SBI is not just a Bank but a Financial Superstore, Read SBI Chairman’s Interview

In a recent interview with BusinessLine, SBI Chairman Dinesh Khara shared insights on various aspects of the State Bank of India. Here are the key points from the interview:

Market Understanding of SBI:

• Khara believes that there is a better appreciation of SBI in the market now compared to the past, but there is still room for improvement.
• SBI has a larger reach and a better portfolio compared to some private sector and smaller banks.
• The bank has achieved decent growth and can generate stronger returns and profits in the future.

Cost-to-Income Ratio:

• SBI’s cost-to-income ratio is currently around 52 percent.
• Last year, there was a one-off provision for salary increases that impacted the ratio.
• Khara mentioned that the cost-to-income ratio for the last financial year is not representative and the bank aims to bring it down below 50 percent in the future.

Differentiation in the PSU Space:

• SBI considers itself more than just a bank, but a financial superstore.
• The SBI Group offers a range of services beyond banking, including investment banking, asset management, life insurance, non-life insurance, card services, and more.
• The bank has a physical, ATM, and BC/CSP network that is not easily replicable.
• With over 22,400 branches and 235,000 employees, SBI is uniquely positioned to better serve its customers.

Handling Government Funds:

• SBI does not compete with RBI in terms of handling government funds.
• The bank focuses on cash management and has developed a transaction banking hub to channel current account business.
• SBI has seen decent success in this area.

Repo Rate Cut and Corporate Borrowing:

• Khara believes that corporate demand for loans is more influenced by the visibility of demand than small changes in interest rates.
• He anticipates a reduction in interest rates from the third quarter of FY24-25 after the monsoon season.

Deposit Rates and SBI:

• SBI is comfortable with the current CD (credit deposit) ratio.
• The bank evaluates credit offtake and deposit availability in ALCO (Asset Liability Committee) meetings.
• With the current interest rates, SBI is confident in supporting its loan book.

Lumpy Corporate Accounts:

• As the economy develops, corporates tend to depend on market borrowing rather than solely relying on banks.
• SBI has internal exposure ceilings and no concentration risk.
• The banking system needs to adapt to this new paradigm and there is an opportunity for banks to cater to the needs of the economy.

Credit Quality of Retail Loans:

• Despite the pandemic, retail loans have maintained good credit quality for almost five years.
• SBI attributes this to having the right structures in place for sourcing, underwriting, and collections.
• Khara does not see the need for caution in any specific pockets of retail lending.

Acquisitions and Inorganic Growth:

• SBI is not restricted from making acquisitions.
• Khara believes that inorganic growth is expensive and private players pursue it to accelerate their growth.
• SBI is not inclined to spend too much money on inorganic acquisitions but has invested well in the rural branch network and its wholly-owned State Bank operation support subsidiaries.

These are the highlights from Dinesh Khara’s interview, providing insights into the State Bank of India’s performance, strategies, and future plans. You can read full interview here.