Challa Sreenivasulu Setty is taking the reins of State Bank of India at a time when the banking sector is witnessing a fierce competition for garnering deposits. The next three years will be challenging for the 59-year-old banker, who started his career with SBI as a probationary officer in 1988.
Setty will have to ensure that SBI not only succeeds in mobilising deposits, but also protects its net interest margins, arrest the decline in low-cost current account savings account (CASA) and expand the loan portfolio, while maintaining the asset quality. He assumes charge as the new chairman from today (August 28).
“Much like an all-rounder in cricket, he is a versatile banker with a comprehensive, 360-degree understanding of the industry. This broad expertise will enable him to effectively guide the bank through challenging times,” said a retired official of SBI who worked with Setty.
With deposit growth trailing the credit growth, banks are struggling to mobilise funds from depositors. Concerned by a widening gap between the credit and deposit growth, the Reserve Bank of India governor has asked banks to innovate products to address the issue. Like other lenders, SBI has also seen its deposit growth slowing from 13% in the third quarter of FY24 to 8.2% in first quarter of the current fiscal.
To counter the slow deposit growth, banks have hiked rates on fixed deposits, but that has created the problem of falling CASA, as depositors move their funds to high-paying FDs. The CASA ratio of SBI has declined from 42.88% in the first quarter of FY24 to 40.70% in Q1FY25.
“While Setty has worked in nearly all the major departments of the bank, he gives special attention to recoveries from bad loans. His philosophy is to keep following up with the borrower,” said a senior bank official.
Setty will need to leverage technology, particularly artificial intelligence, to enhance operational efficiency, improve customer service and stay competitive. Under Dinesh Khara, SBI has made an impressive performance in digital banking. The bank is opening almost 60,000 savings bank accounts daily. Of these, about 34,000-40,000 accounts are opened via the Yono app.
“The bank has made a good start in digital banking, the new chairman will have to ensure that SBI remains aggressive in acquiring customers via digital channels,” said a banking analyst.
Banks prefer to keep a high level of CASA as these are sticky and a cheap source of funds for them. Investors also keep a close watch on banks’ CASA ratios, as a higher ratio indicates that the cost of funds of a bank is lower, which helps boost its earnings.
“Since the first quarter of 2022-23, lenders have faced pressure on CASA ratios as customers prefer term deposits due to attractive rates. The pressure on CASA deposits is anticipated to persist, with an elevated share of term deposits expected to continue for several more quarters,” an analyst told FE.