for identification of 20% employees for posting in new State
Bank HNI entity. This will help in improving employee per business as well.
Standardization should also be across formats used for all internal and
external communications. An intranet site containing standard formats for all
these communications can easily be maintained.
5. Promotion
Communication
assumes much importance in current time. With cut throat competition, the Bank
needs to pep up its promotional activities. State Bank website needs to be
invigorated. It should be flashy with catchy material for display with links
about its subsidiaries. State Bank group website should be operational which
connects a netizen to respective requirement interactively. Facility of online
financial consulting should be set on website. New age tools of marketing like
WOM (Word of mouth) publicity, viral marketing, digital marketing etc should be
utilized for launching new products.
6. People
Employees
form basis for new business as they are point of contact for customers. The
customer facing employees should have a permanent dress code. Selection of
employees for such positions should be done intelligently and properly. Most of
the time, Bank is in an awkward position with person handling a role without
any proper knowledge of it. To avoid such situations, a resource center at each
administrative unit should be set up that maps role-to person appropriately. To
retain a trained and talented employee is much easier than getting new employee
ready for the same. An employee contact center, similar on the lines of
compliant management system, should be set up at administrative level in each
region to address the employee genuine problems. The compensation policy should
be best and as per performance. Also shifting low performers to lesser
important roles with less incentives should be done. Again Pareto’s principle
can be handy in identifying them (20% of employees are responsible for 80% of
work/business). Employee training to accept the changes can go a long way in
reducing their reluctance to it.And as Jack Welch Said about GE
“In GE every day, there's an informal, unspoken personnel review—in the
lunchroom, the hallways, and in every business meeting. That intense people
focus—testing everyone in a myriad of environments—defines managing at GE. In
the end, that's what GE is. We build great people, who then build great
products and services.”
7. Process
The
delivery of services is also of high importance. An idea incubation center at
regional level should be established that discusses means adopted by successful
branch managers in a region and possibility of replicating the same at other
places. State Bank website can be a big source of process delivery. In this
modern age of mobile technology, it is imperative to have a mobile version of
the website on the same lines as that of mobile net banking site.
A lot can be done other than as detailed above. But unless and until a
sense of oneness and pride among employees develops, it is impossible to build
a world class institution. Jack Welch rightly pointed about the GE and its
employees in his book “Straight from the Gut”
“If you like business, you have to like GE. If you like ideas, you have to
love GE. This is a place where ideas can flow freely from and through more than
20 separate businesses and more than 300,000 employees. Boundary-less behavior
allows ideas to come from anywhere.”
A grandiose
feeling, like one above, needs to be developed among employees to make State
Bank a world class institution.
Comments