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Informist, Monday, Oct. 26, 2026

 

MUMBAI – State Bank of India Chairman C.S. Setty expects the Reserve Bank of India's Monetary Policy Committee to raise the repo rate by 50 basis points in December, and is confident about the banking system's credit growth and retail asset quality. "If you are looking at one more rate hike in December, I think rate-sensitive sectors, particularly discretionary spending-related borrowing, probably would be moderated," Setty said speaking at the Business Standard BFSI Summit 2026.

 

He said higher interest rates could moderate credit demand, particularly for discretionary consumption and consumption loans, but distinguished this from a weakening credit cycle. With India's economic growth remaining robust, demand for credit from productive activities is likely to remain resilient, he said.

 

 

On deposit mobilisation, Setty said banks could not rely on higher interest rates alone to attract household savings, as the shift towards alternative investment instruments reflects a structural change in savings patterns. "What is important is in terms of your service quality and what is the value proposition you give to a customer," he said, adding that adequate banking system liquidity should prevent intense rate-driven competition for deposits over the next couple of quarters.

 

Setty also said banks need not be overly concerned about excess credit growth arising from elevated liquidity, as the system should be able to absorb the surplus over two to three quarters. The banking system's retail asset quality was not a major concern despite the prospect of higher borrowing costs, he said. However, he acknowledged that highly leveraged individuals and households could face pressure as interest rates rise.

 

SBI wants to expand its role in housing finance and lending to micro, small and medium enterprises, with Setty saying the lender aims to contribute to economic value creation across sectors.

 

The bank is also working with the National Payments Corp. of India and merchants to develop mechanisms to prevent merchant discount rate charges on UPI transactions from being passed on to consumers, Setty said. He said the rapid growth in UPI transactions requires significant investment in technology, computing capacity, transaction monitoring and risk management.

 

SBI alone handles around 400 million financial and non-financial UPI transactions daily, he said, adding that the proposed merchant discount rate framework should be assessed in the context of the costs involved in maintaining the payments infrastructure.

 

The lender is exploring a new digital platform YONO Bharat aimed at expanding financial inclusion by making digital banking accessible to customers using a wider range of devices, including feature phones. "We would like to bring 300 million customers by 2030 on YONO Bharat," he said, adding that SBI was targeting a launch within six to 12 months.

 

Setty said SBI would adopt artificial intelligence in a calibrated manner, focusing on enterprise-level deployment, governance, risk management and measurable productivity gains rather than pursuing isolated use cases. He said AI offered significant potential in fraud detection, transaction monitoring and risk management, while also improving customer journeys and employee productivity.

 

SBI has already deployed generative AI for internal knowledge management and cheque clearing, Setty said. The bank is reducing its cheque-clearing centres from 17 to four and is working towards a national cheque-clearing centre using generative AI, with human intervention retained to monitor model performance.

 

At 1130 IST, SBI shares traded at INR 951.70 on the National Stock Exchange, down 0.7% from the previous close. The country's largest lender reported a net profit of INR 211.21 billion for the June quarter on net interest income of INR 469.92 billion.  End

 

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Reported by Kabir Sharma and Pratiksha

Edited by Akul Nishant Akhoury

 

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