Mumbai: The country’s largest commercial bank, State Bank of India Ltd (SBI), is moving towards making its rural loans a separate line of business by 2010.
Taking the first step in this direction, SBI, which accounts for about one-fifth of India’s banking industry, has recast its its 13 circles that form the second tier in the organizational structure. Each of these circles will now have a rural and a non-rural division to increase focus on SBI’s rural business.
Opportunities: SBI chairman O.P. Bhat had said in June that the bank was chalking out strategies to make the most of its reach in rural India
So far, there was no dividing line between rural and non-rural businesses and all circles were focusing on national business, besides the large corporate entities being handled by the corporate accounts group (CAG) of the bank, set up in mid-1990s following the recommendation of consulting firm McKinsey & Co.
These 13 circles—Thiruvananthapuram, Bangalore, Chennai, Guwahati, Bhubaneswar, Chandigarh, Patna, Bhopal, Hyderabad, Ahmedabad, Lucknow, Kolkata and New Delhi—are spread across the country.
Even though they do not have separate balance sheets, for all practical purposes they operate as banks within the bank and heads of the circles report to the bank’s headquarters in Mumbai.
These circles will now have two separate heads to oversee the rural and a non-rural business within “national banking”. The rural head of these circles will also have two senior officials working under him. This team will be responsible for lending to small and medium enterprises, as well as rural retail loans. Ambitious targets have been set for rural business in all the circles.
A senior official of the bank, who did not wish to be named, said: “The targets for the circles have nearly been doubled.” The official, however, did not disclose the targets as they were still “being discussed.” The official said the creation of the new division indicates the bank’s thrust in the rural sector.
Earlier, in June, SBI chairman Om Prakash Bhat had announced that the bank was chalking out strategies to make the most of its reach in rural India. He had also announced that 100,000 villages would be provided basic financial services by the bank by the end of next year as part of SBI’s focus on “financial inclusion.”
Out of a total network of 9,500-odd branches, currently about 1,100 branches of SBI provide credit facilities to farmers. These branches also provide technical know-how about different activities to villagers through various small groups known as goshtis.
Besides, SBI also formed 501 farmers’ clubs in January for bringing the rural community under financial inclusion. It has made a plan for providing extension work to farmers through agriculture graduates by linking at least one graduate with a rural branch to enable farmers to take greater advantages of new techniques and facilities.
SBI’s agricultural loans stood at Rs36,922 crore in June, growing more than 30% year-on-year.
The bank’s outstanding loan advances were Rs3.44 trillion at that time, growing close to 29% year-on-year.