[sbinews] New-look SBI will have 7 profit centres -Business Standard

  • From: "Rajendra S. Pai" <rs.pai@xxxxxxxxx>
  • To: <sbinews@xxxxxxxxxxxxx>
  • Date: Wed, 8 Sep 2004 08:34:59 +0530

New-look SBI will have 7 profit centres

Tamal Bandyopadhyay / Mumbai September 08, 2004

Units carved out of existing business divisions.

The State Bank of India (SBI) has created seven profit centres within the
bank following the recommendations of consultancy firm McKinsey & Co.

The seven business units have been carved out of the two existing business
divisions of the bank - the corporate accounts group and the national
banking group (NBG) - set up in the mid-1990s.

McKinsey, which was instrumental in the previous organisational recast eight
years ago, has been with the bank for over two years now supervising the
restructuring plan as well as its implementation.

According to sources, the corporate accounts group, which was created to
deal with the bank's top 200 accounts, has been split into three business

While one unit will continue to deal with the top accounts, another division
has been created to finance projects and a third one for mid-cap (loans of
Rs 25 crore and above) companies.

The top accounts division and the mid-cap division are being headed by chief
general managers while the project finance division is headed by a general
manager (GM). All three group heads report to the managing director in
charge of the CAG.

SBI chairman AK Purwar confirmed that the bank has created seven business
units and that the new structure is already in place. He, however, refused
to offer details on the new-look SBI.

Four business units have been spun off from the NBG. These deal with loans
to agriculture, small and medium enterprises (loans up to Rs 25 crore),
retail loans and government businesses. While a CGM heads the SME unit, the
other three are managed by general managers. All group heads report to the
managing director in charge of the NBG.

Besides relatively smaller manufacturing units, the SME division also deals
with the services sector and wholesale and retail trade.

Giving the rationale behind the creation of the profit centres, a source
said the objective is to get back the businesses which SBI has been losing
to competitors. Even though the market share of the SBI group (the parent
and its seven associates) has remained constant at around 25 per cent, the
bank's share has been on a decline.

In other words, the parent's growth has been slower than that of its
associate banks. "The new structure will arrest the slowdown and make the
bank more aggressive," sources pointed out.

Even though the parent and the seven associates operate as separate
entities, there has been a "virtual" merger of the group as they are working
on one technology platform, sources said. Incidentally, the project finance
division is meant for the entire group where the SBI associates too share
the businesses.

In order to speed up the decision-making process, the bank has cut all
layers and the branches report directly to headquarters for businesses under
these seven units. In other words, the layers of local head offices (LHO)
and circles have been cut out for faster decision making.

Reinventing SBI

Corporate Accounts Group will focus on
Loans to the top 200 firms
Loans to mid-cap companies (Rs 25 crore and above)
Project finance in infrastructure and other areas

National Banking Group will deal in
Loans to agriculture
Loans to SMEs (loans of up to Rs 25 crore) and retail customers
Government business

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