Description
Reduction of Banking Cost and Adding Services; Innovative ideas that may spur next banking reforms or market practice transformation
Enhancing the Relationship Value Through Reduction of Cost of Bank/New Services
By: Amit
State Bank of India
SBI Corporate Business Lines
? ?
SBI offers its client a broad suite of Corporate banking products and services Being the largest commercial bank, SBI looks to assist clients in executing their growth strategies, through geographic and product diversification, by focusing on solutions to clients needs
SBI offers a multi-disciplinary approach to Corporate and Government Banking
Government Grants Channeled through SBI ? For Infrastructure Projects ? For employment generation ? For covering losses on ministries
?
Other Government Business Tax CollectionsCBDT,CBEC ? Ministry Supplier Payments ? Employee Salaries
? ?
PSU Banking Maharatna - 6 Navratna-16 ? Miniratna ? Cat 1-48 ? Cat-15 ? PF and Trust accounts
?
Large Corporates CAG Customers ? 735
?
Mid Corporates MCG Customers
2
Large Corporate (E-Invoicing & Payments for CAG
Customers of SBI)
Introduction and overview
SBI is a Dominant player in Corporate banking & PSUs space & has ability to shape trends in this sector Most of its 735 CAG Clients have sophisticated ERP systems for processing internal workflow as well as transactions with external entities viz. vendor & dealers. The vendors & dealers of the clients are mostly SMEs with limited automation. SBI which can host solution for Electronic Invoicing & Presentment ability to cater to the needs of those SMEs banking with SBI. • For Dealers, the CAG/PSU clients can also have direct debit mandate for accounts. Result: Secured Receivables. • For Vendors, Invoice input can be taken by the ERP of CAG clients via SBI and its processing can be monitored by Co. management thus enhancing transparency.
SBI has reach, specialist knowledge and systems to effectively cater to large corporate customers in its expansion plans
Opportunity
Possible Revenue opportunity for SBI. Turnover of the CAG clients = 20,00,000 Cr. (Note Combine T/O of 8 top PSUs viz. IOC, BPCL, HPCL, ONGC, NTPC, SAIL, BHEL & MRPL is 7,65,877Cr. Source: Rediff.com) If SBI can attract/enhance its share by 10% of the market size; Transaction flows = 2,00,000 Cr. Growth in CA Float @ 4% of the Transaction Flow = 8,000 Cr Annual incremental revenue @ 5% of the enhanced Float value = 400 Cr.
3
Large Corporate
Traders (Agri.))
Introduction and overview
(Confirm Invoice/BoE Payments for
SBI is amongst the Most Trusted Brand with a vast reach & goodwill amongst Urban & Rural masses in India SBI can further enhance its goodwill by transforming payment mechanism in settlement of Wholesale Agri Trade. India’s GDP is approx. $1.43 trillion & share of Agriculture is 16.1%. (Source CIA World Fact book). Thus, in INR terms Indian Agri has an annual output of 10,00,000 Cr. Most of this trade is primarily conducted using “Cash” though data on exact proportion is not available.
SBI has reach, specialist knowledge and systems to effectively cater to large corporate customers in its expansion plans
This is because the producers have little trust on buyers whom they contact at “mandi” & payment mechanism such as cheques or even bank drafts Opportunity do not seem to be a feasible option to be exchanged for their “produce for the season”. The producers generally are banking with banks that SBI to enable Producers (who may be a non-customer) and who acts as Drawer and raise an Invoice and a Bill of have presence in or around their villages and the Exchange (at sight) on “mandi trader” (drawee & a customer of SBI). A facility to upload scanned image of an LR may same may not be having branches in City. Thus also be provided, if required. The Electronic documents would capture the banking information of the Producer as agri producers are compelled to have the risk of well as the mobile contact details. Once the Documents are accepted for payment by the “mandi trade”, his account carrying “cash” from city back to their villages shall get debited by the amount of payment and the payment request shall be posted for crediting the Producers under challenging security conditions. account (this can be done via Bank transfer, NEFT, RTGS or Bank Draft). The system will also be capable of printing the bank drafts which shall then be posted to the Producer’s bank. An SMS confirmation for the amount will be immediately sent on the Producers mobile. Initially, SBI shall have to put up a Kiosk at Mandi to promote the service & also have a back end Call/Processing center support (may be outsourced) for keeping track of transactions & Bank Revenue Opportunity for SBI: SBI can be a First mover in this service and shall have an advantage over other banks draft payment coordination for producers. due to its vast network & goodwill. It is already a big player in Agri Loans market & providing additional services shall enhance its goodwill. SBI can target to enhance its share by an additional 25% of the Total agri trade market to have a transactional flow of 2,50,000Cr. This has possibility to garner additional float @ approx. 4% or 10,000Cr. The revenue opportunity at 5% income is approx. 500Cr.
4
Large Corporate
Customer)
Introduction and overview
(Cash on Demand for Corr. Bank
SBI is a Dominant player in Domestic Correspondent banking space & various banks in India rely on services provided to them by SBI to support their customers SBIs vast reach enables it to conduct various banking transactions in almost any location in India. This network is already being leveraged upon by other banks to support the client transactions in locations where they are not able to support their client’s transactions on their own. This is done via SBIs support & service offering to these Corr. Banks. SBI can tap this market further support Withdrawal of Bulk Cash or currency notes either through its branch network or via. Cash Delivery from its branches/currency chest for clients of its Corr. Bank. A service charge (over & above actual cost) can be levied to Corr. Banks for the service. SBI which can host solution to support such a function.
SBI has reach, specialist knowledge and systems to effectively cater to large corporate customers in its expansion plans
Opportunity
Banks in India including SBI have to hoard Currency Note/Cash much above the prescribed CRR levels in the Currency chest, due to market conditions. This Possible Revenue opportunity for represents money ‘Cash’ is a cost to the bank as it SBI. that has deposits of unable to deploy in profitable current CRR stands at 6%. SBI’s average cash holding shall be SBI the bank was approx. 8,00,000 Cr. And the opportunities over the prescribed CRR. instruments. approx. 1.5% such as money market Besides banks also have to spend for infrastructure So store this money, in insurance & security. 60,000Cr. In Cash holding. to instead of 48,000Cr. SBI might be holding If average Cash holding can be brought down by 5,000Cr. Then SBIs income has potential to go up by 250Cr. calculated @ 5% for suitable deployment of these deposits. Reduction in Infrastructure cost, Insurance & security shall be other benefits besides enhancing goodwill amongst customers.
5
Thank You
doc_390753019.ppt
Reduction of Banking Cost and Adding Services; Innovative ideas that may spur next banking reforms or market practice transformation
Enhancing the Relationship Value Through Reduction of Cost of Bank/New Services
By: Amit
State Bank of India
SBI Corporate Business Lines
? ?
SBI offers its client a broad suite of Corporate banking products and services Being the largest commercial bank, SBI looks to assist clients in executing their growth strategies, through geographic and product diversification, by focusing on solutions to clients needs
SBI offers a multi-disciplinary approach to Corporate and Government Banking
Government Grants Channeled through SBI ? For Infrastructure Projects ? For employment generation ? For covering losses on ministries
?
Other Government Business Tax CollectionsCBDT,CBEC ? Ministry Supplier Payments ? Employee Salaries
? ?
PSU Banking Maharatna - 6 Navratna-16 ? Miniratna ? Cat 1-48 ? Cat-15 ? PF and Trust accounts
?
Large Corporates CAG Customers ? 735
?
Mid Corporates MCG Customers
2
Large Corporate (E-Invoicing & Payments for CAG
Customers of SBI)
Introduction and overview
SBI is a Dominant player in Corporate banking & PSUs space & has ability to shape trends in this sector Most of its 735 CAG Clients have sophisticated ERP systems for processing internal workflow as well as transactions with external entities viz. vendor & dealers. The vendors & dealers of the clients are mostly SMEs with limited automation. SBI which can host solution for Electronic Invoicing & Presentment ability to cater to the needs of those SMEs banking with SBI. • For Dealers, the CAG/PSU clients can also have direct debit mandate for accounts. Result: Secured Receivables. • For Vendors, Invoice input can be taken by the ERP of CAG clients via SBI and its processing can be monitored by Co. management thus enhancing transparency.
SBI has reach, specialist knowledge and systems to effectively cater to large corporate customers in its expansion plans
Opportunity
Possible Revenue opportunity for SBI. Turnover of the CAG clients = 20,00,000 Cr. (Note Combine T/O of 8 top PSUs viz. IOC, BPCL, HPCL, ONGC, NTPC, SAIL, BHEL & MRPL is 7,65,877Cr. Source: Rediff.com) If SBI can attract/enhance its share by 10% of the market size; Transaction flows = 2,00,000 Cr. Growth in CA Float @ 4% of the Transaction Flow = 8,000 Cr Annual incremental revenue @ 5% of the enhanced Float value = 400 Cr.
3
Large Corporate
Traders (Agri.))
Introduction and overview
(Confirm Invoice/BoE Payments for
SBI is amongst the Most Trusted Brand with a vast reach & goodwill amongst Urban & Rural masses in India SBI can further enhance its goodwill by transforming payment mechanism in settlement of Wholesale Agri Trade. India’s GDP is approx. $1.43 trillion & share of Agriculture is 16.1%. (Source CIA World Fact book). Thus, in INR terms Indian Agri has an annual output of 10,00,000 Cr. Most of this trade is primarily conducted using “Cash” though data on exact proportion is not available.
SBI has reach, specialist knowledge and systems to effectively cater to large corporate customers in its expansion plans
This is because the producers have little trust on buyers whom they contact at “mandi” & payment mechanism such as cheques or even bank drafts Opportunity do not seem to be a feasible option to be exchanged for their “produce for the season”. The producers generally are banking with banks that SBI to enable Producers (who may be a non-customer) and who acts as Drawer and raise an Invoice and a Bill of have presence in or around their villages and the Exchange (at sight) on “mandi trader” (drawee & a customer of SBI). A facility to upload scanned image of an LR may same may not be having branches in City. Thus also be provided, if required. The Electronic documents would capture the banking information of the Producer as agri producers are compelled to have the risk of well as the mobile contact details. Once the Documents are accepted for payment by the “mandi trade”, his account carrying “cash” from city back to their villages shall get debited by the amount of payment and the payment request shall be posted for crediting the Producers under challenging security conditions. account (this can be done via Bank transfer, NEFT, RTGS or Bank Draft). The system will also be capable of printing the bank drafts which shall then be posted to the Producer’s bank. An SMS confirmation for the amount will be immediately sent on the Producers mobile. Initially, SBI shall have to put up a Kiosk at Mandi to promote the service & also have a back end Call/Processing center support (may be outsourced) for keeping track of transactions & Bank Revenue Opportunity for SBI: SBI can be a First mover in this service and shall have an advantage over other banks draft payment coordination for producers. due to its vast network & goodwill. It is already a big player in Agri Loans market & providing additional services shall enhance its goodwill. SBI can target to enhance its share by an additional 25% of the Total agri trade market to have a transactional flow of 2,50,000Cr. This has possibility to garner additional float @ approx. 4% or 10,000Cr. The revenue opportunity at 5% income is approx. 500Cr.
4
Large Corporate
Customer)
Introduction and overview
(Cash on Demand for Corr. Bank
SBI is a Dominant player in Domestic Correspondent banking space & various banks in India rely on services provided to them by SBI to support their customers SBIs vast reach enables it to conduct various banking transactions in almost any location in India. This network is already being leveraged upon by other banks to support the client transactions in locations where they are not able to support their client’s transactions on their own. This is done via SBIs support & service offering to these Corr. Banks. SBI can tap this market further support Withdrawal of Bulk Cash or currency notes either through its branch network or via. Cash Delivery from its branches/currency chest for clients of its Corr. Bank. A service charge (over & above actual cost) can be levied to Corr. Banks for the service. SBI which can host solution to support such a function.
SBI has reach, specialist knowledge and systems to effectively cater to large corporate customers in its expansion plans
Opportunity
Banks in India including SBI have to hoard Currency Note/Cash much above the prescribed CRR levels in the Currency chest, due to market conditions. This Possible Revenue opportunity for represents money ‘Cash’ is a cost to the bank as it SBI. that has deposits of unable to deploy in profitable current CRR stands at 6%. SBI’s average cash holding shall be SBI the bank was approx. 8,00,000 Cr. And the opportunities over the prescribed CRR. instruments. approx. 1.5% such as money market Besides banks also have to spend for infrastructure So store this money, in insurance & security. 60,000Cr. In Cash holding. to instead of 48,000Cr. SBI might be holding If average Cash holding can be brought down by 5,000Cr. Then SBIs income has potential to go up by 250Cr. calculated @ 5% for suitable deployment of these deposits. Reduction in Infrastructure cost, Insurance & security shall be other benefits besides enhancing goodwill amongst customers.
5
Thank You
doc_390753019.ppt