The 5 yrs that transformed State Bank of India

OP Bhatt will be most remembered for SBI's rights issue of Rs 20,000 crore, coupled with employee stock purchase scheme that no other PSU bank had ventured into. Besides, the bank also raised equity capital in 2008 when companies such as Wockhardt Hospitals and Emaar MGF pulled out their IPOs. It was a proof of shareholder faith in him.  The merger of SBI's associate banks with the parent was talked about since mid-nineties when McKinsey first suggested it. Mr Bhatt recognised the need to build a huge organisation without working at cross purposes. Fortunately for Mr Bhatt, his predecessor, AK Purwar had set the ball rolling by creating a platform for mergers. Mr Purwar ensured a common technology platform and systems and procedures at SBI and its associate banks. Mr Bhatt took it forward. He pushed merger of State Bank of Saurashtra with SBI at a time when the ruling party had a coalition with the conservative Left.  SBI's 8% fixed rate home loan scheme, in response to global crisis, gained enormous attention. Although, arch rival and HDFC chief, Deepak Parekh was quick to term it as a gimmick. Its humongous success forced rivals to launch similar schemes, which offered fixed rate in initial years and floating rate for the remaining term of the loan.  RBI's then Deputy Governor Usha Thorat expressed concerns over such loans, calling them teaser loans. In response, most home loan providers decided to withdraw such schemes from the market, except SBI. To make a strong case, RBI asked banks to set aside higher capital on such loans, probably to dissuade banks from offering such loans. Mr Bhatt, who felt that the bank's special loans can no way be called teaser scheme, declined to make any provisions for such loans.  "There is total transparency on it," said Mr Bhatt. "The customer is not taken by surprise. On the risk side, the eligibility is considered based on the highest interest charged at the time of giving loan. Neither is there opacity, nor is there risk."  Mr Bhatt, in fact, felt SBI was not given due credit. "We brought the home loan market back. Lakhs of people own their homes because we kept rates down. It pushed up the economy. But this is something that is not recognised by many."  But RBI remains worried about it - possibly relating it to the US sub-prime crisis that sank the global financial system. "Some of us have a strong apprehension that the motivation for introducing teaser loans was not product innovation, but to deprive existing floating rate home loan borrowers from the full benefit of declining interest rates, based on market realities," KC Chakrabarty, deputy governor at RBI, said in a recent interview. "A number of existing home loan borrowers did not get the benefit of lower interest rate."  His another clash with the regulator was when he guaranteed bonds of Tata Steel worth Rs 4,200 crore. RBI claimed that regulations do not allow banks to guarantee corporate bonds, while SBI stood by its client - the Tata Group, which was unable to raise funds for the Corus Group purchase. Disputes with RBI does not seem to cease. The banking regulator downgraded SBI by one notch to B- on grounds that the bank has made lower-than-required provisions for bad loans. The rating, which is highly confidential and is not made public, had upset Mr Bhatt, who recently made a case to RBI to review its rating. The biggest challenge for his successor would be to retain the aggressive brand that Mr Bhatt has created for the once sleepy bank.