State Bank of India (SBI) Chairperson Challa Sreenivasulu Setty on Wednesday said India's overall credit growth remains strong. In a conversation with Business Standard Consulting Editor Tamal Bandyopadhyay at the Business Standard BFSI Insight Summit 2025 in Mumbai, Setty said, "We are not lagging in overall credit growth. The issue is more about sectoral distribution."
He also commented on key issues such as technology investments, listing of subsidiaries, attrition, and attracting private-sector talent—edited excerpts.
Tamal: Indian banking system is in the best of health. Getting into the numbers, it’s never ever net NPA was so little. Some of the banks, even public sector banks, is less than 50 basis points net NPA. All the large banks, both private and public, are about 40–45 basis points, less than 50 basis points NPA. Capital — all are well capitalized. That’s your side of the story. Corporate India also is not overleveraged at all. They’re very slim and trim and all, but still credit is not picking up. What is wrong? I was going through the RBI data — it comes out with the details about the sectoral credit, and can anybody guess where exactly credit is picking up? The latest number says that the only area where there is substantial growth in credit off-take is gold loans — 100 percent plus. If you leave that out, banks’ loans to NBFCs, to corporates, to MSMEs, to agriculture — everything is down. So, sir, what is wrong? Is it something wrong with the other side, or are you overcautious, risk-averse? What's the problem?
Setty: Good morning to everyone. Thank you for giving this opportunity. Last year, around this time, as soon as I took over as Chairman of SBI, the BS Summit was the first public appearance I had. It’s always a pleasure to come back here.
The second thing, before I answer your question — all uncomfortable questions are comfortably answered by the Secretary. So I have only business questions to answer.
Obviously, Tamal has picked up the right question in terms of credit. First of all, sir, thank you very much for the kind words which you have mentioned about the public sector banking performance as well as public sector management performance. I hope that our March reports all will be good. Now that you have endorsed publicly, you can’t go back!
So, the second point, of course, is the twin balance sheet problem we had. Today we are talking about the twin balance sheet advantage. The Secretary also mentioned, in terms of corporate balance sheets being good and bank balance sheets being good. So, where are we lacking in terms of credit growth?
First, let me tell you that we are not lacking in credit growth. If you see the RBI numbers, it is double-digit growth — reasonable credit growth in my view. The problem is in the sectoral credit growth, as Tamal mentioned — not necessarily that it’s coming from gold loans; gold loans constitute a very small percentage of the overall credit ecosystem.
Two important things to notice: the first and foremost, today, very significant growth is happening in the MSME credit. And MSME credit growth rate is not on account of lack of opportunities elsewhere that we are lending to MSME. Today, there’s a greater amount of confidence among mainstream banks to lend to MSMEs because of the data availability, because of the clarity in terms of their business models. Today, a lot of banks and NBFCs are lending to MSMEs.
The second important credit growth is coming from agriculture. The Secretary mentioned MSME and agriculture — both sectors are witnessing around 16 to 17 percent annual growth rates.
And on the retail side, of course, mortgage growth rate is very good, and I personally believe that mortgages for any economy are a very critical piece, because in the real estate sector, almost the residential sector alone has more than 200 different economic activities interlinked to the mortgages.
So, the only thing we are lacking now in credit growth — I think we have been talking for the last three to four years on corporate credit growth — there are several reasons. If you permit me to say that, I think if you really want a data point, I would like to give: if you see, there’s corporate credit growth of around 1 to 1.7 percent, but the equity raising by the corporates is almost 3x. That means non-banking sources are available to the corporates.
I did mention earlier also — in the past, today in the system, corporates have almost 13 to 14 trillion rupees cash lying with them. So, obviously, if any capital expenditure is happening, they’re going to use that cash first and then come to the banking sector. So, the economic activity of the capital expenditure on the private side cannot be measured by the conventional credit growth alone. I think we need to see from the capital formation point of view. We definitely would like — the government as well as the banks — as much private capital expenditure to come back, and there are several reasons for that.
I think most of the companies are able to operate at higher capacities now than before. They used to go for brownfield expansion as soon as they reached 70–75 percent capacity utilization. Today, technology enables them to operate at 90 percent capacity utilization. The second thing is that global disruptions, supply chain disruptions, tariff-related issues — they are all creating some amount of uncertainty in the minds of people.
But one thing I’m very confident about is that private capital expenditure will be coming back soon. The simple reason is that this is an economy built on domestic consumption. As soon as domestic consumption stability is visible to people, I think private capital expenditure is likely to come.
Tamal: So, capex will start. So that’s the right side of the balance sheet. Now look at the left side — there are also problems. I mean, hand on heart, every banker you speak to over a cup of coffee says getting deposits is a big, big problem. For the first time, they are admitting that banking actually is a business of collecting money — that’s more important. CASA (Current Account Savings Account) is going down every quarter, everybody’s CASA is going down. There are a lot of theories — financialization, etc. — but at the end of the day, I’m not getting into M3 and all the economic theory. Money has to come to the banking system, but while it is coming, you are paying more in the form of CPs and CDs and all.
And another responsibility also, sir, is that with the government’s better cash management — just-in-time — all the float that you used to enjoy, now this gentleman does not allow you anymore. So, what do you do on the left-hand side of the balance sheet?
Setty: So, the left-hand side of the balance sheets is structurally going to be different. I think it is irreversible in the sense that, not only in terms of better cash management by the Government of India — obviously that has definitely impacted the current account balances which were mainly available for the banks, and more so for the public sector banks.
I’ll come to the current account a little later. Yes, so structurally the balance sheets of the banks will undergo change. I think we need to understand that. Just to give a comparison, globally, the balance sheets of the banks are built not by deposits but by market borrowings, because much of the financialization which has happened in developed economies — the money has moved away from the banking system to other financial services. It could be equity markets, insurance, pension funds — fairly large markets in many of the developed countries.
And the same financialization away from the banking savings is likely to happen in India also. Just to give you again a data point: we have had 1.6-6 times growth rate of bank deposits, whereas mutual funds are growing at 3x, which which means that there is a sense of asset allocation or the savings allocation among the savers. Whether the savers will completely move away from the banking deposits is unlikely. As the savings improve, the allocation becomes critical. Not that everyone is going to put every money what they save in the markets. So but the flow to the bank deposits in the pure form probably will come down.
If you also see, CASA is not only getting impacted because the current account from governments is coming down — part of the savings is going to the market, part of the savings is also moving to fixed deposits.
Tamal: Because what happened 10 years back — bankers had a herd mentality. Whatever State Bank of India was doing, smaller banks followed, though their ability to manage risk was very different. But they did it to be in the same league. Do you think there’s another side to it? Like now, you’re getting into all the M&A financing and others — smaller, relatively smaller banks will also follow and get into a sort of mess, or are you well prepared to seize the opportunity?
Setty: So, first of all, I must compliment the regulator for coming out with 22 announcements.
Tamal: You have been one — you are one banker who’s been pushing for M&A financing, if I’m not mistaken.
Setty: Yeah, I’ll come to the M&A a little later. I think we must acknowledge, with a round of applause, what the RBI has done in terms of far-reaching — I call them banking reforms 3.0. Of course, the Governor underplayed it, saying these are all something which structurally the banking sector needed, so we have announced them. But I believe that the far-reaching impact — first and foremost — is that these announcements, particularly on the banking side, were a great measure of confidence in the maturity of the banking system in India.
Financing, for instance, shows that the regulator believes the Indian banking system is ready for funding these transactions with maturity. There are guardrails. The draft guidelines also have put in some guardrails. Obviously, we will be further negotiating with the RBI about what kind of fine-tuning can be done in the M&A financing.
And it is also not true to assume that a significant capital from the bank’s capacity to lend will move to M&A financing. The overall market size of M&A financing is minuscule when compared to the more than Rs 220 lakh crore credit system we have.
The primary aim of me — both as SBI Chairman and IBA Chairman — seeking approval for Indian banks to do M&A financing is to give a level playing field and confidence in our ability to appraise the transactions. I’m sure this is the first step in terms of enhancing the gamut of activities the banking system can do on the M&A side.
But there are a host of other announcements I think we need to focus on, and enable today — the banking system is robust. When the banking system is robust, what the regulator is trying to do is enable banks to do activities which they were not doing earlier, and also ensure that their capital buffers are maintained. Expected Credit Loss mechanism is being proposed, which means we need to provide for early recognition of any stress — it’s a combination of prudence and trust by the regulator.
Tamal: Thank you. I’ve been sitting on your chair; I’m sure you can’t say anything else! So this is banking reforms 3.0 from the RBI’s point of view. Now again, the Finance Ministry has done reforms 2.0. Why I’m saying 2.0? Because it did try in 2015, ten years back. Now again, it’s that — what is the reform? Now private guys can come, and one of your four MDs can be from the private sector, and then other EDs also can become, and all.
So, if I’m not mistaken — correct me if I’m wrong — in SBI’s history, when one SBI guy leaves, you don’t call him back if he goes out and all, and this is completely different. So, how will the banking sector manage that? Money part is one part — I mean, that’s a question of getting the talent, whether I’m interested with the lesser money and all, that’s a separate story. But how about the culture, etc.? Is it easy to go through this 2.0 reform by the Ministry? Will it be a success, or like ten years back, it happened in just two instances and then closed?
Setty: So, I’ll answer this question in two parts — one in the lighter vein, and another on a serious note.
In the lighter vein, we all among the public sector banks think that the private sector guys require good training — so they are being brought in here. That’s on the lighter side of it.
On the serious note, of course, the maturity of public sector banks today — the Secretary also alluded to it. Now there is absolutely no difference between public sector and private sector banks — it’s more in terms of ownership. If you really take out the ownership, in terms of product suites, in terms of technology, in terms of capability of people, I don’t think there is any great difference.
If this is intended to facilitate lateral movement, it’s a good move. Culturally, yes, there are certain definite challenges. The cultural challenge is not because these are different animals they’re going to deal with — it’s because of the pay structures and incentive structures, which need further attention from the government if they’re really serious about bringing private structure here.
Obviously, the public sector pay structure is a slightly inverted pyramid — in the sense that you have a large number of people getting paid very well compared to the private sector. As you reach the top, that differential becomes much larger. So, if the government really wants to attract private talent, obviously this structure has to be looked at.
But culture-wise, I think anybody coming to any new institution will have to reorient themselves to adjust to cultural issues. You, Tamal, have written a lot of things on culture; I don’t want to go into that. But I believe the attraction of anybody coming to the public sector is not necessarily the pay structure — it’s the ability to lead a large organization, to learn from large organizations in the public sector. How successful it will be, let’s wait and watch.
Tamal: Thanks. I think the DFS Secretary is sitting and got your message! But tell me — on the one hand, yes, this is a problem at the top end: you guys don’t get much. I mean, it’s a huge difference between private sector CEOs and you and all. But till the mid-senior level, your people are getting more than in the private sector, and more importantly, their job is also secured. So that actually gives you an advantage — you don’t have to do much on the HR front, right? You can focus on business because people leaving and all those kinds of things don’t happen. Am I correct?
Setty: HR is not pay alone, of course, but a big motivation in public sector banks is not necessarily the good pay we give. Obviously, people are paid well, thanks to the government and the management’s approach towards taking care of employees.
But two or three things we need to look at: why are attrition levels low in public sector banks? For example, SBI has less than 0.5 percent attrition rate, whereas in many banks — I think last time also I mentioned about the attrition rate in this forum — it’s not pay alone.
Today, I’ll just give you an idea of how we train our people. Most of them are taken from colleges through a very competitive examination. In SBI alone, our training budget every year — training budget alone, not infrastructure — we spend about Rs 550 crores on training people, and we train people for the banking system, not necessarily for SBI. Every employee, on average, goes through 60 hours of training in the bank, which means that you invest in your manpower training.
More importantly, public sector banks give a variety of opportunities. In my career of 37 years, I must have done 20 different assignments. I don't think any private sector or any other organizations have capability or willingness to provide this kind of exposure — exposure right from the smallest branch to the largest branch in New York I worked. This is an opportunity which public sector banks give.
So, from the HR front, attrition rates are lower not necessarily because we pay well — that’s an important element, of course — but because we also take care of their training requirements and create a sense of purpose for which they are working in the organization.
Tamal: I mean, we call SBI the blood bank for the banking system, because whenever there is — I mean, I don’t want to refer to names and all — but how many of your former colleagues are running the show in multiple private banks? That is because of your training, your culture, and everything else that you stand for. So, hats off to SBI.
Just tell us — your scale, every six years actually you are doubling. I was just going through the numbers — between 2018 and 2024, you doubled your balance sheet. So, how do you keep on doing this, and the kind of investment — is it more investment on technology? And you also have some plans for taking, you know, overseas expansion and all — what happened to that?
Very quickly, because I have a few questions left — just tell us, how do you keep on scaling? Because the government is talking about more such SBIs, because you are the only entity within the top 50, and that’s ever since the last 20–25 years — among the top 50 by assets, only State Bank of India is there; others are not.
Setty: Yeah, thanks. I think operating at scale is an important element for SBI. The doubling of the balance sheet — if nominal GDP is at 10 percent, SBI always outperforms the nominal GDP rate. Ten percent means you add 2 to 3 percent, so with a compounding effect, SBI has the capability to double its balance sheet every six to seven years.
I think technology definitely has helped us. Digitalization has definitely helped us. While we do not disclose our technology spends, I can tell you we are the largest spenders on technology today, and the digital platforms are robust. We invest heavily into backend technology so that the massive transaction volumes — UPI alone — we do around 22 crore transactions every day.
So, technology, digitalization, and reimagining processes across the banking system and branches have helped us handle these volumes at scale.
The second feature you mentioned — YONO. YONO Global is an important platform because, while we operate in 29 different countries, our physical presence is limited. The outreach is mainly driven by YONO Global. We have currently launched YONO Global in 13 different geographies. The volumes are going up — they’re taking care of account opening, remittances. I think we have large-scale adoption of YONO Global going forward.
Tamal: Talking about your subsidiaries — you have many subsidiaries, but at least two of them, say SBI Mutual Fund and SBI General Insurance. I mean, why aren’t you listing them? I mean, it’s not that creating value for your own entity — they’re extremely valued — but actually checking the market, what’s their value and all. But otherwise also, you know, the value unlocking for the investors, adding quality to the stocks and all — why not? When do you — because you keep on saying that someday they… where is there any plan of taking the subsidiaries to the market, at least these two — SBI Caps, at some point of time? Many years back, people used to talk that, and there have been instances where even an investment banking arm has gone into the market but was subsequently delisted. No, I’m not — but SBI MF and SBI General Insurance, why not?
Setty: No, these two subsidiaries definitely will be listed. Timing is something which I cannot take a guess at, but these are good entities, as you mentioned. These two companies do not require capital at this juncture, but we will definitely be accessing the market on these two subsidiaries — particularly to create an opportunity for general shareholders to come into these very valuable subsidiaries of SBI.
Speaking on capital markets, SBI’s Setty said: “I think the capital markets and the whole ecosystem in the capital markets play an important role. For instance, we have adequate room in terms of exposure to the capital markets. And if you have seen the 22 banking reforms which we spoke about, a few of them are aimed at engaging the banks in capital market lending, and SBI is committed to support these capital market participants.”
