State Bank of India will not get into a rate war for deposits despite the pressure persisting in the banking system to grow the liabilities book in the backdrop of strong demand for credit, said CS Setty, the new chairman of the country’s largest lender.

The state-run bank will rather focus more on its customer service and wider network to drive the deposit growth.

"Competition for deposits is expected to continue for some time," Setty, who took over as SBI chairman on 28 August, said.

Banks have been grappling with liquidity pressure on account of deposit growth lagging loan growth for the last several quarters. Customers are looking at alternative investment avenues which are offering relatively higher returns, including the stock market. 

“Everyone is looking at how to get more value out of their existing customers and attract new customers by offering better quality of service. Essentially there will be some tweaking in interest rates particularly in the 1-to-2-year tenor, which is the most popular bucket for fixed deposits,” Setty said.

Speaking at the annual Global Fintech Fest in Mumbai, Setty said SBI can easily sustain a credit growth of 14-16% in the current financial year on a deposit growth of 8-10%, given the higher base of liabilities that the bank possesses. 

The lender is comfortable with its credit-deposit (CD) ratio and is not under any pressure to bring it down, Setty said. 

Earlier, SBI managing director Ashwini Kumar Tewari said SBI would focus on small-ticket deposits, including the Prime Minister Jan Dhan Yojana accounts, to drive growth and boost liquidity. Speaking at the same event, he also said that correction in equity markets over time can help banks get back the deposits it has ceded.

On revival of private capital expenditure, Setty said the lender has sanctioned, approved and disbursed loans of about Rs 4 lakh crore. “If this is an indication of capital expenditure, then it is a robust one,” he said.

The bank is aiming to get 90% of its retail unsecured loans through digital channels. It has disbursed 1.3 trillion personal loans through the YONO app till now, Setty informed.

SBI plans to launch the YONO 2.0 offering in a closed user group in November and then follow it up with a wider launch for all.

Setty said the digital transformation for SBI is a five-year roadmap. “It is not just about digital at the front-end, we are focusing more on technology and technology resilience.”

“What we are focusing on is essentially customer omnichannel so that branch customers can seamlessly move to YONO and internet banking. This requires absolute, deeper reorchestration of the IT platform, which is what we have undertaken under YONO 2.0. It is not only about the customer journey, it is about technological resilience, scalability, robustness, resilience and more importantly cyber security,” he added. 

On the fintech sector, Setty said, “the ecosystem is reshaping the way we do business. It is helping conventional players to re-imagine customer journey.” 

Setty suggested fintechs to make available the element of scalability for any solution that they bring in.