Mumbai: Dinesh Kumar Khara, who has been appointed as the new State Bank of India (SBI) Chairman, is seen as a focussed and methodical administrator.
These attributes will be more than put to test as he faces the challenge to regain market share, which the country’s largest lender has been losing to new-generation lenders.
The bank’s market share in advances has fallen in the last three years, while it has barely held on to its share of deposits despite a flight to safety towards state-run banks after the Yes Bank crisis earlier this year. The fall came despite the fact that the bank merged five of its associate banks and the Bhartiya Mahila Bank with itself in April 2017.
This daunting task comes at a time when private sector lenders have upped the ante with superior services, powered with technology, to wrest market share from public sector banks.
The 59-year-old, who was one of the managing directors of SBI handling global banking and subsidiaries, is set to begin his three-year term at the helm Wednesday. He succeeds Rajnish Kumar, who completed his three-year term Tuesday. The Banks Board Bureau had recommended Khara as a successor to Kumar in August.
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The market share challenge
Khara understands the market share game. Prior to becoming a managing director, he was heading the lender’s mutual fund business as the managing director and chief executive of SBI Funds Management Pvt. Ltd.
Under his leadership, the fund leaped one position up and became the fifth largest mutual fund in India with a total asset under management (AUM) of about Rs 1.3 lakh crore by improving its market share to 8.8 per cent from 7 per cent.
The growth of SBI’s mutual fund business is mainly attributed to Khara, said one of his former colleagues, who didn’t wish to be named.
However, SBI is currently unable to increase its market share in loans and deposits. Its market share in loans fell to 19.69 per cent in 2019-20 from 20.09 per cent in 2018-19. In 2017-18, its loan market share was 19.92 per cent, according to the bank’s annual report.
In deposits, the market share in 2019-20 was 22.84 per cent, which is the same level as 2017-18. In 2018-19, deposit market share was 22.38 per cent.
“The top management needs to be proactive. They need to go and meet top corporate houses who are sitting on cash, or looking for loans,” said a former SBI chairman on condition of anonymity. “Since there is no credit growth, SBI is also not proactive in seeking deposits.”
In his first interaction with the media as SBI Chairman, Khara said Wednesday that the bank is cognisant about market share, but the net interest margins should stay protected.
“We were losing market share, but now, for about a year, we have started gaining the market share also. We are cognisant that we have to have the market share but, in an economy like ours, with 23 per cent of market share in deposits, and 20 per cent in advances, it is a decent market share,” he added.
“But a very important component which I would like to focus on is that the quality of advances book should be good and robust. Secondly, our NIM (net interest margin) should stay protected.”
Who is Khara?
Khara, who joined SBI as Probationary Officer in 1984, has a Master’s in Business Administration from Delhi’s prestigious Faculty of Management Studies (FMS). A post-graduate in commerce, he is also a Certified Associate of Indian Institute of Bankers (CAIIB).
During his 36-year career, he has handled commercial banking such as retail credit, large, mid and small corporate credit, deposit mobilisation and branch management, among others.
He was also instrumental in taking SBI to join the global league by seamlessly integrating five associate banks and the Bhartiya Mahila Bank. With this feat, the SBI joined the league of top 50 banks globally.
This experience would come handy in growing the bank’s business.
“He is always very focussed,” said a former managing director of SBI. “He is not a flamboyant person, but a methodical person. He is a team player and knows how to get things done.”
Speaking to the media, Khara said his priorities in the new role are safety of employees and customers.
“First and foremost is the safety of our employees who are serving, the safety of our customers, and also the quality (of the loan) book that has been maintained till now. We like to see that we are in a position to come to the rescue if somebody needs any help,” he said.
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Other challenge areas
According to analysts, boosting credit growth would be another focus area for the new chairman.
While there has been a contraction in credit in the current financial year as economic activity was impacted adversely due to Covid lockdown, recent data released by private sector banks has provided reason to cheer.
HDFC Bank, the country’s largest private sector lender, said Monday that it has recorded 16 per cent year-on-year growth as of September-end while deposits grew by 20 per cent. Sequentially, HDFC Bank reported 3 per cent growth in both deposits and advances over June-end numbers.
With there are some signs of recovery, SBI should seize the opportunity to grow its business, said the analysts.
Human resources would be another area of his focus, said an SBI official. Particularly, when SBI has not hiked the lease rental allowance for seven years. As a result, the employees are not keen to work in business districts like Nariman Point in Mumbai, for instance — a problem which some other large public sector banks also face.
“This is a problem which public sector banks are facing. If SBI takes a lead in increasing the allowance, others will probably follow suit,” said the official quoted above.
One of Khara’s immediate tasks will be to finalise the bank’s balancesheet for the September quarter. In the June quarter, the lender reported 81 per cent year-on-year rise in net profit to Rs 4,189 crore mainly due to lower provisions and one-time gain of Rs 1,540 crore due to sale of investments in SBI Life Insurance.
A much more challenging task for the nation’s largest lender would be to oversee the one-time debt restructuring scheme that was announced by the Reserve Bank of India for both corporate and retail borrowers due to pandemic related stress.
The banking regulator’s stress tests indicate a rise in bad loans in the banking system in the coming months, and SBI, which was able to bring down its non-performing assets in the last one year, would like to ensure that bad loans do not balloon once again.
According to Khara, both in the corporate and retail segment, the number of customers showing interest for a debt recast “is manageable”.
“Whatever the number (retail customers) we see now, and considering our book it is very much manageable. In corporate (segment), as of now, we have not seen many of the corporates reaching out… yes, of course, there are some, but whatever the numbers we are seeing is nothing unusual, I would say that it is within the manageable limits,” he said.
This report has been updated with quotes from Khara’s media interaction Wednesday
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