The Hindu Business Line : Two hundred years and banking strong

THE STATE Bank of India is two centuries old and is older than the regulator, the Reserve Bank of India, which was set up in 1934. Not many institutions in the country have such a long history, which is intricately linked to the Colonial and Independent India.

As the country's No 1 bank, the banking sector looks at the SBI for leads in setting interest rates and other moves, though in recent times private players such as ICICI Bank and HDFC Bank have struck out on their own. Markets perceive the SBI as the merchant-banking arm of the government having raised a few billion dollars in recent times for the government. It also sells and buys dollars in the market, generally at the behest of the RBI. In recent times, the central bank has been operating through other government banks also.

Born as Bank of Calcutta on June 2, 1806 and becoming the Imperial Bank of India in 1921, it was transformed into the State Bank of India under an Act of Parliament on July 1, 1955. Today, with over 13,650 branches and 5,217 ATMs, State Bank of India is the largest bank in the country with an asset base of $126 billion and profits in excess of $1 billion.

In the 1970s, keeping with the changes in the market, SBI re-organised itself. In 1972, the merchant banking division, the precursor to the SBI Caps was established. In 1986, SBI Capital Markets Ltd. followed closely by SBI Mutual Fund in 1987 became part of the SBI subsidiaries. The 1990s saw the installation of the first ATM.

The bank set up a cards company in collaboration with GE Capital. It also entered the field of Bancassurance with a global partner Cardif SA, a subsidiary of BNP Paribas. Besides this, the SBI is the chief promoter of Clearing Corporation of India Ltd., co-sponsor of ARCIL. SBI DFHI Ltd. is the largest primary dealer in India. SBI Funds Management is a joint venture with Societe Generale Asset Management.

Today, the SBI is seen as a major player among the Self-Help Group. It is the first commercial bank to be accorded the status of Self Help Promoting Institution by Nabard. The SBI has an innovative scheme for facilitating housing for Self Help Group members "Sahayog Niwas".

The first International foray of the SBI goes back to 1867 when the Colombo branch of the bank was set up under the aegis of Bank of Madras. The journey continues even today. The bank is represented in the SAARC countries. It has branches in Dhaka, and in Male, besides joint venture banks in Nepal and Bhutan.

The SBI is also well represented in West Asia, Europe and North America. In the east, it has presence in Singapore, Hong Kong, Shanghai, Tokyo, Osaka, Manila and Sydney.

Yet, by international norms, the SBI is way behind other world-class players. From next year, the SBI will have to adopt Basel-II norms, which could put some pressure on its finances. Its international presence is minimal with the latest and the first acquisition making little impact.

The SBI could argue that the government is the final arbiter of its destiny with the RBI holding majority equity. There has been talk of transferring the RBI stake to the government but that will not make any difference as the SBI will continue to be a government-bank. The only way out is for the RBI or the government to bring down its stake to 33 per cent in SBI through a public issue. That will need amendments to the SBI Act which does not look feasible in the immediate future.

Otherwise, in the next few years, there could be a change in the banking sector with ICICI best placed to lead the pack. And that is what Mr Kundapur Vaman Kamath of ICICI would like.

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