SBI bets on digital for cost efficiency

Public lender State Bank of India (SBI) is taking the digital route for both customer interface and back-end processes to improve its cost efficiency.

Chairman Rajnish Kumar said the lender’s digital initiatives have twin objectives — offering a new and innovative product to the customers as well as improving the bank’s cost efficiency. “The ultimate idea is customers should get enhanced experience. It should also result in cost efficiencies for the bank through optimisation of bank power, which we intend to use more and more for sales and customer interface, rather than most of our manpower being involved in the back-end processes,” he said.

The cost-to-income ratio for the bank stood at 51 for the September quarter (Q2). In the June quarter, it saw a ratio of 53. 64, following its merger with associate banks. The bank has spent ~4,000 crore in FY18 on technology, a figure is “continuously going up”. “Newer technologies keep coming up and we want to stay ahead of the curve as far as digital innovation is concerned. You can achieve this only when you spend money and it will consume a lot of management effort,” Kumar said.

The bank has 26 million mobile banking users, 12 million e-wallet users and 43 million internet banking users. But this constitutes only 20 per cent of its total retail customer base of 420 million.

“One part is customer interface and other part is all backend processes in the bank are being relooked, redesigned and digitised,” the SBI chairman said. However, he stressed on the importance of a physical presence alongside digital presence. “The need for branches in a country as diverse as India will always be there but the sizes and functions of branches may undergo change.”

Branches form 22 per cent of the bank’s total transactions, which has not undergone a major change in the past few years. But, the bank expects the share of digital banking rising over the share of ATMs. Digital banking rose to 36 per cent of total transactions during the year, against 26 per cent in the previous year, whereas the share of ATMs fell to 42 per cent, against 44 per cent a year ago.