State Bank of India free essay sample

It receives and pays money on behalf of the governments. Especially it ren ­ders the following functions as directed by the RBI in this regard. (a) Collection of charges on behalf of the government e. g. collection of tax and other payments (b) Grants loans and advances to the governments (c) provides advises to the government regarding economic conditions, etc. , (2) Bankers Bank: Commercial Banks have accounts with SBI. When the banks face financial shortage, the SBI provides assistance to them as it is considered a big brother in the banking industry. It discounts the bills of the other commercial banks. Due to the functions on this line the SBI is considered in a limited sense as the bankers bank. (3) Currency Chest: The RBI maintains currency chests at its own offices. But RBI Of ­fices are situated only in big cities. SBI, buy its wide network of branches operate in urban as well as rural areas. RBI therefore, in such places keeps money at currency chests with SBI. Whenever needs arise, the currency is withdrawn from these chests under proper accounting and reporting to RBI. Presently RBI entrust currency chest to other Public Sector Banks and a few Private Sector Banks also. 4) Acts as Clearing House: In all the places, where RBI has no branch, the SBI renders the functions of clearing house. Thus, it facilitates the inter bank settlements. Since, all the banks in such places have accounts with SBI; it is easy for the SBI, to act as clearing house. (5) Renders Promotional Functions: State Bank of India also renders various promotional functions. It provides various facilities to the following priority sectors: (i) Agriculture (ii) Small Scale Industries (iii) Weaker sections of the society (iv) Co-operative sectors (v) Small traders (vi) Unemployed Youth vii) Others. In this respect SBI is like any other commercial bank. B. General Banking Functions Besides the above spe cialized functions, the SBI renders the following functions under Section 33 of the Act. 1. Accepting deposits from the public under current, savings, fixed and recurring deposit accounts. 2. Advancing and lending money and opening cash credits upon the security of stocks, securities, etc. 3. Drawing, accepting, discounting, buying and selling of bills of exchange and other negotiable instruments. 4. Investing funds, in specified kinds of securities. . Advancing and lending money to court of wards with the previous approval of State Government. 6. Issuing and circulating letters of credit. 7. Offering remittance facilities such as, demand drafts, mail transfers telegraphic transfers, etc. 8. Acting as administrator, executor, trustee or otherwise. 9. Selling and realizing the movable or immovable properties that come into the banks in satisfaction of claims. 10. Transacting pecuniary agency business on commission stocks. 11. Underwriting of the issue of authorized shares debentures, and other securities. This function is done through subsidiaries now) 12. Buying and selling of gold and silver. 13. It operates Public Provident Fund Accounts for the general public. 14. It operates Non-Resident External Accounts and Foreign Currency Accounts. 15. Providing Factoring service (through subsidiaries). 16. Provides shipping finance. 17. Promotes Export through Export Credit. Provides Project Export Finance. 18. Provides Merchant Banking Facilities. 19. Provides specialized services like Global Link Services . 20. Promotes housing finance through SBI Home Finance Ltd . 21. Offers community services Banking. It provides grants to many socially relevant research projects undertaken by various universities and academic institutions in the country. 22. Provides Leasing Finance and Project Finance Facilities. 23. Participates in Lead Bank Scheme. 24. The State Bank may with the sanction of the Central Government, enter into ne ­gotiations for acquiring the business of any other Banking Institutions. State Bank of India The State Bank of India, is Indias largest and the oldest Bank and a premier in terms of balance sheet size, number of branches, market capitalization and profits. Apart from banking, SBI has also entered into new ventures strategic tie ups – Pension Funds, General Insurance, Custodial Services, Private Equity, Mobile Banking, Point of Sale Merchant Acquisition, Advisory Services, structured products etc – each one of these initiatives having a huge potential for growth. With its cutting edge technology and new banking models, it is expanding its Rural Banking base, looking at the vast untapped potential in the hinterland and proposes to cover 100,000 villages in the next two years. State Bank of India is also concentrating at the top end of the market, on whole sale banking capabilities to provide India’s growing mid / large Corporate with a complete array of products and services. It is consolidating its global treasury operations and entering into structured products and derivative instruments. State Bank of India is the only Bank of India that has been included in the list of fortune 500. It is the largest provider of infrastructure debt and the largest arranger of external commercial borrowings in the country. Survey of SBI Branches 850 Branches of Associated Banks- 5100 ATMS- 8500 ATMs, Other value added services Internet banking, debit cards, mobile banking, etc. Learning Colleges- Four national level Apex Training Colleges (For skill enhancement) Learning Centres 54 (For skill enhancement) Forign Offices 82 (in 32 countries) Subsidiaries in India- SBI Capital Markets, SBICAP Securities, SBI DFHI, SBI Factors, SBI Life and SBI Cards Subsidiary of State Bank of India State Bank of Bikaner Jaipur State Bank of Hyderabad State Bank of Indore State Bank of Mysore State Bank of Saurastra State Bank of Travancore The services of SBI Bank Personal Banking Gold Banking NRI Banking International Banking Corporate Banking Small Scale Industries Small Business Finance Rural Banking Government Business Home Loans The struggle for the soul of India’s biggest bank Apr 21st 2012 | MUMBAI |From the print edition TO WALK into State Bank of Indias headquarters in Mumbai is to enter, unmistakably, the sphere of the state. Men in khaki guard the gate, a protocol officer greets guests and the screen in the lift plays a clip of Indias finance minister. The chairmans suite has been occupied since April 2011 by Pratip Chaudhuri, and if his unflashy suit and modest manner are typical of Indias financial technocrats, his take on the past year at Indias biggest bank by assets, and Asias 20th, is unusually blunt. In this section Weather report Feeling peaky Kim selection Fair play or foul? My conflicted heart The ironing lady Joined-up thinking Reprints Related topics Asia India State Bank of India Just after he took the reins SBI booked an almost-$2 billion pension-related charge worth a tenth of its core capital, crystallising fears that SBI had become too aggressive (see chart 1). The reaction was â€Å"frankly something I was unprepared for†, he says. â€Å"The share price tanked. People worried if SBI was going down the tubes †¦people were writing our obituary. † That trauma, plus a more general sense that India has lost its appetite for liberal reform, has reopened old questions about SBIs strategic direction. Will it evolve into a Western-style private bank (preferably without the kamikaze gene), a path that the previous management team favoured? Or is SBI destined to be a state-led development bank, a model given new legs by the rise of Chinas mega-banks? It is easy to understand worries about SBIs strength. It got a shock when it was downgraded by Moodys, a ratings agency, last year. Asset quality is mediocre, with gross non-performing loans at 4. 6% of total loans, and another 3% classified as â€Å"restructured† (typically a fifth of these turn out to be dud). Yet SBI still has huge muscle. Mr Chaudhuri says bad-debt trends have turned a corner, despite a weak economy that led the central bank to cut rates by half a percentage point on April 17th. Its Tier-1 capital ratio is a passable 9%. Most rivals reckon SBI got a bit carried away with some products, such as mortgages, but is basically sound. And its business model works, with oodles of deposits from 19,000 branches, decent lending margins on a diversified loan book and an array of newish ventures from insurance to fund management. Perhaps a quarter of loans made, some to farmers, are not profitable, but over time SBIs deep national presence will prove a decisive advantage, Mr Chaudhuri says. For the year that ended in March 2012 profits should be almost $3 billion, more than any other Indian bank, although not enough to allow it to avoid government-backed capital increases every few years to fund growth. The debate over strategy had seemed settled under Mr Chaudhuris predecessor, O. P. Bhatt, a passionate figure who ran the bank between 2006-2011. His stated mission was to modernise SBI and his unspoken aim was to free it of state influence. In pursuit of the first goal, SBI took a less defeatist attitude towards the private banks that thrived after liberalisation in the 1990s, winning back business as a result of a push in mortgage lending and of the financial crisis, which saw depositors rush back to state banks. (Today SBI has about a fifth of the banking market. Mr Bhatt also raised SBIs horizons by suggesting it could play the role of an Indian champion, with a chunky presence abroad to help Indian firms globalise, and, in time, enough clout to rival Western and Chinese banks (see chart 2). Mr Chaudhuri says the broad strategy â€Å"continues†. He aims to exploit SBIs role as the biggest gatherer of savings in India, and to improve its efficiency and responsiveness to cus tomers. He would like a fifth of activity to be from the international business (which he used to run), up from about a tenth. More than that would be a stretch: â€Å"Its not every day that Ratan Tata buys Jaguar Land Rover,† he says. Yet despite this fairly clear statement of direction, outsiders tend to be confused about SBI right now. â€Å"Its meandering,† says the boss of a rival bank. â€Å"Its at a complete loss. † Another reckons little has changed: â€Å"Chaudhuri harbours the same ambitions as Bhatt, but has a more realistic timetable. † Part of the ambiguity centres on the role of the state. Mr Bhatt used to speculate privately about the state eventually ceding control over SBI (it owns 62% today). Mr Chaudhuri admires elements of both Western and Chinese banks, but says that state backing is â€Å"definitely† an advantage and wants to shift the bank towards infrastructure lending. This may be in the national interest, but not the banks. Many savvy private-sector rivals see infrastructure as a pit of politics, corruption and bad debts—and boast of steering clear of it. SBI is used to politics, however. It was formed in a state-backed merger in 1921 and nationalised in 1955, and at some point has been accused of neglecting every corner of the economy. Jawaharlal Nehru, Indias first prime minister, even complained about the â€Å"fantastic† salaries of the banks top brass (they are miserly today). In more recent times the bank has said that politicians and officials are fairly hands-off, and has claimed that â€Å"patriotic† loans are limited to special cases such as Air India. The risk of adopting a more relaxed attitude towards the state, of the type Mr Chaudhuri seems to have, is twofold. First, it may make tackling SBIs bureaucracy harder by encouraging politically-linked unions and staff to appeal to government officials to stall the reforms necessary to keep up ith the private sector. Indias state banks, unlike Chinas, enjoy only limited protection, and must face top-notch private competitors. Vested interests already present formidable problems—for years SBI has struggled to integrate a handful of subsidiaries whose claim to partial autonomy is derived from Indias pre-independence princely states. Second , anything other than polite belligerence towards the Indian state tends to be deadly for public-sector firms, given the government machines natural impulse to reoccupy the commanding heights. Without a very clear sense from SBI that it is on a gradual journey away from being a ward of the state, it is not too hard to imagine todays pretty desperate bunch of politicians and officials attempting to meddle more actively in the allocation of credit. The trick for Mr Chaudhuri will be to maintain an outward appearance of modest evolution, but to push for behind-the-scenes change and keep the state at arms length. As Indias exhausted economic reformers can testify, that is an incredibly hard balancing-act to pull off, but for SBI and the country it mirrors it is the only game in town.