A sharpened segmentation push and continued investment
in its multi-channel offering are at the heart of State Bank of
India’s retail strategy as it aims for a hugely ambitious near
trebling of its cross-sell ratio. Bhasker Niyogi, general manager
of the bank’s personal banking business unit, speaks with Maryrose


Box showing SBI retail targets Providing banking services to a country in the middle
of a historic transformation would be a daunting task for the most
experienced financial institution. For the State Bank of India
(SBI), India’s largest bank by assets, servicing the needs of the
world’s second-largest population is a challenge it is no stranger

Targeting a near-trebling of its
cross-sell ratio to 7 products per person is certainly a daunting
challenge. Currently, the average number of products sold per
customer stands at 2.8. If achieved, it would catapult SBI into
world-class territory among leading retail banks.

Established in 1955, the bank is
the product of a series of amalgamations and mergers dating as far
back as 1806. Originally setting up shop as the Bank of Calcutta,
it later re-branded to become the Bank of Bengal before joining
forces with the Bank of Bombay and Bank of Madras to create the
Imperial Bank of India in 1921 – at the time the biggest bank the
state had seen.

Shortly after India gained
independence in 1947 and the newly elected government decreed
development of rural India should be given the highest priority,
the Imperial Bank was integrated with a number of formerly
state-owned banks to create what is now known as SBI – making it
one of the largest banks in the world.

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Over the past 55 years, the bank
has grown from having 480 branches to more than 12,000, with retail
liabilities of INR4.7trn. Yet, in a country where 300m of the
1.2bn-strong population live below the poverty line (on less than
$1.25 per day, according to the World Bank) and nearly 44% of the
780-million strong workforce is illiterate, providing comprehensive
banking services is a fine art.


Bridging the penetration

Chart showing LOW COST DEPOSIT GROWTH: SBI – CASA ratio, March 2009-June 2010Bhasker Niyogi, the
Mumbai-based general manager of SBI’s personal banking business
unit with responsibility for the domestic retail portfolio, told
RBI the overriding retail strategy is to offer banking
services to all strata of Indian society.

“Our objective is to bridge the
huge penetration gap created due to non-inclusion of about 60% of
the population,” Niyogi said.

“We will do this by providing
low-cost banking services on the one hand and world-class banking
services to the upwardly mobile section of the population on the

To achieve this, the bank is
growing its already expansive branch network, utilising banking
correspondents in rural areas and implementing new technology
solutions to improve accessibility at reduced cost.

If its track record is anything to
go by, SBI is already making a significant move into the rural
hinterland in which many of the country’s less well-off reside.

In the year to 31 March, the bank
set up 1,049 new branches across the country, giving it a total
branch network of 12,496. It established 7,788 new ATMs, taking the
total to 21,485 and recruited 27,000 new members of staff.

This year Niyogi aims to increase
the%age of alternate channel transactions – those carried out over
the internet, through ATMs, mobile phones or by swiping a debit
card at point of sale – by as much as 40%. It also aims to bring on
board 15m new customers to the bank’s mobile banking services.

To aid growth, SBI is developing a
whole new suite of products aimed at different sectors of the
domestic population.

“We are planning to launch products
targeting the youth, central government employees and defence
personnel,” explained Niyogi.

“The products are being formulated
and are in various stages of conceptualisation in respect of
structuring and pricing.”

These may seem ambitious targets,
but the soaring population of India means growth on such a large
scale is very possible. According to the World Bank, the country’s
workforce is growing by around eight to ninem each year.

By 2016, the population is expected
to have swelled to 1.3bn and the workforce is anticipated to reach

Chart showing MARKET SHARE: State Bank of India – domestic market, lending market share, June 2009-June2010In order to reach
out to the less accessible rural parts of the country, Niyogi said
SBI has taken a stake in A Little World (ALW), a not-for-profit
organisation which provides business correspondents as an
alternative to bank branches in the less accessible parts of rural

Through the organisation, banking
correspondents are able to walk through villages, providing banking
services door-to-door. Rural villagers are issued with individual
identity cards which are swiped through a handheld mobile phone
device that is operated by a banking correspondent. The phone then
shows up the individual’s account details and for verification uses
a fingerprint reader. Information is then sent to a printer which
provides details of transactions.

In November last year, the bank
also signed a memorandum of understanding with the state government
of Orissa (India’s ninth-largest state by area and eleventh most
populated), to set up banking outposts in 6,234 gram
– the sites for local government in villages and
small towns. The outposts will help promote greater levels of
financial inclusion.

Niyogi is also determined to tap
into the growing needs of the emerging younger generation as well
as the other sectors of society. To achieve the goals, he said the
bank must up its sales productivity.

“Improvement in cost/income ratio
is a challenge,” he said.

“We are aiming to improve sales
productivity in branches by 150% and back office productivity by
two-to-three times its existing value through institutionalisation
of learning and the culture of continuous improvement in the

In-house training is also seen as
crucial for ensuring good banking practices as well as ensuring
level retention, he added.

“Training of the new recruits as
well as re-training and re-orientation of the existing employees is
a challenge which we have recognised. We shall be using the bank’s
Strategic Training Unit for this purpose, alongside in-house


High net worth

Table showing ALTERNATE CHANNEL GROWTH: State Bank of India – multi-channel usage, June 2009-June 2010As well as servicing
the mass population, Niyogi is also aware of the growing number of
high net worth individuals in India and the simultaneous growth
opportunity it presents.

According to the World Wealth
Report 2010
, published by Merrill Lynch/CapGemini, the number
of high net worth individuals in India grew by more than 50% from
84,000 in 2008 to 126,700 last year.

For the first time, the size of the
high net worth population in Asia-Pacific was as large as that of
Europe (3m) and the total wealth of high net worth’s in the region
stood at $ 9.7trn by the end of last year.

To take advantage of the ballooning
wealth of the richest Indians, SBI has begun to create a series of
specialised, ‘Super Circle of Excellence’ branches and last year
completed its first luxury five-star premium banking centre in the
city of Hyderabad, central India.

Known by local bankers as the “City
of Pearls”, the urban centre of Hyderabad is listed among the top
100 richest cities in the world and is the largest contributor to
the Indian gross domestic product.

Niyogi said 50 new accounts have
already been opened at the premium banking centre and SBI aims to
raise this number to 250 by the end of the year.

“[It] is exclusively for the high
net worth individual who needs to keep a minimum deposit of
INR10million. Customers at the branch can open accounts by
invitation only.”

To help support the myriad
financial needs of SBI’s customers, Niyogi is also considering
recruiting middle management executives from outside the bank.

“We are trying to build capacity
and competency in the areas of financial planning, financial
advisory services and wealth management and may look beyond the
boundaries of our organisation,” he said.

“We may employ skilled people from
the market with the necessary expertise through lateral
recruitment, rather than using bank employees recruited through the
usual channels, to bring expertise and experience for the benefit
of our customers.”



Chart showing ALTERNATE CHANNEL GROWTH: State Bank of India – multi-channel usage, June 2009-June 2010But while the
country’s economy may be growing at a fast pace, the bank
calculates there is still a significant shortage of housing in the
country. Despite selling 2.9m home loans, Niyogi estimated that
there is a shortfall of 45m houses in India.

To combine environmental
sustainability with affordability, the bank has launched a ‘Green
Banking Policy’ that incentivises customers to act in a socially
responsible manner when purchasing a property.

“To support green development, we
offer concessions in interest rates, loan to value ratio and
processing fee for home loan buildings that are ‘green rated’ by
bank-approved institutions.”

A recent report by the United
Nations Environment Programme, Global Trends in Sustainable
Energy Investment 2010
, ranked India eighth in the world in
terms of investment in sustainable energy.


Monitoring customer

With so many customers queries to
deal with, the bank has launched an employee engagement initiative
aimed at strengthening relationships between bank advisers and
customers and a SMS complaints service.

“To refine soft skills and foster
the right kind of attitude in staff, we have launched a massive
‘Citizen SBI’ programme which covers every employee of the

“Levels of customer satisfaction
are monitored continuously through online surveys, town hall
meetings, exclusive customer relations programmes and critical
analysis of customer complaints.”

While the bank hasn’t been entirely immune to the effects of the
global financial crisis, its performance over the past five years
shows a solid pattern of growth. As India looks set to continue on
its trajectory of economic and industrial development, SBI’s goals
reflect a strong commitment to opening up access at both ends of
the wealth spectrum