True
to its new-found hallmark, SBI never fails to surprise. When the country's largest
commercial bank turned 200 in June, this year, the news took many by surprise.
However, an even bigger surprise was in store for SBI and its millions of customers,
when the country's apex bank, RBI, recently announced that it would transfer its
59.73% stake in SBI to the government of India soon: the government also surprised
the bank when it turned down its plea to make a foray into Bangladesh. The news
about the change in ownership comes at a time when the banking juggernaut, which
for long has been the banking face of the country and at times acts as guarantor
to the government (remember 1991 financial crisis that forced India to pledge
its gold to the UK) is faced with mounting challenges. The competition from private
banks (local as well as MNC) is taking its toll on SBI. Further, the fast changing
rules of the game have found SBI wanting: while private sector banks like ICICI
Bank and HDFC Bank are focusing on fee-based income, SBI has failed to catch up
with its competitors. Also, with the Basel II norms now in vogue, the bank has
been under intense pressure to shore up its financial health in order to adhere
to the stringent global standards. Alarmed by the bank's consistently poor show,
the new, majority shareowners of the bank have made no bones about their wish:
SBI needs to revamp its business model. "There is apprehension that India's
largest banking group may slip on the banking sweepstakes in three years or so",
comments The Economic Times in its issue dated July 24, 2006. It reports
further that the government has asked SBI's top management to take a hard look
at its existing business model and to make a course correction if need be after
an internal review, which identified SBI along with a clutch of other PSBs for
scaling up performance levels.
However,
for the country's largest commercial bank, it would not be easy to transform the
banking behemoth, which is over-saddled with large employee overheads, hence,
low productivity, and suffers from lack of autonomy. These factors put the sleeping
giant in a disadvantageous position vis-à-vis its private sector peers,
as well as threaten to mar its prospects as it looks to expand beyond the boundaries
of the domestic market. |
