• JANUARY 19, 2000

SBI sees retail banking as a new thrust area

The State Bank of India (SBI) has decided to invest Rs 20 bn into its retail banking sector because of its renewed interest in consumer banking. It currently has a Rs 74 bn personal banking portfolio, and now plans to set aside Rs 10 bn for housing loans and Rs 10 bn for consumer finance for FY2000.

SBI (FY99 total income: Rs 19.11 bn) is India's largest bank. It runs the world's largest network of 8,900 branches and controls about 22% of India's loans and deposits.

Of its Rs 280 bn deposit mobilisation target set for the FY2000, SBI expects Rs 190 bn of this to come from the personal banking segment. This accounts for 60% of its deposits and it plans to invest 10% of this mobilised amount for retail loans.

As part of its technology drive SBI plans to take the number of its fully computerised branches from 1,935 to 2,500 in a years time. They will be selecting a top accounting firm for assisting them for branch as well as ATM network. Currently SBI has 72 ATM's installed and aims on taking this number to 2000 ATMs by March 2002.

With the increase in wealth of the average urban and rural Indian, demand for personal banking products which includes like housing loans, consumer loans, credit cards etc has increased exponentially. Though this area was traditionally neglected by SBI due to its focus on commercial banking it cannot afford to do so any longer given the fact that competition has increased to a great extent in its traditional areas of business. This move by SBI is a step to increase its area of business and profits and to fully leverage upon its huge branch network. However, the thrust has only started recently and its profits from this side of banking business will take some time to show results.

The improving economy and the steps taken by SBI to counter its inefficiencies has made many analysts turn positive on the stock.

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