In Conversation With SBI Chairman CS Setty
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00:00We are here not on account of speed but on account of direction and intent.
00:08Right direction, right intent is something what brought us here in terms of the size,
00:12in terms of the positioning.
00:16So that philosophy of pursuing those objectives will remain.
00:21I think that's the first thing I would like to say.
00:26With the strategies in terms of what needs to be done in the business, in terms of our
00:33strategic directions, in terms of technology, what I intend to do is that in the last three
00:42to four years, we built a strong balance sheet.
00:49We have invested significantly in the technology and digitalization.
00:55Now we have to leverage on that.
00:59The leverage is of two kinds in the sense that, you know, we have unparalleled branch
01:04presence, ATMs, business correspondents, and how do I marry this technology and digital
01:14to reach across the channels and increase the productivity would be my first priority.
01:20The productivity gains on account of the technology investments would be the focus.
01:27So the second feature would be that we have been succulently growing while we had a large
01:38retail growth for a couple of years and when corporate growth was not happening.
01:42If you see retail personnel, MSME, agriculture, corporate, almost having a double-digit growth.
01:52That means my focus on a particular segment is not there now.
01:59I need to grow in all the segments and I have the potential to grow.
02:05But among them, if I have to take out and I see that there's a good amount of income
02:15potential, earning potential in the MSME now, today, and we believe that the kind of data
02:23set what is available in terms of GST, in terms of our own account statement analytics,
02:32the MSME lending is much more confidently we can lend to the MSMEs than what we were
02:38doing earlier.
02:40So the focus would be on the business front.
02:43These are the areas which we are going to do and for all these things, the central agenda
02:47would be the technology and digitalization.
02:50As you know, 2.0 also is going to be something which is going to be available during this
02:54period and which is going to completely transform the customer experience across the channels,
03:00omni-channel experience.
03:03So if I have to, you know, my answer is somehow, these are some of the things, but I think
03:07there are a lot of elements which go into it, you know, to achieve these objectives.
03:11I'm not getting into the numbers, obviously, the numbers, you will definitely come to that
03:15numbers later.
03:16I'll answer them.
03:17Okay.
03:18Let me break this up, Ramachari.
03:20You've got a massive loan book, right, and equally massive deposit.
03:26In fact, your deposit book is larger than the loan book currently.
03:31As a lender who's currently looking at the macro environment, as well as the environment
03:35in the banking sector, growing a big book like yours in an extremely competitive sort
03:43of landscape, whether it be liabilities or assets, how do you think that will go by in
03:49the next three years?
03:51Yeah.
03:52One thing, at the management level, we decided, and even the board level, we have decided
03:58that our growth will not come at any cost.
04:04I said in some context also that if I'm fighting for deposits or competing for deposits, I
04:11would compete on non-rate war, you know, I don't want to get into the rate contest.
04:17Yeah.
04:18I would like to improve the service quality and our customer base is huge and some of
04:24them probably not happy with some of the services.
04:29How do we bring them back?
04:30We have identified the whole universe of our customers who are the promoters, who are promoting
04:37our services.
04:38You know, their SBI is good, you place a bank with SBI, and then we have stagnant customers.
04:44That means, you know, they have an account, but have not been transacting.
04:47We would like to reach out to them and ask them what makes you to come back.
04:52And there are attitudes.
04:53They're leaving.
04:55Some of them probably are leaving for some reason.
04:56We would like to find out, you know, what are those reasons which are making them to
04:59leave.
05:00In the sense that our effort would be to fight on non-rate, you know, contest, not on the
05:08rate war.
05:09Okay.
05:10So is the case with the undercredit.
05:11When you talk about the credit, the credit growth, we would like to do without compromising
05:17on underwriting standards.
05:18I think this is something which we hard-fought and established very, very strong underwriting
05:24standards today.
05:26And there is no way we can compromise on that.
05:29And even if the book grows a little slower, it's fine with us.
05:32Okay.
05:33Fair enough.
05:35Coming within the lending ecosystem, two major parts, you've got a non-wholesale and a wholesale
05:41piece.
05:42Within the non-wholesale piece, you've got retail, you've got MSME as one of the focus
05:46areas, as you mentioned.
05:47I want to touch upon retail and then come to MSME.
05:49First, retail, extremely competitive, unsecured, not so exciting for lenders at this point
05:56in time after the Reserve Bank of India raised some concerns.
05:59And of course, you are seeing some amount of slippages on that side as well.
06:03You and I'm saying the banking system, SBI and so on.
06:07To your mind, what is retail growth looking like for SBI, for the ecosystem?
06:13Do you think that maybe the times of that extremely 30%, 35% growth is sort of behind?
06:19Yeah, I think the CSG of the 35% what we witnessed may not happen for two reasons.
06:26I think there was some pent up demand which resulted in that kind of growth.
06:31Obviously, it will moderate over a period of time.
06:35And the RBI measures also definitely have impacted the unsecured loan growth rates.
06:42But in our book, if I have to talk about SBI, as we keep on saying that there are unsecured
06:48loans and there are unsecured loans of SBI.
06:51So our policy would be that how do we strengthen and expand the user base?
06:59We don't want to give unsecured loan to the same person.
07:02So we have a significant number of salary package account customers who have not taken
07:09these unsecured loans yet.
07:11So we would like to reach out to them.
07:13And I think our potential is there.
07:15I'm not saying that we would be witnessing 30 to 35% growth rates what we've had earlier.
07:22Obviously, to cover on the additional risk base, we may have to increase the rates.
07:29Some amount of rate increase probably would happen in unsecured loan space.
07:33But our effort would be to get the best quality customers into our books.
07:37That's the unsecured piece.
07:39On the secured side, under your predecessor, the focus on the home loan has come back pushing
07:45that product as one of the major drivers of your retail book.
07:49Where does that go from here on?
07:51Because the reason I'm saying this is because hopefully the rate cycle is going to turn.
07:54So there is expectation that the demand is going to pick up again.
07:58Demand is still there.
08:00I think we are doing the run rate is very good under home loans.
08:04And I don't think there is any concern in terms of the home loan growth rate.
08:11I think that is one product which is doing extremely well in our books.
08:15And we'll continue to do that.
08:16And today we have the largest number of processing centers across the country, home loans.
08:22I don't think anybody else has got so many processing centers, which has reduced the
08:27turnaround time.
08:28Today we are able to give a home loan in five days.
08:31So we are not only competing, yes, our rates are customer friendly, competitive rates.
08:37But beyond that rates, we are also providing the excellent customer service.
08:42We are one of the most trusted home loan provider in the country.
08:46We do extreme due diligence on the buildup and the paperwork.
08:51And these are also some of the USTs, which are not visible to anyone, but people would
08:55like to take home loan from SPI because of the due diligence which we do.
09:00And we protect the customer interest when they are buying the property.
09:04So I think that home loan book and the secured retail personal portfolio, I think that will
09:10continue to grow and will be one of the flagship products for us, a flagship product.
09:15Coming to the other focus area that you mentioned about MSME, what took bankers so long to realize
09:21that, okay, this is a growth area because, you know, there was about 10 odd years of
09:26corporate credit growth, which then translated into retail credit growth.
09:30Now finally, lenders, especially somebody at the size of SBI is talking about MSME as
09:36a potential growth area.
09:38What is it that kept lenders out of the ecosystem so far?
09:42And what is it that you're seeing at this point of time has changed for you to enter?
09:46See, we have been traditionally lenders to the MSMEs.
09:49While the growth rates have been impacted, we were always the largest lender to the MSMEs.
09:57Even in the worst times, I think our MSME book was largest in the industry.
10:03The growth rate was lower.
10:05Essentially, I think some of the factors which had impacted MSMEs were, you know, who would
10:14depend on the large corporates and when the large corporates got into trouble, obviously,
10:19they also had, and they didn't have the bandwidth to, you know, handle the issues which they've
10:26come out with.
10:28That made the growth rate to slow down and even the absorption by the MSMEs itself has
10:33come down.
10:35But today, I think MSMEs are also doing well, as the corporates are doing well, number one.
10:42Number two, my ability to assess the needs of the MSMEs in a holistic manner without
10:49depending on, you know, the piece of paper what MSMEs are giving to me, a balance sheet
10:53or a P&L, I have a host of data which is available, whether it could be bureau data, it could
10:58be a GSTN data, or my own internal account data, which I'm able to triangulate and tell
11:03them that this is the loan limit which is available to you.
11:07So my ability to assess MSMEs, not the medium-sized entities, but mainly the small, small size
11:16up to five crores.
11:17Today, up to five crores, we have completely, assessment is moved to a business rule engine
11:23based.
11:24Okay.
11:25That means, you know, if a customer comes and gives his PAN card, I don't need any paper,
11:30just PAN card.
11:31In 15 minutes, I will be able to tell him up to five crore rupees, whether what is the
11:35loan amount which he is going to get.
11:37So I think this confidence is what is somehow driving everyone, not necessarily SBI.
11:42I think the whole system is growing at 20%, correct?
11:46So the confidence level on the governance part and in terms of the data quality part
11:52has improved on the MSMEs, which is making the lenders to definitely go on.
11:57And the second important element which is also contributed is CGTMSC guarantees available
12:03up to five crores.
12:04Okay.
12:05Which is a good development.
12:06Okay.
12:07Okay.
12:08So for the bankers, there's that amount of confidence for those smaller loans.
12:11Got it.
12:12Let me touch on the wholesale piece now.
12:15Like CapEx has been making a comeback for three years, finally, seems like it's here.
12:20There is some amount of rejuvenation within the corporate segment.
12:26In fact, you know, we had the RBI governor just talk about the fact that companies need
12:31to start coming in and really need to start spending.
12:36As a lender who's active in the space and is probably going to lead the charge as far
12:40as private borrowing is concerned.
12:44How do you manage that growth without compromising on risk, without compromising on any kind
12:49of pricing issues?
12:50Because pricing has been a big talking point as far as corporate lending is concerned.
12:55No, I think there's two things I already told you that we have set up an underwriting standards,
13:00whether it is a retail, whether it is MSME, whether agriculture or corporate.
13:05I think our underwriting standards, we are not going to compromise.
13:09When I say underwriting, it's not about the paperwork.
13:12It's about the way we assess the project.
13:15For example, maybe, you know, a few years ago, if a road project is there, we were trusting
13:21that the land will be available, right of way will be available.
13:25And even with 50% right of way, probably we were giving the money.
13:28Today, our underwriting standards say that unless 95% right of way is available, not
13:34even one rupee is given to them.
13:37Which means that the whole ecosystem also has changed and the quality of equity has
13:44changed.
13:45And the promoters are willing to bring the upfront equity, equity available in the form
13:49of private equity or their own cash accruals, which they were able to make in the last two
13:55or three years.
13:56That means the upfront equity is available.
14:00And we are insisting that whatever statutory approvals are required, the statutory acquisition
14:04of land is required, that needs to be in place.
14:08So which gives us confidence that, you know, the kind of cycle which we have seen will
14:13not happen now.
14:14That is on the underwriting side.
14:17And the pricing side, I certainly believe that I think the risk is not being priced
14:22properly in the corporate side even today.
14:26And we don't want to get into that situation.
14:29I personally believe that project finance, where the risks of execution are there, that
14:35execution risks have to be properly priced.
14:39Once the execution risk is over, it can move into a securitization date where the pricing
14:44can be a market related pricing.
14:47I think it is important for all of us lenders, particularly in the corporate banking and
14:51project financing to realize that the execution risks have to be priced properly.
14:56And we are not compromising on that.
14:59But doesn't that make it difficult to grow?
15:03So I think people also come to us because of our ability to assess the project.
15:08It's not just price the project, it's not about pricing alone.
15:12Yeah, once the execution is completed, obviously the price war starts and so, you know, they
15:18go around shopping.
15:19But as far as project financing has been an issue, I think still SBI is a preferred bank.