Welcome to the first episode of Carriage podcast called Inside Edge. I'm your host Raati Kasur, and as we bring together industry leaders, experts, what we plan to do is bring you a plethora of knowledge, information to discuss opportunities, challenges that are there in various segments or sectors and offer you insightful views and engaging conversations. Today we have Mr. Amara. We actually have the honor of having Mr. Amara, the managing director of State Bank of India, the largest bank in the country, and just to give you a little bit perspective on State Bank. State Bank is largest bank in the country both in terms of advances and deposits. It has a network of about 22,900 branches, about 65,000 ATMs, and internationally present with 245 plus branches within 29 countries. So that's the expanse of the bank, and we have Mr. Amara today who looks after international banking, global markets, and technology, very very important functions for the bank, sir. Mr. Amara has risen, you know, through the ranks at SBI, and he joined them as a probationary officer in 1991 and is now the managing director of the bank. Prior to this, he was the deputy managing director and the CRO where he was, you know, responsible for fortifying the risk management functions of the bank, and before that he was the MD of SBI Cards, where he led operational financial efficiencies and solidified the market leadership position of SBI Cards. Once again, thank you, sir, for coming on for our very first episode, and I start the conversation, you know, by really, you know, before we get into the world of banking, want to really understand from you your career journey, you know, how when you started and, you know, how have you risen through the ranks, what has helped you in doing that.
Thank you for inviting me to your first podcast and I wish all the best for this program going forward as well. Part of my journey you have already covered. So I will try to encapsulate my 34 years of journey in SBI in maybe two to three minutes. As you said I joined the bank in 1991 as a probationary officer. Typically bank recruits something around 400 to 500. The number increased over a period of time. Every year certain number of people join the bank and we are identified in the bank in our journey with the bank by the batch year. So we belong to 91 batch. So obviously this word comes very frequently whenever there is informal sitting to identify who else are there from 91 batch. So it builds a bonding actually among the batchmates. The typical onboarding journey in the bank as a probationary officer is almost structured on the lines of civil services. Almost we are given like around 20 weeks of formal training in a classroom. We are exposed to the product knowledge and lot of services what the bank do and of course the evolution of the bank and the policies processes etc. But remaining about one and a half years we spent actually time in various types of branches. Some are like advances oriented branches where you have lot of loans are there, some are like branches with intensive trade finance kind of transactions, some are like branches which cater to a government business on a large scale etc. Idea is to give us a kind of grounding in all facets of banking in the shortest possible time so that we are ready for taking up the next assignment. So after two years we are typically given one portfolio for which we are responsible and we have to handle it for about 2 to 3 years. It can be dedicatedly working for loans, sourcing the loans, processing the loans etc. or it can be for managing the general banking operations more of an operations management in the branch. And once we are through with that assignment then we are also given an opportunity to become branch managers. So here the role comes like you will be heading a small team and then you are responsible for end to end, you are responsible for business meeting the targets and of course you are also responsible for the operation management it's a dual role actually. So that way I had done multiple streams. I spent almost 15 years in operations before moving to corporate center. So from 2006 I spent around six years in corporate center in various departments initially in change management department. Another 3 years I spent in credit risk management department as well. The beauty of corporate center is actually while when you are in operations you become so siloed that you become so target oriented your sphere is so limited. Always focus is on execution and meeting the targets. But the moment you come to corporate center where you have to frame lot of policies which can impact operations at the branches. One has to be mindful of the impact of the policy. That means one has to be familiar with the regulation, one has to be familiar with the opportunity and one has to be very clear about the appetite. I mean what is the customer segment we want to target? What is the opportunity size? So one develops a process of thinking end to end and collaborating with other stakeholders also to contribute to the policy. So my six years of stay in the corporate center actually helped me to become a better person, an all-rounded person and that also gave an opportunity for me to go abroad for about five and a half years in US. So this is again a stint again memorable streams actually for about one and a half years I headed a Chicago branch, another four years I headed a small subsidy called SBI California on the west coast of US. So this is a very peculiar this setup it's 100% owned by SBI but incorporated as per the local US laws. So even though it is a small bank it has its own branches around 10 branches it had at the time, it is led by a board, I'm part of the board by virtue of my executive position in the bank then responsible for stakeholder management responsible for devising the strategy taking the board along and then leading the team which is way different from the Indian team because I'm working with the local team. So here I think I picked up a number of things thanks to the bank actually it gives gives you a lot of challenges but provides a lot of support excellent support and a lot of credit goes to the bosses under which I worked who actually spotted the talent in me but gave me challenging assignments but they were always there you can always lean on them in case of need so such kind of bosses I was fortunate to get correct. So it's a very long history I mean along the journey in the bank of 34 years and this tint shaped me as a person I mean I evolved over a period of time mostly influenced by bank life I spent in the bank as well.
Great, so as I see it, who almost traversed all the functions in banking, you know, whether it is operations, credit risk, policy, international banking, rural banking, you know, so almost all teams or departments is where, you know, I think that's amazing because that makes you, in fact, you know, when we speak about SBI per se we think that, you know, it makes you a complete banker and that's something which is different from some of the other private sector entities where you're kind of confined to a specific function. So, you know, what are the major lessons that you learned during this whole journey? It's a 34-year long journey and what you to define as, you know, a defining moment that changed, you know, your leadership style and how you kind of now conduct yourself.
I think each of my assignments, which number maybe equal to 13 kind of different assignments what I handled, I think each assignment taught me so many things. Maybe as a junior officer when I was working in a small rural and semi-urban branch because in such a setup we are the biggest stakeholder in the local economy or the local community, it comes with humongous responsibility to help the community and also you can develop the bank. But there I realized like if you can provide timely assistance to the needy, whether it is a farmer or whether it is a small MSME customer, I think it brings about lot of change in them actually. Lot of people flourish based on that assistance what we provide and they will remember forever. So I still, mean, very vividly recollect even though it is 20 years old almost for me as a branch manager of a small branch but still I can recollect some of very good experiences I had, the impact you made or I could make on them thanks to the bank. And at a very senior level of course it is like particularly I can recollect my experience in US where when I worked with a very different team, a local team, it comes with a different responsibility. You cannot do micromanagement. You have to believe in their expertise because you have hired the domain experts. You have to give them the targets but you cannot do the micromanagement. You can only hold them accountable. So it is more of an art as to how you are dealing with them. But again leading the team and still as a combined team you have to deliver the result. So giving the autonomy but at the same time holding accountable is one quality I realized because this happens as we are moving up the ladder we will be leading larger teams and it's not possible to do micromanagement kind. It only comes with the principle of trust but verify. So you trust the team but once in a while you do some spot check to figure out whether what you expected is happening on the ground or not and take some corrective steps.
Correct. Correct. That's amazing. That's amazing. So you know, when we as a rating agency also we kind of are very ingrained with the credit in the economy and when I look at the Indian banking system, it's a very vital and important part of the economic infrastructure in the country comprising of public sector banks, private sector banks, foreign banks, regional rural banks, each bank style has a different role to play within the ecosystem. But when I look at the banking system and the way it has shaped up over so many years, it has become more and more resilient as the economy moves forward. If I look at just gross non-performing assets, it's about 3% of the banking system. If I look at net non-performing assets, historical lows, RBI itself is coming out with a commentary that the Indian banking system is very resilient and it's very well capitalized. So in that context, how do you see, while India's economy has shown remarkable growth, how do you see the banking system evolving in the next 3 to 5 years?
I think as you rightly said we have moved away from the problem of twin balance sheet disadvantage to twin balance sheet advantage because corporates are relatively less leveraged, bank balance sheets have strengthened. The FSR kind of report what RBI publishes reconfirming every time every six months that system is resilient and it can take care of the normal shocks without any serious impairment in the capital efficacy etc. I think banks have learned the lessons. What happened particularly you talked about highest GNPA some time back it is 2018 as part of as a followout of AQR a lot of banks have reported huge GNPA, some of the banks have reported losses. I think since then a lot of structural underpinning has happened in the way we were underrating the corporate loan. So in fact we were pioneers in the industry to start what is called among at least among the public sector banks to start what is called a credit review department which actually looks at each of the proposals in a microscopic way of course, looks at brings out like what are the risks involved, what is the extent of mitigation provided and what is the residual risk. So they very clearly articulate whether a proposal can be undertaken or cannot be taken up kind. So clear go no go kind and within the go proposals also they actually risk rate whether it is a high risk or medium risk or low risk. This is a completely independent entity nothing to do with business. So that way they have that autonomy. So now the committee which is hand sanctioning these loans of hundreds of crores has the benefit of not only looking at what the business is saying in terms of in support of the proposals only but they also have the benefit of consuming the input from this credit review department. So they are able to take a more holistic call. They have the 360 view of the proposal and of course even some high-risk proposals also will be taken up where the committee is convinced with the mitigation that is provided and the track record and the relationships. So this has actually this model has worked very well. That's the reason you see like the slippages in the corporate portfolio for almost all banks has come down drastically. Yes, as you rightly said, GNPA is trending even below 3% for the sector and for us also it was trending almost at 2% as per December result, right? I think now this model has been replicated in the public sector banks as well other public sector banks. So this is a kind of structural underpinning. Another big change that happened is the digital underwriting. So thanks to a kind of push to digitalization that happened in the economy lot of unstructured data digital footprint is available. It's not only the transactions in the core banking system, lot of unstructured data, the behavior in the social media, purchases etc. These are all available which is being consumed using the ML based kind of algorithms in underwriting even new to credit customers as well. So this I think of course every bank is at a certain level of maturity but largely banks have invested in the digital and technology and believe in creating end to end digital journeys. So this which started from a small retail customer where you want to give a few lakhs unsecured kind of loan or a credit card right has now switched to even MSME because traditionally MSME is an area where the TAT involved or the turnaround time involved in actually dealing with the proposal finally culminating in a sanction it used to take a few weeks but now with the benefit of all the digital data and this ML based kind of algorithms we are able to arrive at the decision using the business rule engine in very quickly only leaving a very small part to the team in terms of conducting a pre-sanction inspection satisfying themselves about the bonafides of the customer and you may be surprised actually we were able to underwrite loans up to 5 crores using this business rule engine in just in a day. Wow, just in a day. So that's the use of technology that the bank is doing. Increasingly people will start using them. Of course if we talk about like next three five years what will happen you cannot help avoid talking about GenAI correct so obviously I think while AI has been used because I refer to those algorithms where AI/ML is used, GenAI has the potential to improve the productivity so lot of use cases are being experimented in the industry. I think lot of people are trying to evaluate whether they can be operationalized at a commercial scale or not and the advanced AI what we call agentic AI has the potential actually to automate a lot of back office activities seamlessly. So I'm not saying like it will be replacing or anything. I'm only saying like this will be a tool which will enhance the productivity and the teams will start spending more time on the value added part that means relationship building or kind of advisory kind of services with the help of the inputs from the AI models etc they will be able to do it in a better way actually.
Right. And so any specific use case where you know you're really working on right now which you think is something with GenAI would be very efficient in usage.
I think a lot of fintechs, NBFCs have already started using GenAI in their call centers. Particularly for responding to the routine queries of the customers. This is a proven use case in call centers, right? But other experiments are going on in various other areas. I think everybody's experimenting taking the help of consultants and doing lot of something in the loans. Maybe GenAI is generally good in summarizing actually. Yes. So some people are experimenting there. So the face of banking is going to change in the next three to five years. Perhaps it is a positive in the sense we'll be spending more time seeing the customer eye to eye and actually interacting with the customer more than spending time in processing actually right so that part will be taken care of by AI leaving you more time actually.
That's great. That's great. So how, you know, the other thing is because you look at technology you also look at international banking global markets right so how are you seeing the geopolitical changes which are taking place today as we speak the tariff wars which have been imposed on the world, the behavior of developed economies and emerging economies. So how do you see these impacting these global strategy shifts which are happening impacting Indian banking systems?
I think the developments will be impacting Indian banks in different ways for different banks depending upon their exposure to international operations. As you said in the beginning like we have presence in physical presence in almost 244 physical locations in about 29 countries. So we have the largest international presence among Indian public sector banks. So we have an established system. We have every year we look at in terms of how the overseas operations are doing and what is the scope for further expansion depending upon the regulation depending upon the opportunity size in that country. We look at how do we expand or what are the new lines of business we can enter into or otherwise wherever we feel like if it is not viable then obviously appropriate call will be taken to limit it to a particular set of operations. But one area which will be common including the domestic oriented public sector bank also will be like trade finance because some of the customers who has been dealing with certain countries because of this global trade war that's going on or realignment of the supply chains it is possible like their existing customers may not be dealing with the same countries correct or they may be dealing with the new countries etc. So it is time to work with those customers to be in touch with them and to facilitate. So this is a task for everyone. So new trade relationships will get new trade relationship also this is the result of that realignment in the global supply chain. So absolutely but hopefully majority should remain in the same way. I only hope like some middle path will be there and that our country is proactively negotiating with us in terms of entering into bilateral trade agreement. And also in negotiations with so many countries like Europe etc. European Union for a trade agreement. Hopefully this should rectify and the core part should continue but of course some 15 20% change will always be there.
Okay. Great. So you know let's turn back to the Indian banking environment. You know we've seen a lot of regulatory changes which have happened in the past few months. There were two policy rate cuts. Then there was a liquidity injection into the system. There was a deferral of certain processes like ECL or provisioning based on infrastructure sectors and all that. So how do you but the credit deposit ratio which has been a cause of worry has been trending close to 80%. Even now it kind of dipped to 79% in the last fortnight it's trending close to 80% consistently for the past six eight months or so. So how do you see the Indian banking system reacting to this liquidity issue that has emerged and how do you see this issue going ahead?
I think it has two parts if you ask me. One is like the deposit growth lagging the loan growth till recently but of course now we are seeing a kind of small convergence between the deposit growth rate and the loan growth rate. And of course the second part is the growth inducing measures taken by RBI particularly on the liquidity front. So if I talk about the deposit front I think we are no exception to the industry. We also had the same experience but now the situation has improved. But it is not in line with the rates what we used to see the growth rate what we used to see till two years back or three years back. So obviously then this is a result of that financialization where the retail deposits are now increasingly moving to either term deposits or otherwise directly to the markets either through mutual funds or direct investment in the markets. So now there is another opportunity where some of this money anywhere from these market intermediaries will come back to the banking system. So whoever will be able to tap this money for them the growth will continue. But in this process what's changing is the color. Maybe retail deposit is now taking the color of a wholesale deposit from an institution. With the corresponding change in the tenor. Maybe earlier three-year deposit or five-year deposit are quite common till few years back. Now we are seeing a trend where increasingly depositors are happy to keep only for one to two years. And the kind of special deposit schemes that came in last one and a half years 444 days, 400 days, 360, 370 days or whatever it is. I think banks have also played the game understood that perhaps they may have to pay more but limit the risk by limiting the tenor. So I think this now will slightly get corrected because now the transmission is also happening thanks to the additional liquidity support supporting measures taken by RBI. We are already seeing the transmission happening because if you look at the call rates or otherwise if you look at the traps or otherwise chronos kind of rates true they are just aligned to the repo rate and particularly the markup that used to be commanded by CPs and CDs that mark has come down. And a lot of banks have already announced a reduction in the deposit rates including some banks in the savings bank deposit rates too so the transmission is happening already so the rates will tend to come down. And inflation forecast from RBI is also very benign it's close to 4% that's true so the downward bias is there on the rates as of now.
Right. And you rightly said there were innovative periods which banks kind of look at raise deposits and they were at pretty high costs in the last one year or one and a half year and these deposits are there to stay with the banks right so with the policy rates coming down and the transmission going on the lending side also obviously you will have to give money cheaper than what you were giving at the point of time when you raise deposits so how is it going to impact the NIMs in FY26 how do you see that happening?
I think see it is a general belief it is a known when the rates were rising I think the system was also the beneficiary because of the same lag effect where the rates were not getting transmitted on the loans you were getting the benefit to the extent the rates are linked to the external benchmarks. The portfolio was getting repriced but deposit rates the transmission did not happen automatically. There was always a lag. So is the case now where it will work in a reverse way where you would perhaps deposit rates may remain slightly elevated but part of your loans portfolio getting repriced because of a reset in the repo rate or if it is a table linker kind of portfolio whenever the table rates are down obviously it will get transmitted. So it is given that some compression may will be there but it all depends upon how you are pricing the loans and to your point like whether we are struck with a very very costly bulk deposits and for a longer tenor. If any bank is undertaking such kind of activity they will have more challenge in terms of reducing the deposit cost as compared to somebody who is prudent who is limiting that bulk deposit also to a short tenor. I think they will have more maneuverability in terms of managing the compression. Okay. But you see that there will be a pressure on NIMs in the intervening period. I think that will be there if the rate cuts further continue.
