SBI gets a new chief: Can Setty make the elephant of Indian banks dance again?

C S Setty is the next SBI Chairman

A last-minute suspense gripped the selection of a new chief of State Bank of India, succeeding Dinesh Khara, when FSIB postponed the interview of the three top managing directors shortlisted to run the elephant of Indian banking.

Apart from Challa Sreenivasulu Setty, who was later chosen as the chairman, the other two MDs who were to be interviewed were Ashwini Kumar Tewari and Vinay M Tonse.

The exact reasons for postponing the interview isn't known yet but probably the Financial Services Institution Bureau (FSIB), an autonomous  body under the central government, wanted to wait for the new government to take charge. When the announcement came finally, Setty's name came on the expected lines. Out of the three, Setty is the senior most and has a strong CV with work experience across almost every major verticals of the bank for over three decades.

“He has a lovely personality. It is a treat working with him. Setty is a storehouse of knowledge and an excellent leader who will definitely take SBI to greater heights,” said a former colleague who has worked with him for a long period. “A great thing about him is that wherever you meet him, in work environment or social events, he will recognise your presence.”

Another top banker, who has been with a rival organisation, too said Setty is a right choice for the SBI top job. "He is very knowledgeable and meticulous. I always thought he was the most competent and fit candidate for this position," said the banker who too declined to be named.

A strong balance sheet

Outgoing Chairman Dinesh Khara, who is set to retire on August 28 when he turns 63 (the upper age limit for the position of SBI chairman), is leaving a strong balance sheet for his successor. Under Khara's leadership, SBI has continued to be an outlier even during the bad times when other lenders struggled with asset quality and growth issues.

For the quarter ended March 31, SBI has the lowest gross non-performing asset (GNPA) in a decade at 2.24 percent as against 2.78 percent last year, while its net NPA came in at 0.57 percent compared to 0.67 percent last year.

At the post-results press conference for the March quarter, Khara said that the GNPA is the lowest in 10 years at 2.24 percent. SBI loan growth remained strong in the March quarter as it clocked one of the best growth in over eight quarters.

"Credit growth has been robust across all segments. RAM crossed Rs 20 trillion in FY24, corporate segment clocked a healthy growth of 16 percent year-on-year," Khara said.

The road ahead

For FY25 too, SBI has given a guidance to keep up the strong performance on growth. "We will be able to maintain a credit growth trajectory of 15-16 percent that we had in FY24. Deposit growth would be around 13-14 percent," Khara said.

“Credit growth is at 15.24 percent YoY with domestic advances growing by 16.26 percent YoY. Corporate advances and agri advances have crossed Rs 11 lakh crore and Rs 3 lakh crore," SBI said in a stock exchange filing.

Overall, the bank’s balance sheet is sound at this point. In Q4FY24, its total income rose to Rs 1.28 lakh crore from Rs 1.06 lakh crore a year ago, while its operating expenses grew relatively slower at Rs 30,276 crore from Rs 29,732 crore. The overall provisions nearly halved to Rs 1,609 crore from Rs 3,315 crore in one year.

Yet, there are challenges

There are challenges ahead, even for the biggest bank of the country, under a watchful regulator. The RBI’s recent crackdown on banks and NBFCs on the technology front and with respect to governance issues is a reminder to the whole industry on the tough tasks ahead.

The RBI’s recent proposed rule changes with the provisioning against infra projects too can pose challenges, although Khara recently said the bank is confident of absorbing the impact. However, by Khara’s own admission, the bank may have to reprice the loans if the draft rules come as final guidelines.

That apart, there are early signs of a pick-up in consumer loan-linked bad loans, especially in sectors like education loans and credit cards, which will pose challenges for the whole banking industry in the event of a prolonged delay in economic recovery.

SBI is often referred to as the 'elephant' among Indian banks for a reason - its sheer size. Even for the best banker, handling SBI, which has total assets of Rs 61 lakh crore as on March 2024 that is more than the combined assets of both HDFC Bank and ICICI Bank, won’t be an easy task. The most critical aspect to watch ahead will be how the banking industry will navigate if fresh asset quality issues surface, particularly in consumer loans.