SBI chairman CS Setty told Moneycontrol that the RBI’s upcoming regulations to curb misselling and mandatory bundling will not affect SBI’s fee income.
Speaking on our current “Latha & The Leaders” series, Setty added that the bank is preparing to finance M&A deals by assembling a strong team that includes key executives from SBI Caps’ merchant banking division, its joint venture partner Investec, and staff members from SBI’s corporate banking division.
With great pleasure, Setty noted that the market is closing the SBI-private bank valuation gap. SBI’s loan growth of 15.6% in the recently released Q3 statistics was greater than that of the top three commercial banks and the six biggest PSU banks (following SBI). He said that the difference in performance between PSU and private banks is closing, both in the P&L and the stock market.
In addition to loan growth, PSU banks have been displaying improved figures in other indices, such as credit cost. In Q3, SBI’s credit cost decreased to 29 basis points, compared to around 40 basis points for the top private banks. Setty restated SBI’s recommendations that the bank will use cycles to achieve a return on equity of more than 15% and a return on assets of more than 1%.
The chairman acknowledged that the bank would be impacted by the RBI’s new “expected credit loss rules,” which go into effect in April 2027, but he claimed that the impact would be minimal because, first, asset quality has been improving annually; second, the RBI has given the bank five years to meet the necessary provisioning; and third, SBI intends to strengthen its collection mechanism and be better prepared for the ECL deadline in the year leading up to April 2027.
Regarding the RBI draft regulations on banks’ misrepresentations of financial products, Setty stated that his bank always adheres to the suitability of products supplied to customers and never forces product bundling. According to the RBI’s new regulations, banks must reimburse customers if they demonstrate that the goods they purchased were inappropriate. “In any case, fee money from selling insurance products provides 15% to the bank’s other income,” Setty explained, adding that a suitability test is completed digitally and a suitability document is automatically prepared.
Speaking on the highly publicized topic of artificial intelligence, the Chairman stated that a bank with 530 million clients, such as SBI, is in the best position to gain from A.I. due to its size. The bank is already managing operational risks with AI: “We rely entirely on artificial intelligence (AI) for fraud detection and fraud risk management,” he stated, adding that efforts are being made to leverage AI to provide clients with highly customized recommendations.
