State Bank of India (SBI) chairman CS Setty expects competition for deposits to continue for some more time even as banks look at ways to spur deposit growth.
In his first public speech after assuming charge as chairman of country’s largest lender, Setty said that banks may tweak interest rates of short-term deposits. However, he does not expect a rate war among the banks.
“Most of the banks including us are not getting into a rate war. We want to attract customers by way of improved service quality and some banks are looking at opening branches,” Setty said. “There will be some tweaking in interest rates particularly in the one-two year bucket, which is the popular one. Competition for deposits is likely to continue for some time,” he said.
Banks are looking at how to get more value out of their existing customers and attract new customers by offering better quality of service, he added.
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, Reserve Bank of India governor Shaktikanta Das has asked banks to innovate products to address the issue.
Setty said there is no pressure on the bank to lower its credit-deposit ratio.
“We have a very comfortable CD ratio, and we are not under pressure to reduce the CD ratio. We have robust credit growth, and we expect 14-15% credit growth,” he said. “Even if we have 8-10% deposit growth in SBI, because of the large base in absolute numbers, it will be larger than the absolute amount of credit growth,” he added.
SBI has launched a 444-day term deposit scheme ‘Amrit Vrishti’, offering 7.25% interest.
According to Setty, savers are moving funds to high yielding assets which is putting pressure on the banks.
“It is a fact that due to the change in asset allocation of the customers, some movement of investments is going to other asset classes, so obviously increase in credit growth and savings to other asset classes is putting pressure on deposits of the banks,” he added.
SBI is working on a five year roadmap focussing on technology and technological resilience and the bank is aiming to create an omnichannel experience with YONO 2.0 app.
“Yono 1.0 is robust, but what we are looking at is a complete transformation of the app. The app is about 5-6 years old. While the design elements will remain, we are focusing more on the stability, scalability and robustness of the applications, which entails deeper technology transformation,” he said.