In Short:
Challa Sreenivasulu Setty is set to become the new chairman of SBI. Despite a deposit slowdown and rising loan delinquencies, analysts are positive about SBI’s future under Setty’s leadership. The bank may focus on areas like improving market share, SME segment growth, mobilizing more overseas deposits, reducing costs, and enhancing capital. Setty is also expected to advance SBI’s digital initiatives, especially its Yono app.
Welcome Challa Sreenivasulu Setty – The New Chairman of SBI!
Exciting news! Challa Sreenivasulu Setty is all set to take the reins as the Chairman of the State Bank of India (SBI), taking over a financial giant with a rock-solid balance sheet. But, there are some challenges on the horizon that he will need to navigate through.
A New Leader Takes Charge
Setty, who currently oversees SBI’s subsidiaries, global markets, and technology, will officially become the Chairman on or after 28 August for a three-year term. He will be succeeding Dinesh Khara, who took over as Chairman in October 2020 and received an extension until October 2023.
Challenges Ahead
SBI, being India’s largest bank, is facing a widening funding gap. While its loan book surged by 15.4% year-on-year, deposits only grew by 8.2% in the June quarter. This imbalance is more significant than the industry average, where deposits grew by 11.1% and non-food credit by 17.4% during the same period.
Rising Loan Delinquencies
The sector is also grappling with rising loan delinquencies, especially in unsecured loans. SBI’s Xpress Credit product saw an increase in delinquencies in the June quarter, leading to concerns. The gross NPA ratio for Xpress Credit rose to 0.97% on a portfolio of ₹3.5 trillion.
Khara attributed these delinquencies to delays in salary payments, but some experts are not entirely convinced by this explanation. Suresh Ganapathy, from Macquarie Capital, expressed surprise at the quick movement of customers into a 90-day bucket due to payment delays.
Prospects under Setty
Despite these challenges, analysts are hopeful about the future of SBI under Setty’s leadership, given the bank’s robust balance sheet. Some areas of focus for Setty may include improving current account deposit market share, growing the SME segment, raising overseas deposits, reducing the cost-to-income ratio, and enhancing capital adequacy.
Jefferies analysts anticipate a smooth leadership transition under Setty, with a focus on expanding the small business segment, reducing the cost-to-income ratio, and potentially raising capital for better buffers.
Advancing Digital Initiatives
Setty is also expected to drive SBI’s digital initiatives, particularly overseeing a significant upgrade for Yono, the bank’s banking app. With 78 million registered users and counting, Yono is a vital component of SBI’s digital strategy.
SBI had plans to revamp Yono and rename it ‘Only Yono’ to enhance its digital offerings, but this plan has yet to materialize. Former Chairman Rajnish Kumar envisioned a bright future for Yono, valuing it at over $40 billion if spun off into a subsidiary.
Exciting times lie ahead for SBI as Challa Sreenivasulu Setty steps into his new role as Chairman, steering the bank through challenges and advancing its digital journey to new heights.
