His strategy seemed to have paid off

O. P. Bhatt took over the reins of sbi when private players were catching up. He decided to go slow and his strategy seemed to have paid off. With SBI’s profits two times that of its closest rival ICICI Bank, sbi is far ahead of its competitors by any means

B&E: What steps have been takn by you to bring down the NPAs?
OPB: We are making continuous efforts to bring down the NPAs and we have restructured loans for the same. Then we have our Stressed Asset Resolution Centres (SARCs), which too work towards bringing down the bad loans. They identify assets as and when they get stressed and then start working on them to ensure that do not turn bad.

B&E: The bank has been able to bring down the cost of deposits from 6.16% in June 2009 to 5.27% in June 2010. How has it been possible?
OPB: It’s because we have been able to reduce our high cost deposits. We will try to lower the cost of deposits further and if we cannot do that, we will try to maintain the low levels that we have been able to achieve.

B&E: Do you plan to raise capital in the near future? If yes, how?
OPB: We certainly plan to raise capital in the future. However, we are still working on it. In fact, we have a plan to raise about `200 billion by the end of the current financial year. The capital would be raised by way of rights issue, which will keep the government holding unchanged. If we do not raise it by way of rights issue, then the other options are preference shares and FPO (follow-on public offer).

B&E: You just said that you are upwardly biased on interest rates. Does that mean that the banks will not give good offers during the upcoming festival season?
OPB: Banks can give good offers during the festival season and they will surely do that because the festival season draws a lot of customers and no bank would like to miss that opportunity. But then, the rate that they offer will have to be above the base rate.

B&E: RBI has made it clear that they do not have issues in giving new banking licences to industrial houses? Is this a bad news for the exsisting players?
OPB: This is a philosophical thing. There are arguments both ways. In my view, if an industrial house gets a banking licence then the onus is on RBI to see that the things are done in the right manner. We all know that we need more banking facility to achieve the financial inclusion goal. Hence, we certainly need more banks in the system.

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Source : IIPM Editorial, 2012.

An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles.

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Betting big on the inorganic mode

First it was the Bank of Madura. Then, it was Bank of Sangli. And now, the Bank of Rajasthan. ICICI Bank is seemingly strengthening its presence in the Indian banking space by undertaking a slew of acquisitions much like its peer HDFC Bank did in the past. by Avneesh Singh

It was the February of 2008. The world was yet to come face-to-face with the debacle of the US banking giant Bear Stearns. Yet in India, officials of the largest private sector bank, ICICI Bank, had started feeling the heat. And it was not for the fact that they had already predicted the slowdown that was coming their way, it was due to the acquisition of the Centurion Bank of Punjab (CBoP) that proved the genesis of all headaches in the ICICI camp. CBoP had been on the radar of ICICI Bank for quite sometime already, but it was HDFC Bank that finally got hold of CBoP. ICICI Bank, which had held on to its numero uno position in the private banking space and second slot in the banking space apparently felt that it was losing its ground. It made ICICI realise that something’s got to give, if it wanted to avoid nightmares of the likes of HDFC Bank, Axis Bank and Punjab National Bank beating it with the lesson cane! It decided that growing inorganic was the route to redemption.

What followed was interesting. Despite the Bear Stearns episode in March 2008, the Indian banking scenario continued sauntering without many hiccups. There were promises in the air, especially the air above the Indian banks. But something set the cat amongst the pigeons – the crash of the banking behemoth Lehman Brothers, which filed for bankruptcy in September 2008. The world economy was heading for its worst crisis since the Great Dipression and Indian banks set off the alarm. One which set off the louded was ICICI Bank. Reason – during that point in time, it had an exposure of around 57 million euros in Lehman senior bonds and another $30 million in the insurance company American International Group (AIG), whose financial health too was as shaky as Lehman Brothers’. ICICI Bank was forced to pack its dreams (of steaming past others of its ilk in the Indian space) in a suitcase and catch the next flight to the land of protectionism. Times were too risky to take a plunge and ICICI Bank wanted to play safe.

More than a 21 months later, after a prolonged phase of silence, the bank has stepped back into its aggressive boots. And this time around, it has given clear indications of a desire to grow through both organic and inorganic means. Even Chanda Kochhar (CEO of ICICI Bank) has done much work towards rebuilding the perception of the bank amongst its customers. May 3, 2010, also saw ICICI open its 2000th branch in the country (it opened it in Andheri West, Mumbai). But there was more in store for the market. Withing 20 days, the Board of Directors of the bank approved an amalgamation of Bank of Rajasthan (BoR) with ICICI Bank, subject to approval by shareholders and Reserve Bank of India, therefore sending that signal of aggression to competitors and customers alike.

Read more.....

Source : IIPM Editorial, 2012.

An Initiative of IIPM, Malay Chaudhuri 
and Arindam Chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles. 

Prof. Rajita Chaudhuri's Website
domain-b.com : IIPM ranked ahead of IIMs
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IIPM Best B School India
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IIPM's Management Consulting Arm-Planman Consulting
Professor Arindam Chaudhuri - A Man For The Society.... 
IIPM: Indian Institute of Planning and Management
IIPM makes business education truly global
IIPM B-School Detail