SBI will have a 20 per cent equity in the fund, with a domestic investor holding the remaining equity, said SBI Chairman O P Bhatt.
Speaking on the sidelines of the Indian Banking Conference at the Indian School of Business (ISB), Bhatt said the fund would be set up in about six months and would meet loan requirements in the range of Rs 10 crore (Rs 100 million) to Rs 100 crore (Rs 1 billion).
The first tranche of the fund will be Rs 500 crore, which will be gradually increased. It will be managed by external agents and will remain outside the purview of SBI. It will also advise clients on matters relating to taxation and trade apart from helping successful companies list on the Bombay Stock Exchange (BSE).
With the law ministry giving its go-ahead for the merger of State Bank of Hyderabad with SBI, the bank is now awaiting the Cabinet's nod. He, however, said it would not be possible to tell when the merger would be complete. It would first merge State Bank of Saurashtra with itself and then decide on others.
"It is an amalgamation of family units,'' he said, adding customers would get the added benefit of SBI's vast network in the country and abroad too. The mergers would also increase the efficiency and reduce costs and time, he added.
"We will look for mergers outside the family once the in-house banks are brought under one roof,'' the chairman said. On aligning with the unions, he said several members were positive about the development and did not foresee any major hindrance.
The mergers would put the banking industry in a new perspective and would also prompt other banks to go the SBI way, he said.
On retaining talent, he said salary revision was due in November. "There would be a hike in salaries shortly as discussions are under way." SBI has already issued a notification to fill 20,000 posts across all categories to give an impetus to the customer-centric exercise that the public sector bank has taken up.
It is also evolving an incentive model to motivate staff. "This one would be different from what private banks are giving,'' he said, refusing to draw parallels between the two. The bank is consulting faculty from the Indian Institutes of Management on evolving ethical incentives.
Besides, it is revamping about 3,000 branches and also working on a computer-based queue management system, which would enable customers to seek an appointment before visiting the bank.
Earlier, addressing the conference, Bhatt said it had become more difficult for public sector banks to serve various sectors of the economy in the post-reforms period. Talent, operational control and ownership were the biggest issues facing these banks.
According to him, PSU banks are unable to attract entry-level talent due to rigid recruitment policies, slower growth, lower compensation and perceived lack of operating freedom.
On the operations front, fear of accountability, the audit of the Comptroller and Auditor General and the Central Vigilance Commission guidelines come in the way of decision-making, he said.
Speaking on the occasion, Axis Bank Chairman and Chief Executive Officer P J Nayak said technology and relationship management were key to the success of private sector banks in India.
Citigroup India Chief Executive Officer Sanjay Nayar said the banking system in India was highly inadequate and highly under-capitalised.
"The banks needed incremental ability to expand physically as well as on the capital side," he added.
McKinsey & Co Director Joydeep Sengupta said the Indian banking sector "fares poorly" on financial access and deepening. The four metropolitan cities account for 50 per cent of loans. This is a "very concentrated sector," he added.
