Accounting For The Future

The reasons behind the restructuring are obvious. The number of global players scrambling for the small, but lucrative, top-end market has increased. Being launched are a continuous stream of new products backed by aggressive marketing and state-of-the-art technology. Citibank has introduced customer-activated service terminals at its model branch at Nariman Point: customers can do routine banking while sitting anywhere in 35 countries. ANZ Grindlays provides its high-value clients add-ons like free tax consultancy and hotel and car rental discounts.

Home-grown competition has also been turning on the heat. Smart and nifty private banks have sprung up. In their first year of operations, the Hinduja-promoted IndusInd Bank and Global Trust Bank, launched by former Vysya Bank chairman Ramesh Gelli, have managed to garner deposits in excess of Rs 600 crore and are showing profits—a pittance compared to SBI's deposit base of Rs 83,746 crore but definitely, indicators of a trend that for some customers small is beautiful. Even among nationalised banks, high-growth rate stars like Canara Bank and Punjab National Bank (PNB) are snapping at SBI's heels. Last year, PNB grew 19 per cent, 2 per cent more than SBI. Obviously, SBI has to shed its sloth. And fast.

Enter McKinsey & Co, the world's leading management consultants. In addition to radical changes in strategies and systems, the McPlan aims to create a flexible organisational structure with decentralised decision-making to cut down procedural delays. "What we expect to achieve is an organisation with a strengthened balance sheet that will provide sufficient vibrancy, initiative, flexibility and entrepreneurial spirit to deal with the emerging environment," says SBI Chairman P.G. Kakodkar.

In its new avatar, the SBI will conduct its business through four "groups" or strategic business units. "This market segmentation exercise would enable us to focus on different customer groups and their varied needs and provide value to each segment," says Kakodkar. Each of the strategic business groups will have under it more focused units and a dedicated delivery system. The corporate banking group's dedicated branch has already opened at Nariman Point in Bombay. In time, there will even be consumer finance centres, specialised personal banking branches and even branches devoted exclusively to development banking. "Where we cannot provide dedicated branches, our effort would be to provide dedicated divisions within a general purpose branch," says Kakodkar. On a pilot basis, the new structure has been rolled out in Bombay and Madras. By March 1996, it is expected to become operational on an all-India basis.

At present all credit proposals, even from high-value corporate clients, go through a long administrative chain, starting from the local branch office to zonal office to head office to local board and then the central board. Under the new scheme of things, these proposals will go straight from the branch office to the corporate accounts group. In the national banking group, the authority structure has been delayered. The raising of loan approval ceilings for frontline managers means that the branch office and the head offices will dispose of 80 per cent of the requests falling in their purview; only 20 per cent of proposals will need to move higher up. The process will substantially improve loan repayment performance, says P.K. Bhattacharjee, chief general manager at the Delhi head office.

Can SBI achieve what it has set out to do? However efficient its commercial operations become, it still has to perform the treasury functions for the Government. It still has to take care of the repayment of India's foreign debt, a responsibility dumped recently on the bank. These activities entail no profits, only major headaches. SBI can never be as fancy-free to innovate as any other bank in the country.

But some early results of the new drive are already in. Linking all large commercial and industrial branches by an electronic funds trasfer system via the SBI Datanethas dramatically slashed funds locked in inter-branch transfers. Inter-branch adjustments have dropped from Rs 4,700 crore in 1994 to Rs 570 crore in 1995. While in the last two years the number of employees has increased at a conservative rate of 1.3 per cent, deposits per employee have more than doubled. Obviously, the pachyderm has started moving.