SBI appeals to RBI to establish operational support relationship | Rare Techy


State Bank of India has received in-principle approval from the Reserve Bank of India for the proposed rate cut. The bank will soon start a pilot in a few locations before launching the new venture in India.

“We are building a league to support operations. It is intended to address the concern related to the cost-to-income ratio. We have already received in-principle approval from RBI and soon we will launch it in pilot mode,” said SBI Chairman Dinesh Kumar Khara.

Related Stories
SBI suspends listing of mutual fund arm as market remains volatile

Dinesh Kumar Khara, President, State Bank of India, says:

In connection with BusinessLine, Khara said outsourcing will enable lenders to use their cost-effective manpower for more productive operations. SBI’s cost-to-income ratio stood at 53.3 percent in FY22, an improvement of 240 basis points over FY19 levels. In comparison, the cost-to-income ratio of the top three private banks is below that of SBI, by 35-40 percent. Hence, the company’s focus on improving operational efficiency can help India’s largest bank significantly improve its profitability over time. In FY22, SBI’s net interest margin was 3.15 percent, while the average for private banks was 4 percent in FY22.

Keep the basic functions

“Routine tasks can be done by the company. We are finalizing the structure but it will be more technology and some people. Technology that supports people on the ground,” he said, adding that basic functions such as the loan sanctioning process will stay in the bank.

“Essential functions cannot be outsourced as per RBI guidelines,” he pointed out.

Khara said that the pilot will be launched soon in a quarter or so in several areas and once the results are seen, it will be rolled out across the country.

Pet projects

Khara said it is one of his pet projects, adding that the bank started the process of hiring a consultant in January this year to set up an operations support company.

The company will focus on providing support services mainly for agriculture, micro, small and medium enterprises, other micro loans, data entry operations, activities as authorized for Business Correspondents, among others.

SBI is working to improve its costs. The expenditure-to-income ratio has decreased to 53.31 percent in 2021-22 from 53.5 percent in 2020-21 and 55.7 percent in 2018-19.

Not many lenders in the public sector join forces to manage the non-core functions of the bank, while the model is very popular among private banks. Among the public sector banks, Bank of Baroda was the first to implement a similar strategy of supporting operations. However, Khara believes that given the scale and size of SBI, the banking services company could be a much bigger one that encompasses different functions.


Source link

Related Articles

Back to top button