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In order to achieve a healthy credit growth of 10-12 per cent by 2020, State Bank of India will adopt a two-pronged strategy comprising portfolio reordering that will reduce the credit risk-weighted assets (CRWA) to total advances ratio.
It also plans to take up internal reorganisation of corporate banking, according to its Chairman, Rajnish Kumar. Through portfolio re-ordering, CRWA to total advances ratio declined by 780 basis points to 71.14 per cent as on March 31, 2018.
A bank achieves reduction in CRWA by funding those assets that have less risk, thereby requiring less capital to make the loan and / or by shedding assets that carry higher risk.
The gross advances of India’s largest bank grew at 4.91 per cent to ₹20,48,387 crore by March 2018 from the previous year’s level of ₹19,52,507 crore.
“Retail segments (personal, SME & agriculture) now constitute 57.5 per cent of the domestic loan book. Much of the growth in advances came from personal retail segments, including home loans and auto loans.
“Overall, personal retail loans grew by 13.55 per cent in FY2018, which is in line with the bank’s strategy of growing more aggressively in this segment,” said Kumar in a communication to shareholders.
Corporate credit
Revamping of the corporate credit structure and system within the bank will proceed on such lines that it will widen the universe of clients and focus on new segments.
“The Corporate Accounts Group (CAG) will focus on high priority and quality individual and group relationships, and the concept of group relationship coordinators will be introduced.
“CAG will offer an end-to-end solution to high-quality large corporates focusing on fee income, project finance and supply chains around large corporates. The credit risk management function will also be strengthened by on-boarding sector specialists and improving due diligence,” elaborated the SBI chief.
Kumar observed that the threat of competition from market competitors cannot be taken lightly, and the bank will leverage its balance sheet strength and pricing power to optimise the risk return matrix.
HR issues
HR issues, according to the SBI chief, need a fresh look as the usage of advanced digital technology such as Artificial Intelligence (AI) and big data increases within the bank. The skill-sets of the employees needs to be upgraded in line with the changing operating environment.
“Given the pace of retirements in the next five years, it is important to put in place a robust plan of succession. Potential leaders will be identified and mentored through customised training programmes to create a strong leadership pipeline.
“Some of these works are already in progress, and concrete action plan will be implemented in the next two years,” said Kumar.
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