Catch our Chairman, Shri Challa Sreenivasulu Setty, as he shares his insights on the RBI’s latest Monetary Policy in an engaging conversation with Ms. Latha Venkatesh, Consulting Editor, CNBCTV18News
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What Challa Setty said
Written from the verified transcript and checked against it. Every figure links to the moment it was said.
Challa Setty, Chairman of State Bank of India, discussed the impact of rate hikes on the banking sector, noting that with books roughly equally divided between MCLR and EBLR, repo hikes benefit EBLR repricing. He expects no significant deposit rate increases for two to three quarters due to ample liquidity. Setty argued rate hikes alone may not impact credit growth, but inflation crossing 6% could affect investment decisions. He downplayed asset quality risks despite El Nino's impact, citing resilience over the past three to four years, though acknowledging potential seasonal variations in agricultural credit. On account aggregators, Setty welcomed interoperability but flagged consent management and information frequency concerns. He praised the proposed technical consultative committee for structured market engagement. On deposit rates, he reiterated they depend on both demand and fair compensation for customers, promising hikes if inflationary expectations rise.
Key takeaways
Rate hikes benefit banks through EBLR repricing, with no major deposit rate hikes expected for two to three quarters.
Credit growth mainly depends on inflation staying within RBI projections, not just the repo rate level.
Asset quality is likely to hold up despite El Nino, with only minor seasonal variations in agricultural credit.
3:12Will this combo make for a situation where the best of our asset quality is behind us and we are going to start to see defaults?
4:23Because if account aggregators are across in one platform, do you see more loans getting disbursed quickly, due diligence improving because data on both sides is available?
5:52I mean, it was not fleshed out properly, but is this a good institutional start to market regulator–sector regulator cooperation?
6:51So just a final question, if I may squeeze in: when do you think deposit rates may go up?
Welcome back to this monetary policy special, and we now have the person whom I can only describe as second in importance only to the Reserve Bank governor. We have the chairman of State Bank of India, Mr. Challa Srinivasulu Setty. Mr. Setty, thank you very much indeed for joining us. Well, there is a rate hike and there is a likelihood of a couple of more. Do you think this next two quarters are good times for the banking sector? At long last, some elbow room in terms of margins.
Thank you, Lata, as usual for having me on your show on the MPC day. Obviously, I think now the books are broadly either equally divided between MCLR book and EBLR book, or slightly higher for the industry as a whole, which means that any repo hike will be immediately beneficial to repricing those EBLR loans, subject to, of course, how the deposit rates are going to play out. In a couple of quarters, I don't foresee any significant improvement or increase in the deposit rate because liquidity is sufficiently available to the banks and there will not be any major competition for deposits. So, as you rightly said, I think the two quarters, maybe two to three quarters, are definitely beneficial in terms of the repo hike.
Okay. Now, the flip side of this is if it is going to be three hikes, which is what most people are guessing. You know, people had gone with two hikes and now because they have changed their stance, the majority in the market is veering towards a 6% terminal repo rate. Will that begin to affect off-take? At a higher cost, maybe people will desist from borrowing.
So the rate hike alone may not impact the credit growth, but if inflation crosses 6%, and I think that most of the time the credit decisions or investment decisions by the individuals, particularly, are taken based on what the inflation rate and inflationary expectations are. So more than what the end state is in the next two, three quarters on the repo rate, we should be watchful of the inflation. And if inflation remains as per projections of the RBI, I don't think there will be a greater impact on the credit growth. There are certain rate-sensitive sectors, particularly mortgages, long-term mortgages, where the EMI calculation is influenced by the rate hikes. But other than that, I believe broadly the economic activity seems to be moving pretty good, and the next two quarters are busy season, which means that the economic activity continues to be high. So from that angle...
Thank you for opening our eyes to that — that, you know, it's more what is available in the pocket that determines the ability to borrow. Do you, on the flip side, expect asset quality problems? Because the rate hikes are coming at a time when El Nino is having its worst impact. More and more districts are being declared drought-hit. Will this combo make for a situation where the best of our asset quality is behind us and we are going to start to see defaults?
So there could be some impact on the agricultural portfolio, but broadly on the system level, I don't foresee major risks on the asset quality. We have gone through much adverse conditions in the last three to four years, and the asset quality held up. So I'm a little confident that there may not be a major issue on the asset quality. There could be some seasonal variations, as we have witnessed in the past also, on the agricultural credit quality, but we have not seen any major issues in terms of the retail portfolio — not only for SBI, but for the banking system also.
7 more exchanges in this transcript
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Setty, C. (2026, October 7). Catch our Chairman, Shri Challa Sreenivasulu Setty [Interview transcript]. State Bank of India. CEOInterviews.AI. https://ceointerviews.ai/interview/2998954/
MLA
Challa Setty. "Catch our Chairman, Shri Challa Sreenivasulu Setty." State Bank of India, 7 Oct. 2026. Transcript, CEOInterviews.AI, https://ceointerviews.ai/interview/2998954/.
BibTeX
@misc{setty2026_2998954,
author = {Challa Setty},
title = {Catch our Chairman, Shri Challa Sreenivasulu Setty},
howpublished = {Interview transcript, State Bank of India. CEOInterviews.AI},
year = {2026},
month = {oct},
url = {https://ceointerviews.ai/interview/2998954/},
note = {Speaker-attributed transcript with timestamps}
}
