Available information does not indicate green shoots. The trajectory of Covid-19 infection is far from stable in India. As a result, a second wave of disruption to economic activity, once caseload increases, cannot be discounted altogether. A higher caseload will hamper services recovery such as tourism, hotels, transport and manufacturing.

When do you expect the economy to revive?

It is difficult to predict the exact time of turnaround. Given the available information, it is difficult to conclude that the worst is over. Most of the high-frequency indicators do not show that recovery, following Unlock 4.0, is broad-based. There is weak start and sustainability is dependent on how demand responds to Unlock 4.0.

What will trigger growth?

Unlock 4.0 has resulted in economic activity gaining traction. But it will take some run time to fully recoup the losses due to previous phases of lockdown. The labour has been displaced, government is facing a revenue crunch and demand is low. Hence some time must be given. But the larger question is how we can kick-start the growth at the earliest, without losing much time going forward.

Do you see the problem being on the demand or supply side?

Just prior to the Covid-19 outbreak, in the third quarter of FY20, the demand was ebbing. The monetary policy document of the Reserve Bank of India (RBI) clearly brings this out. The output gap was around -3.5%. Thus, we entered the Covid-19 lockdown with a demand problem.

With the outbreak of the pandemic, the economy has been subject to both demand and supply shocks. The loss of output resulted in a loss of income and demand. Thus, it is essentially a demand problem, with the supply side added to it.

"We entered the Covid-19 lockdown with a demand problem. With the outbreak of the pandemic, the economy has been subject to both demand and supply shocks. The loss of output resulted in a loss of income and demand."

When do you see credit offtake picking up?

Some offtake has happened. When the RBI cut the rates, we had system liquidity surplus of approximately Rs 9 lakh crore. Since the 'Atmanirbhar Bharat' package (Rs 20 lakh crore for self-reliant India), the liquidity in the system has fallen to around Rs 6 lakh crore. Thus, some credit offtake has taken place, but it is lower than in normal times. The economy is still to fully recover. Since the cash flow or sales have become uncertain, credit risk has increased. But this is why the MSME (micro, small, and medium enterprises) sector was de-risked by way of guarantee. For large corporates, the ratio of current assets to liability was comfortable, which is why there is more certainty.

On a year-on-year basis, non-food bank credit growth at 6.7% in July 2020 was the same as in June 2020 but lower than the growth of 11.4% in July 2019. Credit growth to agriculture and allied activities increased by 5.4% in July 2020 compared with a growth of 6.8% in July 2019. Credit growth to industry slowed down to 0.8% in July 2020 compared with 6.1% a year ago.

Do you see credit discipline going out of control after the Covid crisis ends?

Even though there is the possibility of NPAs (non-performing assets) rising and in case the GDP growth is at its worst, I feel the rise in the number of stressed accounts will not be that steep. This is because the large part of risk has been provided for and the overall industry provisioning coverage ratio (PCR) is approaching 70%. The RBI also recognises that some restructuring may be undertaken as defaults may be purely due to economic reasons. The Kamath Committee has given directions in this respect.

You are bullish on lending to MSMEs. But won't this lead to fresh NPAs?

Under the 'Atmanirbhar Bharat' package, the MSME sector has been given the primary emphasis as it accounts for 35% of the GDP, contributes to 30% of the exports and is the largest employment-generator. The sector has been de-risked so that banks can lend. Considerable progress has been made to implement these schemes since the launch. Hence there is every reason to be bullish. At SBI, we have created a special vertical, FI&MM, for micro enterprises and have undertaken full revamp of the SME business.

What steps have been taken to consolidate the MSME business?

Our market share under MSME is 13.59%, as on 31 March 2020. We have taken several initiatives to consolidate the MSME business. A major step has been to strengthen credit delivery through focused 663 SME (small and medium-sized enterprises)-intensive branches. These branches have well-trained relationship managers who drive the bank's SME business. There are also MSME-designated branches.

The SME structure was revamped in June in order to have special focus on advances from this segment. An assistant general manager (SME) was posted in each administrative office, with support of chief managers to monitor SME advances. Emphasis was laid on cluster finance approach, based on potential for select activities in the geographical area. The CRM platform was used to source and convert business leads and the tracking system was strengthened.

There has been an increased effort to capture the lower segment of MSME loans up to Rs 5 crore. Extensive usage was made of the digital platform like Contact-Less Lending Platform (CLP) to acquire new customers through easy and quick process. To retain the existing high value customers, we regularly organised customer meets, webinars, and workshops to address the needs and grievances of our customers.

We have tied up with industry majors for financing their dealers and vendors. So far (till 1 October), we have tied up with 305 industry majors and funded 31,441 dealers.

For India to reach a $5 trillion economy, what should be our banking structure?

Since the reform started, the idea of banking has been that India should have a three-tier banking structure with 3-4 large banks having a decent global presence. The second layer would consist of large domestically oriented banks, and at the bottom will be the regional and local and cooperative banks. We are proceeding towards this structure with consolidation in public-sector banks. Also, we may add new types of banks such as payment and digital banks, which are more technologically oriented.

A case is being made for having only a few big banks. Some say there should be further consolidation among the big banks. You are on which side of the camp?

Seventy per cent of the banks are government-owned. The government has to thus take the call. The government has indicated that there are no proposals for further amalgamation in the public-sector banks. I think the matter rests there.

Do you think banks need to adopt cost-cutting measures to stay in competition?

Cost-cutting is an ongoing process in any organisation, more so in the current situation. Banks are no exception. Given the challenges banks are facing today, there is a need to bring down the operational costs and at the same time improve asset quality with a view to ensuring an increase in the interest income. We have taken various steps towards simplification of processes to improve operational efficiency. More and more services are being offered on the digital platform for increased customer convenience and reduced operational cost.

Do you support the voluntary retirement scheme for 30,000 SBI employees?

As regards VRS, the underlying objective is to provide a window to that group of workforce who feel they have reached a saturation point in their career and are willing to hang in their boots. They may also be having medical issues and are finding it difficult to contribute productively. It will give an opportunity to such employees to lead the life and career of their choice.

The intent is not to reduce manpower. Rather, infusion of resources is being done through the recruitment of probationary officers, associates and officers in specialised domains such as IT, risk, data protection/data analysis, and credit analysis.

" Since the cash flow or sales have become uncertain, credit risk has increased. But this is why the MSME sector was de-risked by way of guarantee. For large corporates, the ratio of current assets to liability was comfortable, which is why there is

After the listing of SBI Card, are there plans to take SBI Mutual Fund public?

The asset management company has become No. 1 in India. But we have Amundi, a French company, as our joint venture partner. We have to take them on board. Discussions are on, but nothing is final as of now.

Will SBI General Insurance go for a public float?

SBI General Insurance has still not reached that valuation level. We are in the process of building the business. We need to grow it to a higher level before we decide to list it. But both the asset management company and the insurance company will get listed eventually.

YONO has been one of your pet projects. You have indicated a valuation of $40 billion for it. Is that realistic?

The plan is to hive off YONO. It is profitable and its valuation will get reflected once it sits outside the bank. Given the valuation start-ups get, YONO can get valued at $40 billion.

How did you conceive of it?

YONO was launched in November 2017 to offer users a seamless and unique omnichannel digital experience for both their lifestyle and banking needs. Many of our physical and alternate channels-from branches to ATMs and business correspondents-are deeply integrated with YONO. Using YONO Cash, for example, a user can withdraw cash from a huge network of point of sale terminals in our network. Due to YONO there has been a huge synergistic impact on our entire network; it has become much more productive through cross-linkages.

Was there internal opposition to this digital drive?

Once our staff understood how digitisation improved their productivity and made their work lives much simpler, the initiative took deep roots within the bank. This is unparalleled in the banking industry in India.

With the rise of Google Pay and Amazon Pay, are banks forced to transform?

We are aware of the capabilities and competition from fintech and technology companies in various segments of our banking services-from payment systems to digital lending. However, it would not be correct to assume that banks have been forced to transform only due to these factors.

We believe our digital transformation agenda is strategic in nature and is independent of any competition posed by any technology company. The key agenda for our transformation initiative has always been how to deliver a seamless and superior customer experience to our users and at the same time continue to cement our leadership position in the industry.

Have you been able to achieve that?

It would be unfair to consider YONO as just another app in the market. We genuinely believe that the scale of offerings on YONO are truly unmatched by any other platform in the country. We have offered a complete digital banking proposition through YONO that is unparalleled by any other banking platform.

We can confidently say that today our digital services are way ahead of any service provided by any competitor or technology-based company. For example, our recently launched YONO Quick Pay is well ahead of Google Pay or Amazon Pay, in terms of features or ease of customer experience.

Our growing volumes and user base are a proof of success of our application. We have reached a registered user base of over 2.8 crore in less than three years. We are adding nearly 65-70 k new users daily. These numbers are just an indication of the scale and success of our platform.

What about the private banks like HDFC which have a strong digital focus?

One aspect of YONO that distinguishes us from our competition is the continuous agile product innovation in line with customer needs. For example, we launched a Special Pre-Approved Personal Loan variant specially targeted at customers during the Covid-19 scenario. We do not think that any other bank has the scale, capability and reach to come anywhere close to the success of YONO in the near future.

 

"Both the asset management company and the insurance company will get listed eventually. While the asset management firm has become No. 1, SBI General Insurance has still not reached that valuation level. We need to grow it to a higher level before w

SBI has a large customer base that is less tech-savvy and is outside the urban geographies. How does YONO reach out to them?

One of the key objectives of our digitisation drive has been to enable our customers to undertake most of their banking transactions and requirements digitally without the need to visit the branches physically. With this objective in mind, we think we have been fairly successful in enabling our customers to adopt digitisation.

However, there is still a very significant customer base of our bank in rural and semi-urban geographies that is still not digitally savvy. Our focus now is to bring this customer segment to the digital adoption bandwagon by making digital products and services extremely. With this focus, we are going to increase our digital product offerings in the agricultural banking segment.

You'll be surprised to know that our facility to get one's Kisan Credit Card (crop loan) account digitally has been gaining immense support and popularity among the farmers of our country, with more than 1 lakh+ applications getting reviewed in ~ 1 month of launch.

When you took over the reins of the bank, you said that 2017-18 was a year of despair, 2018-19 would be a year of hope, and 2020-21 would be a year of happiness. Looking back, do you still agree with what you said then?

Covid-19 took all of us by surprise. The last episode of mass outmigration from cities in India due to disease outbreak was in 1897 during the outbreak of the bubonic plague in Mumbai. Even the Surat outbreak of the same disease was not of this scale. Our annual rolling plans and risk assessment exercise under ICAAP account for many contingencies, but who would have thought about such an event? Yes, this event has caused massive loss to the economy and it will take time to recover fully.

You have worked as a banker. You have seen the corporate world in close quarters. What reforms would you suggest for both so that India progresses economically and socially?

We must think of some radical reforms. The recent reforms in agriculture deserve praise. We must strive for political consensus in labour reforms as the window of opportunity is narrowing. We must also revisit our environment regulations and land acquisition laws. Lastly, we must bring the reforms to the state level as this is the place where ultimately the economic activity happens. Some states have taken a lead with state-level Covid-19 packages.

After 40 years at SBI, how do you look back on the institution?

It is a great institution that makes everyone feel like a family. Why we love it so much is because of the family feeling. I don't think many organisations can claim to give its employees this feeling. Wherever you are, you are never short of help. These are things that are very unique to SBI.

During your time at SBI, you have seen turbulent days like demonetisation, Insolvency and Bankruptcy Code (IBC), tumbling down of big corporates, frauds and the outbreak of the coronavirus pandemic. Are you going to write a book which will be revealing and explosive?

I am shifting to Delhi to a rented house as my friends and family are there. Eventually I will write a book on my journey from Meerut in Uttar Pradesh to becoming the chairman of SBI. It will be a balanced account of the events that unfolded.