SBI Mutual Fund: Who is the Real Beneficiary?

The State Bank of India (SBI), the largest Public Sector Bank(PSB) in India, faces criticism over its focus on floating subsidiaries like SBI Mutual Fund. Banking union leaders argue that these ventures divert the bank's attention from its primary role of attracting deposits and lending to borrowers. This shift, compounded by pressure on bankers to attract investments, raises questions about SBI's adherence to its public sector ethos.

Structure of SBI Mutual Funds:
SBI Mutual Fund operates as a joint venture between SBI and Amundi, a European asset management company. It manages assets across various funds, aiming to meet the investment needs of individual and institutional clients. The company is one of the largest mutual fund managers in India, leveraging SBI's vast customer base to expand its reach.

Concerns Over Profit-Driven Policies
Saji Varghese, an executive committee member of the State Bank of India Employees’ Federation (BEFI) and the All India Vice President of BEFI, has raised concerns about SBI's recent policies. “Lower expenses and higher profits have become the guiding principle,” Varghese told Kanal, attributing these changes to preparations for privatisation.

He criticised SBI’s reliance on Third Party Products (TPPs) like SBI Mutual Fund, stating that these policies primarily benefit large corporates. “The model of SBI Mutual Fund uses depositors’ money to benefit large corporates. Common depositors have no say in the choice of companies for investment, and no public sector undertakings benefit from these investments,” Varghese explained.

Impact on Core Banking and Deposits
The shift in SBI’s focus has affected its core banking operations. “The old school banking principle of attracting deposits by offering interest and lending the money to borrowers has been sidelined. The major objective of bank officers has become the sale of TPPs and diverting deposits to mutual funds,” Varghese stated. He added that the pressure to meet unrealistic sales targets has adversely affected Current Accounts-Savings Bank Accounts (CASA) and Fixed Deposits (FD), further straining the bank’s traditional operations.

Employee Challenges and Market Dynamics
Bank employees are reportedly facing significant pressure to sell TPPs. Shahil (name changed), an SBI officer, attributed this shift to changing market preferences. “The younger generation prefers taking risks for higher returns rather than relying on the security of deposits. Mutual funds are an option for them,” he said.

However, Shahil acknowledged the burden of unofficial targets communicated through informal channels like WhatsApp groups. “There is more emphasis on SBI Life Insurance as it yields maximum commission for the bank, unlike SBI Mutual Fund. This aims to increase profitability under the category of other income,” he added.

Read More : SBI Life Cross-selling Targets Spark Concerns Among Bankers

Ethical Concerns in Mutual Fund Operations
The ethical implications of channelising funds from depositors to mutual funds have been a contentious issue. Devidas Tuljapurkar, the All India Joint Secretary of the All India Bank Employees’ Association (AIBEA), criticised this practice. “Savings of the common man are being channeled to the speculative share market for the benefit of corporates,” Tuljapurkar told Kanal. “AIBEA has been opposing such deviations from core banking activities right from their inception”, he added.

“Once you attract deposits to mutual funds, the actual deposits with the bank diminish, leaving lesser funds to lend to borrowers. This contradicts the role of SBI as defined by the Act passed by Parliament. Fundamentally, running asset management companies is not an objective of a public sector bank”, the veteran union leader explained.

Potential Shift Towards Privatisation
Banking union leaders have warned that these policies align with a broader shift towards privatisation. Varghese highlighted the implications of such moves, stating, “Manpower is being wasted, and all categories of staff are subjected to unbearable work pressure.” He cautioned against the possibility of SBI transforming from a public sector entity to a private corporate entity, further questioning its alignment with the objectives set at the time of nationalisation.

As India’s largest PSB, SBI holds a vital position in the nation’s financial ecosystem. However, concerns raised by union leaders and employees regarding the prioritisation of mutual funds and other TPPs underscore the need for introspection. Addressing these issues is crucial to maintaining SBI’s public sector role and ensuring that its policies align with the broader interests of employees, depositors, and the nation.