SBI won’t get into a rate war amid fight for deposits, says new chief

“We want to attract customers by way of improved service quality and improved access," Setty said at the Global Fintech Fest 2024 in Mumbai. “Everybody is looking at how we can get value out of the existing customers, and also attract new customers by offering better quality services."

Even so, competition for deposits among banks is likely to continue for some time. For this, there could be some tweaking in rates for one- to two-year deposit buckets, which continue to be the most sought after, said Setty.

Setty took charge as the head of SBI earlier this week, replacing Dinesh Kumar Khara who retired effective 28 August.

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The banking sector is facing the worst deposit crunch in 20 years as the pace or raising funds from customers has lagged credit growth. On year, credit growth was up 13.5% as of 9 August while deposits have risen 10.9%, as per Reserve Bank of India (RBI) data.

The credit-to-deposit ratio—or the percentage of deposits given out as loans—has been generally hovering around 80% since September. It saw a decline of 19 basis points over the previous fortnight to 79.1% in the two weeks through 26 July, compared with 77.3% on 11 August 2023, CareEdge said in a note earlier this week.

A basis point is one-hundredth of a percentage point.

For SBI, the domestic CD ratio stood at 69.28% as of June.

SBI has a very comfortable credit-to-deposit ratio and is not “under pressure to bring down" this number, said Setty, pegging credit growth for FY25 at 14 -16% and deposit growth at 8-10%. In absolute terms, this deposit growth will be higher than credit growth given the existing large base, he said.

On the lending side, corporate credit growth has been reasonably good, with the bank seeing 15 -16% growth in the previous quarter.

“We have sanctioned, approved, and disbursed loans of about ₹4 trillion. If this is an indication of capital expenditure, then it is a robust one," he said, adding that especially in core sectors such as renewables and roads people have started talking about expansion. “I am sure the private capex cycle will come back."

YONO 2.0

SBI reviewing its technological infrastructure to offer an omnichannel experience to customers under YONO 2.0, the second generation of the bank’s mobile banking application.

“We are focusing more on technology and technological resilience, which requires you to invest in data architecture, revisit your infrastructure, network. What we are focusing on now is essentially customer omnichannel focus so that branch customers can seamlessly move to YONO and then internet banking. This requires absolute, deeper reorchestration of IT platform, which is what we have undertaken under YONO 2.0," Setty said.

“It is not only about the customer journey; it is about technological resilience, scalability, robustness, resilience and, more importantly, cybersecurity."

The country’s largest bank is also looking at large-scale adoption of marketing technologies, which combined with the bank’s artificial intelligence and machine learning prowess, will enable SBI to make hyper-personalized offers.

“And not only in terms of retail personnel, we are looking at even other segments—bottom of the pyramid, financial inclusion segment, agriculture, MSME (medium, small and micro enterprises)—what kind of personalization can be done. We have a rich data base of customers, and our digital transformation is also focusing on the new to bank customers."

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While so far the digital mobile offerings were aimed at existing customers, the bank is now triangulating public data sets available to developing new-to-bank offerings, he said, adding that the lender aims to eventually source 90% of retail and MSME loans through digital channels.

“There is a deeper digital transformation happening under YONO 2.0. It’s not just tweaking the journeys of YONO 1.0 and calling it 2.0," he said. “What we are looking at is complete transformation of this application."

The bank plans to roll out the phase one of YONO 2.0 by November under a ‘closed user group,’ which will eventually be opened to the public, Setty said, adding that the bank has identified some “frequently used consumer services" that will be part of the initial launch.