BFSI Insight Summit: Looking at if we can have YONO Bharat, says C S Setty

SBI Chairman C S Setty says the bank is working with NPCI to prevent UPI merchant charges from reaching customers, while FCNR(B) inflows will ease deposit competition

State Bank of India (SBI) is working with National Payments Corporation of India (NPCI), merchants, and merchant acquirers to work out a model where the cost of the merchant discount rate is not passed on to the customer, C S Setty, chairman of the bank, said in a fireside chat at the Business Standard BFSI Summit 2026 on Monday. Setty also said that inflows under Foreign Currency Non-Resident (Bank), or FCNR(B) would ensure, at least for a couple of quarters, that there was no great competition for deposits. Edited excerpts:

 

Where do you want to see SBI in the next three to five years?

 

 

As far as what SBI has set out to do, it is an extension of years of our engagement with the Indian economy. I believe what SBI plans to do as an institution is no different from what India wants to do on the macro side. As the popularly known proxy for the Indian economy, I think SBI has a greater role to play. I keep telling my teams that we have a greater responsibility to play this role because almost one-fourth of household savings and the country’s savings are mobilised by SBI. If you expand that universe from banking to overall financial services, whether insurance, mutual funds or pension funds, our footprint is further enhanced in the overall financial ecosystem. So, while scale is an integral part of India’s growth story, that is also reflected in what SBI is doing. SBI came into existence in 1955, and we will reach 75 years of our journey in 2030. That also gives us a road map of almost four to five years. We started last year. We have enhanced that strategy and road map to “Road to 75”, what we call “Vision 2030”. We would like to play an important role in various areas of value creation in the country, whether micro, small and medium enterprises, corporate lending or housing loans. All of them create value in their own sense, and we would like to be part of that.

 

The interest-rate trajectory has changed. Do you think rising rates will impact credit growth, which has been robust this financial year so far?

 

Interest rates will influence competition as well as the amount of credit demand, though not necessarily immediately. They will have an impact as we go forward. If there is one more rate increase in December, the rate-sensitive sectors, particularly borrowing related to discretionary spending, will probably be moderated. I think we need to distinguish that. One important thing to recognise is that we are entering the rate-increase cycle with a robust growth rate. We have a rate increase as well as a prediction of 7.1 per cent growth. There will be sustained growth coming from the real economy’s demand for credit. So, as I mentioned, demand, especially financial demand, will probably be moderated if the rate goes up. But I don’t think the overall environment will see any less demand for credit. 

  

Banks are facing challenges in mobilising deposits. Do you think this rate cycle will help attract more deposits, particularly when the stock markets are not doing that great?

 

At this stage last year, I said there was a structural shift in household savings. There could be some movement because of market sentiment. But we are seeing that, without realising what asset allocation means, most individuals and households are allocating their money to their savings. So, part of that would be this. Deposits will continue to be an important part of this allocation.

 

But on deposit mobilisation for banks, again, this is a repetition of what I have been saying: There is only so much that rates can do to propel deposits. What is important is the quality of service and the value proposition you offer customers in terms of maintaining the account. What we have also seen, fundamentally, is that the shift is not only happening from deposits to other active instruments. Within the bank too, there is competition. Moving from a savings account to a fixed deposit is so easy. These factors are also adding to the structural competition for deposits. But adequate liquidity from the Reserve Bank of India (RBI) has been supportive, and FCNR(B) flows, at least for a couple of quarters, will ensure that there is no great competition for deposits.

 

Where do you see the terminal rate in this cycle of rates going up?

 

The bank’s view is that we may have a 50 basis-point increase in December and then there is a pause before March 31. For this financial year we are expecting an increase of 50 basis points.

 

Is deploying FCNR(B) deposits going to be a challenge?

 

For FCNR(B), I don’t think it is a major issue because $10 billion works out to less than ₹1 trillion in a ₹60 trillion universe, which is what we have. It is providing short-term liquidity, but I don’t think there is a deployment issue. Even for the system, I believe that combined with robust demand and the RBI’s liquidity-absorption measures, we should not really worry about it. God will bless me that there will be a recovery in December. I don’t think we need to worry about that part. My view is that this kind of liquidity can be absorbed in two to three quarters, as I mentioned. Initially, as has happened, the RBI will do most of the absorption, and the RBI probably may be fine with it.

 

Whenever the rate-cycle changes, there are concerns about asset quality because the borrower’s investment capacity is impacted. We are in the regime of external benchmark-linked rates (EBLR). This is the second rate cycle under the EBLR regime. Rates were pretty low. To what extent are higher interest rates a concern for banks in India?

 

I don’t think there will be system-level concerns, but there would be concerns for individuals and households, given the higher leverage now. I don’t know how much they can take absorption from the high interest rates. But broadly, from a system-level perspective, I don’t think we should be worried about asset quality on the retail front.

 

What is your take on the merchant discount rate (MDR) on Unified Payments Interface (UPI)?

 

UPI has transformed the way payment systems operate in India. It is a global success story in terms of the payment maturity that India has achieved. But it is also good for people to understand that we need a lot of investment to manage these systems. For instance, volumes are going up tremendously, and it is not merely about managing volumes; it is also about managing the risks associated with these transactions. Just to give you a picture, I must have mentioned earlier that SBI alone handles almost 400 million financial and non-financial transactions a day under 

 

UPI. In most of these transactions, above the threshold of ₹5,000, we carry out real-time monitoring. This means that we need to invest in proactive risk management. We also need to provide the computing capacity to handle this level of transactions. All of that requires investment.

 

Banks like SBI would never hesitate to invest to support their customer journeys. But, as a system, unless we provide some support, the economic value of this activity and the investment itself may be affected. This is where I think the MDR discussion is coming from. As has been widely mentioned, 98 per cent of transactions do not come under the MDR framework. Business-to-business transactions, which are predominant, are also exempted. In quite a lot of the scenarios we have run, we have seen that end users are not impacted as much as predicted. But the minimal MDR being discussed will be useful to the system.

 

Is there a way banks can ensure that merchants are not hostile to customers?

 

We need to work out the system, and need to look at the service-level agreement from merchants. We need to strengthen grievance redress in case merchants are trying to pass it (MDR) on. And we need to build systems to recognise what kind of granular external monitoring is needed. We are working with NPCI, merchants and merchant acquirers to build the ecosystem, to work out a model where it is not passed on to the customer, to the extent that it is technically feasible to monitor.

 

So you are in talks with banks, NPCI and other stakeholders too?

 

The Indian Banks’ Association too is working on that.

 

In this context, the revamped YONO app was launched. Can you tell us about the progress?

 

Digitisation is a prerequisite in India when you are handling this kind of service. We take private data from 530 million customers in India. The customer-acquisition engine at SBI is robust. We acquire about 75,000 customers every day. As you are aware, on deposits, we don’t charge our customers anything, such as minimum balance charges. Most of our journey started with zero balance. We want people to come and open accounts across the country. We have 23,000 physical outlets and about 160,000 digital touchpoints in the country. As your scale grows, how do you reduce or almost minimise the cost to serve? If you don’t do that, services either become inefficient or some cost falls on someone. So I believe a digital application is instrumental in reducing the cost to serve and reaching as many people as possible at a lower cost.

 

Just to give you an example, a visit to a branch for customer service costs about ₹40-50. On the digital platform, it is less than ₹1 even if you include capital expenditure. To serve that customer base, we would like to ensure that the number of registered users increases. We have 110 million registered users. I think having 200 million customers is immediately feasible. But beyond that, how do you make the app more inclusive? We are considering this too. For example, we do not make it available on certain categories of devices where the security features are not adequate, and feature phones do not have YONO. We are looking at whether we can have a variant called YONO Bharat, which we will focus on.

 

Of our 530 million customers, we have 173 million-180 million who are familiar with UPI apps. We would like to bring them on to a smaller, easy-to-use version that is device-neutral to reach all of them. I believe that, on the road map I mentioned, if we can introduce YONO Bharat, we can bring 300 million customers on board by 2030. This is something we would like to do to ensure that the mobile application does not strictly remain a mobile application. It becomes an empowerment.

 

YONO Bharat is the latest offer from SBI we should look forward to. Do you have a timeline?

 

We are working on various things: How device neutrality can be achieved and what simple and intuitive services we can provide to customers. Maybe six to 12 months is what we are looking at.

 

Speaking of technology, how do you plan to harness artificial intelligence (AI) for credit assessment and risk management? What is SBI’s strategy on AI?

 

SBI was one of the first few banks to adopt AI in a big way, in the conventional sense. Obviously, when we talk about AI now, we talk about Gen AI and agentic AI. In the previous versions of AI, we were among the biggest adopters. You are familiar with our three approaches. Purely based on AI models, we built almost 100,000 portfolios based on AI models and MS-related.

 

But when we talk about new-generation AI, Gen AI and agentic AI, we want to approach it in a calculated manner. I don’t think it should be a set of use cases. The approach to AI adoption should move away from experimenting with a bunch of use cases. How will you build the AI stack at enterprise level? I mention this because the enterprise AI stack is extremely important. It brings together governance, risk management, model efficacy and the constant monitoring of models. All of these are integrated into the AI stack. We are working on that. We have had some successes. For example, we now use Gen AI extensively for internal knowledge management. We are also moving to Gen AI for cheque clearing. We used to have 17 cheque-clearing centres; we are reducing that to four. We will be forming a national cheque-clearing centre run purely by Gen AI. This is improving efficiency and allowing the workforce to be redeployed where it is needed.

 

There is another element I would like to mention. When we talk about AI adoption, particularly in institutions with more than 100 years’ history, where processes have evolved over time, we need to re-engineer processes before deploying AI. Otherwise, AI becomes inefficient. 

 

SBI has been a leading employer for the past couple of years, and there was concern that AI may affect manpower. Your views?

 

We have seen some impact on work. But nobody has seen the phenomenon of AI having an impact on the workforce. There are certain segments of work that will definitely move to AI. In financial services, given the volumes we handle, it is all about redeploying the  humans as required and moving people out of jobs where they are no longer needed.