Banks not getting into rate war, says SBI Chief Setty

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Though competition for mobilising deposits is likely to continue for some time, banks are not getting into a rate war, said SBI’s new Chairman Challa Sreenivasulu Setty.

Acknowledging the change in asset allocation trend among customers, Setty, in a fireside chat at the Global Fintech Fest, said: “But, what I notice is that most of the banks, including us, are not getting into a rate war. We want to attract customers by way of improved service quality and access.” 

“Everybody is looking at getting more value out of the existing customer and attracting new customers by offering better quality service,“ he added. 

Rat race for deposits

Despite increasing fixed deposit rates, banks have been facing stiff competition from alternative investment avenues such as mutual funds, non-convertible debentures issued mainly by non-banking financial companies, and stock markets, among others, which are offering relatively higher returns. 

Essentially, there will be some tweaking in the interest rate, particularly in the 1-2 years tenor, the most popular bucket for FDs. The competition for deposits is likely to continue for some time, the SBI chief added. 

RBI’s latest monthly bulletin observed that going forward, the low share of low-cost current and saving deposits in total deposits may curb domestic fund-raising efforts of banks through high cost funding options, due to a likely squeeze on banks’ net margins.

“This may also force banks to align loan growth more closely with deposit growth and normalise incremental credit-deposit ratios. In part, this behavioural shift may be induced by signs of stress in the unsecured loan segments, especially in personal loans and credit cards portfolios,” per the bulletin.

Credit-deposit ratio

To a question on whether higher credit growth vs deposit growth is giving rise to higher credit-deposit (C-D) ratio, Setty said: “Fortunately, we have a very comfortable C-D ratio. We are under no pressure in terms of reducing our ratio.  

“We have a robust credit growth. A 14 – 16 per cent credit growth is what we are anticipating in FY25,” Setty said.  

Even if SBI has 8 – 10 per cent deposit growth, because of its large deposit base, it will be able to support credit growth in absolute terms.  

Setty noted that large corporates have capital expenditure plans, with the loan sanctioned and under disbursement pipeline of almost ₹4 lakh crore.