Sep 01 2014 : The Economic Times (Delhi)
MONDAY Musings - Fin Inclusion: SBI Aims to Create Savings Habit
B SRIRAM MANAGING DIRECTOR, SBI
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Public sector banks are always at the receiving end when it comes to their adaptability to latest developments. But the State Bank of India is moving aggressively to remain relevant in a market which is set to witness a revolution with differentiated banks, says B Sriram, managing director, in an interview with Sangita Mehta and MC Govardhana Rangan. Edited excerpts:There is a lot of noise about financial inclusion. What will be its impact on the real economy?
It will have a big impact. We are looking at 10-12 crore accounts to be opened. It's not only opening accounts, they will have balance, there will be transactions, it will have multiple products like pension, insurance and even loan products at a later stage. In phase one, we are looking at opening accounts and creating the habit of savings in all citizens. In phase two, we are looking at bringing all these products to the customer so that not only the banking system develops on that, but the whole economy gets a boost.
There would be payment banks and small banks which would be nimbler than you are in reaching customers and their costs will be low. How do you compete?
I do not see them as competitors. They would be players in the economy like us, in a localised way. They have certain restrictions in the way they operate. They would collect small deposits and invest only in treasury instruments. So, to that extent, they are not in a loan market and they have their role defined by the RBI. They have their own niche in the market either they can be in combination with the bank, or they can be on their own.The intent is you add or multiply. You don't divide and subtract. The purpose is every citizen in every nook and corner of the country has access to banking service or whatever remittance service that payments bank would give is made available to him as close as possible. It is a question of synergy and it's not that they will take my business, or I will take their business.
For long, rural areas were neglected on the pretext that they are not profitable. Has that changed?
I don't subscribe to the view that small-ticket loans are not profitable.For SBI, the CASA (Current Accounts Savings Accounts) franchise is coming out of rural and semi-urban areas.There are circles that drive 60-70% CASA, including the North-East and Odisha. Circle-wise if you see the demography, the more rural or semi-urban you are, the higher the CASA is. They are as important as the big businesses. They have to be served in a way that they remain with the bank. Like small drops in an ocean, these are things that make SBI. There is a character of continuity in terms of benefits available to the bank and they would not swipe in swipe out easily.
Now, every one is talking about the bottom of the pyramid customers.How would SBI differentiate?
SBI was a pioneer in SSI (small scale industries) sector and so, we have a huge level of expertise in financing this sector. Most of the financing we do today is slightly different from what it was. From manufacturing, it has extended to services, it has gone to realty, it has gone to channel financing, vendor, and dealer finance.The full cash flow of the customer is captured by the bank. So, the business model has changed. We have developed products to capture this.
We also have cash management products which are robust and well known. We have also gone in a big way to cash pick-up for SME customers.Here, the cash is picked up at customers' area either at the shop or jeweller once or twice a week and then, it is credited in their accounts.This gives us some CASA balances.
Are not private sector banks better at doing this?
We are also mapping SME clusters to certain branches and creating certain products for those branches. We are also creating specialised position relationship managers small enterprise they will look at the segment between ` . 10 . 1 crore to ` crore and they would be trained in processes and delivery and also in lead generation. How to capture leads?
How to go and market and handling of the account?
Is not the competition from private lenders increasing here as they also feel that urban markets have saturated?
There is no doubt that we have to be a banker of choice. We have the best brand, we have the best reach, we have the best personnel, best IT. But all this best will work only if we are the bank of choice to the customer. For that, it is very essential that our whole system is driven towards being customer friendly and customer focussed. For this, we are rolling out digitised branches. We want to show to customers that we could be as efficient as any of the bank in the world.
How different is that in enhancing the customer experience?
For example, if a person wants a car loan, he has to go to various showrooms to choose the car and go to the bank and try to get a loan. In these sorts of digital branches, he can at the touch of a screen will get all the latest models that are available, their prices in various cities. The moment he chooses the dealer, he can, at the touch of a screen, calculate how much loan he would require, and what would be the monthly payment. Next, for home
loans, we would put on the site all the projects that are approved by SBI and based on this, the customers can choose the right fit whether he wants 10-15 year home loan. Is technology becoming more important than finance expertise?
It has to be a mix of both. We are at an advantageous situation because of our brick-and-mortar branch strength.The strategy is two-fold, grow brick and mortar and at the same time also grow the digital way. There is market for both. The greatest strength of the bank today is its reach.
But e-transactions are still low in the country.The percentage of our transaction through the electronic route is touching 40% and the idea is to ramp it up to 60%. When that happens, that will automatically de-clutter our branches to some extent.
But that may change if your bank starts charging customers for ATM transactions?
I don't think so. Because people would rather pay for the transaction rather than come to the branch. Charges are not so heavy that they would like to come and stand in the queue. A cup of tea also today costs ` . 10. In that context, it is not a very large sum.
There is a lot of hope now when it comes to the economy. Do you see any thing on the ground?
Lots of activities are happening at the ground level. The PM himself is monitoring various things very closely. Overnight, you can't have new projects and suddenly investors come pouring in. But there is an intention on the part of corporates to try and raise resources, try to reduce their debt and clean up their balance sheets and then to look ahead and see where there is scope for enhancement. In manufacturing, the inventories that were built up are now starting to recede.
If economy revives, there could be an increase in demand for funds.Will that put pressure on interest rates?
I don't see any increase or decrease. It will remain more or less at this level.Two-three factors are being looked at.One is the targeted inflation figure, and the other is the revival of the growth cycle which takes at least a few quarters. Also, the stressed assets in the economy are still there. So, looking at all these factors, I can't see an increase or decrease.
It will have a big impact. We are looking at 10-12 crore accounts to be opened. It's not only opening accounts, they will have balance, there will be transactions, it will have multiple products like pension, insurance and even loan products at a later stage. In phase one, we are looking at opening accounts and creating the habit of savings in all citizens. In phase two, we are looking at bringing all these products to the customer so that not only the banking system develops on that, but the whole economy gets a boost.
There would be payment banks and small banks which would be nimbler than you are in reaching customers and their costs will be low. How do you compete?
I do not see them as competitors. They would be players in the economy like us, in a localised way. They have certain restrictions in the way they operate. They would collect small deposits and invest only in treasury instruments. So, to that extent, they are not in a loan market and they have their role defined by the RBI. They have their own niche in the market either they can be in combination with the bank, or they can be on their own.The intent is you add or multiply. You don't divide and subtract. The purpose is every citizen in every nook and corner of the country has access to banking service or whatever remittance service that payments bank would give is made available to him as close as possible. It is a question of synergy and it's not that they will take my business, or I will take their business.
For long, rural areas were neglected on the pretext that they are not profitable. Has that changed?
I don't subscribe to the view that small-ticket loans are not profitable.For SBI, the CASA (Current Accounts Savings Accounts) franchise is coming out of rural and semi-urban areas.There are circles that drive 60-70% CASA, including the North-East and Odisha. Circle-wise if you see the demography, the more rural or semi-urban you are, the higher the CASA is. They are as important as the big businesses. They have to be served in a way that they remain with the bank. Like small drops in an ocean, these are things that make SBI. There is a character of continuity in terms of benefits available to the bank and they would not swipe in swipe out easily.
Now, every one is talking about the bottom of the pyramid customers.How would SBI differentiate?
SBI was a pioneer in SSI (small scale industries) sector and so, we have a huge level of expertise in financing this sector. Most of the financing we do today is slightly different from what it was. From manufacturing, it has extended to services, it has gone to realty, it has gone to channel financing, vendor, and dealer finance.The full cash flow of the customer is captured by the bank. So, the business model has changed. We have developed products to capture this.
We also have cash management products which are robust and well known. We have also gone in a big way to cash pick-up for SME customers.Here, the cash is picked up at customers' area either at the shop or jeweller once or twice a week and then, it is credited in their accounts.This gives us some CASA balances.
Are not private sector banks better at doing this?
We are also mapping SME clusters to certain branches and creating certain products for those branches. We are also creating specialised position relationship managers small enterprise they will look at the segment between ` . 10 . 1 crore to ` crore and they would be trained in processes and delivery and also in lead generation. How to capture leads?
How to go and market and handling of the account?
Is not the competition from private lenders increasing here as they also feel that urban markets have saturated?
There is no doubt that we have to be a banker of choice. We have the best brand, we have the best reach, we have the best personnel, best IT. But all this best will work only if we are the bank of choice to the customer. For that, it is very essential that our whole system is driven towards being customer friendly and customer focussed. For this, we are rolling out digitised branches. We want to show to customers that we could be as efficient as any of the bank in the world.
How different is that in enhancing the customer experience?
For example, if a person wants a car loan, he has to go to various showrooms to choose the car and go to the bank and try to get a loan. In these sorts of digital branches, he can at the touch of a screen will get all the latest models that are available, their prices in various cities. The moment he chooses the dealer, he can, at the touch of a screen, calculate how much loan he would require, and what would be the monthly payment. Next, for home
loans, we would put on the site all the projects that are approved by SBI and based on this, the customers can choose the right fit whether he wants 10-15 year home loan. Is technology becoming more important than finance expertise?
It has to be a mix of both. We are at an advantageous situation because of our brick-and-mortar branch strength.The strategy is two-fold, grow brick and mortar and at the same time also grow the digital way. There is market for both. The greatest strength of the bank today is its reach.
But e-transactions are still low in the country.The percentage of our transaction through the electronic route is touching 40% and the idea is to ramp it up to 60%. When that happens, that will automatically de-clutter our branches to some extent.
But that may change if your bank starts charging customers for ATM transactions?
I don't think so. Because people would rather pay for the transaction rather than come to the branch. Charges are not so heavy that they would like to come and stand in the queue. A cup of tea also today costs ` . 10. In that context, it is not a very large sum.
There is a lot of hope now when it comes to the economy. Do you see any thing on the ground?
Lots of activities are happening at the ground level. The PM himself is monitoring various things very closely. Overnight, you can't have new projects and suddenly investors come pouring in. But there is an intention on the part of corporates to try and raise resources, try to reduce their debt and clean up their balance sheets and then to look ahead and see where there is scope for enhancement. In manufacturing, the inventories that were built up are now starting to recede.
If economy revives, there could be an increase in demand for funds.Will that put pressure on interest rates?
I don't see any increase or decrease. It will remain more or less at this level.Two-three factors are being looked at.One is the targeted inflation figure, and the other is the revival of the growth cycle which takes at least a few quarters. Also, the stressed assets in the economy are still there. So, looking at all these factors, I can't see an increase or decrease.
