The growth numbers look strong. Banks are in their best position in decades. Yet, there is a sense that these are not the best of times. Your reading of the economic pulse?
In my 38 years of banking, I have seen several cycles, but what is clearly visible this time is resilience. Since 2020, we have faced unprecedented issues, whether Covid, tariff issues, the Russia-Ukraine war or the Middle East crisis. Each has affected India in some manner, yet economic activity has shown significant resilience. Banks are well capitalised and corporates are well positioned with deleveraged balance sheets. MSMEs were expected to face tough times, but timely interventions helped. Despite global uncertainties and challenges, we have acquitted ourselves very well.
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What is your outlook on growth, inflation and interest rates?
On growth, the first-quarter projection of 8% is widely debated, but I think growth will be at least 7.5%. Inflation will depend on how agricultural production plays out, but we broadly agree with RBI’s inflation projections (of 5% for FY27). As for rate action, any changes in the current calendar year will be clearly data dependent.
Global disruptions are lasting longer. How do you see this playing out for the economy, corporates and banks?It is difficult to put a timeline when these issues will be resolved. We thought many would be short term, but they have lingered. The challenges are now stacked up; they do not come sequentially. How we handle multiple challenges arriving together, and with equal intensity, will be an important part of our resilience model.
The caution we see is largely because we are all moving towards a new reality of global uncertainty. It requires constant evolution and readjustment in our approaches, policymaking and strategies. This is something we need to get used to.
What gives you confidence in SBI’s 14-15% credit growth guidance when new private-sector projects are not visible?
Our overall guidance of 14-15% growth will predominantly come from the retail, agriculture and SME segments, as is happening across industry. But we are also seeing good growth on the corporate side. Part of it comes from a seamless shift between market borrowing and bank credit, particularly for working capital. Beyond this, we have a visible corporate pipeline of ₹4-5 trillion, about half sanctioned and half under discussion. It includes renewables, conventional power, battery storage, transmission, distribution and data centers.
With FCNR(B) window closing earlier than expected, are you revising the target? What visibility do you have on ECB demand?
We had estimated about $10 billion and are sticking to that. As we speak, we have done more than $9 billion. On ECBs, we have visibility of almost $4 billion of corporate funding demand. Funding is not a challenge for us, and we will be able to support it.
Asset-quality environment appears benign. Where do you see the next major risks?
Banking continues to be a cyclical industry. The financial sector is a proxy for the economy. But if an economic cycle turns four or five years from now, banks and financial institutions are much better positioned to handle it because of their capital buffers and robust risk profile of their books. Today, risk can come from any side. Nobody imagined Covid, tariff uncertainty or geopolitical crisis, yet we withstood them. At the same time, new challenges should not be underplayed. A decade ago, cybersecurity was not discussed as much. Today, the focus cannot be only on credit risk. Operational risk is now much more in focus.
Every institution fancies a segment to grow. What is SBI’s?
We are already a dominant player in most product segments. The scale at which we operate is significant. MSME will be a major focus area. Against an overall loan market share of about 20%, our SME share is around 13%, and we would like to increase it. If there is one segment where we are focused on gaining market share, it is MSME.
In the last three years, we have gained market share in MSME. We are making significant effort to not only defend but to increase our market share.
What are your ambitions in credit cards and auto loans?
We are number two in credit cards and would obviously like to be number one. SBI has been fortunate in gaining customers’ confidence and trust. In auto loans also we have a significant market share. We slowed slightly in the first quarter because of pricing pressure and other factors, but we have already reworked pricing and expect to return to a dominant position.
Corporate loan pricing remains intense. How do you balance risk-based pricing with competition?
Corporate lending is competitive partly because it is operationally less expensive. Apart from low operating costs, corporates provide significant relationship value. It is not only lending. The relationship includes letters of credit, bank guarantees, foreign exchange, employee salary accounts, cash management, collections and disbursements. We have consciously moved from being predominantly a corporate lender to being a corporate banker, offering a suite of solutions. We now use a 24-item checklist for every corporate relationship to assess the relationship value, not lending alone.
SBI’s NIMs are lowest among peers. How much can fee income contribute to profitability?
On the NIM, we are constantly striving to improve it and have given 3% guidance for FY27. On fee, we have the potential to take it up to 20% of total income. That itself would be a big movement for us. We are an asset-heavy bank. With ₹60 lakh crore of deposits, we have to build the loan book; we cannot focus purely on fee income. The question is how much relationship value we can create through lending. Products per retail customer have increased from about 1.5 earlier to 3-3.5 on average. On the corporate side it is six to seven products. An average of four products per retail customer and 7-8 for corporates would be good.
You have spoken about the balance sheet doubling over the next several years. Do you have a profit target?
We do not have a profit target as such, but aim to maintain return on assets of 1% and return on equity of 15% through the cycles. Scale is inevitable as the economy grows, but we also need to serve a diverse customer base efficiently through a digital-first approach.
SBI’s NPAs are low. Is it a reflection of risk aversion?
If we were not taking risks, we would not grow at 17-18%. Every product segment has grown at a double-digit pace. It is a benign asset-quality cycle, and the entire system has benefited, but the outcome cannot be attributed to the cycle alone. The whole gamut underwriting, delivery and monitoring have improved tremendously. The risk-reward balance is examined very intensely at SBI. We have among the lowest risk-weighted asset density in the industry, but that has not stopped growth in any segment. We have identified the best underwriting process for each product category. That has helped contain credit costs, even with a loan book of about ₹50 lakh crore.
Priority sector has been debated for a long time now with the dynamics in the economy changing since it made its debut. What should be the focus?
Priority sector lending (PSL) framework needs alignment with the changing lending and economic landscape. Adjustment has been made from time to time, but there is room for further fine-tuning. PSL should not be only target-oriented; it should also be impact-oriented. In agriculture, for example, the entire value chain is not fully funded. The focus should be on linking crop loans, warehouses, traders and other participants to fund the value chain, rather than viewing each loan separately. Lowering the target is not the answer. The definition can be expanded.
The government has said public sector banks should shed their PSU image and reach younger customers. How do you interpret that?
It is not that young people are not banking with us. The issue is how we design products, processes and our approach to this customer base. The opportunity is to make proactive outreach, educate them about products and processes, and ensure that products reach them. In the case of SBI, customers below 30 years account for nearly 35% of our new customer acquisition.