SBI will double its balance sheet in 6-7 years: SBI chairman CS Setty

There is greater confidence among banks to lend to MSMEs because of data availability, and clarity in terms of their business models, says Setty

CS Setty, chairman of State Bank of India (SBI), in a conversation with Tamal Bandyopadhyay, at the Business Standard BFSI Insight Summit 2025, discusses the slowdown in credit growth in the economy, the Reserve Bank of India’s (RBI) reforms in the banking sector announced after the October Monetary Policy Committee (MPC) meeting, and the potential impact of allowing private-sector professionals into public-sector banks. Edited excerpts:

 

Despite the rate cuts, and government reforms, why is credit growth not showing meaningful uptick? 

We are not lacking in credit growth. If you see the Reserve Bank of India (RBI) numbers, credit growth is growing in double digits, which is reasonable in my view. There is significant growth happening in Micro, Small and Medium Enterprises (MSME) credit. Today, there is greater confidence amongst banks to lend to MSMEs because of data availability, clarity in terms of their business models. There is also significant credit demand coming from the agriculture sector. Both the sectors are witnessing 16-17 per cent growth rates. On the retail side, mortgage growth is good. The only thing lagging is corporate credit growth. Non-banking sources are also available to the corporates. Today, the corporates have huge amounts of cash lying with them. If any capital expenditure is happening, they will use that cash first. 

The private capex cannot alone be financed by bank credit. The government and the banks would like as much as private capex to come back. Most of the companies are able to operate at higher capacities now. Today technology allows them to operate at 90 per cent capacity utilisation. Global disruptions, supply chain disruptions, tariff related issues are all creating some uncertainty in the minds of the people. But, private capex will come back soon for the simple reason that this economy is built on domestic consumption. As soon as stability in domestic consumption is visible to people, I think capex will pick up. 

 

Due to increased competition to get Indian household savings, are Indian banks facing issues in getting deposits? 

Structurally, the balance sheets of banks will be undergoing a change. Globally, the balance sheets of banks are built not by the deposits but by the market borrowings. This is because of the financialisation that has happened, and money has moved from the banking system to the other financial services. The same financialisation is likely to happen in India also. We have had 1.6 times growth in bank deposits, whereas mutual funds are growing at 3x, which means that there is a sense of asset allocation among the savers. It is unlikely that the savers will completely move away from bank deposits. The flow of deposits to banks will probably come down. CASA is not only getting impacted because the current account from the government is coming down, and part of the savings is going to the market, but also because savings are moving to fixed deposits. Earlier the composition of fixed deposits was 61 per cent, and now it has gone up to 64 per cent. On the current account side, the moment public sector banks realised that the government’s current account is not going to be available to them in a big way, we have all in a large way moved to business banking accounts, which was predominantly controlled by the private sector banks. We are getting a dominant share in the non-governmental current accounts.

 

How do you look at the banking reforms the RBI announced after the October MPC meeting? 

I must compliment the regulator for coming out with 22 measures. These announcements are a great measure of confidence in the maturity of the banking sector in India. M&A financing, for instance, shows that the Indian banking sector is ready for funding these transactions with maturity. We will further negotiate with RBI on what kind of fine tuning can be done on M&A financing. And, it is also not true to assume that a significant capital from the bank capacity to lend will move to M&A finance. The overall market size of M&A financing is minuscule when compared to the ₹220 trillion credit system we have. The primary aim of me seeking approval for M&A financing is to give a level playing field and confidence in our ability to apprise the transactions. I am sure this is the first step in terms of enhancing a gamut of activities that the banking system can do on the M&A side. Today, the banking system is robust, and when the banking system is robust, what the regulator is trying to do is enable the banks to do activities which they were not doing earlier, and also ensure that their capital buffers are maintained.

 

How do you see the entry of private-sector people in state-owned banks? 

There is no difference between the public sector and private sector. This is more in terms of the ownership, if you really take out the ownership, the product structure, technology, I don’t think there is any difference. If this is intended to facilitate lateral movement, it’s a good move. Culturally, there are definitely challenges. But the culture challenge is on account of the pay structures, incentive structure. The public sector pay structure is an inverted pyramid. There are a large number of people getting paid very well, compared to the private sector. As you reach the top, that differential becomes much larger. If the government really wants to attract private talent, obviously this structure has to be looked at. But culture wise, anybody coming to any new institution, will have to reorient themselves.

 

How do you keep on doubling your balance sheet every six years? 

If the nominal GDP grows at 10 per cent, and if SBI grows 2-3 per cent more than the nominal GDP, and with the compounding effect coming into play, SBI will double its balance sheet in 6-7 years. Technology definitely has helped us. Today, we are the largest spenders on technology. The digital platforms are robust, and we invest heavily into the backend technology. 

 

When will the subsidiaries get listed? 

SBI General Insurance, and SBI Mutual Fund will get listed. Timing is something I cannot guess. These two companies do not require capital at this juncture.