Setty, who took over from Dinesh Khara as chairman of India’s largest lender a year ago, has informed the subsidiaries that since salaries, especially of the top brass, are benchmarked to industry standards, they must perform to justify that.
“There is a message from the top that performance is key and the benchmarks are the peers in the private sector and the broader industry that each of the subsidiaries belongs to,” the person cited earlier said on the condition of anonymity.
SBI has 18 subsidiaries in India, two of which—the life insurance company and its credit card business—are listed. The performance review will start with two of the seven frontline subsidiaries.
The person quoted earlier said the state-owned bank wants to start this exercise at SBI Card and SBI Caps, and then move on to insurance and other subsidiaries. SBI Card does not have a publicly traded comparable peer, and SBI Caps is unlisted.
The recent exits at SBI Capital Markets were a result of this approach, the person said. Mint reported in April that SBI’s investment banking and project advisory arm was undergoing a restructuring exercise, leading to exits of at least three senior executives.
“SBI is justified to want more from its subsidiaries,” Ashutosh Mishra, head of institutional equities research, Ashika Stock Broking. “They have been using the SBI brand name and its reach to distribute their products, and it is only fair that they give quantifiable returns to the bank.”
Queries emailed to SBI, SBI Caps, SBI Card, and SBI General Insurance remained unanswered. A spokesperson for SBI Life Insurance said it does not “comment on speculations”.
The push for better performance coincides with a government nudge to public-sector banks, asking them to monetize their stakes in subsidiaries. As a precursor, banks should improve governance and professional decision-making and bring greater operational efficiency to their subsidiaries, news agency PTI reported on 29 June, citing unnamed sources.
Quest for leadership
Although SBI has shown strong performance and is valued higher than its closest state-owned peer by total loans—Bank of Baroda—it still lags private sector lenders. SBI traded at 1.5 times its book value in FY25, while Bank of Baroda, HDFC Bank and ICICI Bank traded at one time, 3 times, and 3.3 times, according to Motilal Oswal Financial Services.
After announcing the bank’s June quarter results on 8 August, Setty told reporters that the bank “will continue to nurture these subsidiaries and maintain leadership positions in their respective businesses.” Setty said on 11 August that it is “seriously looking” at listing its general insurance and asset management businesses, the Hindu Businessline reported.
Since being named chairman, Setty has been pushing to bring in more business and improve performance, said another person, who also spoke on the condition of anonymity.
Succession planning
The first person said succession planning at certain frontline subsidiaries needs more thought to prepare the next rung of leadership to take over when required. It is not just about performance since some of these subsidiaries are outpacing the market in growth, he said.
“The bank has noticed that some department and vertical heads have stayed around for years without properly creating a pipeline of talent to come up the ladder,” the first person said. Employees of subsidiaries should be rotated within these companies so that they get exposure to various business functions.”
While those like the insurance subsidiaries are doing far better than peers, some have underperformed the market.
For instance, SBI Card, the second largest by the number of cards and the third largest by customer spends in FY25, has consistently faced higher credit costs. A key metric to gauge the quality of a lender’s portfolio, credit cost is the total provisions and write-offs as a percentage of assets. In Q1 FY26, it stood at 9.6%, up 58 basis points from the previous quarter and 111 bps higher than a year earlier.
SBI Caps, which leads the league tables in debt advisory, has been losing ground to newer players in the last few years. The firm has also not been able to scale up its advisory business when it comes to deal-making. This, coupled with intensifying competition in the advisory space, has likely led to the restructuring, Mint reported in April.
“SBI Cards has once again delivered what’s become its most consistent metric—elevated credit costs,” analysts at Sanford C. Bernstein (India) said in a note to clients on 25 July.
It said that despite hopes that the previous quarter (Q4 FY25) marked the bottom, the company posted yet another disappointing set of results, with credit costs rising further to 9.6% and dashing expectations of a quick turnaround. According to Bernstein analysts, the management attributed the increase in credit costs to higher expected credit loss (ECL) provision requirements, implying that losses were higher than what was modelled, requiring higher provisions for certain assets.
“That said, if the past four–five quarters are any guide, the market reaction may prove fleeting—a brief dip, renewed hopes of a bottom, and another rally, all in the recurring hope that next quarter will somehow offer an alternate reality.”
