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How SBI reclaimed the top slot

September 17th, 2009 2 comments

The story of Phoenix may be a myth, but its alter ego reflections in brands is not. State Bank of India (SBI) is one such rare brands which have come back to life from its ashes. Though many may counter that SBI was never facing extinction, but nevertheless one has to agree that five years back the SBI brand was looking at the last leg of evolution cycle, desperately in need for some fresh idea or a fresh vision or pure luck. Well as luck would have it (no pun intended) the latter two happened for this massive amalgamation of nationalized banks cluster. The fresh vision came in form of Om Prakash Bhatt and the luck came in form of 2008-09 world recession triggered by the collapse of financial system worldwide.

Bhatt started off as a probationary officer in the State Bank of Indian in 1972 and worked his way up the ladder. Ironically, banking was not his first choice for a career. He joined the bank only after he proved to be “underage” to appear for the Indian Administrative Service. After that it was a dance of his skills, within an year of taking over as chief general manager of the bottom-ranked north-eastern circle of SBI, Bhatt lifted the circle to the No. 1 position. In his next assignment as the managing director of the State Bank of Travancore, Bhatt changed the profile of a traditional traders’ bank into a retail bank and aggressively sold mutual fund and insurance products.

Bhatt was later elevated to chairman in July 2006 . The first thing he did was to stop the roll-out of core banking solutions in SBI branches. TCS was implementing the computerization of SBI banks and Bhatt made them do about 700 changes to the project they were already rolling out as he felt it was just a “mechanical roll out of technology without checking of it was benefiting customers”, which seems to true for image of SBI at that time! Bringing a new word AUDACITY to SBI he opened about 955 branches in just 5 months. He plans to use ATMs for issuing cheque books and bill payments apart from cash dispensing. Results? “Our home loan portfolio has grown 27% this year, higher than the competition. Similarly, the auto loan portfolio’s growth has been 30%. You can’t call SBI a sleeping elephant any more,” said Bhatt with a wide grin in his interview in May 2008.

With him at center-stage of aggression, SBI has managed to come up with campaigns such as Surprisingly SBI. Although this campaign caught people unaware and many wondered why such an old and reputed bank went for “surprising” campaign, but it did a huge publicity of banking facilities to the younger generation. Thanks to great execution, some of the ads like “Chiman lal Charlie“, guy with no pants etc made a strong mark in mind of customers. The brand recall of SBI shot through the roof! It had just to connect old  faith with new customer and these ads did brilliantly. It was backed with elderly couple ads. Stage was set for the luck to come and make the party louder for SBI.

Sep 2008 saw the unimaginable sublimation of Lehman Bros empire, and with it eroded the reputation of and trust in the financial world. Suddenly the private banks saw their liquidity drying up. The strongest competitor and the only other bank apart from SBI in world’s top 500 financial services brands, ICICI, suddenly was again caught in bankruptcy rumors which erodrd the trust to great extent. People were now chanting PSU banks and running there. And with high brand recall guess who came to the mind? Yes, the war was won by SBI.

Bhatt has become businessman of the year, 2009 and is now in race for the Indian of the Year award instituted by CNN-IBN. HDFC chairman and member of the jury Deepak Parekh said of Bhatt: “OP Bhatt has proved that given the constraints of working in the public sector one can move forward….he has improved the results of the bank and has put State Bank of India on the global map.”

Since he took charge at India’s largest public sector bank in 2006, he has raised the banks market share and loans from 15% to 16.5% and deposits from 15% to 17.5%. He has also regained the top slot for market capitalisation, a position it lost to ICICI in 2007. And SBI has also taken over HDFC  in home loans. The State bank of India is now 29th most reputable company in the world according to Forbes.

sbi-advertising

Some stories make much great read once completed, you just read one of them. All the best SBI!

HIV wala okish, other two were senti i guess
Categories: Advertisement, Finance, Marketing Tags:

Tax Saving basics – I

February 17th, 2009 No comments
It is that time of the year again when we sift through our financials and make decisions as to where to invest to save the tax. As popularily said, we should save tax by planning instead of evading it. So I will be writing few posts on where all to save the tax from. This post lets have a look at LTA (leave travel allowance) options.

Leave Travel Allowance (LTA) Exemption

This is the allowance given by public sector companies under LTC rules and by private sector under fringe benefits (FB). The rules for this are set by government and not by the company. Here are the Ten Commandments for LTA:

  1. You can get LTA only if you have applied for leave from your company and have actually traveled. Only domestic travel is allowed on LTA, not international one.
  2. The entire cost of the holiday is not covered. Only the travel costs are covered; and the lodging sightseeing and food etc are NOT covered. Also you will have to show the ticket to claim your LTA.
  3. If you travel by car and it is owned by a central government organization like ITDC, the state government or the local body, then LTA is permitted. Some companies also accept plain taxi bills.
    If you could not get public transport and resorted to private transport like renting a car, get a bill issued by the rental company. If your employer does not accept the bill, you can always file an income tax return, claim an exemption and get a refund.
  4. LTA covers travel for yourself and your family. Family, in this case, includes yourself, parents, siblings dependent on you, spouse (even if your spouse is working) and children.
    For children born after October 1, 1998, the exemption is restricted to only two surviving children (unless, of course, one birth has resulted in multiple children like twins and triplets).
    If your family travels without you, no LTA can be claimed. You have to make the trip, either by yourself or, if claiming for your family, you should travel with them.
  5. LTA is not related to when you started your employment. The government fixes blocks of years. These blocks are not financial years (April 1 to March 31); they are calendar years (January 1 to December 31).
    The current block is 2006-09 — January 2006 to December 2009. The earlier one was from 2002-05 — January 2002 to December 2005. During this time period, a person is entitled to two LTA claims from this block.
  6. Though you can claim two journeys in a block of four years, you can claim the LTA benefit just once in a year. You cannot claim both the journeys in one year.
    So, while a person can get an income tax exemption for two journeys in a block of four calendar years, he can make a trip only once a year. If you make two trips in a year, you lose one. One-way out is to claim one and make your spouse claim the other.
  7. You can carry forward your LTA. One LTA can be brought forward and claimed in the first year of the next block.  Let’s say you do not take your LTA in 2006-09. Or that you use only one LTA. Don’t worry, you will be able to take the pending LTA in 2010. This means that, in the 2010-13 block, you will be totally entitled to the three journeys.
  8. If you switch jobs, you can get the LTA not only from your present organization but also from your former employer, if the concession is lying unutilized.
  9. You must take the shortest route to your destination to be eligible for LTA.
  10. If your LTA is not utilized, it gets added to your salary and you will be taxed on it.
Mode of journey and amount of fare you receive -
By Air : Economy class national carrier via shortest route.
By Railways : AC 1st Class Fare via shortest route.
By any other  mode of Transport : If recognized public transport exists, then the 1st Class Deluxe fare; else an amount equivalent to the AC 1st Class Rail fare.
Categories: Finance, Personal Finance Tags: , ,

Understanding importance of Banks – I

October 12th, 2008 2 comments

Since starting of this blog, I have tried to cover the topics for the people like myself, those who understand only basics of finance and not the luscious terms like hedge funds, leveraged buy outs, mortgage funds etc.
So we will be writing a series on the importance of banks, how they effect our financial ecosystem. In this first post, let us quote Ilian Mihov, Professor of Economics at INSEAD, France. Here is how he explains it -

Banks fulfill a very important role in the economy by matching borrowers and lenders. When we deposit $100 in a bank, the bank keeps, at most, two to three dollars in its vaults (in fact the money is often in the central bank), the remaining $98 or so is lent to a borrower.

Most businesses require loans for their normal operations. When the banking sector does not work properly, businesses cannot get loans and they have to curtail their production and lay off workers. As they curtail production, they demand fewer products from their suppliers and therefore their suppliers have to reduce their output and fire workers. If manufacturers cannot sell their goods because the firm downstream does not need as many products as before, they cannot generate enough revenue to repay their earlier loans. Businesses go bankrupt and banks experience further problems as their balance sheet deteriorates due to non-performing loans. At this point, banks want to lend even less because of the uncertainty generated from bankruptcies. As they lend less, the vicious circle continues – with producers cutting production and firing workers.

On the top of this, depositors start worrying about their deposits because the non-performing loans have made some banks go belly up – your bank has lent out your money to borrowers who cannot return it. Depositors start withdrawing their cash and banks have even fewer possibilities for lending as they have to hoard cash in case there is a run on the bank. If the financial sector does not work, the real economy can go into a deadly spiral and shrink by 30 per cent as during the Great Depression.
Categories: Finance Tags:

Four Weeks of Financial Turmoil

October 8th, 2008 1 comment
Last four weeks have sent the financial world in a full carnage, as bear guzzled up the giants who had been on bull rampage for quite some time now.

We are sure you would have read about what happened, how it happened and what can happen further, so here are some links to just epitomize the blood bath.
(All of these are either interactive or images)

Journey of the four weeks of dominoes turmoil

Price-Earning ratios graph, indicating when its time for stock to bond market shift

How the Credit Crisis Unfolded

A timeline of bailouts and buyouts of financial companies in US and UK

Sources: NY Times website

Categories: Economics, Finance Tags:

Economics of a non-cash transaction

October 1st, 2008 1 comment
You would have seen these notices outside shops

All Major credit cards accepted, Conditions apply
Condition: Bill should be atleast Rs.200

No return, No Exchange
2% extra on credit cards


This makes us wonder about the business model of a credit card and how the economies of a credit card transaction are placed between various entities involved in a transaction.

Ideally in a transaction, you would see two parties – an entity who pays and an entity who accepts; but to complete a credit card transaction you will need five entities to come and work in unison. (It may happen that some of these entities are same and not different)

Lets go through the last transaction you did when you bought that book for yourself. Say the book was of Rs. 100 and you paid through your ICICI Visa card and signed on the slip, showing HDFC name, which was kept by the merchant. Now as per the illustration below, Merchant would get back only Rs. 98.10 from Acquirer out of 100 and is paid 1.9% less. This 1.9% will now feed the rest of the three entities. And you will pay back full Rs. 100 to your credit card issuer, ICICI bank, at end of your billing period. But ICICI will give Acquirer (HDFC here), the one who placed the card reader in the shop, Rs 98.60 keeping Rs 1.40 to itself. So by now HDFC has already made Rs 0.50 (98.6-98.1). Now HDFC will give Rs. 0.07 to VISA while ICICI will give Rs. 0.08 to VISA.

Now above numbers are for transaction of Rs. 100 so use these numbers in percentage points and you get an idea of money interchanged per transaction in percentage. The numbers here are just illustrative and would change according to network, merchant type etc. But they do give a fair idea.

But then there are many ways of doing a non cash transaction these days: Credit card, Debit Card, Prepaid Card, PayPal/Google Checkout or Mobile payments…

The snapshot below lists the approximate processing fees charged by each major player in various payment instruments (ranging from Cash/Check to Credt & Debit Cards and Mobile Payments).

Categories: Economics, Finance Tags: