Hello and welcome to Business Today. I'm Siddharth Zarabi, and with me today a very special guest on this C-Suite Spotlight conversation: the recently appointed chairman of India's largest banking institution, the State Bank of India, Mr. Challa Setty. He's been in the top job at SBI for over four months, but I must tell you he's an SBI veteran, has spent over three and a half decades in this bank. Warm welcome to Business Today, Mr. Setty, and congratulations.
I know your first four months have been busy, and I want to therefore just start by getting you to tell our viewers about what kind of priorities have you been following after you hit the ground running as chairman.
Thank you, Siddharth, for having me on your show. Yes, I think it's true you have been a lifer in State Bank of India, 36 years with the bank, but being a chairman of the largest institution in financial services is a great honor and also a greater responsibility. So it's a mix of continuity and change for me in the sense that, you know, I've been part of this board for the last four years, which means that many things what we collectively have been doing as management, some of these initiatives will continue in terms of digitalization, in terms of increased focus on the financial inclusion, and what we have done in terms of that, I think would continue to be pursued by me. But what additionally I would like to do essentially is that how do we build on our network, how do we build on the digital capabilities what we invested in, and bring the consistency in our performance and increase the productivity of both digital channels as well as branch channel, and more importantly create resilience in our operations. These are broader themes, but there are a lot of sub-themes in it. So to get this idea of, you know, consistency, productivity, and resilience across the bank, we have initiated, myself as well as four managing directors working with me, have undertaken the largest staff outreach program ever attempted in SBI. Physically, we are going to what is called zonal offices and meeting very critical components of our machinery, that is branch managers. 22,500 branches we have. We have more than 500 regional offices, more than 100 zonal offices, 17 local offices. We are trying to meet everyone and convey the same theme on the consistency, productivity, and resilience.
This almost sounds like a padyatra you are going to be on, a campaign across the country.
And I think this was important because I think many a time people ask me that the bank is in a good shape, is the highest profit-making bank in the country, in fact highest profit-making company in the country. So what is the inflection point we are looking, what is next for us? In fact, we called this outreach program, in my view, appropriately as 'Next Leap'. What is next leap for this bank? Right. So this outreach program is also aimed at getting the feedback from the ground that what else we need to do as a bank, both in terms of serving our customers better, right, and creating the value for our stakeholders, whether it is shareholders, employees, government, regulators. I think these are the common themes which we are talking to them and also getting the feedback from them.
It's quite interesting, Mr. Setty, that you're going down this path, if I may say that, because this conversation, and I must inform our viewers as well, comes after a very high-powered jury headed by former Minister of State for Finance, Jayant Sinha, and many others actually have selected and awarded the State Bank of India India's Best Bank in Innovation award. And I guess viewers would want to understand that if the award is for innovation, which means digitalization and newer ways of reaching the customer, you're also talking about expanding your physical reach, I believe more branch expansion. How does this work together, and why? What is the strategy behind strengthening the physical presence as well as the digital part of your business?
See, we have currently about 500 million customers and hugely diversified customers as a reflection of Indian diversity. We have, you know, extremely wealthy high-net-worth individuals in our customer base and also a zero-balance account holder. In fact, we normally start the journey with zero balance in many of the rural areas just to bring them into the banking system. So this diversified customer base needs to be served both physically and digitally. And our physical presence is unparalleled. We have around 22,500 branches today, but we also have done an extensive market study, micro-market study. We found that there are certain gaps, the newly developed townships or new emerging colonies where everyone wants to have an SBI branch. So we are looking at a potential business opportunity in these areas and going for the physical branch network.
Why does this happen? Because, you know, a common-sense response to this would be that in a country which sees such high volumes of online payment transactions, does the Indian customer behave quite uniquely that he wants a physical presence, a connect, someone familiar behind the counter, as well as have access to online payments and digital technology for banking? How do both go together?
It is not restricted to the financial services alone. Interestingly, the completely digital-native companies like Amazon, Flipkart, or many of these new-age startups which have started their journey on the digital would also like to have physical presence. Not only in India, we have seen that even today the large mainstream banks which have completely gone digital in a very big way in the developed countries like JP Morgan, Citi, are also expanding their physical footprint. I think it's a combination of both. But what we want to do at the branches probably will change as we go forward. We need to reimagine the branch function. It may not be purely transaction-oriented. Today, if you see in SBI, 97% of the transactions happen outside the branches. 97% of the transactions, which you mentioned, the high digitalization, whether it could be UPI, it could be, you know, the app-based transactions, internet banking. So, but still, even the 3 to 4% of the transaction volume for us, of our size, is still a good footfall happens in the branch, number one. Number two, we also want to use the branch network for quality value-added services to be delivered. Whether they can be still a platform for, you know, wealth advisory, right? Wealth advisory, people still want to meet physically and see. First element, home loan is still physically sold. People want to come and find out, you know, how do I create the document, what is the paperwork you need. So I think the physical and digital in India will coexist, and I think we are trying to ensure that, you know, we don't miss out on that.
The chairman of one of India's largest private sector banks recently told me that technology is the new arms race when it comes to banking and financial services. Do you agree with this? And when it comes to technology, what are you doing to enhance the play? You already have the YONO app and many other plans. What's the technology focus that you have?
I think technology is going to be central to everybody's agenda, not necessarily the banks. Banks, I think, adopted technology much earlier than many other industries. If you see, the core banking itself is almost 25 to 30 years old, which means that today banking is heavily technology-oriented. The payment services completely moved to digital and technology. So, which means every financial services institution is not only spending on technology, trying to arrive at what the right technology to use. So in SBI, we have been one of the pioneers in terms of technology adoption, both on the branch banking as well as on the digital banking. What is the next step in this technology? I think the three points which I mentioned right in the beginning about the resilience. It is important that while we create the digital channels or alternate channels, the availability of the channel is very important, 24 by 7. And the customers probably will visit the branch once in a week, but people visit the digital channel 10 times in a day. So, which means that we need to create that resilience in our digital channel. This is what we are extremely focusing. You mentioned YONO. YONO 2.0 is all about how do we increase the capability of this application to handle the volumes, growing volumes. Today, if you take away the financial inclusion customers, the Jan Dhan accounts, zero balance, which are not truly zero balance, today we have around 30 crore plus customers who are non-financial inclusion customers, but we have just about 8 crore customers on our YONO app. We want to bring as many people as possible, both from the financial inclusion side as well as non-financial inclusion customers, to come on the app.
Why has the gap remained, Mr. Setty?
No, that's what I think. That while we talk about a lot of adoption in the financial services, the payments have picked up, but other financial services still, I think, it's in the process. We want to bring as many people as possible on this, which means that the capability of this digital channel has to be strengthened to handle the volumes. My assumption is in the next 3 to 4 years it will grow 3.5 to 4X in terms of the traffic. So, which means that we are investing in backend technology, how we provide the resilience to the digital channels so the availability will be ensured, and the simplification of journeys will be done both for the customers as well as our own employees so that they can serve the customer better.
Before I move on to other matters, since you spoke about YONO 2.0, I'm just wondering, and in your entire career you've had exposure to multiple aspects of banking including technology, but what kind of size and shape do you see YONO 2.0 having, you know, maybe 5 years or 3 years subsequently? Because when we talk to other people in this space, they even talk about a different valuation and a metric for the app platform. Some others believe that app platforms can become omnibus and have other services also being retailed through it. What's therefore the long-term shape that YONO 2.0 will have eventually?
Yeah, you know, YONO 1.0 itself was revolutionary when we launched it. You had, you mentioned something about value-added services. It's not a pure banking app. Today we sell many of the non-banking products also on it, insurance, mutual funds, credit cards through that. And we have created additionally a marketplace. Somebody wants to buy something in Amazon, we are asking them to list in our app. So it's a combination of marketplace, banking and non-banking financial services. It was revolutionary when it was launched, but a lot of people have caught up on that. So the next step, what we are trying to do in YONO 2.0 is, it was essentially a mobile offering. The technology what we have developed is customer journeys which were revisited were essentially to make it available on the mobile. And mobile is going to be a powerful device. I think the future of banking is all about how effectively you use the mobile platform. But we also have a large platform in terms of branch channel. We have a large platform in terms of internet banking, where still people use desktop banking, right? And we have a large number of feet on street people who actually source applications for us. So what we are trying to do in YONO 2.0 is not only about a mobile application, we are reimagining our branch journeys, how feet on street will work, how contact center will work, and more importantly, how internet banking works with a common code. That means, you know, if you start a journey with the branch and you have some work to go to the office and you want to complete the rest of the journey, you can start where you have left off. Today it's not possible because they're all silos.
Mr. Setty, I want to begin by asking you that, you know, in your position as the head of the country's largest banking institution, what's your assessment of the credit markets? And attached to that, the investment appetite of corporate India, which has been a matter of debate for the past 3-4 years.
