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Asia-PacificDecember 1 2017

SBI looks to find the perfect balance

Under new chairman Rajnish Kumar, State Bank of India hopes to adjust the work-life balance so staff are in shape to help bring down bank's cost-to-income ratio. Brian Caplen reports.
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Rajnish Kumar

Not many bosses begin their tenure by urging staff to review their work-life balance. Even fewer tell their employees to work only eight hours a day and that work should be fun. But this is how Rajnish Kumar began his term as chairman of State Bank of India (SBI) in October, expressing his thoughts in a letter to staff.

Mr Kumar, who has spent his entire career at SBI and took over the role of CEO from the highly respected Arundhati Bhattacharya, comes to the position at a time of considerable stress: the bank is in the throes of a complicated merger with five associated banks and Bharatiya Mahila Bank that has taken gross non-performing assets to nearly 10%.

Stress relief

Mr Kumar says he has heard a lot of employees are under stress and is concerned that this will not yield the best results. His approach is to tackle the quality of staff input in the belief that this will lead to a better output.

“My letter to staff does not speak about business, it speaks about connecting with customers, it speaks about technology adoption, it speaks about work-life balance,” he says. “I have outlined the value system which our people need to follow because my belief is that we need to focus on the input part and then the output will follow. If the staff are able to give good customer service, if they improve their learnings, if they adopt technology, this automatically will give us results.

“I have received a lot of feedback about stress that people are feeling and I don’t want people to be under stress. Work should be fun and I believe that eight hours [a day] are more than enough. If you work sincerely for eight hours you don’t have to work more than that. The moment you feel that work is a burden then you come under stress, but if you feel that work is fun [you work better].”

Back to life

Mr Kumar says that employees need to have a proper work-life balance, to spend time with their families and to distance themselves from work when they are not in the office. “That is something that I practice, whatever the time pressures,” he says. “I do try to work eight hours a day although I don’t always achieve it. In my routine I try to be in the office by 10am and then I try to leave by 7.30pm. I am hesitant to accept invitations for dinner unless they are very important.

SBI in figures

“At least, I believe two hours in the evening and one hour in the morning should be reserved for the family. I enjoy walking in the mornings with my wife. I try to balance [work and life] and I expect my staff to do the same.”

“Everything is linked. Learn about your job, the technology will help you to work smarter and [then you] have a better work-life balance. We want our people to be healthy and unstressed and then they will be more productive rather than having time off for stress. This talk about work-life balance has been very well appreciated.”

Both Mr Kumar and SBI's managing director for corporate and global banking, Balasubramanyam Sriram, agree that SBI is within reach of a virtuous circle whereby non-performing assets start to get resolved, provisioning costs come down, gains from the merger start to flow and profits will rise. Mr Kumar says that in the financial year ending in March 2017, 80% of operating income went into provisioning. “The problem is the cost of the provisioning,” he says. “Once I am able to control that, in terms of return on assets and return on equity, everything will look very good.”

The merger is with five associate banks – State Bank of Bikaner & Jaipur, State Bank of Mysore, State Bank of Travancore, State Bank of Patiala and State Bank of Hyderabad – and Bharatiya Mahila Bank.

Advance work

Mr Kumar says that a lot of work has been done on corporate accounts as a result of the merger. “We did a lot of provisioning, we did asset recognition [of bad assets in the merged banks], aligned them with SBI and in the first quarter [of the current financial year] the retail assets were also aligned,” he says. “So this gave us elevated non-performing loans in the retail segment, but this quarter onwards, at least for the retail sector, things have become much better and the situation is under control. With corporate accounts, the benefit is that now there is a single management account team handling things. Earlier there was a lot of duplication of work as the accounts were spread over five different banks, but now they are all consolidated and whatever provisioning was to be done we did last year.

“That brings in a lot of efficiency in management and the other aspect of the merger – the optimisation of the branch network – that has already been done. We merged 994 branches within three months which is a big thing. Quite a few administrative offices were closed and treasury is integrated, so the efficiencies of the merger are now visible.”

Efficiency drive

Mr Sriram says that many bad assets are now going through the official process. “There is a clearcut timeline so we are looking at the end game of the non-performing asset problem,” he says.

He adds that inefficiency was widespread before the merger, with many of the same corporate loans managed by a different relationship manager at each bank and branches located next door to each other. The yield was less at the associate banks than at SBI and the capital could be better utilised at parent bank level.

“The first part of the merger has been very successful,” says Mr Sriram. “The integration of the technology and the staff has been almost seamless. The second part, driving the benefits of the merger, we will do over the next two or three years to prove to the stakeholders at large that the merger is successful in more ways than one.”

Mr Sriram says that SBI is showing robust growth in retail but that corporate lending is more subdued, with fewer projects around and many corporates accessing the capital markets for funds.   

As India’s largest state-owned bank, SBI is expected to play a leading role in government initiatives such as financial inclusion. The bank is also a leader in technology: it has the world’s most popular Facebook site for a bank, it has pioneered the digital, self-service Intouch banking suites with remote advisers, and its mobile wallet app State Bank Buddy has more than 10 million users, clocking up Rs1.7bn ($26m) in transactions in the first quarter of the current financial year.

SBI has turned this technological prowess towards financial inclusion. Mr Kumar says that SBI has opened 130 million of the total 300 million accounts opened under the government’s financial inclusion initiative Pradhan Mantri Jan-Dhan Yojana. “Eighty per cent of the accounts are active and the average balance in these accounts has gone up,” he says.

Power of three

Jan-Dhan ties in with the Aadhaar biometric identity code and mobile numbers to form the so-called 'JAM trinity'. “Aadhaar has become the mandatory know your customer [KYC]  document and is being used for almost everything in India, all the government services. For opening a bank account you need that card, we can do the e-KYC and the account can be opened instantly by mobile,” says Mr Kumar.

SBI is also looking to cut costs and reduce its cost-to-income ratio (currently just under 50%) with three internal IT projects. Mr Kumar says the bank is betting heavily on three major technology projects. One is Project Lotus to create an omnichannel that will free up a lot of manpower going forward and should bring down the cost-to-income ratio by 20%. There is also customer relationship management software being installed to give a single view of the customer, and a new risk management system allowing branch and customer profitability to be assessed at a granular level.

“These three projects – plus the use of data analytics, which will be used for improving underwriting standards, artificial intelligence, end-to-end digitisation of many processes that are happening – the combined effect of all this, even if a 40% [target] looks very ambitious, is that we should be able to significantly improve our cost-to-income ratio,” says Mr Kumar. 

At one time in India, the private sector banks were the trailblazers and the state banks the laggards. SBI has done a huge amount to overturn this idea in terms of technology and systems, and with its new emphasis on work-life balance may be about to repeat that success in the area of human resources.

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