Customer protection, value-added services to drive biz growth: C S Setty

"Annually, 12 million people prefer opening their savings accounts with us. That is not possible if your customer service is poor"

The current business environment comes with many challenges. With its robust financial profile, State Bank of India (SBI) is working to enhance customer service quality through innovation and technology. C S SETTY, chairman of the country’s largest lender, in a fireside chat with Tamal Bandyopadhyay, consulting editor, Business Standard, spoke about his journey, the future of the bank, and said that the best was yet to come. Edited excerpts:

 

As a 1988 probationary officer, getting into the corner office, it’s just about two months now, what do you have in you that others didn’t have to become a leader?

 

In terms of 36 years at SBI, we always say that for every probationary officer batch on the first day of their training, the trainer will say that one of you will become chairman of the bank. So, while we don’t consciously pursue becoming no. 1 in the organisation, I’m honoured and humbled by the responsibility entrusted to me.

 

But what it takes to reach any leadership position — and SBI is no exception — is constant learning, sincerity, and hard work. These are the qualities that have ensured that SBI gives an opportunity to everyone.

 

There are certain issues at this point, like a high credit-deposit ratio, deposit mobilisation, and the net interest margin under pressure. There is stress in certain quarters, particularly in unsecured loans. How genuine are these concerns?

 

Challenges are not new to the Indian banking industry. Banking inherently has a cyclical nature.

 

We’ve had asset quality issues. I also remember that in the early 1990s, when we gave a commercial loan, we used to ask for 400 per cent collateral. So, from there, you can see how the way credit has been liberalised.

 

Deposits and credit growth will find some equilibrium somewhere. It is bound to happen — whether deposits get accelerated to meet credit needs, or credit gets decelerated to meet deposit needs.

 

Today, all of us are focusing on deposit mobilisation. The customer has started gaining attention, and the value-added services linked to their accounts have gone up.

 

Deposit mobilisation has two elements. First, you cannot mobilise deposits only by increasing the interest rates. There is only so much we can do with rates. As you increase the rates of interest on deposits, your ability to lend — especially qualitative lending — will also be impacted. You need to balance that.

 

Second, deposit mobilisation is also a franchise activity, particularly for a large bank like SBI.

 

You are offering a 2.75 per cent rate to savings bank account holders. How do you keep them on hold?

 

A savings bank deposit is all about transaction demand, and they are all, globally, transaction accounts. Many countries do not even pay any interest on savings deposits. What we have ensured is that if anybody is opening a savings bank account, we add value.

 

Today, 63,000 automated teller machines operate in the country, and 12 million transactions happen, none of which are charged. 

 

They are all free services provided. Digital services such as Unified Payments Interface (UPI) or Yono (You Only Need One)-based transactions are all free. How many frictionless banking services you provide is going to determine how many customers a bank can attract to its portfolio.

 

Annually, on average, about 12 million savings accounts are opened with us, which means that people still trust SBI in terms of the value they get.

 

Despite paying such a low interest rate?

 

The interest rate probably is not very significant.

 

Are we heading towards a structure like in developed markets, where a savings bank will be almost treated like a current account?

 

If someone has excess money in a savings account, it just gets swept into a fixed deposit, meaning they are still earning significantly by managing their cash flows.

 

Your bank is running a mutual fund (MF). Until recently, if I were an SBI customer, I would be encouraged to put money in the MF, not keep it in the bank. How do you manage this balancing act?

 

Some focus on deposits exists, but I’ll just give a data point. In SBI, MF penetration is 1.14 per cent of our customer base. It means they are not competing; they are complementing each other in terms of deposits and MFs. So, the penetration, if you see it, is hardly anything.

 

Any MF activity that SBI undertakes is approved at the highest level of a managing director. This ensures that our customers receive the right value when it’s done.

 

You have so many unlisted subsidiaries, including the MF, SBI Capital Markets, and SBI General Insurance. What’s the plan for them? Is there any way of getting them listed?

 

Many people may not be fully aware that the non-banking subsidiaries of SBI have contributed both to the value creation for the parent and investors and more importantly, to the ecosystem. Today, most of the non-banking subsidiaries of SBI are market leaders.

 

Regarding value creation, the bank has said on record that our investment in subsidiaries was Rs 6,000 crore, and today the gross value of these subsidiaries is about Rs 3 trillion. Our idea is that if any subsidiary or joint venture requires capital, we will definitely look at selling some stake.

 

About listing, if it adds value to the company and increases the investor base, then there’s a right time for such an activity. We want most of these subsidiaries to have the heft when they come to the market, and we feel that value creation is happening.

 

You have not spoken about the stress that the Reserve Bank of India (RBI) has been repeatedly talking about in unsecured loans. You also have a very large portfolio of retail, agriculture, and micro, small and medium enterprise (MSME) loans. Do you see stress in the unsecured portfolio?

 

It is not appropriate for me to talk about SBI at this juncture, as results are yet to be announced. But when we looked at the numbers of most of the banks that have announced results, there seems to be some stress on the unsecured loan portfolio, but not to the level where it’s alarming.

 

Obviously, some slowdown is happening in unsecured loan growth as a result of the risk weights going up. Also, perhaps the reason for unsecured loan growth coming down is that much of these unsecured loans happen through non-banking financial companies and microfinance institutions.

 

SBI is not necessarily known for customer service.

 

Absolutely wrong.

 

What are you doing for your customers?

 

When we talk about 500 million customers, there is not a single family that isn’t touched by SBI, directly or indirectly.

 

We take pride in that, and there is a constant endeavour to ensure that the customer is at the centre of our activity. Otherwise, I cannot believe that 12 million people prefer opening their savings accounts with us. That is not possible if your customer service is poor.

 

SBI is constantly reimagining and reinventing itself. Today, we are adjudged one of the most digitally savvy banks. We handle 180 million transactions a day on UPI. Some foreign banks handle 180 million transactions in a year, but we handle that in just one day. Sometimes, 180 million becomes 220 million.

 

Just two months now, how is life at the top?

 

It comes with incredible satisfaction. It’s not about decision-making at the top. Much of the decision-making is structured in public sector banks. 

 

It is not an individual who makes a decision. But having a large organisation with the ability to change lives is an opportunity that is incredibly challenging and also satisfying.

 

When it comes to technology, you’re talking about the payment system. How do you democratise technology? SBI’s balance sheet has a huge exposure to agriculture and MSMEs. Are you using technology in the right way for their benefit?

 

Both these sectors — agriculture and MSMEs — are looking up. A lot of banks are confident about lending to these sectors.

 

But, how do you make credit accessible to these sectors? For MSMEs, for instance, we have introduced what is called a business rules engine (BRE), which is completely data-based, and with the credit guarantee cover (Credit Guarantee Scheme for Micro and Small Enterprises), we are able to give a sanction of up to Rs 5 crore within a day.

 

Since we introduced BRE-based lending, in the past six months, we’ve done about Rs 28,000 crore worth of loans on a BRE basis.

 

Regarding agriculture funding, on the Yono Krishi application (app), every year, the farmer has to review his crop loan. He used to come to the branch, losing one day of productivity. With the Yono app, he can complete the review process in four clicks. More than the ease of doing business, he saves one productive day that he would have spent coming to the branch from his village.

 

The other side is the digital risk. How do you manage that?

 

As digital penetration has gone up globally, digital frauds are a reality. This is not unique to India. So, all stakeholders — including banks, regulators, law enforcement agencies, and the government — are making a huge effort to ensure that these frauds are prevented.

 

There are two reasons for this: One is customer protection. The second is a larger concern: India has progressed so well in digitalisation, and it is important to ensure that confidence in the system is not lost.

 

The immediate and urgent priority is to put proactive risk management in place. Many digital frauds can be prevented by creating massive digital awareness.

 

SBI’s 2023-24 profit was higher than the collective net profit it made between 1955 and 2023. Will the good run continue?

 

The RBI governor said that the macros of the country are strong, and the financial services system is completely intertwined with the macros.

 

The governor also mentioned that most of the banking system has improved its operational standards. It is a very important statement coming from the regulator, and we strongly believe that we now have very strong underwriting standards, aided by the ecosystem.

 

I am a strong believer that the best is yet to come. We are ready to support good times, with stronger balance sheets, robust underwriting, and a rich database.