SBI not worried about RBI mis-selling curbs, says Setty; bank assembles team for M&A financing deals

The chairman admitted that  RBI’s new “expected credit loss rules” which become effective from April 2027 will impact the bank, but it would be marginal

• SBI's fee income won't be hit by RBI's new bundling rules
• SBI forms a team for M&A financing with SBI Caps and Investec
• SBI adopts AI for fraud prevention, plans more AI services

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SBI’s fee income will not be impacted by the RBI’s impending rules to control misselling and compulsory bundling, SBI chairman CS Setty told Moneycontrol. Speaking in our ongoing series 'Latha & The Leaders', Setty also said the bank is gearing up to do M&A financing by putting together a crack team, including employees from SBI’s corporate banking division, plus key executives from the merchant banking division of SBI Caps and its JV partner Investec.

Setty pointed out with much delight that the market is reducing the valuation gap between SBI and private banks. In the just-reported Q3 results, SBI’s loan growth of 15.6 percent was higher than that of the top 3 private banks and the 6 largest PSU banks (after SBI). “The performance gap between private and PSU banks, both in the stock market and in the P&L, is narrowing,” he said.

Not just loan growth, but even in terms of other matrices like credit cost, PSU banks have been showing better numbers. SBI's credit cost is down to 29 bps in Q3 against over 40 bps for the leading private banks. Setty reiterated SBI’s guidance that the bank would achieve more than 15 percent, return on equity and over 1 percent return on assets through cycles.

The chairman admitted that RBI’s new 'expected credit loss rules' which become effective from April 2027 will impact the bank, but it would be marginal he said: one because asset quality has been improving every year; two because RBI has given 5 years to meet the required provisioning and three because in the one year run-up to April 2027, SBI plans to strengthen its collection mechanism and be more prepared for the ECL deadline

On the RBI draft rules on the mis-selling of financial products by banks, Setty said his bank never compulsorily bundles products, and strongly follows the principle of suitability of products sold to consumers. RBI’s new rules require banks to pay back consumers if the consumer prove unsuitability of products sold. “A suitability test is digitally done, and a suitability form is automatically generated, Setty said, adding that in any case, fee income from selling insurance products contributes 15 percent to the bank’s other income.

Speaking on the very newsy issue of artificial intelligence, the Chairman said a bank like SBI, which caters to 530 million customers, is best placed to benefit from A.I., given its sheer scale. The bank is already using AI to handle operational risks: 'Fraud prevention, fraud risk management is completely AI driven for us”, he said, adding that work is underway to use A.I. for offering hyper-personalised recommendations to customers