SBI Chairman C.S. Setty unveils how strategy & technology are shaping the bank’s future

SBI Chairman C.S. Setty unveils how strategy & technology are shaping the bank’s future

C.S. Setty, Chairman of the State Bank of India, talks about his plans for the bank, the strategy for the future, and technology, among other things.

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Siddharth Zarabi
  • Jan 9, 2025,
  • Updated Jan 9, 2025 9:07 PM IST

At 59, Challa Sreenivasulu Setty, the Chairman of State Bank of India, shoulders the responsibility of shaping the future of India’s largest bank. In this exclusive interview with Business Today’s Siddharth Zarabi, the 27th chairman of the storied lender, who took charge in August 2024, delves into his vision for steering the institution into its next phase of growth, his strategy on building the loan portfolio while maintaining asset quality at a time when credit growth has been lagging deposits, the credit markets and the investment appetite of India Inc., the stress in pockets like unsecured credit, and how his life been since moving into the corner office at State Bank of India. Edited excerpts:

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At 59, Challa Sreenivasulu Setty, the Chairman of State Bank of India, shoulders the responsibility of shaping the future of India’s largest bank. In this exclusive interview with Business Today’s Siddharth Zarabi, the 27th chairman of the storied lender, who took charge in August 2024, delves into his vision for steering the institution into its next phase of growth, his strategy on building the loan portfolio while maintaining asset quality at a time when credit growth has been lagging deposits, the credit markets and the investment appetite of India Inc., the stress in pockets like unsecured credit, and how his life been since moving into the corner office at State Bank of India. Edited excerpts:

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Q: What have been your priorities since you took over as chairman?

A: I have spent over 36 years at SBI, but being the Chairman of the largest institution in financial services is a great honour and also a greater responsibility. It’s a mix of continuity and change for me in the sense that I’ve been a part of this board for the last four years, which means that many things we collectively have been doing as management, some of these initiatives will continue in terms of digitalisation, increased focus on financial inclusion, SMEs… Additionally I would like to build on our network, on the digital capabilities that we invested in and bring consistency in our performance and increase the productivity of both digital and brand channels, and more importantly, create a resilience in our operations... To get this idea of consistency, productivity and resilience across the bank, I, along with four MDs, have initiated the largest staff outreach programme ever attempted at SBI. Physically, we are going to our zonal offices and meeting very critical components of our machinery, that is managers [of our] 22,500 branches. We have more than 500 regional offices, more than 100 zonal offices, 17 local aid offices, [and] we are trying to meet everyone and convey the same theme on consistency, productivity, and resilience.

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Q: It almost sounds like you have been on a padyatra...

A: Except that we are not going by foot. This is important because many a time people ask me that the bank is in a good shape, is the highest profit-making bank in the country, in fact, it is the highest profit-making company in the country, so what is the inflection point we are looking for? This outreach programme, in my view, [can] appropriately [be called] as the next leap. This outreach programme is aimed at getting feedback from the ground about what else we need to do as a bank, both in terms of serving our customers better and creating value for our stakeholders, whether they are shareholders, employees, or government regulators.  

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Q: What is the strategy behind strengthening the physical presence as well as the digital part of your business?

A: We have currently about 500 million customers. And hugely diversified customers as a reflection of Indian diversity. We have high networth individuals in our customer base and also zero-balance account holders… This diversified customer base needs to be served both physically and digitally. And our physical presence is unparalleled, with around 22,500 branches… But we have also done an extensive market study and found that there are certain gaps… the newly developed townships where everyone wants to have an SBI branch. So, we are looking at a potential business opportunity in these areas.  

 

Q: Does the Indian customer behave uniquely in the sense that he wants a physical presence, as well as have access to online payments and digital technology?

A: It is not restricted to financial services alone. Digital native companies like Amazon, Flipkart… would also like to have a physical presence. But what we want to do at the branch will probably change as we go forward... It may not be purely transaction-oriented. Today, at SBI, 97% of the transactions happen outside the branches... But even the 3-4% of the transaction volume translates to good footfalls at the branch. Two, we also want to use the branch network for quality value-added services to be delivered. They can be a platform for (say) wealth advisory (services), home loans… I think the physical and digital will coexist in India. And we are trying to ensure that we don’t miss out on that.  

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Q: The chairman of one of india’s largest private sector banks recently told me that technology is the new arms race when it comes to banking and financial services. Do you agree with this? What is the technology focus that you have?

A: I think technology is going to be central to everybody’s agenda… Banks, I think, adopted technology much earlier than many of the other industries. Core banking itself is almost 25-30 years old… At SBI, we have been one of the pioneers in terms of technology adoption, both for branch banking as well as digital banking. What is the next step? The point I mentioned about resilience; it is important that while we create the digital channels or alternate channels, the availability of the channel 24/7 is very important. This means we need to create resilience in our digital channels… this is what we are focussing on. YONO 2.0 is all about increasing the capability of this app to handle growing volumes. Today, if you take away the financial inclusion customers, the Jan Dhan accounts, zero-balance accounts, we have around 30 crore-plus (300-million-plus) customers who are non-financial inclusion customers, but we have just about 8 crore (80 million) customers on our YONO app. We want to bring as many people as possible, both from the financial inclusion side as well as non-financial inclusion side to the app.  

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Q: What kind of size and shape do you see YONO 2.0 taking a few years from now? What is the long-term shape that it will take eventually?

A: YONO 1.0 was revolutionary when we launched it… It’s not a pure banking app. Today, we sell many of the non-banking products also… insurance, mutual funds, credit cards... And additionally, we’ve created a marketplace… it’s a combination of marketplace, banking, and non-banking financial services… but a lot of people have caught up. What we are trying to do in YONO 2.0, is it was [earlier] essentially a mobile offering… But we also have a large platform in terms of branch channel. We have a large platform in terms of internet banking… And we have a large number of feet on street, people who source applications for us. So, [what] we are trying to do with YONO 2.0 is not only about mobile... We are re-imagining our brand journeys, how feet on street will work, how contact centres will work and more importantly how internet banking works with a common goal. That means if you start a journey with the brands and you have some work to go to office and you want to complete the rest of the journey on the go, you can start where you left off. Today it’s not possible because they are all silos.

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Q: As the head of the country’s largest banking institution, what is your assessment of the credit markets, and the investment appetite of India Inc.?

A: I think we have witnessed good credit growth post-Covid… also because there was pent-up demand. It is also a fact that much of that credit growth had come from the retail personal [space], whether unsecured personal loans or home loans. Home loans is a very important category of growth. What we also witnessed is that two important segments are growing—MSME and agriculture. We have witnessed almost 16-17% credit growth rate in these two sectors. It is also possible that while the demand was always there, the ability of the banks to look at these customers from a different lens [wasn’t]. Because digital data is available [now], the ecosystem provides many enablers like [credit] bureau data, GST data, our own account data, which we are able to combine and assess these customers in a better manner today.

Corporate credit has been stagnating for the last three to four years… But private investment obviously is happening only in certain sectors. The core sectors like steel and cement, despite having capacity utilisation of 70-75%, are not witnessing new investments coming in. I think it has more to do with the external markets. They’re not very sure how the export markets are going to behave… In my view, 70-75% capacity utilisation generally triggers capital expenditure movement, where they have to add new capacity. That’s been stagnant for almost two years...  

Q: What needs to be done to help revive demand?

A: I think all the enablers are in place in terms of the infrastructure, taxation… What is important for the private investment to kick in is in terms of the demand... We have been, of course, talking to the government that till private investment kicks in, the heavy lifting has to be done by the Government of India… till the demand picks up… [there are] a couple of other reasons also, if you see the first two quarters; we have had elections in one quarter, another quarter saw heavy rains... We may or may not have felt the effects directly, but they definitely slowed down investments, particularly on the government side… And Q3, Q4 onwards, probably government expenditure will accelerate and create demand in the rural and urban areas. We are confident that rural will do better because heavy rains in the kharif season has added to the reservoir levels. This is a good crop… and good rural demand will have a significant effect on the overall consumption pattern.  

Q: There has been a flight of capital to the stock markets, and deposits have been lagging credit. How do you view this? Has the situation stabilised now?

A: The latest numbers indicate that deposits growth has overtaken credit growth, which means that equilibrium is being achieved now. It will stabilise at around 11-12% both on the deposits and advances side. As far as savers to investors, I think it is a debate that has been active in various fora… It is not only about investment in equity market... the flight of money from savings account to fixed deposit is also there. So, ease of doing investment and investment awareness [are factors]. Obviously, mutual funds have also contributed in terms of creating this investment culture. But eventually as they progress, there will be better asset allocation, which means that the deposits continue to be a critical component of the investment basket. I think all investment advisors tell everyone that you cannot put everything in equities. You have to have a basket… and deposits will continue to be an important part in the investment basket of any individual.  

Q: What is your take on the broader retail credit story given the stress that has been seen in unsecured credit, that has also attracted regulatory attention?

A: Post-Covid retail credit growth has been significant. Even before Covid-19, most lenders consciously moved to retail, which means that retail credit growth rates have been more than what the system anticipated. Retail credit has three, four components… home loans is the biggest component of retail credit... The good news is that in the overall system, the retail unsecured personal loan cost is just about 10%. And if you take only retail credit, it’s just about one-third of that. It’s predominantly home loans, which create good capital assets. And also, a lot of these home loan customers are first-time homebuyers… 95% of the borrowers [on our books] are first-time homebuyers.

Q: We have seen GDP growth falling to a seven-quarter low… from your vantage point, what do you see happening on the economic growth front?

A: I think the growth of India should be seen in the global context. The IMF estimate for global growth rate is about 3.2%, whereas we’ve been expecting around 7% growth rate for India. The last two quarters have definitely impacted growth. But one quarter decline, I think we should not be really worried about. This country and economy have got greater potential... Our estimate is growth rate of around 6.5% is still a possible scenario for the full year. This is not a bad situation for us. This growth is also driven by consumption, which is expected to come from the rural areas, and government expenditure will probably spur the demand further.  

Q: What do you think of the cost of capital which hasn’t gone down? Is it time for the mandarins of the MPC to consider it?

A: I think this demand for rate cut has been there for quite some time, but I think RBI and MPC are definitely weighing the inflationary situation, particularly on the food inflation side. Once it slightly moderates, I think they will be able to take a call on that.  

Q: How has life been for you since you moved into the corner office?

A: It has been a very enriching experience. In fact, it’s more than the responsibility. I think the diversity of areas which we look at and considering that this bank touches everybody’s life in India, directly or indirectly. Every day is a new day in terms of the life of the SBI Chairman. That’s what I believe. It has been good, challenging but extremely enriching.

@szarabi

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