State Bank of India: Competitive Strategies of a Market Leader

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Case Details:

Case Code : BSTR132
Case Length : 19 Pages
Period : 2000 - 2004
Organization : State Bank of India
Pub Date : 2004
Teaching Note :Not Available
Countries : India
Industry : Banking

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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"The nationalized banking industry would be subject to tremendous pressures to perform as otherwise their very survival would be at stake......The nationalized banking industry in India will have to get its act together if it has to survive in the new millennium since it would be subject to intense competition not only from the new domestic players but also from established global outfits."¹

- SK Gupta, Chief General Manager, (Bengal Circle), State Bank of India.

"We are second to none in banking technology, though we were initially far behind the private sector banks in launching core banking solutions to facilitate anywhere banking facility. We are now in a position to take the lead in the banking technologies as we have become front runners in the sector."²

- A Ramesh Kumar, Chief General Manager, SBI's Mumbai Circle.

Introduction

In March 2003, State Bank of India (SBI) and its associate banks had 13,579 branches, one of the largest branch networks for any bank in the world. It played a key role in providing working capital finance and term loans to Indian industry.

In 2003, SBI had eight business units - corporate banking, international banking and domestic banking for concentrating on core business areas; associate banks unit for looking after these banks, credit division unit to monitor overall credit and three other business units including finance, corporate development and inspection for in-house work.(Refer Exhibit I for the Organization Structure of SBI). SBI was the largest commercial bank in India in terms of revenues, assets, deposits, branches and workforce. Since the late 1990s, SBI had been losing market share in the Indian banking industry due to the tough competition from private sector banks (Refer Exhibit II for market share of public, private and foreign banks in 2001).

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By adopting modern technology and offering superior customer service, the private sector banks gained a significant share in urban banking.

Expressing concern over this trend, in an interview to the Asian Banking Journal, AK Purwar, SBI's Chairman and Managing Director since November 2002, said, "The top most priority for the bank has been retention of market share. As a PSU bank, SBI was losing its market share. Although it was at a very slow pace, it was definitely losing its market share."³ To regain lost ground, SBI initiated a major internal restructuring exercise. The bank responded to competition by taking several measures including offering an array of new products and services, forging alliances with other business entities, entering new areas of business and adopting novel ways of reaching out to customers and providing them value-added services.

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1] "Indian Banking System Moving towards International Best Practices," Vision 2001 www.shilpabchitra.com.

2] "SBI on Innovative Banking Spree," www.sify.com, April 17, 2004.

3] "SBI Aims to Retain Market Pie, Attain Global Benchmark," Financial Express, April 03, 2004.