We Need Public Sector Banks For At Least Another 10-15 years, Says SBI’s Rajnish Kumar

It’s been close to two years since you took over as SBI Chairman. What has been the journey since then?

The journey has been exciting because at SBI, continuity and change go hand in hand. We have seen preparations in terms of provisioning, recognition and cleaning up of the balances sheets. It is now a lot more cleaner and healthier. Our NPA -- gross and net NPA – has come down substantially and very much within manageable limits.

Second is our digital footprint in banking where we are the leaders in digitization. A lot of work has been done and in the next 12-18 months, we will complete the remaining work.

Thirdly, we have made major progress on the HR front, where new initiatives have been taken and we launched a very massive employee engagement program ‘Nayi Disha’ which was very well received by the bank. These three things state that we have made good progress and the bank’s capability to compete in the market is very strong.

What are your expectations from the new government?

The government will have to take steps in initiatives that boost demand. In the past years, the government spent more on infrastructure. But generally the consumer demand is showing signs of weakness. The auto industry has slowed down. Industries involved in the customer segments feel that the demand is slow and that means how we need to boost the consumption demand. Demand in the economy as a whole needs more attention.

SBI posted profits for the March quarter, but were lower than the expected figures. What is the overview like according to you?

This was a decision we had to take. Particularly there are three accounts which are at a very advanced stage of the resolution. This year we will be able to recover those three accounts. The profit could have come in during the previous year but either because of technical reasons we had to take the call.

You have put the war on NPAs on a fast-track. How would you look at this war on NPAs and what does the future road map looks like?

As I mentioned earlier, corporate NPA and retail NPA have to be seen in a different light and the problem was more on the corporate side. If I refer to the corporate book, the retail NPA is around 3% and that is steady without any huge variation. Our net corporate NPA is Rs 34,000 crores out of which Rs 27,000 crore is considered as returnable. So what we need to do is provide another 14,000 crores which is not much of an issue for us.

Practically by March 2020, we won’t have any past legacy in the corporate book.

For the past cases, we will continue to follow them factually because every rupee matters and that effort whatever legal remedy is available for the bank, will be taken under consideration. The NPA overhang will ease in the months to come.

Recently an RBI report shows a pickup in bank credits due to higher credit disbursal by SBI. Now your credit dispersal to infra group is 5% but credit to small firms and MSMEs is lower. What is the larger trend?

We are providing credit to SMEs also since March 19 in all segments including agriculture, MSME, retail, housing loan and corporate credits. The growth was in all segments has helped us chart out our plans for the current year. In both retail and corporate, credit will grow while we are mindful of credit quality.

What do you think of the larger NBFC crisis and what is the way forward?

NBFCs have many different categories. The problem is arising because of the flow of money from mutual funds which had become a big source of short-term funding which over a period of time has dried up. So the growth will definitely have an impact and we are keeping a watch on this situation. When the new government comes in they will have to take care of them because the availability of liquidity measures as well as solutions to providing a structure to an NBFC.

SBI recently led successful mergers and PNB & Canara Bank are likely to lead a merger in the smaller banks category. How will this impact the Public Sector Bank ecosystem?

There is a huge number of public sector banks in the country and they need to be consolidated to be larger and stronger. One of our mergers with Vijya Bank and Dena Bank is completed at a balance sheet level. Based on the success level of the merger maybe the new government will continue with that path to see more mergers ahead.

And how many public sector banks should we have?

If you look at the Narasimhan Committee report that came out in the early 90s, the vision was to see 4-5 nationalized banks and a few regional banks. I think we need at least 4-5 banks which are bigger and the gap between the top bank and the second must be narrowed. That can happen only when there is a consolidation between the Public Sector banks.

How do you view the public sector banks in India compared to the private sector banks?

I’ve always said that a country of our size requires a lot of inclusive banking which is largely being done by the public sector banks of this country. For a few more 10-15 years, we would require public sector banks because every bank is commercial and listed on the stock market but there is a certain obligation for the public sector bank. I don’t foresee a scenario where public sector banks are not there.

Do you think 10-15 years down the line the situation could change dramatically?

That situation is very difficult to predict but after 10-15 years when the country’s socio economic level would have reached a certain level. Then we can take a decision based on the scenario then but it will also be an issue of debate. But in today’s circumstances and socio economic development there is no way we can function without public sector banks.

60% of ATMs are still not upgraded and the RBI mandate has been the June deadline. Why do you think we have a situation like this?

ATMs upgradation is going on. A bank like SBI has 60,000 ATMs. Along with other banks the tally is up to 200,000. There have been many changes in quick succession by RBI and implementing all of them is a major task and that is where there is some delay. I think before December 2019 we will be able to comply with the RBI’s mandate.

It’s been three years since the Banking Bureau was constituted. Do you think they have delivered according to the promises?

The selection process has streamlined quite a bit and there is transparency and fairness in appointment. But the role of Banking Bureau was designed to be much broader and that is the issue.

How do you look at the roadmap of SBI? How are you going to look at the next 5 years regarding changes and major expansion plans?

We have to make a very strong back in terms of efficiencies. As I said earlier that we are much stronger with our balance sheets. It has to become more productive on the financial side and the complexities of business which have demand for risk management and compliance need to be addressed. We have to keep pace with it and digitization is the formula for success and for our survival in the future. The path has been very clear since the last couple of years and in terms of digitization, SBI is at the forefront.

The bank’s capabilities foresee those opportunities through constantly upgrading the processes, attention to detail to security and compliance and innovation. SBI is keen to become a very customer friendly, financially strong and a very tax savvy bank.

How do you think technology is disrupting banking in a larger framework?

I won’t use the word disruption but today on the consumer’s side most of the transaction happens through Internet & mobile banking. If we don’t keep pace with what the new age customer wants, we won’t be successful. A bank like SBI which has a physical presence and a recognized digital presence has a strong structure for success. Digital is not limited to internet and mobile banking but also that the data generated by banks is used effectively to enhance customer experience while cutting down costs. The way we live our lives is changing and there is an aggregator model for everything and such a shift happening in an overall economy requires the bank to be aligned.  

Do you foresee the physical side totally gone because smartphones can become bank branches?

If you don’t have physical banking, the digital aspect won’t survive. Our country is very large given the population, market segment and smartphone users. But if still 50% people use smartphones the rest 50% will still depend on physical banking.

How do we make sure we don’t see any Vijay Mallyas in the future?

That is a very difficult question but it can happen through a very strong legal system. Banks also need to be very careful and the recent actions taken by the government and banks are placed in a huge system where exceptions can also be there but the law particularly around fugitives, attachment to their property and the more careful analysis can avoid such situations ahead. In future there won’t be such kind of cases and the only thing you can do is to take safety measures which are happening.

What is your view on the government writing off farm loans?

It should be an episode from the past because now trends tend to be direct transfers. Like the central government had provided money to a certain category of farmers. Government will have both ways where they can waive off farm loans and direct transfers as well. I consider direct transfers to be a better way and Orissa, Telangana have taken that wise step. Underprivileged and poor families are now given income support by the government and the central bank would need money to carry this on a larger scale. I hope loan waivers become a matter of the past.