Case Study On SBI
Case Study On SBI
Case Study On SBI
FYBBA- A
Group 11
Study of the State Bank of India in respect to Organizational Structure,
Departmentation & Span of Control
Group Members,
We take this opportunity to express our gratitude and deep regards to our professor Ms.
Pallavi Rallan for her exemplary guidance, monitoring and constant encouragement
throughout the course of this assignment.
We also take this opportunity to thank Mr. Anil Jain, the Deputy General Manager of
stressed assets management group, SBI, for his cordial support, valuable information and
guidance, which helped us in completing the assignment through various stages.
Lastly, we thank almighty, our parents, brothers, sisters and friends for their constant
encouragement without which this assignment would not be possible.
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State Bank of India
State Bank of India (SBI) is a multinational banking and financial services company
based in India. It is a government-owned corporation with its headquarters in Mumbai,
Maharashtra. As of December 2013, it had assets of US$388 billion and 17,000 branches,
including 190 foreign offices, making it the largest banking and financial services
company in India by assets. State Bank of India is a regional banking behemoth and has
20% market share in deposits and loans among Indian commercial banks.
Operations
SBI provides a range of banking products through its network of branches in India and
overseas, including products aimed at non-resident Indians (NRIs). SBI has 14 regional
hubs and 57 Zonal Offices that are located at important cities throughout India.
Domestic presence
SBI has 14,816 branches in India, as on 31 March 2013, of which 9,851 (66%) were in
Rural and Semi-urban areas. In the financial year 2012-13, its revenue was INR 200,560
Crores (US$ 36.9 billion), out of which domestic operations contributed to 95.35% of
revenue. Similarly, domestic operations contributed to 88.37% of total profits for the
same financial year.
Subsidiaries of SBI
State Bank of – Indore/ Bikaner and Jaipur/ Hyderabad/ Mysore/ Patiala/ Travancore
International presence
The Israeli branch of the State Bank of India located in Ramat Gan.
As of 28 June 2013, the bank had 180 overseas offices spread over 34 countries.
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Organizational Structure and Management of SBI
The management of the State Bank of India vests in a Central Board of Directors which
consists of:
A Chairman and a Vice-Chairman appointed by the Central Government
in consultation with the Reserve Bank of India.
Two Managing Directors appointed by the Central Board of Directors
with the approval of the Central Government.
Six directors to be elected in the prescribed manner by the shareholders
other than the Reserve Bank.
Eight directors to be nominated by the Central Government in
consultation with the Reserve Bank of India to represent territorial and
economic interests in such a manner that not less than two of them have
special knowledge of the working of the cooperative institutions and of
rural economy and the others have experience in commerce, industry,
banking and finance.
One director to be nominated by the Central Government.
One director to be nominated by the Reserve Bank.
Two directors to be appointed to represent the officers and the staff of the bank.
Explicit and implicit institutional rules and policies designed to provide a structure where
various work roles and responsibilities are delegated, controlled and coordinated.
Organizational structure also determines how information flows from level to level within
the company. State Bank of India’s organizational structure is of two types:
Functional Structure: A functional organizational structure is a structure that
consists of activities such as coordination, supervision and task allocation. The
organizational structure determines how the organization performs or operates.
Divisional Structure: The Divisional structure or product structure is a
configuration of an organization, which breaks down the company into divisions that are
self-contained. A division is self-contained and consists of a collection of functions that
work to produce a product.
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State Bank of India’s organizational structure is mainly divisional at Apex Level,
although as we percolate downwards, it becomes largely functional.
State Bank of India’s organizational structure can be segregated into four main
departments based on business groups as seen in the figure 1, that fall directly under the
chairman of Sate Bank of India. A separate Managing Director (MD), directly reporting
to the Chairman, heads each department:
International Banking (IB)-The Treasury Segment includes entire investment
portfolio and trading in foreign exchange contracts and derivative contracts.
Central Banking Group (CBG)-The Corporate / Wholesale Banking segment
comprises the lending activities of Corporate Accounts Group, Mid Corporate Accounts
Group and Stressed Assets Management Group. These include providing loans and
transaction services to big size corporate and institutional clients and further includes
non-treasury operations of foreign offices. The credit sanction of Rs. 100 crore per
company will fall under the jurisdiction of the Managing Director
National Banking (NB)-The Retail Banking Segment consists of branches in
National Banking Group, which primarily includes Personal Banking activities, including
lending activities to corporate customers having banking relations with branches in the
National Banking Group. This segment also includes agency business and automated
teller machines (ATMs).
Associates and Subsidiaries (A&S)-Other business units involve associate and
subsidiary banks and non-banking subsidiaries.
There are two more departments on the same level that are under the chairman as seen in
figure 1, namely:
Chief Vigilance Officer (CVO) - The Chief Vigilance Officer is appointed to
assist the Head of the Department/Organization in all vigilance matters. He will look after
activities including fraud detection and prevention of frauds.
Central Board Secretariat (CBS) – He revises the budget and delegates authority.
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Again, referring to figure 1, apart from these, there are several parallel business verticals
to help the main departments that are also controlled by the chairman:
Deputy Managing Director Mid-Corporate Group (DMD MC) - Provide loans to
Mid-corporate Group, pertaining to International banking.
Deputy Managing Director Stressed Assets Management (DMD SAM) - Handles
Recovery of bad loans/the accounts of large defaulters.
Deputy Managing Director Global Markets (DMD GM) – He is responsible for
handling foreign office and overseas branches.
Deputy Managing Director Chief Financial Officer (DMD CFO) - Handles the
balance sheet and is the head of accounting unit as well.
Deputy Managing Director Cross Selling and New business (DMD CS&NB)
-Responsible for selling other financial products, and providing corporate loans to new
ventures and businesses as well.
Deputy Managing Director Corporate Development Officer (DMD CDO) - He
handles the recruitment/training/accountability/transfers/postings/promotions.
Deputy Managing Director Chief Info Officer (DMD CIO) - He is responsible for
handling and providing all matters pertaining to the Right to Information Act.
Deputy Managing Director Chief Credit & Risk Officer (DMD CC&RO) - To
ensure that loan portfolio of bank is not subject to risk, he lays out plans and policies to
maximize recoveries and minimize risk.
Deputy Managing Director Information & Management Audit (DMD I&MA) -
Information & Management Audit Department supervises internal audit of all foreign
offices of the Bank, namely:
a. Home Office Audit carried out by officials identified by Information &
Management Audit Department.
b. Internal Audit conducted either by an official of the Bank or by an outsourced
firm of that country, where foreign office is located.
c. Management Audit of Representative Offices, Joint Ventures and Subsidiaries.
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Advantages of Functional Structure for State Bank of India:
Specialization—It ensures a greater division of labor and enables the concern to
take advantage of specialization of functions.
More efficiency—Efficiency of workers is increased as the workers and other
have to perform a limited number of operations and they get suggestions and instructions
from specialists.
Economy—Standardization and specialization in various fields facilitates
production on a large-scale resulting in economy in production.
Expansion—It offers a greater scope for expansion as compared to line
organization. It does not face the problem of limited capabilities of a few line managers.
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Span of Control
Span of Control is a term originating in military organization theory, but now used more
commonly in business management, particularly in human resource management. Span of
control simply refers to number of subordinates a supervisor has.
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SBI’s Span of Control
State Bank of India adopts the wider span of control. A very basic way to show this is
take the MD(National Banking’s Entire span of control throughout the country.
Expanding further, here are a few charts which will help make simple the Organizational
Structure, as well as the span of Control of the Company, ranging from the Chairman,
right to the branch manager of the Bank.
The Chairman is the Head of the Central Management. Committee who is appointed by
the Government of India in consultation with RBI.
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The Chief General Manager will be assisted by four Circle Officers at the DGM cadre
in the areas of bank development, credit, finance and vigilance.
The State Bank of India has 14 Local Head Offices, which are also called
‘Offices at the Circles’ located at state head quarters. The heads of all LHOs are
directly responsible to the Chairman of the ban. The Circle Office has the jurisdiction of
all Modules of the bank attached to it.
The General Manager Personal and Development Banking is assisted by four Assistant
General Managers (AGMs) in the areas of administration, personal, development and
expansion. The General Manager Commercial and International Banking is assisted by
four AGMs in the areas of premises, computers, accounts and policy and decision
making.
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There are 58 modules headed by a Deputy General Manager. The modules cordinate the
activities of the bank through regional offices. The heads of the regional offices and the
branches headed by Assistant General Managers will directly report to the Deputy
General Manager of a module.
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The organization chart of a branch is shown in Exhibit No.3.5. A branch is
the first level office having direct interaction with large number of customers.
The branch manager is the functional head of a branch. He is assisted by
managers, officers and clerks and the size of the staff is based upon the volume of
business.
Considerations
Although a wide span of control can save money, budget developers must be careful
about cutting costs when it comes to management.
Budget consultants tend to cut employees in middle management, but widening
the span of control can create more problems than the cost savings is worth.
Managers may begin to fall behind on deadlines or become unable to properly
manage their employees because there is not enough time for each task.
Also, Mangers have less control over their subordinates, leading to slackness.
Lethargy tends to creep in.
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There are policies in place for Business process reengineering, to improve control,
processes, etc.
At every level, management is aided by Secretariats to help establish control. The
Secretariat at every level has a administrative reporting and control function.
Apart from this, the bank provides Co-ordination platforms for brainstorming and
to maximize sales.
There is a well-defined system in the SBI regarding the decision making process.
Different officials depending upon their positions and also through committee
approach take financial decisions at various levels.
Centralized credit processing cells are being formed at certain center for sanction
of personal segment loans and loans under SIB segment.
Branches source the applications and forward them to the respective credit
processing cells, for their consideration
Centralization and decentralization in state bank of India regarding sanction of
loans, each officer of the Bank will consider loan proposals and take a decision in
terms of the scheme of delegation of powers, on the merits of the proposals.
If bank need to purchase any kind of equipment like computers or software branch
managers are required to take permission from the high authority.
Departmentalization
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Departmentalization involves the dividing of an organization into different departments,
which perform tasks according to the departments' specializations in the organization.
Departmentalization as a means of structuring an organization can be found in both
public and private organizations. There are three types of departmentalization in State
Bank of India:
Functional Departmentalization: An organization can be organized into
departments based upon the respective functions each performs for the organization.
Territorial Departmentalization: Organizing departments along geographic lines is
often a good idea for large multinational firms with offices around the world. All
activities related to the organization's activities in each region are handled by a
department in that region.
Product Departmentalization: An organization can also divide itself by its product
lines. It creates a department for each product and that department controls all activities
related to the product including development, production, marketing, sales, and
distribution.
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Referring to Figure 3, the Chief General Manager will have General Managers and
Assistant General Managers directly under them, according to functions and product.
Apart from this there are 58 modules controlled by Deputy General Managers
Refer to figure 4. The Deputy General Managers are also territorially controlling
modules. The heads of the regional offices and the branches
headed by Assistant General Managers will directly report to the Deputy General
Manager of a Module. Apart from this, departmentation is product and functional as well.
Refer to figure 5. The Assistant General Managers and Regional Managers are spread
across different regions. The Assistant General Manager again has branch managers
reporting to him, which are territorially spread and has other Chief/Deputy managers and
work staff, which are divided functionally. The Branch Managers have a mix of Product
and Territorial Departmentalization as well, with managers, and staff working under
them.
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Advanatges of Product Departmentalization:
The bank has various Branch units and admin offices containing
Compliance unit(Inspection and management audit dept), this comes under the control of
a Deputy Managing Director.
Every branch has an inspection audit, which are responsible for checking loan Portfolios,
individual accounts, etc.
One copy of the report is sent to the branch, one to regional office and one to corporate
center, this helps in rectification of mistakes done by each departments, this ensures
efficient work.
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Questionnaire
The following questions were asked to the sir to acquire information about the Bank:
1. Can you give me an idea about the span of control of SBI at various levels, and in
various regions? What are the factors that affect its Span of Control?
2. Does SBI face any grievances due to this system? How does the bank address
them? Any changes you plan on making?
3. A wide span of control leads to loss of control/overburdened superiors, how do
you address those issues?
4. Can you tell me about SBI’s Organizational Structure at various levels/ regions?
5. Also, can you tell me what the reasons are leading to this sort of Organizational
Structure?
6. Please give me an idea of the troubles faced due to this type of organizational
structure in SBI.
7. What are the methods adopted by the bank to overcome them?
8. Is SBI centralized or decentralized? Why?
9. Can you provide details of the type of departmentalization followed at various
levels/regions?
10. What are the advantages/disadvantages of the type of departmentalization SBI
follows?
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Verificaton Letter
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