The RBI has given preliminary approval to the State Bank of India for its subsidiary proposal to support operations, aimed at reducing the cost-to-revenue ratio.

The Reserve Bank of India has given preliminary approval to the State Bank of India for its operations support subsidiary proposal, which aims to reduce the cost/revenue ratio. Before launching the new branch in India, the bank will soon start a pilot program in selected areas. Dinesh Kumar Kara, president of SBI, said that the creation of a subsidiary for operational assistance is still in progress. His goal is to reduce price-to-income concerns. They already have authorization in principle from the RBI and we will start a test program soon.

SBI obtains approval from RBI to establish a subsidiary to support operations

SBI delays listing of mutual fund arm as the market remains volatileBy engaging with BusinessLine, Khara said the subsidiary will allow the provider to leverage its high labor cost for more productive services. SBI’s cost-to-income ratio stood at 53.3% in FY22, an improvement of 240 basis points over FY2019 levels. By comparison, the cost-to-income ratio of the top three private banks is much lower than that of SBI, at 35-40%. Therefore, a subsidiary aimed at improving operating efficiency can help India’s largest bank significantly improve its profitability over time. In FY22, SBI’s net interest margin was 3.15 percent, while the average for private banks exceeded 4 percent in FY22.

By bemaad

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