Devesh Mittal

PGDM-FS
Roll No. 34
State Bank of India

SWOT analysis
Strengths:
 Brand name: SBI Bank has earned a reputation in the market over
the period of time(Being the oldest bank in India tracing history
back to 1806)
 Market Leader: SBI is ranked at 380 in 2008 Fortune Global 500
list, and ranked 219 in 2008 Forbes Global 2000. With an asset
base of $126 billion and its reach, it is a regional banking
behemoth
 Wide Distribution Network: Excellent penetration in the country
with more than 10000 core branches and more than 5100
branches of associate banks (subsidiaries)
 Diversified Portfolio: SBI Bank has all the products under its belt,
which help it to extend the relationship with existing customer’s
Bank has umbrella of products to offer their customers, if once
customer has relationship with the bank. Some Products, which SBI
Bank is offering are: Retail Banking Business Banking Merchant
Establishment Services (EDC Machine) Personal loans & Car loans
Insurance Housing Loans
 Government Owned: Government owns 60% stake in SBI. This gives
SBI an edge over private banks in terms of customer security
 Low Transition Costs-SBI offers very low transition costs which
attracts small customers.
  Continued effort to increase low cost deposit would ensure
improvement in NIMs and hence earnings

Weaknesses:
 The existing hierarchical management structure of the bank,
although strength in some respects, is a barrier to change
 Though SBI cards are the 2nd largest player in the credit card
industry, it has the highest non-performing assets ( NPAs) in the
industry, which stand out to be at 16.28 % (Dec 2007)
 Modernization: SBI lags with respect to private players in terms of
modernization of its processes, infrastructure, centralisation, etc.
 SBI is currently operating at a lowest CAR(8%). Insufficient capital
may restrict the growth prospects of the bank going forward
 Delay in technology up gradation could result in loss of market
shares.
 Management indicated a likely pension shortfall on account of AS-
15 to be close to Rs50bn
 Contribution of retail credit to total bank credit stood at 26%.
Significant thrust on growing retail book poses higher credit risk to
the bank.

Opportunities:
 Merger of associate banks with SBI: Merger of all the associate
banks (like SBH, SBM, etc) into SBI will create a mega bank which
streamlines operations and unlocks value
 Planning to add 2000 branches and 3000 ATMs in 2008-2009. This
will further increase its reach
 Increasing trade and business relations and a large
number of expatriate populations offers a great opportunity to
expand on foreign soil
  Global expansion: SBI already has expanded globally and start
its operations internationally in 32 countries like Australia,
Bangladesh, etc. and has more plans of expansion in other global
markets
 Growing retail & SMEs thrust would lead to higher business growth
 Micro Finance: there is a lot of growth opportunity in the area of
micro finance
 Strong economic growth would generate higher demand for
funds pursuant to Higher
 Corporate demand for credit on account of capacity expansion

Threats:
 Advent of MNC banks: Large numbers of MNC banks are
mushrooming in the Indian market due to the friendly policies
adopted by the government. This can increase the level of
competition and prove a potential threat for the market share of
SBI bank
 Consumer expectations have increased many folds in last few
years and the bank has not been responsive enough to meet them
on time
 Private banks have started venturing into the rural and semi-urban
sector, which used to be the bastion of the State Bank and other
PSU banks
 Employee Strike: There was an employee strike in the year 2006
which disrupted SBI’s activities. This can be repeated in the future
 Stiff competition, especially in the retail segment, could impact
retail growth of SBI and Hence slowdown in earnings growth
 Slow down in domestic economy would pose a concern over
credit off-take thereby Impacting earnings growth
 The changing interest rates and the changing policies of RBI.
Porter Five Forces Model Analysis of SBI:
Competitive Rivalry - High
The banking industry is one of the most competitive industries today.
This industry has been in our society for centuries now and almost
everyone in one way or another makes use of their services. The
competitors of SBI include Andhra Bank, HDFC Bank, ICICI Bank, Citibank,
and many others. The banking industry is no longer limited to just
opening accounts or giving loans; it has become very versatile now. The
competition is now about being innovative and attracting customers
with different unique products to suit their needs. Every bank attempts
to lure customers away from competitor banks. Customers want the
best services at the lowest rates at the fastest pace. Thus, the
competitive rivalry is very high for SBI.
Threat of New Entrants - Low
The entry barriers of the banking industry are very high. It is not easy
establishing a private bank in India at the national level. It takes a lot of
time and huge investment. There are strict regulations by the regulating
bodies. People do not trust new banks with their money. Marketing
costs will also need to be incurred. A new bank launching itself only in a
niche segment in a particular area has a chance of being successful.
India's banking sector regulatory reforms also limit the presence of
foreign banks in India, further lowering this threat for SBI. Thus, the
threat of new entrants is low for SBI.
Bargaining Power of Suppliers – Low
The suppliers of SBI can be divided into two categories. First are those
who supply materials like stationery and other required goods and the
second category are the service providers i.e. the human resource (Goel,
2010). The suppliers of the first category pose no threat. SBI is a bulk
purchaser making it ideal for a supplier. The suppliers are in large
number making the switching cost of SBI very low. They cannot attempt
to influence SBI. The second category can be attracted by other banks
with better offers of employment. Banks are always on the lookout for
talented employees. Overall, the bargaining power of the suppliers
against SBI is low.
Bargaining Power of Buyers - High There are a lot of banking and
financial service provider options for the customer. There switching cost
is very low. All the services that SBI provides are also provided by a
majority of the other banks. The competition is now on effectiveness
and the speed of the services being provided. This is especially for high-
margin corporate clients. Reduced service charges, higher currency
exchange rates, and other facilities are being used to attract customers.
SBI is not in a position to attempt to influence the customers or raise its
service charges. Therefore, the bargaining power of the buyers against
SBI is high.
Threat of Substitutes - Medium
Besides banks, there are other financial institutes that provide many of
the services such as loans, insurances, mortgages etc to customers. They
are substitutes of banks and are also competing with them. In addition
to these, many companies such as Microsoft, Sony, and General Motors
offer financing solutions to customers who buy in bulk or buy big ticket
items (Ganesh, 2013). However, due to the large size of SBI, these
substitutes present only a mild threat against SBI.

PEST ANALYSIS OF STATE BANK OF INDIA:

POLITICAL FACTORS:
Endorsing the fact that RBI plays a vital role in proceeding of SBI and
forging and penetrating rules to the whole Indian banking sectors.
Hence, the RBI’s 1991 monetary policy and control system accrued
the efficiency, competitiveness and productivity between the banking
sectors.
However, with accordance to the Banana Banking Skins 2010 survey the
political interference accounted as the major risk for banking sectors.
Relatively, the Finance Minister raised the farmer credit goal from $536
billion 2009-08 to $606.9 billion 2009-10 and the Union budget 2009-10
prolonged the debt condo nation to six months for the 2 hacter land
farmer holders which can make positive and negative impacts over the
SBI operation as the bank process their 36% of their activities in rural
zone of India.
ECONOMIC FACTOR:
Economic fluctuation reflects a fragile and lucrative effect to the banking
sectors financial system. Considering the “India vision 2020” belayed by
Planning Commission of Indian Government in order to ideate
the banking sectors future. The Commission seeks to raise the India’s
ranking from 11th to 4th in World Development Report from GDP
ratio perspective and transforming India from low-income nation to
upper-middle-income nation. To implement the vision, priorities are
striving to increase the annual GDP growth from8.5% to 9% in next 7
years and Indian Vision seeks to mitigate the agriculture share from 28%
to 6%, which could be prove vulnerable to SBI in terms of investment in
infrastructure, technology and operations.
SOCIAL FACTOR:
According to 1950-2050 demographic studies, India’s fruition rate is
waning from 5.91% to 2.76% today and is expected to decrease more to
1.8%. Furthermore, India’s demise rate is mitigating from 25.5% 1950-55
to 8.5% now and will reach to its lowest rate 7.9% in2020-25. The
mentioned statistics indicates the sign of longer income of customers to
the SBI group and the transition of customer target to the younger
customers, as India will be entitled as the youngest nations during 2010-
2025
TECHNOLOGICAL FACTOR:
The term Information Technology has remained a revitalize factor for
the success of banking sectors operation. Thus, the Foreign Banking
sectors entered the Indian market with asserting the technological
based approach while processing new technological innovation. Hence,
the State Bank of India is required to respond to such approach in order
to rebound their market share, as the bank has been staggering from
loss of market share due to being unresponsiveness to the technological
changes.

BCG theory: Cash Cow

There is a lot of growth potential for the banking industry because of
increasing disposable income of customers, increasing working class,
more volatility in other markets also increasing importance of savings
and in this banking industry SBI has shown a growth rate of 13% with
a 21 % increase in PAT standing to 62.1 cr in the FY 2008-09. Hence it
can be concluded that SBI stands at cash cow in BCG matrix.
SUSTAINABILITY AND BUSINESS RESPONSIBILITY (BR) POLICY
The proposed policy on Sustainability and Business Responsibility (BR) is
detailed below:
Introduction State Bank of India (SBI), is one of the country’s oldest
establishments and a premier institution in the financial sector. Its
presence spans across more than two centuries and the SBI group
currently has a footprint across several countries globally. The financial
sector is one which is in a constant state of flux, necessitating change
and transformation as and when required. The Bank is committed to
being an agent of positive change and understands that growing its
business sustainably is the foundation for creating long term value for all
stakeholders. Therefore, SBI is focused on offering products and services
in a responsible manner that proves beneficial for the stakeholders
whilst simultaneously taking the Bank’s social and environmental impact
into account. SBI’s Sustainability and Business Responsibility Policy
determines its effort to adapt and operate efficiently in an environment
filled with risks and opportunities. The Bank is continuously evaluating
possibilities through which risks can be mitigated and opportunities
grasped, thereby leading the way for other players in the banking
industry. Its business practices are built on the highest level of ethical
values and a working culture that binds this large organization together.
SBI is determined to extend its beliefs and commitment to the
community at large. The Bank’s multi-faceted business model is rapidly
evolving to meet several requirements concurrently, such as enhancing
customer satisfaction, increasing focus on digitization contributing to
national development goals, developing communities, improving
financial literacy amongst underprivileged people, reducing the carbon
footprint of its operations and aligning its initiatives to the global
Sustainable Development Goals (SDGs) This Policy Statement outlines
the approach taken to manage SBI’s economic, environmental and social
performance in an integrated manner and will help ensure that
internationally accepted standards and best practices are applied when
identifying, assessing and monitoring environmental, social and
governance risks with respect to the Bank’s business operations. The
policy also addresses aspects covered under the nine principles as
defined by the National Voluntary Guidelines on Social, Environmental
and Economic Responsibilities of Business published by the Ministry of
Corporate Affairs, Government of India, in July 2011.
All the Bank’s policies are reviewed at periodic intervals and the
information is updated as needed.
Objective and Scope of the Sustainability and Business Responsibility
Policy Statement The primary objective of the policy statement is to help
direct SBI’s sustainability strategy and integrate it with its business
strategy. The policy also identifies the Bank’s environmental and social
focus areas and outlines the general principles on which its sustainability
initiatives will be designed and implemented. In an effort to constantly
improve its sustainability performance, Bank has implemented several
initiatives across operations to reduce its carbon footprint and has
designed several products and services to be environmentally and
socially friendly. As an organization that is supported by a large
employee base across India, SBI understands that its sustainability
strategy will only be successful if it is pro-actively adopted by all the
employees. In light of this, several steps have been taken to build
awareness around the importance of sustainability amongst different
levels of the workforce, including senior management and the board
members. Employees have also been encouraged to engage in the
Bank’s activities and demonstrate sustainable behaviour. Committed to
taking tangible actions, S
BI aspires to:
1. Conduct day to day operations and business transactions in a
responsible manner
2. Be accountable to all its stakeholders including internal and external
stakeholder groups and the society at large
3. Conduct banking transactions and other investments with
professional integrity-conforming to highest ethical standards- and in
compliance with the regulatory framework
4. Establish a working environment that aids in nurturing employees and
contributes to their overall professional development while actively
promoting a healthy work-life balance
5. Reduce Bank’s Carbon footprint
6. Aiding the capacity creation towards mitigation and adaptation of the
effects of climate change 3
7. Identify and mitigate risks and identify opportunities for sustainable
growth across all aspects of banking operations
8. Innovate continuously to develop financial products and services
which enable environmental conservation as well as socio-economic
development
9. Collaborate with Policy makers, peers in the industry and public
bodies to propagate public good through policy decisions around
Governance and Administration, Economic Reforms, Inclusive
Development Policies, Energy security, Water, Food Security,
Sustainable Business Principles etc. Going forward, the Bank will make
requisite efforts towards reducing the carbon footprint of its own
operations as well as of its financial transactions. To this end, SBI will
work towards enhancing generation of renewable energy and increased
carbon offsetting. It is the Bank’s aspiration to achieve a state of carbon
neutrality, in the long run. SBI aims to balance its business and
sustainability performance, and has therefore identified core
environmental and social areas that it will concentrate on.
These are: Environmental Aspects:
▪ Lending at concessional rates for renewable energy projects with a
focus on boosting investment
▪ Establishing Digital Banking platforms
▪ Implementing Energy Conservation & Energy Efficiency initiatives
▪ Reducing Greenhouse Gas (GHG) emissions
▪ Managing Waste Generation and Disposal (Hazardous and
NonHazardous)
▪ Reducing Paper Consumption
▪ Reducing Water consumption
▪ Adopting Environmental best practices, such as, establishing a robust
environmental management system, installing mechanisms to harvest
rainwater, setting up Solar ATMs across India, using LED lights across all
the office building, composting waste etc. wherever possible.
Social and Governance Aspects: ▪ Implementing Ethical Banking
Practices ▪ Ensuring Compliance ▪ Promoting Human Rights ▪
Encouraging Gender Diversity ▪ Talent development and retention ▪
Promoting healthy work-life balance ▪ Constructive engagement with all
internal and external stakeholders ▪ Increasing access to banking
services ▪ Enhancing Financial literacy ▪ Ensuring Customer satisfaction ▪
Building Communities ▪ Establishing Strong Grievance Redressal
Mechanisms The policy and its elements are applicable to all domestic
Departments/Verticals/Business Groups of State Bank of India. 3.
Integration of the Sustainability and Business Responsibility Policy with
the Risk Management Framework As a large Banking institution, risks are
inherently present in most of SBI’s business activities. These risks can be
related to the Bank’s reputation, products and services, strategic
decisions, market presence, operational activities, environmental and
social impact etc. SBI believes that investing in sustainable businesses
and practices can act as a robust tool to cohesively manage these risks.
Towards this, the sustainability and Business Responsibility Policy will
support Bank’s Risk Management framework, identifying measures to
mitigate risks arising from an evolving economic, environmental and
social landscape. 4. Business Ethics and Sustainability SBI encourages
and respects professional behaviour that encapsulates strong moral
values. The ethos of the organization is outlined by its Code of Conduct
which emphasizes on the zero tolerance towards unethical business
practices. The cornerstone of the Code of Conduct is the belief that the
Bank is a trustee and custodian of public money and in order to fulfil its
fiduciary obligations and responsibilities, it has to maintain and continue
to enjoy the trust and confidence of public at large. With this
background, implementation of the sustainability and Business
Responsibility policy will also be supplemented by the Bank’s Corporate
Governance and Code of Conduct. The Code of Conduct lays down
principles of ethical business practices and prescribes adherence to
applicable laws and regulations as a bare minimum requirement. These
include regulations around environmental protection, health and
welfare of the entire workforce and 5 upholding the rights of all
individuals that the Bank works with. The Bank expects each of its
employees to abide by it working culture by behaving professionally,
with integrity and in compliance with applicable laws and regulations.
The laid down clauses of the policy will become a part of the operating
philosophy and will be supported by a robust governance mechanism in
order for it to achieve its objectives. To enforce the Code of Conduct the
Bank has instituted a vigilance mechanism which is built on three
primary behavioural aspects- Preventive, Punitive and Participative and
is further complemented by a well-defined whistle blower policy. It
allows any employee to communicate a concern or complaint
confidentially and anonymously. The whistle blower policy covers all
employees of the organization and guarantees a timely response and an
assurance that there will be no retribution or negative consequences. 5.
Governing Sustainability The Bank understand the importance of robust
governing mechanisms and regards it as an essential component for
long term success. SBI’s stakeholders are also showing an interest in the
role of environmental, social and governance (ESG) criteria in evaluating
portfolio risks and long-term investment business opportunities. Bank
has designated the Deputy Managing Director(HR) and Corporate
Development Officer to oversee the Bank’s overall environmental and
social performance and steer our sustainability vision in the right
direction. He reports to the Chairman of the Board of Directors. The
execution of Bank’s environmental and social goals and targets are
monitored by the Corporate Centre Sustainability Committee (CCSC)
that comprises 14 Corporate Business and functional Heads. As per the
National Voluntary Guidelines on Social, Environment and Economic
responsibilities, the Business Responsibility at the Bank will be headed
by a Director level position (Managing Director) overseeing the
compliance requirements of the Bank. The mandatory Business
Responsibility Report, shall form part of the Annual Sustainability
Report. Further, the Circle Sustainability Committees (CSC) have also
been established at each Circle to monitor the sustainability
performance at the Circle level. The Corporate Sustainability
Department at the Corporate Centre is the nodal department to handle
the issues relating to Sustainability matters of the Bank. DGM
Sustainability is responsible for overall sustainability performance
management, executing sustainability initiatives across the Bank,
running awareness programmes for sustainability across the Bank,
development and publication of the annual sustainability report and
other related matters. 6 Representatives may also be selected from time
to time from various other functions within the Bank to assist the
sustainability committee at the Circle and Corporate level in fulfilling the
objectives of the policy. The Bank has instituted a ‘Sustainability Pledge’
which draws strength from the Bank’s vision to drive its sustainability
agenda throughout the organization at all levels. The Bank plans to
reiterate its commitment to this pledge across its entire workforce on
the occasion of World Environment Day (05th June) every year. 6.
Governing Mechanisms of the Policy Statement It is understood that
transparent and good governance results in wider and focused efforts to
adopt sustainability practices in its business activities. Roles and
responsibilities at each level of the governing structure are outlined
below: ▪ The Board of Directors is responsible for approving the
sustainability and Business Responsibility Policy. ▪ The Deputy Managing
Director(HR) and Corporate Development Officer (CDO) will directly
supervise the implementation of the Policy on behalf of the Board and
the DGM (Sustainability) will be the owner of the policy. DGM
(Sustainability) will also be responsible for overseeing the
implementation and communication of the sustainability strategy to the
stakeholders. ▪ The Corporate Centre Sustainability Committee (CCSC) is
responsible for overall execution of the policy. The Committee will also
be responsible for: i. Ensuring that the policy is consistently and
effectively executed by each functional unit of SBI and provides for
adequate training, coaching and resources to ensure effective
implementation and compliance. ii. Ensuring new functional units are
designed keeping in mind the policy and, iii. Reporting on the
achievements, failures and difficulties of implementing the policy to the
Board. ▪ The Nodal Officer at respective circles (DGM & CDOs) will
implement the policy at the circle level along with the circle level
sustainability committee. 7 State Bank of India Sustainability Governance
Structure Board of Directors Deputy General Manager (Sustainability)
Corporate Centre Sustainability Committee Circle Level Sustainability
Committee Board Level Approval Owner of the Sustainability Policy
Execution of the Sustainability Policy Corporate level Circle level Deputy
Managing Director(HR) and Corporate Development Officer