Low deposit growth big challenge for new SBI chief

The bank, with assets of Rs61.79 lakh crore at the end of FY24, already identified opportunities in sunrise sectors under the government’s production-linked incentive (PLI) scheme

Tasks Ahead

♦ Setty hails from Jogulamba Gadwal district, Telangana

♦ He’s replacing Dinesh Khara

♦ Expansion of SBI’s Yono 2.0 will require his attention

Mumbai: The central government formally appointed Challa Sreenivasulu Setty as Chairman of the count largest lender, State Bank of India, recently. Setty (59) has been appointed as Chairman of the state-run bank for a period of three years starting on or after August 28, the date on which he is likely to assume his new office.

It was in June when Financial Services Institutions Board (FSIB) interviewed three candidates and chose Setty for the top job at SBI. Setty was born on September 26, 1965, in Peddapothulapadu village in the Jogulamba Gadwal district of Telangana State. He completed his Bachelor of Science degree in Agriculture from the Acharya NG Ranga Agricultural University (ANGRAU). He joined State Bank of India in 1988 as a Probationary Officer in Ahmedabad Circle.

He was promoted to the SBI Board as a Managing Director in January 2020. Building loan portfolios in emerging sectors, expanding the Yono 2.0 app to attract tech-savvy customers, harnessing the power of AI and data analytics for seamless customer onboarding and fraud detection, addressing climate risk in the balance sheet, managing the challenges of current account and savings account (CASA), and unlocking value in non-bank subsidiaries are some key challenges before the new Chairman.

The bank, with assets of Rs61.79 lakh crore at the end of FY24, already identified opportunities in sunrise sectors under the government’s production-linked incentive (PLI) scheme. Companies are investing in renewables, green hydrogen, electric cars and lithium batteries. With a 20 per cent share in the lending market, SBI has always been at the forefront of new economic sectors. However, Setty has to provide leadership in assessing risk and return to take the bank to newer heights.

The expansion of SBI’s digital offering, Yono 2.0, will require Setty’s attention. With a user base of over 74 million, it offers pre-approved personal loans and instant auto loans.

However, he has a host of other challenges before him and the foremost among them being his ability to check the slowdown in deposit growth, an industry phenomenon though, whereas credit growth has been lagging behind.

It was sometime back when the Reserve Bank of India (RBI) Governor Shaktikanta Das had flagged concerns on the widening gap between credit and deposit growth with household savings increasingly moving away from traditional deposits, urging banks to adopt new strategies to attract deposits and manage liquidity risks effectively.

The RBI Governor had further said, “deposit mobilisation has been lagging credit growth for some time now. This may potentially expose the system to structural liquidity issues. While there could be a debate regarding ‘deposits funding loans’ vis-à-vis ‘loans funding deposits’, the current regulatory concern stems from the fact that there could be structural changes happening which banks need to recognise and, accordingly, devise their strategies.”

Das highlighted that households and consumers who traditionally leaned on banks for parking or investing their savings were increasingly turning to capital markets and other financial intermediaries. However, SBI group’s chief economic advisor, Dr Soumya Kanti Ghosh had different opinion on this. He feels that the success of India’s mutual fund industry has not been at the cost of bank deposit growth in the country.

For Setty, who is currently heading the International Banking Group (IBG) of the bank along with its IT, tackling low deposit growth will invariably be a big challenge as well as the top priority. And he is likely to do it efficiently. The reason is not far to seek. Setty, a first from Telangana to take over the top position of the bank in past several decades, belongs to the money lending community of the State and banking runs in his adrenalins. Setty will be replacing the incumbent Dinesh Khara as the new Chairman of SBI.