CAD, retail asset quality key challenges for new SBI chair

Maintaining loan growth momentum, protecting margins may not be easy as interest rate cycle changes

- MANOJIT SAHA

The banking system in India is healthy and well capitalised, and bad loans are in check.

State Bank of India, the country's largest lender, reflects this robust health of the system and reported ₹61,077 crore as net profit in 2023-24 as against ₹50,232 crore in the previous year.

The gross and net non-performing ratios are 2.21 per cent and 0.57 per cent, respectively, as on June 30.

Challa Sreenivasulu Setty, who takes charge as chairman on Wednesday, still has to worry about a few issues.

First is deposit growth, and, within that, the share of current and savings account (Casa) deposits, which are the low-cost deposits.

The bank's deposit growth was 8.18 per cent year-on-year till June 30, way below loan growth of 15.39 per cent. The Casa deposits scenario is much grimmer and has grown by a mere 2.6 per cent year-on-year. Term deposit growth was 12.2 per cent.

Further, it is the growth of current account deposits that the new chairman may like to address first. Current account deposits reported negative growth of 4.64 per cent year-on-year till June, while savings account deposit growth was 3.76 per cent.

"While SBI was able to defend its overall deposit market share over the last five years at 23 per cent, the Casa deposit share has fallen by 200 basis points. Within Casa, the current account market share has fallen more, around 310 basis points," said Rikin Shah, vice-president, research, IIFL Securities.

"The problem for SBI is that they are unable to catch up with small and medium enterprises (SMEs) in getting their businesses, where the private banks were able to deepen their relationship.