SBI eyes Mumbai flats for execs

Mumbai: State Bank of India (SBI) is looking to buy 60 apartments in upmarket south Mumbai for ₹500 crore to house executives, underscoring how state-run banks offer generous perks to compensate for differences in remuneration with private sector rivals.

India’s largest lender has called for applications from architects interested in the project. They will be selected through a design competition. The architect, who will double as a project management consultant, will help supervise work on these apartments, which will be either ready or under construction, preferably available in a block exclusively for SBI.

The bank is keen on South Mumbai neighbourhoods such as Mahalaxmi, Parel, Lower Parel and Worli, showed the document reviewed by Mint. The architect will be paid a professional fee of up to 0.5% of the total project cost.

Meanwhile, SBI already has about 500 apartments of one, two and three BHK (bedroom, hall, kitchen) sizes for its employees across Mumbai.

SBI’s willingness to spend on employee housing highlights the role of perks in retaining talent at the bank. At a time when private sector peers have seen significant attrition, especially in junior levels, SBI reported a 3% attrition, including superannuation and voluntary retirements, in FY23. Rival public sector lender Bank of Baroda (BoB) saw a 1% attrition in the same period.

In comparison, attrition at HDFC Bank stood at 34.15% and ICICI Bank at 30.9% in FY23, data from annual reports showed. A spokesperson for SBI said that “as a policy (the) bank does not comment on such matters”.

Apart from job security and perks, many employees stick to public sector banks because they offer wider exposure to various aspects of banking than private lenders, where internal portfolio changes are few.

“The zonal head of a PSU bank handles a much larger P&L than a private bank employee of the same level,” said Monica Agrawal, managing director (financial services), Asia Pacific India lead–board and CEO services at Korn Ferry.

Benefits such as housing, pension and medical are a big plus for public sector banks, Agrawal said. In rare cases, when chief general managers or executive directors feel they cannot climb the ranks further, they are open to private banks. Some said that while PSU employees are at a salary advantage in the initial years, growth slows down later.

“The compensation structure at PSU banks is [better when compared with] private firms at the junior levels, [but] at mid or senior levels, where private banks start paying significantly better, typical PSB employees become more entrenched in their organizations and ways of working and consequently the barriers to exit become much higher,” said Anandorup Ghose, partner, Deloitte India. Ghose said wage negotiations and changes in benefits take time in the public sector and require discussion with unions as well. State-owned banks, he said, do not have instances of long-term incentives which have been discussed in the past but have not yet been adopted as a part of the compensation structure.

Last year, SBI decided to liquidate its real estate management subsidiary. Incorporated in June 2016, SBI Infra Management Solutions Pvt. Ltd used to look after buying, selling or leasing premises, providing advisory services on existing and upcoming business centres. It also planned, executed and monitored the construction of new buildings, interiors and furnishing of all SBI premises, among others.

According to the subsidiary’s FY21 annual report, it was severely affected by the covid-19 pandemic in general and by the countrywide lockdown in particular during the first half of FY21. “Entire activities were on hold countrywide for a few months, and later, activities were resumed but on a low scale due to scarcity of labour and materials,” it said.

It added that operations were suspended from January 2021 due to rollback of all projects on “as is where is basis” by SBI, its only customer. “To reduce the fixed cost, the management of the company then decided to repatriate all officials deputed from SBI back to their parent organization,” as per the annual report cited above.