[sbinews] Off the beaten track (ET editorial on SBI's overseas acquistion plans)
- From: "Rajendra S. Pai" <rs.pai@xxxxxxxxx>
- To: <sbinews@xxxxxxxxxxxxx>
- Date: Wed, 7 Apr 2004 08:42:12 +0530
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Off the beaten track
(Economic Times)
EDITORIAL
TIMES NEWS NETWORK[ WEDNESDAY, APRIL 07, 2004 04:14:40 AM ]
The State Bank of India (SBI) is set to add a new chapter to the annals of
Indian banking. The country's largest bank is in the process of acquiring a
bank in the US . If successful, this would be a huge cultural change for
Indian banking. So far, the main thrust of foreign operations of Indian
banks was to support and service India 's foreign trade. Lending to the
ethnic community was another stream of business. And given this captive
business, the foreign branches of Indian banks never took the trouble to
undertake mainstream banking in the host country. Anyway, even if they had
tried, their low resource base and inadequate technology would have been too
big a handicap. In that sense, the strategy adopted by SBI is a complete
break from the past. It would be a truly local presence. But acquisition is
the easier part of the deal. The bigger challenge lies in successfully
integrating the acquired entity within the SBI fold. It's no mean task given
the huge cultural mismatch in the way Indian banks function and the way US
banks function. As opposed to highly technology-driven delivery by US banks,
Indian public sector banks still largely rely on human interface for the
delivery of various services. However, the cultural mismatch need not always
be a negative. According to a study by Booze Allen Hamilton, branch banking
seems to be making a comeback in the US . And given its expertise in manning
branches, SBI can achieve a good technology-manpower balance to make its US
venture a success.
The big danger for this initiative lies in SBI failing to differentiate
between this venture and its foreign branches that are focused on Indian
business and Indian diaspora. Indeed, initial reports do suggest that the
acquisition is being considered with an eye on the needs of Indian
corporates abroad. If that were the case then the acquisition makes no
sense. The same can be done with one of its numerous overseas branches. SBI
must learn from the foreign banks that are operating in India . But for
foreign ownership and slightly upmarket clientele, they are no different
from our private sector banks. In short, SBI must shed its India hangover
and try its luck in the international arena.
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