 "'All focus on deposit mobilisation': SBI Chair CS Setty at BS BFSI Summit")
State Bank of India (SBI) Chairman C S Setty stated that the bank’s current approach focuses on balancing deposit and credit growth amid evolving financial demands and customer expectations. Speaking with Business Standard’s Tamal Bandyopadhyay at India’s largest banking, financial services, and insurance (BFSI) event, the Business Standard BFSI Insight Summit on Wednesday, Setty emphasised the importance of deposit mobilisation as a critical path forward in the Indian banking sector.
Setty highlighted how the bank is adjusting strategies to maintain equilibrium between deposit mobilisation and lending needs, recognising the importance of customer-centric services in a rapidly maturing economy.
"We have achieved a certain equilibrium between deposit growth and credit expansion," Setty said. "This balance requires ongoing adjustments to ensure that deposits and credit needs align effectively. Whether that means accelerating deposits or decelerating credit, it’s a constant recalibration process."
Shift in savings account management
Setty acknowledged that deposit mobilisation has become a top priority across the banking sector. He noted that customers are receiving heightened attention as banks shift their focus towards enhancing value-added services linked to their accounts. Traditionally, savings accounts have been primarily transactional. However, Setty explained, "Today, everyone is looking at ways to deliver additional value to customers through these accounts, striving to make banking more beneficial for them."
According to Setty, SBI’s deposit mobilisation strategy rests on two key elements. First, simply raising interest rates isn’t a sustainable solution. Although higher rates may attract more deposits, they could impact the bank’s capacity to lend efficiently. "We have limits on how much we can adjust rates because excessive increases affect our lending quality. It's essential to strike a balance," he explained.
Second, Setty emphasised that deposit mobilisation is fundamentally a “franchise activity,” particularly for a large institution like SBI.
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Deposit mobilisation and credit growth
During the Covid-19 pandemic, when many banks scaled back deposit intake, SBI’s extensive branch network of 22,500 branches continued to welcome depositors. Setty attributed this approach as one reason why SBI has sufficient liquidity to support its credit growth.
“A key lesson from the pandemic has been the importance of taking care of our depositors; it’s essential for providing the liquidity we need,” he said.
Deposit crunch inevitable in a maturing economy: Setty
Addressing the current deposit landscape, Setty acknowledged a “deposit crunch,” attributing it to changing asset allocation preferences in a maturing economy. As household incomes grow and alternative investment options such as mutual funds and insurance gain traction, customers are diversifying their financial portfolios.
“We shouldn’t be overly concerned about funds moving into mutual funds or insurance,” he said, adding that this trend aligns with the long-term aspirations of India’s financial sector. “The challenge now is for banks to enhance their value proposition so that a portion of this allocation continues to remain within traditional deposits.”
When asked about SBI’s 2.75 per cent interest rate on savings accounts, one of the lowest in the country, Setty explained that SBI’s goal is to provide additional value rather than relying solely on interest as an incentive. He also noted that many countries do not offer any interest on savings accounts.
“The bottomline is that you take care of your depositors, and your business will be taken care of,” Setty concluded.