Banks, companies better positioned to weather next downturn: CS Setty, SBI, Chairman

State Bank of India (SBI) chairman CS Setty, who has been in charge for two years, discusses the current economic situation with Economic Times (ET) journalists. Setty acknowledges that the growth numbers are strong, but there is a sense that these are not the best of times. He believes that despite global disruptions such as Covid, tariff issues, the Russia-Ukraine war, and the Middle East crisis, the economic activity has shown significant resilience.

When asked about his outlook on growth, inflation, and interest rates, Setty predicts that the first-quarter projection of 8% growth is widely debated, but he thinks growth will be at least 7.5%. He agrees with the Reserve Bank of India (RBI) on inflation projections of 5% for the fiscal year 2027. As for rate action, any changes in the current calendar year will be data dependent.

Setty acknowledges that global disruptions are lasting longer and that it is difficult to put a timeline on when these issues will be resolved. He emphasizes that handling multiple challenges arriving together and with equal intensity will be an important part of their resilience model. Setty also highlights the importance of constant evolution and readjustment in their approaches, policymaking, and strategies due to the new reality of global uncertainty.

Despite new private-sector projects being scarce, SBI's 14-15% credit growth guidance comes predominantly from the retail, agriculture, and SME segments. The company also sees good growth on the corporate side, driven by a seamless shift between market borrowing and bank credit, particularly for working capital. SBI has a visible corporate pipeline of ₹4-5 trillion, with approximately half sanctioned and half under discussion.

Setty confirms that the Foreign Currency Non-Resident (Banking) (FCNR(B)) window closing earlier than expected and the visibility of $10 billion in demand has been met. They have already funded more than $9 billion in ECB demand. While asset quality appears benign, Setty identifies banking as a cyclical industry. However, banks and financial institutions are now better positioned to handle economic cycles due to their capital buffers and robust risk profile.

In terms of SBI's growth ambitions, the company aims to increase its market share in the MSME segment, currently around 13% of the overall loan market share of about 20%. SBI is also focusing on growing its credit card and auto loan businesses, with the goal of becoming the market leader in both sectors. The bank is shifting from being predominantly a corporate lender to being a corporate banker, offering a comprehensive suite of solutions.

SBI's non-interest income margin (NIM) is currently the lowest among its peers, with a 3% growth guidance for FY27. The bank aims to increase its fee income to 20% of total income, which would be a significant movement for the institution. With ₹60 lakh crore of deposits, SBI needs to build a loan book, and fee income can significantly contribute to profitability.