We open 65,000 savings accounts a day, says SBI Chairman CS Setty

He says SBI is comfortable with liquidity with overall credit deposit ratio at a modest 68 per cent and the aim is to maintain incremental CD ratio at 100 per cent

Challa Sreenivasulu Setty, who took charge as chairman of State Bank of India (SBI) in August, says the conversion of net profit from operating profit is moving towards 70 per cent, which indicates culmination of efforts from all fronts. In an interview with Manojit Saha and Abhijit Lele, he says SBI is comfortable with liquidity with the overall credit-deposit (CD) ratio at a modest 68 per cent and the aim is to maintain the incremental CD ratio at 100 per cent. Edited excerpts:

 

SBI’s business was Rs 90 trillion as on September 30. Advances were around Rs 39 trillion and deposits Rs 51 trillion. When do you see the bank achieving a business of Rs 100 trillion?

 

We have given the guidance of 14-16 per cent growth in advances, and on deposits, we expect lower double-digit growth of, say, 10 per cent. With the current run rate, I think by March 2026, we will be there, at Rs 100 trillion. Probably, even before that.

 

You had said SBI could touch an operating profit of Rs 1 trillion this financial year. When do you see net profit of Rs 1 trillion?

 

It will take some time. We have a three-year horizon for reaching a net profit of Rs 1 trillion. Our ambition is to be the first company to achieve it. Sooner or later, everybody will reach that milestone.

 

It is not about chasing profit. This number establishes the potential of this organisation to generate and convert its operating profit into net profit. The conversion ratio of pre-provision operating profit into net profit is moving towards 70 per cent, which means any number on the PAT (profit after tax) side is a culmination of efforts of increasing core income, other income, reducing both financial cost and operating cost, and containing slippages. Profit after tax of Rs 1 trillion also means achieving all these elements to create that net profit.

 

You took charge as chairman in August. What are your goals in the next three years?

 

Heading the largest bank of the country, every chairman’s tenure is not a sprint, it’s a marathon. My long-term perspective is to ensure we can consistently demonstrate strong and reliable performance. It is not only consistency in financial performance, it is also about customer service, availability of our technology products, keeping the institution compliant with regulatory guidelines and also consistency in creating shareholder value.

 

To do that, we need to invest in people, processes, products, and technology. We have done well on technology spend. We have done well in creating and developing Yono, our flagship mobile app. In every aspect of our operations, we want to make technology central to our agenda.

 

Coming to resilience … cyber security, what kind of investment are we looking at? We are planning to have a centre of excellence on cyber security within SBI, which will be a model centre of excellence for cyber security stance in the wider banking industry. We would like to see if we can provide cyber security services or advisories to other public-sector banks.

 

Loan growth in SBI was lower than the industry’s in the last few years. Will SBI be able to better the industry in FY25?

 

As far as SBI is concerned, we are still sticking to our guidance of 14-16 per cent. We have a good pipeline in the corporate space. We have made significant investment in technology in lending to small and medium enterprises (SMEs) — cash flow based non-collateralised SME loans, which is showing a good amount of traction. Our loan growth is coming from across the spectrum. Corporate loan growth is 15-16 per cent, agriculture is 16 per cent. This means secular growth will help us in achieving the target.  Growth in loans to industry may slow, which could be because some of the players are more active in particular sectors, for eg unsecured personal loans, which may be slowing their credit growth.

 

What is the corporate loan pipeline?

 

It is about Rs 6 trillion including both sanctions and loans under process.

 

Deposit growth was slower, below 10 per cent. What are the steps SBI is taking to improve deposit growth?

 

Deposit growth will be around 10 per cent this financial year. You must also remember we have a large base, which is Rs 52 trillion now. Our aim is to see in absolute terms the incremental credit deposit ratio of 100 per cent. We have enough liquidity in our system as the overall CD ratio is modest around 68 per cent.

 

Deposit mobilisation is also a function of branch network. We have 22,500 branches. We are opening an average of three savings accounts a day per branch, which means we open 60,000-65,000 savings accounts every day. All the customers may not be opening the account for the first time, which means some of them have the potential to fund these savings accounts significantly. In the past two-three months, we galvanised our branches, and every staff member is engaged in deposit mobilisation.

 

Closely linked to deposits is the margin and SBI’s net interest margin has declined in the past two quarters. It was 3.14 per cent in Q2. Do you see further pressure on margins, particularly when the interest cycle changes?

 

Margin compression is not likely to be significant. We are conscious about the cost of resources. We are focusing more on galvanising our branches, to ramp up deposit mobilisation, so that low-cost retail deposits are mobilised.

 

We have increased our MCLR (marginal cost of funds based lending rate) by almost 25 basis points in the past three-four months. The benefit from this will accrue from December. This means that even if there is a rate cut there will be some buffer in terms of the MCLR.

 

What is the share of MCLR-linked and repo-linked loans?

 

Approximately 32 per cent is linked to the MCLR and 20 per cent is fixed, which means that 52 per cent is more or less stable. It will take some time for re-pricing to happen. So the rest is linked to the floating rate – the external benchmark-linked rate (EBLR).

 

Do you think any interest-rate cut can come only after the Reserve Bank of India reduces the repo rate? There is a view among a section in the government that interest rates are pinching.

 

Depositors have to be suitably compensated. Similarly, our loan products are priced reasonably for borrowers. We have ensured to a large extent they are getting the right value for their relationship. So keeping that in mind, any further rate reduction may happen only when policy rate reduction happens.

 

The capital adequacy ratio of SBI was 13.46 per cent at the end of September. Is there any equity-raising plan this financial year?

 

In the last four years, we have ploughed back profits of Rs 1.2 trillion into capital. We plough back at the end of the year. With the current level of capital to risk (weighted) assets ratio, it can support Rs 6 trillion of loan growth. If you consider the profit this financial year, we will have the capacity to fund loan growth of Rs 10 trillion. We are adequately capitalised.