The country's largest bank, State Bank of India, is drawing up a retail and agricultural banking strategy to reclaim lost market share.
SBI's market share in total assets fell to nearly 17 per cent from over 19 per cent in 2006-07, as private and foreign banks gained on the back of a sizzling growth in retail loans. ICICI's share in banking assets jumped to over 9 per cent last year from over 7 per cent a year earlier.
SBI proposes to carve out retail and agricultural banking as separate strategic focus areas. Retail, for the time being will be a focus area and could be converted into a strategic business unit depending on its performance later.
According to banking sources, the bank wants to concentrate on retail banking in line with its earlier strategy of setting up separate corporate accounts and mid corporate groups. It has identified 640-odd branches across the country to focus on retail banking.
SBI is also setting up online share trading platform and launching some new deposit products. These branches will be directly monitored by the corporate office so as to ensure decision-making faster.
Similarly, the bank will set up a separate agricultural business unit which will engage in rural financing as a whole - both agricultural and non agricultural.
Sources added that till now, the bank has been selling products mostly on the assets side (loans ) to the rural population. Henceforth, it will launch deposits side products and make available ATMs and debit cards to rural customers.
To cut costs, the bank is also contemplating outsourcing several activities following the guidelines prescribed by the Reserve Bank of India.
At present, it outsources recovery of loans but it could be extended to other products as well. However, the sources said various legal issues needed to be looked into before the bank could take a decision.
In the second quarter ended September 31, 2006, the bank reported a net profit of Rs 1,184.49 crore (Rs 11.84 billion) as against Rs 1,215.36 crore (Rs 12.15 billion) a year earlier.
On a consolidated basis, it has recorded a net profit of Rs 1,801.76 crore (RS 18.02 billion) which is higher than Rs 1,632.68 crore (RS 16.33 billion) in the same period last year. Interest income on advances for the half-year registered a growth of 37.48 per cent on a year on year basis.
