SBI chairman A. K. Purwar in Calcutta on Saturday. Picture by Kishor Roy Chowdhury

Calcutta, May 21: Taking a leaf out of the books of private sector banks, State Bank of India has decided to give monetary incentives to its branch managers and assistant general managers if they achieve business targets set by the management.

The decision forms part of the managerial autonomy that the Reserve Bank of India has recently approved for the banking industry.

A. K. Purwar, chairman of SBI, said: “Yesterday, the board cleared the proposal to give monetary incentive to the branch managers and assistant general managers for achieving targets. ”

“It will be a lump sum amount. Gradually, the ambit of the scheme will be widened and officials of lower ranks will also be included.”

This is the first time that a public sector bank has decided to provide incentives to employees based on performance. The practice is popular among private sector banks where it forms a part of the salary. However, in SBI’s case, this will not be a part of the salary and will be an add-on to the pay packet.

Speaking about banking operations, Purwar said project financing is emerging as one of the important areas of credit offtake. Purwar was addressing a seminar on the banking sector organised by Ficci and Bharat Chamber of Commerce.

In the last financial year, the bank had sanctioned Rs 9,000 crore for project finance and the actual disbursement was to the tune of Rs 2,600 crore. The project finance segment grew 190 per cent in 2004-05. This year, the bank hopes to lend Rs 20,000 crore under this head.

“We are eager to provide term loans to good customers to expand their projects,” Purwar said.

However, the SBI chairman lamented that the number of projects that are coming was not quite encouraging.

SBI had decided in July last year to aggressively provide advances to the mid-corporates. “The decision has resulted in good business for us,” Purwar said.

The bank has provided advances of Rs 10,313 crore to 632 new mid-corporate units. This is a growth of 28 per cent over last year’s Rs 11,621 crore.

The bank, which will raise tier-II capital of Rs 4,000 crore this fiscal, does not rule out an increase in tier-I capital in the near future. “We may not raise tier-I capital this year. But we might look into it in future,” Purwar said.

“Consolidation is a must for the Indian banking sector. We need some big banks to be present in the country. It is difficult to say when the consolidation begin in the country. But size and speed will be the theme of the banking sector in next decade,” Purwar said.