Money & Banking

Performance of corporations should not be solely measured by the returns to shareholders: SBI chief

Our Bureau Mumbai | Updated on August 11, 2020

Rajnish Kumar, Chairman, State Bank of India(file photo).

The performance of corporations, including banks, should not be solely measured by the returns to shareholders but by what they’re doing for society as a whole, according to State Bank of India Chairman Rajnish Kumar.

In an interview with ‘McKinsey Quarterly’, Kumar observed: “When that happens, the true worth of organisations would be more....but investors in the stock market – they’re not going to like it.”

Regarding the bank’s duty to shareholders, he observed that there are certain interventions in the area of social banking that SBI has to do as a government-owned bank. And there’s a financial cost to that, which is reflected in its earnings.

“There’s no such obligation on the private sector. So when measured purely by returns to shareholders, there is a fairly huge difference.

“But I always say there are certain inherent advantages to public ownership, especially public confidence around keeping their money with the bank,” Kumar emphasised.

On the social-policy side, the SBI chief his bank is helping with the stability of the financial system and revival of economic growth. Action has to be coordinated between the bank, the government, and various regulators, he added.

“The quality of the government’s response depends on how honestly the feedback is reaching the government from the ground. As the CEO of SBI, I’m connected to the ground: what’s happening in the economy, to the individuals, to businesses.

“Based on what we’re observing, we make recommendations that help the government shape its response,” said Kumar.

Re-imagining operations

On re-imagining operations in a post-Covid-19 world, the SBI chief opined that the bank has to look at each and every office, floor by floor, each and every position, each and every role, and each and every person.

“The current model is that you live at a place, and you work at a place…This concept will undergo a change, but when it does, what will be the impact on individual human behavior?

“Not everybody would like to work from home. It may look like a very exciting idea, but when you sit at home for one month, you may realise it is not such an exciting idea,” said Kumar.

So the flexibility around workplaces and what the compensation structure should be have to be thought through.

Published on August 11, 2020

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