SBI tries hard to become tech savvy to ward off competition

By Pradeep Rane | 26 Sep 2003

Mumbai: State Bank of India (SBI) is aggressively trying to become tech-savvy in order to ward off competition and to ensure customer retention.

The largest commercial bank in the country has recognised technology as a tool to make it more customer-focussed, to ensure customer retention and to enhance customer acquisition, especially in the retail space.

SBI has appointed McKinsey to help streamline the business model to ensure it is competitively aligned to meet the current business objectives. SBI is beginning to bridge the gap between itself and the private and foreign banks on the customer orientation front.

Says a report by leading broking firm Merrill Lynch: "Absence of a fully-integrated technology platform is a key hurdle for SBI today in achieving complete efficiencies that many of the private banks have. Now SBI has recognised that technology is a key enabler to have a competitive edge over private players."

There were apprehensions in the past about SBI's ability to implement its technology plan successfully. "But, we believe those are overplayed. SBI's technology rollout is now fully under way. SBI, in our view, is ahead of any other government bank in implementing its technology platform," says the Merrill Lynch report.

SBI has already set up 1,700 ATMs, majority of which are networked. These include almost 600 ATMs of its seven associate banks.

It will also be networking about 500 branches by the end of FY04. SBI is simultaneously developing its 'core banking solution' that, among other things, will provide full connectivity to almost 2,000-2,500 branches, across the top 80-100 cities. SBI has also computerised almost 4,100 of its branches and all branches are expected to be computerised by FY05.

SBI will also be able to do real-time transaction processing and has an integrated customer database that should significantly help SBI's cross-selling efforts, the report said. "Given a customer account base of 70 million, any success at cross-selling could potentially lead to significant revenue flows."

Further, SBI will also be able to leverage the technology platform for enhanced risk management and loan pricing. The technology platform is likely to be completed in 18-24 months (by FY05).

The bank is implementing the technology project in phases and by the end of FY04, it is expected to see about 500 branches fully interconnected, covering almost 30-35 per cent of its business. It also plans to computerise all its branches (though not interconnected).

"Although, when complete, the technology platform will cover only about 2,000 branches and limited to the top 80-100 cities — that, in our view, is adequate for SBI to provide stiff competition to most of the private and foreign players," the reports sums up.