SBI turns 200

By Our Banking Bureau | 04 Jun 2005

Mumbai: The State Bank of India completed 200 years on 2 June 2005. Originally set up as the Bank of Calcutta on 2 June 1806 it was renamed Bank of Bengal three years later. Thereafter, it was redesigned as the first joint-stock bank of British India, sponsored by the Government of Bengal and named Bank of Bengal.

Three banks, Bank of Bengal, the Bank of Bombay and Bank of Madras (the latter two came into being 40 years later) held the reigns of Indian banking for over 50 years and were finally amalgamated in 1921 as the Imperial Bank of India.

However, when the Reserve Bank of India was established as the apex bank in 1935 the Imperial Bank's role was slightly diluted and it was converted into a purely commercial bank, which was permitted to undertake foreign exchange business for the first time ever.

By 1947, the Imperial Bank had a capital base of Rs 11.85 crore, deposits and advances of Rs 275.14 crore and Rs 72.94 crore respectively. It had a network of 172 branches and more than 200 sub-offices extending all over the country.

The Imperial Bank of India was transformed into the State Bank of India under an Act of Parliament on 1 July 1955. It had 480 branches, sub-offices, three local head offices inherited from the Imperial Bank, and more than a quarter of the resources of the Indian banking system under its control.

In 1959, State Bank took over eight former state-associated banks as its subsidiaries. With that the concept of banking as repositories of community savings, and lenders to credit-worthy parties gave way to commercial banking.

The first major reorganisation of the SBI took place in the 1970s. The merchant banking division, the precursor to the SBI Caps was established in 1972. SBI Capital Markets and SBI Mutual Fund were set up in 1986 and 1987 respectively as SBI's subsidiaries. SBI's first ATM was set up in the 1990s as well as a cards division in collaboration with GE Capital. It also entered the field of Bancassurance with a global partner Cardif SA, a subsidiary of BNP Paribas.

Besides this, the SBI promoted the Clearing Corporation of India Ltd, was the co-sponsor of ARCIL. SBI DFHI, is the largest primary dealer in India. SBI Funds Management is a joint venture with Societe Generale Asset Management.

As the country's No 1 bank, the banking sector looks at the SBI for leads in setting interest rates and other moves. Markets perceive the SBI as the merchant-banking arm of the government as it has raised a few billion dollars in recent times for the government. SBI also sells and buys dollars in the market at the behest of the RBI. In recent times, the central bank has been operating through other government banks also.

Today, with over 13,650 branches and 5,217 ATMs, State Bank of India is the largest bank in the country with an asset base of $126 billion and profits in excess of $1 billion. It services more than 90 million customers through a network of about 9000 branches and has a 25 per cent market share along with its subsidiaries.

SBI went global in 1867 when the Colombo branch of the bank was set up under the aegis of Bank of Madras. SBI at present is represented in the SAARC countries and has branches in Dhaka, and in Male, besides joint venture banks in Nepal and Bhutan. It is also well represented in West Asia, Europe and North America. In the east, it has presence in Singapore, Hong Kong, Shanghai, Tokyo, Osaka, Manila and Sydney.

However according to international norms, the SBI is way behind other world-class players. SBI's achievements are pale compared to banks like Citigroup, which has 200 million customers in over 100 countries, or the 150 year old HSBC, which is present in 77 countries and is cited the fifth largest company in the world. Also the SBI is likely to find the going tough in the near future when it has to adopt Basel-II norms, which could put pressure on its finances.

All said and done the since the RBI holds majority equity in SBI it is basically the government that holds the key to its future.