Image: Vikas Khot
Arundhati Bhattacharya, chairman, SBI
Forbes India Leadership Award: Best CEO-Public Sector
It’s a hot autumn day in India’s financial capital, and the 19-storey State Bank of India (SBI) building, in the heart of south Mumbai’s Nariman Point business district, is undergoing a makeover. The façade is being given a facelift and extensive repairs are under way. This transformation at the country’s largest bank, with a standalone balance sheet size of over Rs 20 lakh crore, isn’t just cosmetic. Inside the building, which is home to one of the biggest and most significant financial institutions in the country, there is some serious work going on to ensure the bank itself—and not just the building—gets a spanking new look, in line with changing times.
Indeed, if the bank’s 59-year-old boss Arundhati Bhattacharya, the first ever woman to head the institution and a member of the Forbes Asia’s Power Businesswomen list in 2015, succeeds in what she has set out to build, SBI as we know it could be a thing of the past. In its place could stand a tech-savvy, digitally equipped modern-day financial powerhouse that could give new-age banks a run for their money. The resolute but affable Bhattacharya has already begun making deep-rooted changes at SBI ever since she took charge in October 2013, when the Indian economy was still reeling under the effects of high inflation and slowing growth. Today, almost two years later, chairman Bhattacharya (she still goes by the designation ‘chairman’ since the SBI Act does not have a provision for a ‘chairperson’) says the first clear signs of change are visible.
Gross and net non-performing assets (NPAs) of the bank are under control, thanks to several measures Bhattacharya and her top team have put in place; the bank has taken firm strides towards embracing cutting-edge technology aggressively; a detailed digital banking game plan is being rolled out; and several new human resources initiatives are being given shape to ensure the bank’s employees are engaged in its progress and in step with the times. Business and profits per employee—two key ratios for judging employee productivity—are up, and the training gap (the number of employees minus the number of employees trained) is down sharply from FY2013 when it stood at a very high 55.45 percent to just 2.45 percent in FY2015.
“Yes, lots of things have happened,” Bhattacharya tells Forbes India
. “Nobody talks about asset quality as only NPAs. You now talk of the pre-screening stage. There’s a very different way now of looking at NPAs. It doesn’t mean that once they [the loans] become NPAs you begin running after them. It means you try and find them as quickly as possible and don’t even allow their entry into the bank.” Consequently, risk, which was more of a ‘platform function’ where boxes used to be ticked, has become a live function involving dynamic credit ratings. Good and bad events are both priced in and reflected in the way the bank deals with the accounts. “There’s also a lot more collaboration between departments,” she adds. “Nothing is the responsibility of just one department. If I want to ensure more point of sale (PoS) machines [machines in which cards can be swiped at merchant establishments] get deployed, it’s not just the responsibility of the corporate accounts group branches but the national banking group branches as well. There’s a lot of horizontal integration.”
Departments now undertake planning keeping not just their own department imperatives in mind but also the overall requirements of the bank. Even in the case of the bank’s associates and subsidiaries, this horizontal integration is being witnessed. For instance, most purchases made by the bank are now made for the SBI Group as a whole; representatives from the associates and subsidiaries also sit in on several meetings to get a clearer picture of how the mother bank functions.
The change that is playing out at the banking giant is gradually manifesting in its performance ratios as well. SBI’s earnings per share, which stood at Rs 17.94 in June 2014, is now at Rs 19.52; return on equity has grown from 11.94 percent to 12.3 percent, and book value from Rs 150.3 to Rs 162.54 during the same period. Return on assets, which took a dip from 0.74 percent in June 2014 to 0.68 percent in March 2015, has again climbed back to 0.72 percent in June 2015. In the June 2015 quarter, SBI beat Street expectations and posted a 10.25 percent increase in net profit at Rs 3,692 crore, with both gross and net NPAs declining year-on-year. Non-interest income, which includes commissions, fees and treasury gains, surged by nearly 20 percent. But Bhattacharya laments that this improved performance wasn’t really appreciated by the markets, as the SBI stock fell close to 5 percent on the day of the results. “It’s probably the public sector discount at work in the markets,” she says with a smile.
Image: Getty Images
SBI Chairman Arundhati Bhattacharya and Union Minister of Finance Arun Jaitley at the launch of SBI Buddy, a mobile wallet, in Mumbai
THE ACCIDENTAL BANKER
The steely resolve Bhattacharya has shown in getting SBI—generally seen as slow, stodgy and old-world—to embrace change aggressively can be surprising given that she never aspired to be a banker at all. Bhattacharya spent her early years in the rough and tumble of industrial towns Bhilai (Chhattisgarh) and Bokaro (Jharkhand), where her father was an electrical engineer. Her mother studied homeopathic medicine to address the lack of medical facilities in and around the area. Bhattacharya completed her graduation in English literature from Lady Brabourne College in Calcutta (now Kolkata) though she was initially fascinated with biochemistry. She sat for the SBI probationary officers examination since she needed a job and, in 1977, joined the bank.
“It [banking] was very accidental,” she admits. “I had no ambition of becoming a banker; it just happened. But I stuck to it and enjoyed the challenge.” From her first assignment at the foreign exchange department of the SBI Main Branch in Calcutta until now, Bhattacharya has had several assignments that have taken her to various cities and towns and even to the United States. In the process, in the 38 years she has spent at SBI, it has been akin to switching jobs 12 to 14 times, given the varied nature of her assignments. From setting up new businesses and joint ventures for the bank to investment banking, human resources, corporate development and even being the bank’s chief financial officer (CFO), Bhattacharya has performed several key functions, a factor that has led her to understand the working of the banking behemoth in great detail.
The new businesses assignment, however, is the one she lists as her most challenging, since during the period of a year and eight months she had to stitch together three joint ventures with foreign partners. She also set up the mobile banking platform, among other things. “I also launched a financial planning platform that didn’t really take off then, but had I got more time perhaps I could have made that work too,” she says. “That period was very challenging but also very satisfying. A lot of what we did then is coming to fruition now.”
It is this multiplicity of roles she has played at SBI that is now proving to be her greatest strength as she aims to rebuild SBI and make it future-ready. Her stint in investment banking, for instance, led her to view projects in their entirety—debt, equity and other combinations—rather than as pure loan accounts. This has helped her better understand the stresses of projects and their promoters. One firm, for instance, which SBI is actively helping turn around is wind energy company Suzlon Energy, which was till recently hurtling towards disaster. Today, with Bhattacharya actively involved in the restructuring, Suzlon is on the road to recovery, thanks to a strategy that involved selling key assets and bringing in a strategic investor in the form of Sun Pharma’s Dilip Shanghvi.
Says Tulsi Tanti, chairman, Suzlon Energy: “She [Bhattacharya] is focussed and plain-speaking without any ego. She does not mind calling a spade a spade and saying ‘no’ if something cannot be done. She has financial acumen with [an] entrepreneurial approach and has clarity on the way the bank needs to function with each of the customers.” Tanti, who acknowledges the help SBI extended in helping Suzlon turn around, adds that Bhattacharya understood his intent to get the company back on track and “went ahead with a couple of bankers to release project-specific exposure so that the company continues as a ‘going concern’.”
Bhattacharya’s financial acumen that Tanti speaks of was honed further during her stint as CFO. “A doctor sees a patient and says what is wrong. But if you have the blood report you will know everything. The CFO’s role is like that. The CFO is in charge of all the numbers and you really get to know the bank in a very, very deep way. No other department knows it that deeply. That role brought with it a lot of learning. I had the blood report of the bank,” Bhattacharya says.
REWIRING THE OLD GIANT
Most management experts acknowledge that it’s easier to set up something from scratch rather than rewire a legacy institution. Getting a 209-year-old bank like SBI to change was, therefore, not going to be easy. However, Bhattacharya knew that with the competitive environment changing rapidly, key rivals embracing new technology and with customer preferences changing with changing demographics, SBI would need to move decisively to keep in step with the times. Consequently, the bank put together an aggressive digital strategy, which included drawing on the power of digital, mobile and social, and unveiled several offerings on these fronts. Alongside, the bank put together key partnerships with new economy firms like Amazon, Snapdeal, PayPal, taxi aggregator Ola and others to extend its reach and capture new customers. It has also launched SBI Buddy, an e-wallet offering, which Bhattacharya hopes will bring in younger customers into the bank.
“We are putting in major efforts on digitisation. We started with the brick and mortar piece, getting the InTouch branches in place. We are also examining what really works and what is too futuristic. The e-wallet has come in now and the partnerships have also started working,” she explains.
Bhattacharya’s game plan is simple: In an age where digital banking is getting increasingly commoditised, she wants SBI to remind people that when it’s a question of money, trust and security are paramount. “It’s good to be cool when you’re very young, but at a certain age you realise coolness alone will not do. You need security, stability and trust. So whatever we’re doing, we’re trying to do as transparently as possible and trying to communicate that we’ve been around for 209 years and don’t have the intention of going anywhere. We are still the government’s largest bank.”
The efforts on ‘unleashing the power of digital’, which SBI lists as one of its six key strategic objectives (the topmost, not surprisingly, being ‘improving asset quality’), are also bringing in results. The share of alternative channels (internet banking, PoS, mobile and other channels) in total transactions at the bank has gone up dramatically, from 61.6 percent in June 2014 to 71.4 percent in June this year.
SBI has also significantly ramped up its presence on social media, with Facebook, Twitter and YouTube; LinkedIn, Instagram and Pinterest initiatives are being rolled out. Its Facebook following now stands at around 33 lakh, with a 12.3 percent increase witnessed month-on-month in August.
“I would like to assure the youth that we are working very hard. They are a very important part of our offerings. I can assure them we will give them service without they having to step into any branch. 24/7, 365 days a year. That is what we are aiming for and we will do it,” says Bhattacharya.
She is particularly keen on rolling out more PoS machines. “We are now seeing how best we can move people from the ATMs to PoS. We want to totally disintermediate cash. For instance, when you go to a grocer, why do you need to pay cash? You may as well swipe your card. There are enough security measures now, and you can also set limits on your transactions.” Bhattacharya says the bank will shortly have the highest number of PoS machines. “Very often we have come from behind and overtaken the others. Maybe sometimes we have not been able to move fast enough. But unlike new players we are like a car that gets repaired while it’s running. I can’t afford to stop.”
The markets and the analyst community have been appreciative of the efforts put in by the bank. “SBI stands out among PSU banks on two fronts—a strong capital base with little dilution risk, and a strong deposit franchise which it is protecting with a comprehensive retail plan encompassing significant investment in digital initiatives,” says a JP Morgan report put out after SBI’s June 2015 quarter results.
But the accent on digital is not restricted to just IT and new e-offerings. Soon after taking charge, Bhattacharya also set up a full-fledged analytics team within the bank, the strength of which stands at 44.
“It’s not just early warning signals that the team gives us. It’s about intelligent data-crunching. We had a data warehouse earlier, but not analytics. These are people with formal analytical backgrounds who tell us the emerging trends. Professors from the Indian Institutes of Management [IIMs] are also consulting with us and giving us directions,” she says.
Her efforts have also won her praise and admiration from peers in the highly competitive world of Indian banking.
Says Shikha Sharma, managing director and CEO of Axis Bank, who won the Forbes India Leadership Award in 2014 for Best CEO-Private Sector: “Arundhati has exhibited exemplary leadership and vision in bringing to fore some of the issues that the industry has been grappling with. Her keen insight, experience and deep understanding of the banking sector have helped revitalise the State Bank of India.”REPOSITIONING HUMAN RESOURCES
One aspect Bhattacharya is putting great emphasis on is people. Budgets are now being set scientifically for every department, and also being linked to people. Employees facing similar challenges and situations are put in the same group for the purpose of more meaningful performance comparisons, and technology is being used for this as well, with Boston Consulting Group (BCG) having guided the bank in these efforts.
“Human resources are the bank’s main raw material. What else do I have?” asks Bhattacharya. “Today, corridor talk does not decide anything. Comparisons are between likes. For example, I cannot compare a branch manager in Mumbai with one in Purnea [a district in Bihar]. Purnea will compete with Ganjam [a district in Odisha]. A Mumbai manager will compete with one in Delhi, a Noida person with one in Pune and so on. The question is, within their cohort, how are they performing?”
Besides, postings to attractive locations are being given as rewards for good performance. But equally, they are also decided based on requirements and merit. For instance, if a good performer requires, for personal considerations, to be located at a certain city or town, he or she can be given that as a reward. “How do you merge personal goals with organisational goals and be transparent about it? That’s the key issue.”
The new HR system is in the pilot stage, and while a parallel rollout is being undertaken, Bhattacharya says the full-scale rollout will happen next year. This new HR framework has the potential to change the way in which the bank—and its 2.13 lakh employees—function.
As someone who has broken into a male bastion as the first woman boss of SBI ever, Bhattacharya takes challenges in her stride. Has it been tough for her as a woman leader? “Today there are many women heads of Indian banking,” she responds quickly. “Not just in public sector banks, but also in private and foreign ones. Being a woman, there will be perceptions and doubts about whether you are going to put your family ahead of your work. Many bosses keep worrying about that. So, early on in life you have to build a reputation that you’ll do what it takes, and that you can manage both.”
And indeed, Bhattacharya, who retires in October 2016, will clearly need to continue doing what it takes to ensure SBI does not veer off course. With the economy still to fully find its feet, stresses remain in the bank’s loan book. The mid-corporates and the small and medium enterprises (SMEs) together account for nearly 70 percent of the total gross NPAs of the bank, and are a cause for worry.
But the SBI boss is optimistic. “The mid-corporate sector is in a lot of stress. They were not in a position to see their way through a big downturn, and don’t have deep pockets or the ability to manoeuvre as large corporates have. It was a major challenge. We have done a tolerably good job. Over the next two quarters, if the economy keeps performing, it [the stress] will reduce.”
The optimism, in a sense, also stems from the successes the bank has had in keeping NPAs in check. As Tanti points out: “She took over at a time when the banking sector was under severe stress and there was a great degree of uncertainty. She led from the front by chairing the stress resolution committees herself.”
Analysts, however, also see stress in asset quality coming from sectors like steel, where SBI has significant exposure. With the Indian steel industry facing the heat from cheap imports, the bank will need to keep a close watch on such projects. Besides, there’s also the risk of mortality of some of the restructured assets. Bhattacharya, then, will have to demonstrate the resilience she has displayed so far in ensuring the stressed sectors are monitored carefully and don’t prove to be a drag on the bank.
But then, resilience comes naturally to Bhattacharya—it is even a family trait. She cites the examples of her mother and her aunt as two key influences in her life, as people who taught her to help herself and not expect anybody to hold her hand. Her family—her husband, a doctorate in computer science from Indian Institute of Technology, Kharagpur, and her daughter, who is now studying her BBA from Manipal University—have been rock-solid in their support even as the demands of her career took their toll and they had to move locations and often live apart. “My husband supported me throughout,” she says, adding that her daughter too has never complained about the challenges of constantly shifting houses. “But I often tell my colleagues that it’s good to put youngsters through challenges. Today’s children are mollycoddled. If they are given challenges they grow up very well,” Bhattacharya says. “We often underestimate them.”
Two years into her stint, Bhattacharya continues to push for constant improvements. “I have been seeing positive responses [to the changes] but I want to see much more. I want to have a situation where, whenever I go to functions, I should have people come and tell me how delighted they are with SBI rather than the other way round,” she says. “Today I do have some people telling me good things but not everybody. I want it to be everybody. That’s a very big ask, but being chairman I can ask that of my people.”
That, indeed, is a very clear mandate.
(Additional reporting by Aveek Datta)
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(This story appears in the 16 October, 2015 issue of Forbes India. To visit our Archives, click here.)