From an economic point of view, how is the second wave different from the first?
Compared to the first wave, when GDP decelerated by more than 23% in the first quarter of FY21, we expect the numbers to be significantly different this time around. The other aspect is that the lockdowns occurred at different times, which ensured continued economic activity. The supply chain was disrupted for industries, but some activities like construction continued. Plus, we haven’t seen migrations from the cities that were there last year, and living with Covid has become a new normal. We don’t see a lot of disruption for big business. It is largely in the space of commerce and SMEs.
Do these sectors need assistance government or banks?
The RBI has extended a restructuring option for borrowers up to Rs 25 crore. In our experience over the past year, few entities have come forward for restructuring. Borrowers have also become cautious. Banks can take care of the financing needs of large companies. The use of working capital by the companies we finance is only 70%, which means they have leeway to borrow.
Demand is expected to be affected as citizens spend more on health. Do you think this affects SBIthe retail trade of?
Right now, the priority of the middle class is health. We have designed a program to meet clients’ needs for Covid care, which includes hospitalization. We have tried to keep it cheaper than our normal credit. From now on, it is available to our customers as we have some visibility into their behavior. The loan amount will be linked to the credit scores and we will be launching it soon.
Will you also make loans to the health sector?
We will support the entire health related ecosystem – hospitals, oxygen factories for hospitals and even oxygen manufacturers. We can also support non-bank finance companies that provide such loans to the health sector.
Will your growth goal be affected by Wave 2?
We had credit targets but given the mobility restrictions we will have to wait and watch for things to normalize. Our growth will be an interaction between macro and internal efficiency. Our internal aspiration is to take return on assets and return on equity to the next level. Regarding internal efficiency, we will do our best to create value.
Is there still risk aversion among lenders?
The government has taken several steps to restore the confidence of bankers. There is no aversion to risk. When there is a 30% underutilization of working capital limits and term loans have not been used, risk aversion is on the part of entrepreneurs, not banks.
Have you achieved your goals on the digital front?
At the end of 2020, 59% of our transactions were digital. Today, they are at 67%. Digital also represents 97% of out-of-branch transactions. We are leveraging analytics in a big way. We will strengthen Yono (app) to improve customer experience and deliver end-to-end digital products from account opening to lending. Of the 50,000 accounts opened daily, 30,000 are end-to-end digital. Almost 30,000 rupee crores (loans) have been made using artificial intelligence and machine learning. We will further strengthen our capacity here.
What about the rural area where SBI has a significant presence?
Therefore, SBI will continue to search for “Phygital”. We are increasing the number of commercial correspondents to grant loans. The idea is to offer all commoditized products via digital media with agencies offering value-added services. The formalization of the economy has given us a significant tailwind. In Jan-Dhan accounts, the average balance rose to Rs 2,800, which gives insight into their behavior and allows them to lend to them.
How do you see the competition from fintech? Will Yono remain the super app?
I wouldn’t want to undermine what startups do. We will complement their efforts. We would like to have Yono as a super app, because having more and more apps just confuses things. The intention is to make it richer and more robust.
Have you identified the assets for sale to the new bad bank?
It is in progress, but it should be around Rs 20,000 crore.
How do you plan to make SBI bigger and better globally and in India?
SBI is a replica of the Indian economy and will go global with the economy. Our international operations contribute about 10% of the size of the balance sheet and will grow as the economy approaches the $ 5,000 billion mark, export opportunities will increase. We present our overseas operations as an Indian bank dealing with global trade in addition to focusing primarily on India. Besides upgrading their technology to improve their products and services, we are optimizing costs by offering back office operations from India. We want to increase the penetration of mutual funds, insurance and credit cards and make them accessible to everyone.
What is the strategy for funding projects in the future?
It is not true that we do not maintain projects. Few projects have been funded. Lately, capital investments have mainly been made by government entities and in the roads and construction sector, which we have supported while the private sector is experiencing low capacity utilization. In addition, several companies took advantage of the liquidity of the system and raised equity and debt in the financial markets. Among our sanctions, the disbursement is 70 to 71%. For banks, there is still room to lend because many companies do not have access to markets. Banks also have an advantage when it comes to the stability of financing needs.
With the exception of a few sectors such as steel, performance in the insolvency process has not been good. How do you see it?
It’s a paradigm shift. A whole ecosystem for resolving stressed assets is now in place. For a capital-deficit economy like ours, brownfield projects are always in demand. It is the value of the underlying asset that helps determine the system’s recovery rate. Last year, since NCLT’s operation was affected by Covid, banks began promoting the regulations. There are several options available today for stressed asset resolution, IBC or the NARC process. All of this will lead to some competition in terms of the ability of bankers to generate better value.
The NBFC again say they are under pressure. Does this again justify SBI intervention?
Last year we stepped in because the RBI came out with TLTROs (Targeted Long-Term Repo Operations). Right now, we may not be risk-prone to go alone. We will assess whether the regulator introduces something.