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You have spoken about making SBI the most valuable bank. How do you plan to do that?
It is a great honour to head the State Bank of India. On being the most valued bank, I also said two other things. If it is India’s decade it is SBI’s decade, I also said that we have to be the best bank. So these three elements, of being the best bank, and being the most valuable bank gel well with our approach that SBI would be a proxy to the Indian market. We believed in the last few years that all the stakeholders want consistency in our performance, more than anything. (Besides) the highest profit and highest quarterly profit, what is important and we have pursued in the last few years has been consistency in performance. Most of the stakeholders look for consistency rather than surprises, even if they are pleasant surprises. So we will be focusing on that.
Secondly, we have invested in technology, processes, and people reskilling and we have an unmatched, unparalleled branch presence, digital presence and ATM presence, and we have the largest business correspondent network, with 85,000 correspondents working for us.
How do we bring these together and improve productivity? We need to sweat these assets more, increase productivity, identify the pain points, both at customers’ and our own employees’ levels and remove those wrinkles to ensure better customer service. These productivity gains are also going to add to the value.
You have a corporate loan pipeline of ₹4 lakh crore. These loans are finely priced. In a situation where the system-wide deposit rates are going up, how are you going to manage margins and thus profitability?
Deposit is a franchise for us. Yes, we have over 22,500 branches. We are also committed to compensating our depositors adequately. I hold the view that most of us including SBI would not fight on rates alone. They have to fight on customer service and convenience – the whole package. As far as the asset side is concerned, we believe that the risk is not being priced properly, especially on the infrastructure loans, particularly the projects under implementation. We do not want to compromise on that element. Our strength is in terms of assessing the project, however complex, and we would like to stick to our core competence of assessing a large infrastructure project without compromising on the margins. Eventually, this risk-based pricing, particularly on the infrastructure side, has to come in. The market will stabilise in terms of risk-based pricing.
You have taken over at quite a challenging time with the new guidelines on liquidity coverage ratio (LCR), expected credit loss (ECL) and provisions on project finance expected in the next few months…
Challenges do come but we have to see what opportunities emerge out of them. SBI has resilience. We have strengthened the balance sheet. We also feel that the benign asset quality environment will continue for some time. On project finance draft norms, our view is that there would be some elevation of the pricing base in case it is implemented as it is. While we have not made a detailed assessment, our estimate is that it is not going to impact SBI in any big manner.What are your priorities at the bank?
My first priority is how do I build on the strengths which we have established in these years.
The second thing is that technology is going to be central to our agenda. When I say technology, it is not only the customer front-end journey we are talking about, but the back-end resilience which is something we want to focus on and this resilience will give us two things. One is that the customer is confident that SBI’s digital channel is a stable, reliable channel. To make the journey more intuitive, reliable, and stable, we have invested sufficiently in technology resilience. You can’t talk about technology without talking about cyber security.
There are two elements of cyber security. One is cyber security from an institutional point. How do I protect my system, ATMs, branches and networks? The second element is how do I protect my customers in terms of ensuring my digital channel is safe and secure. For instance, if anybody has a malicious app on their mobile, they can’t download the YONO since it senses some unwanted apps on their mobile. These are the new innovations that help in protecting customers.
We have also invested heavily in technology related to proactive risk management. This tells the customer beforehand to avoid certain transactions or immediately after doing the transaction, we are able to tell the customer that this transaction is not safe. Strengthening proactive risk management in the technology space is also one of the important elements. We are also looking for hyper-personalisation. If a customer doesn’t want to receive something, he will not be sent any such notification. But if he shows some interest then we will curate the marketing products and say that this is what is relevant for you. We are completely aligning our digital marketing to be customer-centric. They have always been priorities. But I think we are going to accelerate the process.
The central bank has also flagged risks in unsecured loans. How do you see the system navigating this challenge?
At the system level, there is definitely a slowdown, which was the objective of the regulator. On unsecured lending, the average compounded annual growth rate of 30% to 35% was unlikely to be sustained at that level. As far as SBI is concerned, we were always very cautious in terms of lending. Even for salaried customers, we focused on their ability to pay our loan. Even if it means that there would be some slowdown in unsecured loans, we would like to focus on qualitative unsecured lending.
On the asset side, retail has been expanding faster than corporate. You have a big pipeline. How do you see this asset book playing out?
The biggest advantage for large banks like SBI is we have several swim lanes. As you see, in the last few quarters, our credit growth has been secular, particularly in the first quarter. Our home loan sourcing is very strong which is an indication of what your growth rate is going to be. On the corporate side also, we have a very strong pipeline. Agriculture is doing very well, and we have entered into high-value agriculture be it orchard owners or fruit exporters, giving us good growth in rural finance. We see good growth in MSME too. Overall, we have witnessed 15% to 16% growth and I think it is continuing. So, while we don’t see any slowdown anywhere we would like to ensure that we grow equitably across the segments, without compromising on underwriting standards.
How will SBI use the rising fintech ecosystem?
The biggest value that fintechs bring is innovation. While large institutions like ours also innovate, our approach has always been of collaboration. We are now moving towards a deeper integration of fintech solutions to our customer journeys. For example, in our YONO 2.0, we have around 15 to 20 fintechs working on various journeys. Their solutions are consumed by our journeys. If a solution is there with a fintech which is acceptable to us, instead of building de novo, we are just consuming their services and that requires a deeper engagement. So the collaborations are becoming deeper, which is a very big contribution from us because any fintech working with SBI gets to work with scale. Most solutions are available with them. We identified 12 categories to work with fintechs such as payments, KYC, AML, digitalisation of documents and so on.
Is SBI or its subsidiaries likely to tap markets to raise equity?
The primary approach towards divestment or going to market is based on the capital requirement. And currently, we do not see any such requirement in any of the subsidies. We believe that we are sufficiently capitalised to meet the credit growth. While we definitely evaluate the need for capital as we move forward and approach the board for raising capital, the pressure for raising capital is not immediate.
There are reports about SBI selling its stake in Yes Bank. What is the progress?
There is nothing significant to share. This is the only statement I can make.
Liquidity is relatively easy now but deposit rates remain high. Is there anything that RBI can do to make it easier for banks to attract deposits?
Liquidity is improving. Government spending is going up. We see the easing of liquidity which will help banks to garner deposits. The focus has to shift from what are the regulatory prescriptions that we want to be changed. The Indian banking system is also mature enough to look at what they are required to do in terms of outreach of the customers, innovative solutions on the product side, and on the customer outreach side.
Inflation is coming down. What’s your sense on rates?
The regulator would be mindful of food inflation, particularly before taking any call on the rate cuts. We also have to see what the Fed is going to do soon. But there is a certain amount of decoupling across the globe in terms of the regulatory actions on the rate cuts. There are countries like Japan increasing rates, the ECB had moved on the rate cuts earlier on. Each of the central banks will be taking its own call based on the local conditions. Our house view is that probably the rates will remain here for some time if not through this fiscal at least through this calendar year.