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BW Businessworld

When Size Does Matter

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Depending on the way you look at it, State Bank of India (SBI) was born in 1806, 1921 or in 1955. In July 1955, the Imperial Bank of India passed into state ownership and, among other changes, was renamed State Bank of India. The Imperial Bank itself was born in 1921, when three Presidency Banks — of Calcutta, Bombay and Madras — were amalgamated. The oldest of the trio was the Presidency Bank of Calcutta (or Bengal), born in 1806.
 
SBI is not just an old bank — it is a huge bank. Perhaps not by global standards — banks such as Citi would dwarf it — but definitely humungous by domestic standards. It is as big as the next three banks put together. And while its slogan of being the ‘Banker To Every Indian’ is a bit of a stretch, it had over 175 million savings bank accounts last year.
 
Because of its size and reach, it is the first choice for many people. They include big businessmen seeking loans of a size that would make other, smaller banks run for cover. And, poor, daily wage earners who trust their hard-earned money with only the biggest government-owned bank.
 
Size has its virtues but also brings its own set of problems. Over the next five years, SBI will face some of the knottiest problems it has so far. The first is raising capital — it will need to raise over Rs 1 lakh crore of fresh capital to meet the new capital adequacy norms. Compounding the problem will be the fact that over 60 of its 72 top managers are retiring in the next few years, leaving a huge gap in the top team. Meanwhile, aggressive lending practices have seen non-performing assets go up dramatically. It has numerous other issues to tackle as well.
 
Deputy editor Srikanth Srinivas has been tracking SBI for a very long time. In the cover story this issue, he examines the roots of SBI’s problems.
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The results of our annual B-school survey are in. The past year was a tough one in which to pass out of a B-school. Most colleges had to grapple with the kind of placement challenges that they have not faced in 10 years. It was also a tough time for private B-schools which see themselves as businesses. Several of them are shutting shop.
 
Despite all the gloom and doom though, the best colleges are improving constantly. A majority of colleges which participated in our survey this year have improved their infrastructure, faculty or curriculum. This year, our method of assigning scores — both absolute and relative — has changed marginally. The details are in our note on the methodology, which is on page 90.

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(This story was published in BW | Businessworld Issue Dated 15-07-2013)