LAST MONTH, State Bank of India (SBI) chairman Dinesh Khara said the bank will recruit 12,000 probationary officers and associates this fiscal. A whopping 85% will be engineering graduates. While Khara said this is in keeping with the bank’s thrust on technology and not an indication of a “bias towards engineers,” we have to look at the strands at play here — the biggest being the rapid adoption of technology in banking — to fully appreciate SBI’s moves.
But before that, here are the headline numbers. SBI reported a 21.59% rise in standalone net profit to ₹61,077 crore in FY24. Operating profit rose 12% to ₹93,797 crore. Market share of deposits and advances was 22.55% and 19.06%, respectively. This achievement should be seen in the light of the overall share of state-run banks. According to the Trend and Progress of Banking in India FY23, the share of state-run banks in consolidated banking sector balance sheet fell from 58.6% in FY22 to 57.6% in FY23, while the share of private banks rose from 34% to 34.7%. During this period, state-run banks accounted for 61.4% deposits and 57.9% advances. This tells you about the centrality of SBI in India’s banking sector.
Technology & People
The reasons for massive hiring of technology talent have been clear for a while. Legacy banks are up against fintech players, whose technologies are reshaping frontiers, both in retail and corporate banking. In the background is the regulatory aspect. Reserve Bank of India (RBI) has of late come down heavily on regulated entities it believes have invested inadequately in technology and processes, leading to downtimes, outages and inconvenience to customers. SBI has read the tea leaves.
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But what has gone relatively unnoticed is fine-tuning of the bank’s approach. It aims to be a “banker to every business” and not just a “banker to every Indian.” Take the business platform of SBI YONO (YONO-B, available on desktop as well as a mobile app) with integrated digital offerings that has been positioned as a digital bank for corporate clients. Offerings include trade finance, foreign exchange, cash management, corporate internet banking and supply-chain finance for corporates ranging from start-ups to India’s biggest conglomerates. Some of these pit SBI against far nimbler private and foreign banks. Focus on corporates is critical as the country moves towards becoming a $5-trillion economy and India Inc. gets more integrated into global supply chains. Any chink in offerings can prove to be costly.
However, the bank can pull it off only if its human resources are proactive. For this, SBI carried out an employee engagement survey, Abhyuday. It claims the survey got response from more than 95% eligible employees: more than 1.89 lakh voiced their opinion. A large chunk of responses covered recommendations on pay and promotions
By The Book
In order to reduce risk on books, the bank has been cutting exposure to the wholesale segment and pivoting to retail for the past five-six years. “The credit profile of its wholesale exposures is on the mend, partly in sync with broader trends in the Indian credit cycle. We expect these trends to continue for the next few years”, says Santanu Chakrabarti, head, BFSI Research, BNP Paribas Securities.
At a more granular level, deposits grew 11.13% to ₹49.16 lakh crore in FY24. With interest rates firm, term deposits grew 16.38% to ₹27.82 lakh crore, while current and savings accounts (CASA) rose 4.25% to ₹19.42 lakh crore. A higher CASA means lower cost of funds. CASA ratio (as percentage of deposits) stood at 41.11%, above the industry average of 40.08% (December 2023 figure).
RBI has, of late, sounded caution on retail book of banks, especially unsecured credit. But according to Anand Dama, senior research analyst at Emkay Global Financial Services, “the bank’s retail book (including personal loans) continues to be of better quality as loans are mainly extended to captive customers. Also, SBI has been cautious in sourcing loans from co-lending partners as well as buyout portfolios.” Gross non-performing assets (GNPAs) stood at 2.24%, 54 basis points lower than in FY23. Net NPAs dipped 10 basis points to 0.57 per cent. Return on assets was 1.04%, up 8 bps, while return on equity stood at 20.32%, up 89 bps.
But numbers are only a reflection of the larger strategy at work through the use of technology. To get a sense of what’s in store, here’s how Khara signs off in his last annual report as he hands over the baton to a new incumbent in August: “Going forward, your bank is committed to making result-oriented investments in IT infrastructure and ensuring its safety and reliability. Further, efforts will be made to leverage analytics to expand business, process optimisation and risk mitigation.”