Decision Making Of Sbi Commerce Essay

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State Bank of India is the top commercial bank in India, which offers services for instance retail and commercial banking, treasury operations and global banking, insurance, factoring, pension fund management and security trading. SBI is a primary part of the State Bank Group, which consists of other seven banks. Furthermore it offers further services such as joint funds and insurance (Datamonitor, 2011). SBI operates in India and headquartered in Mumbai, India. The company have more than 292,000 employees as at March (CNN, 2012).

The bank has more than 20,000 branches. SBI segments include assets, which includes venture portfolio and trading in foreign exchange agreements as well as derivative agreements which involves lending activities of mid corporate group, corporate accounts group and stressed assets management group such as retail banking, which includes personal banking activities, including loaning activities to corporate customers and other banking business (Anon., 2012).

At a Glance as at March 2012 (CNN, 2012)


Mumbai, India


July 1st 1955


Pratip Chaudhuri

No. of employees

More than 292,000


$36,950 million


$3,202 million

State Bank of India boarded on a development spree, increasing its network from approximately 500 branches in the 60s to more than 8,000 by the 90s. It played a significant role in developing India's rural districts by providing financing in order to modernize India's agricultural industry. Moreover it helped out in infrastructure development through providing credit and development support to villages. Therefore, SBI was the 'the big daddy' or the 'king' of banking sector in India (Lal & Tahilyani, 2011).

Transformation at SBI

SBI has the largest market share in the banking sector and it is ahead of its immediate competitors, such as ICICI Bank. Although SBI is the largest bank, Ramamurthy carried a grim smile over his face. Leaning over the desk he spoke to Kavita and Divya, "although we are the best in the market, we are losing market share to other banks. We are losing share of our high net worth individuals." High net worth individuals are those who have invested more than 10,000 with us and carry high potential for investment. However, since the entry of private players in the market it has been losing market share, particularly of the high net-worth individuals who are important customers of SBI. With their latest technology and customer oriented services these players were able to steal a considerable pie of Ramamurthy promising to investigate the matter.

2.0 Internal analysis

2.1 Strength

In India SBI is the biggest commercial bank in terms of No. of branches, deposits, profits, and number of and employees. SBI have the common slogans of 'Pure banking nothing else' and 'With you all the way'. SBI has more than 21000 ATMs and a total workforce of 292,000. SBI became banker to all social classes of people moreover it has ethical values and Indian's cultural (Sebastian, 2012). Moreover SBI has a powerful brand name over the country and overseas. It became the synonymous for banking in the rural areas and some more it is a public sector bank and government of India has 60% of share which is a competitive advantage over other banks in India.

Other strength points of SBI will be:

Strong domestic market position sustaining reach and customer confidence.

Strong capital position helping pursue growth initiatives.

SBS merger further hastens SBI and its associate banks merger and helping defend its leadership position.

SBI has a portfolio of products and services, it succeeded in the cross selling of its products and services.

All SBI branches has core banking and it enables the customer to bank anywhere same as local bank.

2.2 Weaknesses

- reduction in the asset quality increasing non performing assets's ratio.

- susceptible to political interventions.

- Huge amount of staff, hence the bank spends a considerable amount of its income in employee's salary compensation.

- the bank is fully computerized but the lack of computer efficiency made the banking very slow.

- expected to experience high level of attrition due to retirement of its top management.

- still carries the image of the old government sector bank.

2.3 Change forces at work

2.3.1 New technology

2.3.2 Changing work value

2.3.3 Knowledge explosion

2.3.4 Product Obsolescence

2.3.5 Industry Competition

2.4 Market turbulence

2.5 Resistance to change

3.4 Porter's Five Forces

The decade of 2000s was a turning point in the Indian banking industry. It brought out major transformation in the working style of Indian banks. With several competitors gaining ground in Indian Territory, SBI was facing constant threat of takeover. Bellow is exhibit that maps the banking industry in general using five forces model of Porter. There is huge competition in the banking industry and consumers are the kings. Banks that provide good customer service and responsive to the market in the long run would win.

SBI appointed KPMG as consultant for preparing an IT plan for SBI in 2001. The next year SBI launched a project to network more than 14,000 domestic and 70 foreign branches. All branches were computerized but on decentralized system. This was the time when competitors like ICICI Bank and Citi Bank with technological competence entered Indian market and posed immediate challenge for SBI. They carried superior customer relationship management systems and responded very quickly to customers. Yielding to them would require SBI to restructure its business, either fight for competency or go out of business. In 2004, SBI implemented business process reengineering and rolled out six-sigma. It launched an initiative of core banking systems for integrating all its branches and by 2008 became the second bank in the world to have 10,000 branches.

The threats of new entrants: Financial conditions and global economy both are in crisis however the banking industry is booming. This condition attracted plenty of multinational corporations interested in Indian banking industry. Even lots of domestic non-banking financial firms are as well elatedly waiting to receive banking license from RBI. This is critical for the existing banks together with State Bank of India furthermore the competition will be high. The 200++ years experience and knowledge of SBI in the industry and reputation are going to help it overcome these threats (Sebastian, 2012).

Rivalry among existing competitors: The main competitors of SBI in India are ICICI Bank and Bank of India. ICICI bank is the second leading private sector bank in India; as well it has good reputation in banking industry. The increase number of banks in is going to raise the competition as all banks are competing for the same resources and customers. SBI have to face this competition from these banks and therefore plan its activities consequently (Sebastian, 2012).

The bargaining power of buyers: Consumers are greatly attracted by the bank and its core importance is great customer services and satisfaction. However same customer is going to come up with arguments and compare to other banks products in order to bargain. Therefore, SBI has to make sure to satisfy such customers with their products and services as they are capable to have same services from competitor and switching costs to another bank is low (Sebastian, 2012).

Bargaining power of suppliers: SBI has suppliers who supply stationeries, peripherals and computers. Switching cost another supplier is time consuming and the process is costly. It has to obtain support from cash filling agencies in order to fill ATMs all over the country. seeing as these things are very significant for bank, suppliers are getting higher bargain power (Sebastian, 2012).

Threat of substitute products and services:  banking industry in India is getting high growth and profitable position, and therefore several foreign banks are entering into the market. They all have financial products and services alike this will give choice for customers. Whenever a customer feels their needs are not satisfied with SBI offers therefore easily they can go for substitute with a lower switching cost (Sebastian, 2012).

3.5 Global trends in banking

The financial crisis put a sharp halt to the rapid asset growth that the banking sector had witnessed in the pre-crisis period. From 2006 to 2007 the growth rate of assets for the top 1000 banks was 24.2% compared to 6.8% during 2007-08. Even during 2008-10, the growth rate remained relatively flat at 2.7% reflecting the devastating effect the crisis had on the banking industry (Anon., 2011).

Profits before tax (PBT) of the banking sector also witnessed a sharp decline during the crisis, with the PBT of top 1000 global banks declining by $667 billion between 2007 and 2008. With the economic situation improving during 2009 and 2010, the banking sector recovered some of its losses with the PBT of the top 1000 banks increasing by $594 billion between 2008 and 2010 (Capgemini, 2012).

2010 turned out to be a good year for banks with profits returning. 2011 started with renewed optimism as investors began bristling with growth strategies and expansion plans. That collided with the surprise of the mid-2011 threat of a double dip. The corporate operating landscape continues to face a lack of confidence due to the US and European sovereign debt crisis and lukewarm Western economies. This, added to falling profits and hardening regulations, has dampened the initial buoyancy of the sector and reminded us of the necessity of being fluent in managing change (Mackenzie, 2011).

Three global trends are impacting CRE in the banking and finance sector:

Smart Growth is a key strategic focus adopted by banking and finance organizations. Growth remains the key driver, but will be moderated by the fact that it takes place in a volatile and morphing environment and at varying paces across the globe. Growth strategies that are more complex to deploy will be balanced by a renewed interest in optimizing costs, rationalizing the portfolio and driving even stronger operational efficiency.

Flexibility is the characteristic common to the tactics employed to enable smart growth. Primarily impacted by the Global Financial Crisis (GFC), banks and financial organizations have had to resize their portfolios and quickly learn about the importance of flexibility. CRE teams are now ready to test and utilize a full range of options including productivity enhancement, workplace mobility and partnerships to achieve a higher degree of flexibility in their portfolio that will help them navigate through the continued economic turbulence.

A stronger connection to the C-suite is CRE executives' key ingredient for success. CRE executives garnered enhanced visibility during the GFC. With this comes higher expectations and tougher key performance indicators (KPIs) as well as an opportunity to impact the broader business financially and strategically and to enhance the contribution of the CRE function.

4.0 Globalisation Impact on Banking in India

Globalisation refers to the process of the intensification of economic, political, social and cultural relations across boundaries, and it is principally aimed at the homogenization of political and socio-economy across boundaries. A sound banking system depends partly on the control exercised by the central bank and, the trust that customers have that their money will be safe, and that when one wants to withdraw money their funds will be available. According to (Rose, 1999), a financial institution is one that facilitates allocation of financial resources from its source to potential users. (NJANIKE, 2003-2008).

Globally banks have registered an increase in their product portfolio due to increased Information Communication Technology (ICT) and as a result the banking sector's product portfolio was greatly influenced. This has resulted in improved efficiency in the global financial system. However in most developing economies ICT lacks the necessary infrastructure to support it. This keeps the service quality low and depresses the rate of return on investments in the banking sector. Therefore this paper seeks to establish whether the transformation of the banking sector from a national level to a global influence has had any effects on the banking sector. It seeks to ascertain the influence of globalization on the growth, stability and soundness of the banking sector in the economy from 2003 to 2008 (NJANIKE, 2003-2008).

Bank branch networks have been influenced greatly by Automated Teller Machines(ATMs), computerized telecommunications devise that provides a financial institution's customers a method of financial transactions in a public space without the need for a human clerk or bank teller (Smith, 1999). Most banks now have more ATMs than branches, and ATMs are providing a wider range of services to a wider range of users. For example in Hong Kong, most ATMs enable anyone to deposit cash to any customer of the bank's account by feeding in the notes and entering the account number to be credited.

Telephone, mobile, video and online banking have replaced face to face interaction with the banker in many economies (Rose, 1999). Rose described telephone banking as a service provided by a financial institution which allows its customers to perform transactions over the telephone. Online banking is a term used for performing transactions, payments and so on over the Internet through a bank, credit union or building society's secure website.

Globalisation can be seen as an evolution which is systematically restructuring interactive means among nations through breaking down barriers is the areas commerce, communication and other areas of endeavour (Ohuabunwa, 1999). This is as a result of existence of free-market forces and good corporate governance among other values. According to the International Monetary Fund (IMF) globalization has increased international division of labour and the accompanying integration of national economies through trade in goods and services cross border corporate investments, and financial flows. The effect of globalisation on the banking or financial system is not something imposed but the result of forces for change that are deeply rooted in human nature: the drive for freedom and better service, for new discoveries, and for a broader horizon (MacEwan, 1990). In the banking sector globalisation has removed national or entity barriers to the free movement of international capital and this process is accelerated and facilitated by the supersonic transformation in information technology (Ohiorhenuan, 1998).


There are three distinct spells of development of Banking industry in post independent India, the pre-nationalisation era from 1947 to 1969, the post-nationalisation cum pre-liberalisation era from 1969 to 1991 and the neo-liberalisation era from 1991 onwards. The first phase was mostly city-centric private Banking marked by frequent failures and liquidation of Banks and consequent pauperisation of numerous poor and middle class depositors and loss of jobs for the employees. The post-nationalisation era saw a sea-change in the Banking scenario : financial stability of Public Sector Banks (PSBs) controlling more than 84% of Banking business of the country, PSBs commanding trust and confidence of the Banking-public, expansion of Branch net-work of Banks - particularly in hitherto unbanked rural and semi-urban centres, opening up the banking services accessible to the rural poor, expansion of credit to agriculture, small scale industries and small entrepreneurs, artisans - even to the marginal farmers, small shop-owners, vegetable vendors etc. During this post nationalization era, Regional Rural Banks (RRBs) were established in 1975 onwards under the auspices of PSBs to cater to the credit needs of rural-India. Till 1990, priority sector lending constituted over 70% of the advance portfolio of RRBs giving further fillip to the rural economy (Biswas, n.d.).

With the onset of World Bank-IMF dictated reforms, euphemistically called liberalisation, successive Governments at the centre have consistently been trying to undo all the good work of the PSBs as also to dismantle and privatise the PSBs altogether. On 14th August 1991, the Government of India (GOI) appointed a Committee headed by Mr. M. Narashimham (called "Narashimham Committee - I") to suggest the modus operandi for reforms of the Banking Sector. On 16th November 1991, the said Committee submitted its Repost suggesting downsizing of PSBs through closure of Branches, merger of PSBs, reduction of priority sector lending from the then prevailing 40% to 10% of total advance portfolio, abolition of Banking Service Recruitment Board, granting of more autonomy to PSBs in respect of both financial and administrative matters, to reduce the supervisory and regulatory control of Reserve Bank of India (RBI), the Central Bank of the country, and, to top it all, dilution of Government Holding in PSBs through suitable amendment of relevant legislations (Biswas, n.d.).

The result is there for all of us to see. Because of the presence of a strong and dominant Public Sector, the financial sector in our country, though affected, has not crushed down with the melt down of the financial sector in the United States and other major economies of the capitalist world; not a single copper of public money has to be spent to dole out/save any PSB, none of the depositors in any Bank has lost a single farthing of his/her deposit; when the financial giants all over the world have been happily off-loading their employees in thousands to tide over the crisis, not a single Bank-employee in India has lost his job just to accommodate the financial health of his/her employer. Pension; the only post-superannuation succor of employees, still remain assured.

There is, however, no room to be complacent. The present dispensation at the centre of our country has not learnt any lesson from the prevailing convulsion in the world economy and is still hell bent on going full steam with its reforms agenda. The recent cabinet decision to increase the cap on FDI in insurance sector from 26% to 49%, as also to amend the law to allow proportionate voting rights to the shareholders in Private Banks are indications of the road-map drawn for the desired reforms. There is the added danger of their intentions to allow proportionate voting rights to the private shareholders of PSBs by amending the relevant law. The working class, employees in financial sector in particular, have, therefore, to carry on the struggle unabated. The left parties of our country have always remained with us in these struggles and they will continue to do so in future, we are confident.

5.0 Technology management

6.0 Change and Innovation

7.0 Conclusion

7.1 recommendations