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CS Setty: Meet The Man Who Could Be The Next SBI Chairman

Setty inherits an incredibly strong bank, with all the right levers in place. But what will he do differently?

<div class="paragraphs"><p>Challa Sreenivasulu Setty, managing director, State Bank of India. (Source:&nbsp;File photo)</p></div>
Challa Sreenivasulu Setty, managing director, State Bank of India. (Source: File photo)

In 2018, State Bank of India held a dinner at a five-star hotel in Mumbai, as a way to introduce its top brass to reporters. It was a practice with many banks at the time, to improve on their relationship with the press.

It was essential then because banks were in early stages of exiting a major debt restructuring exercise and SBI was no exception. As is usual at these gatherings, the banker handling the most trending portfolio at the time would get mobbed by most reporters in the room.

In the middle of the ballroom, one officer stood among reporters regaling them with stories about his childhood. He was a mere child, working for his father's grocery store, where he and his brother would go out collecting dues from other villagers. The officer was talking about everything he learnt, as a youngster, about the value of timely recoveries.

In about a month after this dinner, the officer, Challa Sreenivasulu Setty, was appointed deputy managing director in the stressed assets management group. When he took over, SBI's total gross non-performing asset ratio was 10.91%. But that in the over Rs 10-lakh-crore corporate portfolio was close to 22%.

In an interview with Bloomberg in June 2020, Setty said that there were two lessons he learnt as an adolescent debt collector. The first was time value for money, implying that the sooner the debt is repaid, the better it is. The second lesson was to never stop following up with the borrower. These lessons drove his thought process of large debt resolutions at SBI.

When Setty left the stressed assets group in FY20, after his elevation to managing director of the retail and digital banking business, overall gross NPA ratio had fallen to 6.15%. Gross NPA in the corporate portfolio dropped to 9.67%, as of March 2020.

The general pick up in large-value resolutions through the Insolvency and Bankruptcy Code did help Setty in showing these results. His resume got a big boost as well.

Over the weekend, the Financial Services Institutions Board recommended Setty to be named the chairman of India's largest lender, succeeding Dinesh Kumar Khara in August. The final decision in the matter remains with the government; however, it seems that Setty will occupy the corner office in about two months.

A Diligent Officer

A soft-spoken and gentle professional, Setty is revered by his former colleagues as someone who always stands with his fellow officers. In a career spanning 36 years at SBI, Setty has worked across most verticals and has developed a strong rapport with the cadre across the country.

At least three of his former colleagues, who spoke with NDTV Profit on the condition of anonymity, said he was a thorough professional, keen on getting into the nitty-gritty of a problem before solving it.

A private sector distressed assets specialist said when Setty was a chief general manager, he was once informed about a bidding process in a large asset resolution not being conducted fairly. The bid was for selection of an advisor for the resolution.

Typically, officials at that level don't respond well to criticism. Moreover, in large cases, such grievances are often ignored. Setty, to his credit, chose to redo the bid entirely within the prescribed rules, the distressed assets specialist said, also speaking anonymously.

In Setty, SBI has found the right successor for Khara, one of the three former SBI officials cited earlier said. His diligent and hard-working nature, along with his strong communication skills, will make Setty's tenure one to watch out for.

What Is Expected Of Setty?

Under Khara, India's largest bank has a stable balance sheet, supported with strong growth. The lender has made a renewed effort to expand its retail segment, especially the mortgage lending business.

As of March 31, SBI's total advances are at nearly Rs 38 lakh crore, while deposits are at over Rs 49 lakh crore. Retail loans form Rs 13.52 lakh crore, where home loans contributed more than half, or Rs 7.25 lakh crore. SBI's return on assets were at 1.04% in FY24, while return on equity is at 20.32%. One June 4, SBI shares hit an all-time high of Rs 912 apiece, though Khara believes the lender is still undervalued.

Setty thus inherits an incredibly strong bank, with all the right levers in place.

Going ahead, he will have to focus on three aspects:

  • Ensuring that the future growth is adequately adjusted to risk.

  • Facing technological challenges.

  • Sustaining growth momentum from over the last two years.

Another challenge is the widening gap between credit and deposit growth, and its impact on the system. Though SBI's credit-deposit ratio remains at a very comfortable 77%, indicating a lot of headroom for growth.

While there is no doubt that Setty will achieve what is expected of him, the flavour he brings to SBI while doing so, will be what the market watches out for.

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