The Hindu : South Indian Bank: A bank with traditional flavour

Online edition of India's National Newspaper
Monday, Feb 16, 2004

Business

Business

South Indian Bank: A bank with traditional flavour

A. Sethumadhavan

THE THRISSUR-based South Indian Bank was formed 75 years ago by a group of 44 persons who mustered about Rs. 22,000 with a clear vision of freeing the small traders from the clutches of moneylenders. This is significant, notes A. Sethumadhavan, who took over as chairman in June 1999. The business turnover is now around Rs. 12,000 crores for a bank that was not promoted by big business groups but by some middle-class persons and for the middle-class.

In the early Sixties, when the banking industry in Kerala was going through a turmoil, SIB took over 15 smaller banks, mostly in the northern parts of the State. Now it has 401 branches and 51 extension counters spread over 14 States and Union Territories. By the end of this financial year, it will have 410 branches and two more regional offices to cover the Palakkad area and the Bangalore region. The bank has targeted a net profit of Rs. 80-85 crores for this year.

Among the old private sector banks, SIB has been rated as the best by the Reserve Bank of India. The capital adequacy ratio as on December 31 was 12.74 per cent and yet it is going to the capital market shortly with a rights issue that will raise its net worth to around Rs. 500 crores. With this, the bank will be reaching a critical size to be recognised as a Kerala-based bank with national presence.

On the technology front, the SIB has taken a major initiative. Though a traditional bank, it took a "very bold decision'' about three and a half years ago to upgrade its technology to the latest possible one. It tied up with Infosys Technologies and even today it is the only bank of its kind to go for a centralised core banking solution. By March, about 210 branches will be networked with the centralised data centre at Kochi.

The decision to go for hi-tech was taken some years ago and the investment was about Rs. 35 crores. The project is over, ahead of schedule.

With this technology, the bank has been able to provide anywhere banking and has also launched a global debit card. It has also launched netbanking facility. It has tied up with ICICI Prudential for insurance and with United India for general insurance. Now varied kinds of financial services are being provided under one roof, a kind of financial supermarket. The bank, Mr. Sethumadhavan says, has drawn up a perspective plan for the next five years at the end of which the total business is to reach a level of Rs. 23,000 crores with over 450 branches.

The Chairman does not see any kind of take-over threat to his bank. The shareholding is widely scattered (there are about 90,000 shareholders), and the single largest shareholder is ICICI with 11.38 per cent and some other institutions hold 3 or 4 per cent. In the present scenario, "hostile take-over'' is ruled out because anybody wanting to acquire above 5 per cent has to get prior clearance from the RBI."We are a bank with traditional background and traditional flavour; I do not think that any foreign bank or foreign player would take a fancy for our kind of bank,'' the Chairman avers.

Basically the bank has targeted an organic growth of reasonable percentage, year after year. It has doubled its total business during the last three years, something which is phenomenal for the old private sector banks. (from Rs. 5,000 crores to Rs. 10,000 crores). With this kind of growth, the bank is sure that it can manage its affairs on its own. After the rights issue, with a net worth of Rs. 500 crores, SIB will become a mid-size bank. At the same time, "we would not be averse to take over another bank if there is synergy,''Mr. Sethumadhavan says.

In the platinum jubilee year, Mr. Sethumadhavan is aiming at a change of mindset. With the technological backbone, the staff has been told to blend technology with tradition.

"We do not want to be known as a hi-tech bank; we want to leverage the best technology, to build up volumes and cut costs.'' The major strength all along had been the personalised service at the counter. Technology cannot substitute human endeavour and human efforts, Mr. Sethumadhavan adds.

K. Venkiteswaran

in Kochi

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