New-look SBI will have 7 profit centres

Units carved out of existing business divisions.

The State Bank of India (SBI) has created seven profit centres within the bank following the recommendations of consultancy firm McKinsey & Co.

The seven business units have been carved out of the two existing business divisions of the bank "" the corporate accounts group and the national banking group (NBG) "" set up in the mid-1990s.

McKinsey, which was instrumental in the previous organisational recast eight years ago, has been with the bank for over two years now supervising the restructuring plan as well as its implementation.

According to sources, the corporate accounts group, which was created to deal with the bank's top 200 accounts, has been split into three business units.

While one unit will continue to deal with the top accounts, another division has been created to finance projects and a third one for mid-cap (loans of Rs 25 crore and above) companies.

The top accounts division and the mid-cap division are being headed by chief general managers while the project finance division is headed by a general manager (GM). All three group heads report to the managing director in charge of the CAG.

SBI chairman AK Purwar confirmed that the bank has created seven business units and that the new structure is already in place. He, however, refused to offer details on the new-look SBI.

Four business units have been spun off from the NBG. These deal with loans to agriculture, small and medium enterprises (loans up to Rs 25 crore), retail loans and government businesses. While a CGM heads the SME unit, the other three are managed by general managers. All group heads report to the managing director in charge of the NBG.

Besides relatively smaller manufacturing units, the SME division also deals with the services sector and wholesale and retail trade.

Giving the rationale behind the creation of the profit centres, a source said the objective is to get back the businesses which SBI has been losing to competitors. Even though the market share of the SBI group (the parent and its seven associates) has remained constant at around 25 per cent, the bank's share has been on a decline.

In other words, the parent's growth has been slower than that of its associate banks. "The new structure will arrest the slowdown and make the bank more aggressive," sources pointed out.

Even though the parent and the seven associates operate as separate entities, there has been a "virtual" merger of the group as they are working on one technology platform, sources said. Incidentally, the project finance division is meant for the entire group where the SBI associates too share the businesses.

In order to speed up the decision-making process, the bank has cut all layers and the branches report directly to headquarters for businesses under these seven units. In other words, the layers of local head offices (LHO) and circles have been cut out for faster decision making.