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<v Speaker 1>Hello, and welcome to the India Today Business Todo's studio

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<v Speaker 1>here at the World Economic Forum in Sami and joining

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<v Speaker 1>me now Chellas Nava Salusti, the Chairman of the State

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<v Speaker 1>Bank of India, mister city a very warm welcome. We

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<v Speaker 1>need all the warmth here in our studios here, but

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<v Speaker 1>thank you for making the time and the backdrop of

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<v Speaker 1>this conversation. This first question that I really want to

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<v Speaker 1>ask you is that the world is in trade turmoil.

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<v Speaker 1>There are geopolitical shocks every two days or every day.

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<v Speaker 1>A CEO all across the world wakes up, reads the

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<v Speaker 1>headlines and then figures out what is going to happen

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<v Speaker 1>to his business in all of this turmoil. One key

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<v Speaker 1>message that keeps sticking out, also from foreign CEOs is

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<v Speaker 1>India's resilience, political stability and the maturity of its fiscal,

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<v Speaker 1>monetary and administrative policies. How do you yourself see the

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<v Speaker 1>current uh you know, situation of India visa vither of

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<v Speaker 1>the globe.

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<v Speaker 2>First of all, thank you Verma Sad for having me

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<v Speaker 2>on your show India. I think this resilient India story

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<v Speaker 2>is talk of dours you know this time and even

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<v Speaker 2>the last year when we were here while geopolitical disruptions,

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<v Speaker 2>tariff related issues, trade dislocations, all of them have put

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<v Speaker 2>a lot of pressure across the globe and India has

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<v Speaker 2>no exception. But the way India managed in terms of

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<v Speaker 2>fiscal prudence, in terms of ensuring that you know, sufficient

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<v Speaker 2>liquidity is there in the system, and some of the

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<v Speaker 2>heavy lifting done with the Government of India in terms

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<v Speaker 2>of supporting the infrastructure. So all of them indicate. Even

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<v Speaker 2>if you see the latest IMF estimates, our own estimate

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<v Speaker 2>also puts India's GDP growth around seven point five percent.

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<v Speaker 2>I think it's a it's a very resilient story. And

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<v Speaker 2>I see that both the calendar A twenty six and

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<v Speaker 2>twenty seven paying out very well for India. Banking system

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<v Speaker 2>is robust and we expect that the government continues to

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<v Speaker 2>have the prudential fiscal management and that gives us confidence

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<v Speaker 2>that the India's resilience story continues.

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<v Speaker 1>If we take two thousand and eight as the cutoff

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<v Speaker 1>here from there, we have seen every few years there

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<v Speaker 1>is a global shock which then has some amount of

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<v Speaker 1>impact on India, some spillovers. In two thousand and eight,

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<v Speaker 1>there was a great decoupling theory that we used to

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<v Speaker 1>talk about it before that. I want to follow up

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<v Speaker 1>your observation that given the current global context, is there

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<v Speaker 1>any spillower risk that we also need to keep in

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<v Speaker 1>mind with regard to the Indian economy.

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<v Speaker 2>So the interconnectedness as increased over the years. If you

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<v Speaker 2>really see twenty ten decoupling story did not play out

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<v Speaker 2>as much as we wanted. Right, we were also impacted

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<v Speaker 2>and we had undertaken one of the largest cleanup in

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<v Speaker 2>the banking system in terms of acid quality reviews and

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<v Speaker 2>recapitalization of the public sector banks. But in the last decade,

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<v Speaker 2>what we have seen is that the lot of legislative measures,

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<v Speaker 2>a lot of fiscal measures, and also in terms of

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<v Speaker 2>the strengthening of the banking system, both from a regulatory

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<v Speaker 2>side as well as the banking management side, has made

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<v Speaker 2>I think India, I don't. I can't use the word

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<v Speaker 2>that the decoupled from the rest of the world, but

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<v Speaker 2>I think much more, as we mentioned right in the beginning,

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<v Speaker 2>much more resilient to handle this disruptions c.

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<v Speaker 1>Our re engagement with global trade. But in a different context.

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<v Speaker 1>Over the last few years, we are pursuing currently in

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<v Speaker 1>conversations for more than a dozen trade deals. Some have

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<v Speaker 1>reached fruition, A big one with the European Union is

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<v Speaker 1>perhaps around the corner. The United States is work in progress.

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<v Speaker 1>What does this mean for Indian industry in terms of

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<v Speaker 1>newer opportunities and for a lender of your size and stature,

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<v Speaker 1>how do you intend to support the momentum that this

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<v Speaker 1>kind of new trade engagement is likely to generate?

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<v Speaker 2>So new trade engagements? You know, the way India are

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<v Speaker 2>pursued to have these free trade agreements to pursue something

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<v Speaker 2>which is win win is not that you know you

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<v Speaker 2>are giving away something or not giving away at all.

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<v Speaker 2>That approach has now more to a more pragmatic approach

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<v Speaker 2>that what kind of trade facilitation can be done while

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<v Speaker 2>using the FDAs is still in the hands of the industries. Right,

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<v Speaker 2>the committantly can have a freated agreement, but how do

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<v Speaker 2>you use that FTA is up to the industries and

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<v Speaker 2>I'm sure that the industry bodies are working on that.

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<v Speaker 2>And also, if you see, the free DAID agreements also

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<v Speaker 2>had helped us in terms of geographical diversification of the trade.

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<v Speaker 2>Not necessarily that you are and one particular country are

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<v Speaker 2>a group of countries. You are highly dependent on export

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<v Speaker 2>oriented activities. Now we see that much more diversification happening.

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<v Speaker 2>There is one part and as the trade finance part,

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<v Speaker 2>we still we are the largest trade finance provider to

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<v Speaker 2>the Indian industries today. Out of my ninety billion dollar

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<v Speaker 2>overseas book, almost thirty billion twenty five to twenty seven

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<v Speaker 2>billion dollar is a trade book and predominantly funding the

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<v Speaker 2>Indian corporates accessing the overseas trade finance.

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<v Speaker 1>That's a very significant number and point that you have

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<v Speaker 1>shared with us.

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<v Speaker 2>You know, you.

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<v Speaker 1>Spoke about our high growth rate seven point five percent,

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<v Speaker 1>inflation at pretty much historic lows. The monetary system has responded.

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<v Speaker 1>RBA has eased rates, liquidity support has been provided. What's

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<v Speaker 1>your base case for the cost of capital going forward

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<v Speaker 1>for pretty much every class of borrowers in India.

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<v Speaker 2>So the policy rate cards almost one hundred and twenty

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<v Speaker 2>five dis point in the last two to fifteen months

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<v Speaker 2>has helped the softening of the interest rates on the

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<v Speaker 2>loan side, whether it is a retail loans or corporate loans. Broadly,

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<v Speaker 2>I think there is a softening on the corporate side.

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<v Speaker 2>There's still you know, we have a concept of mclr right.

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<v Speaker 2>The marginal cost has not come down as much as

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<v Speaker 2>we wanted, our the industry wants, mainly because I think

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<v Speaker 2>the cost of deposits have remained more or less sticky.

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<v Speaker 2>So there is a good growth as an indicate that

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<v Speaker 2>industry level good credit growth and deposit growth is slightly lagging,

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<v Speaker 2>which is putting pressure on banks to not to cut

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<v Speaker 2>the interest rates as much as they desire to on

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<v Speaker 2>the deposits. So this having said that, I think some

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<v Speaker 2>of the monitor measures on the fiscal measures are helping

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<v Speaker 2>to achieve a good credit growth which I believe is sustainable,

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<v Speaker 2>maybe in the range of twelve to fourteen percent. The

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<v Speaker 2>system leveled credit growth coeres.

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<v Speaker 1>On the deposit side. And I'm not asking you this

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<v Speaker 1>as an sbas specific question, but broadly speaking, at the

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<v Speaker 1>macro level, at the policy level, is there something that

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<v Speaker 1>you feel needs to be done, because I would say,

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<v Speaker 1>and you are the expert on this, that it seems

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<v Speaker 1>to be that there is a bit of a structural

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<v Speaker 1>break with the past behavior of fixed deposits, although by

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<v Speaker 1>quantum they still remain the largest, there is a trend

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<v Speaker 1>shift that seems to be happening. So does the system

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<v Speaker 1>need to respond differently.

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<v Speaker 2>I'm sure. So that's many a time I spoke on this.

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<v Speaker 2>The structural shift which you mentioned is definitely happening, and

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<v Speaker 2>as the economy is mature and the households individual's ability

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<v Speaker 2>to access various non banking financial same instruments, this structural

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<v Speaker 2>shift is definitely here to stay. How banks have to

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<v Speaker 2>structure their balance sheets now with this, in my view,

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<v Speaker 2>I think the shift is almost irreversible. There could be

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<v Speaker 2>some flows happening aong their equity market is doing well,

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<v Speaker 2>there will larger flows. If not doing well, smaller flows,

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<v Speaker 2>but flows definitely will be there. If you see the

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<v Speaker 2>bank deposit go one x, the mutual fund go through

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<v Speaker 2>three x, right, so, which means that the banks probably

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<v Speaker 2>have to access the markets more in terms of funding

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<v Speaker 2>their asset growth. Some of these money which is moving

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<v Speaker 2>to pension funds, mutual funds, insurance definitely has to come

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<v Speaker 2>back to the real economy and support the banks raising

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<v Speaker 2>the capital, particularly from the dead capital market.

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<v Speaker 1>So going forward in twenty twenty six, what is the

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<v Speaker 1>biggest challenge to sustain the strong credit growth momentum the

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<v Speaker 1>numbers that you also gave, is it a demand or

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<v Speaker 1>tightness in funding, what would you say will be required

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<v Speaker 1>to keep it sustained for the foreseable future.

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<v Speaker 2>One is Indian economy is all about domestic consumption and

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<v Speaker 2>domestic investment story. Well, we do want to have export markets,

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<v Speaker 2>and service exports are doing very well and merchandise exports

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<v Speaker 2>are also picking up, and so it is broadly the

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<v Speaker 2>domestic consumption and domestic investment story, which means that the

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<v Speaker 2>credit growth broadly coming from the domestic consumption. Even if

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<v Speaker 2>the corporates have to invest, they would like to see

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<v Speaker 2>sustained domestic consumption. So the first part is whether this

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<v Speaker 2>consumption demand is going to be sustained. In our view,

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<v Speaker 2>our house views that is going to be sustained. And

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<v Speaker 2>number two, adequate liquidity in the banking system. I'm very

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<v Speaker 2>glad to share. I think the RBI always have been

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<v Speaker 2>assuring us and also ensuring that system liquidity is adequately

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<v Speaker 2>provided for. These are the two major things. And while

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<v Speaker 2>global disruptions and the narratives will keep happening, I think

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<v Speaker 2>for India these two important things are there. And while

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<v Speaker 2>fiscal management continues to be the bedrock of inin econ.

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<v Speaker 1>That's a very good point and it's clear that not

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<v Speaker 1>just from the monetary policy side, but also from the

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<v Speaker 1>fiscal policy side. We've seen a massive support to consumption.

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<v Speaker 1>The JST cuts were unprecedented and we had income tax rationalization.

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<v Speaker 1>Also there is a string of reforms. I want to

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<v Speaker 1>ask you a broader question on reforms again. Twenty twenty

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<v Speaker 1>five very clearly a big year for reforms. Prime Mister

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<v Speaker 1>Modi has indicated that path will continue in twenty twenty six.

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<v Speaker 1>So you know, we started this conversation with a broader thing.

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<v Speaker 1>What's your own belief about the reform story of India

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<v Speaker 1>and how you expected to pan out.

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<v Speaker 2>So I was just listening to the Minister yesterday in

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<v Speaker 2>your India Today conversation. I think one point which we

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<v Speaker 2>all must recognize that a lot of rationalization of the

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<v Speaker 2>regulations and loss compliance burdened on the industry is sought

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<v Speaker 2>to be reduced. Labor codes is again is a big

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<v Speaker 2>reform which has been there for in discussion for a

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<v Speaker 2>long time. And now the way the industry has taken

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<v Speaker 2>and re orienting its deliver policies to suit the courts

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<v Speaker 2>is a very very important development in my view. So

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<v Speaker 2>the reforms objective of the Government of India is to

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<v Speaker 2>ensure that he is of doing business and also give

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<v Speaker 2>confidence to the investors that this one country which will

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<v Speaker 2>continue on the reform's path. But if I have to

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<v Speaker 2>really ask one thing I think we have also been

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<v Speaker 2>mentioning from our house point of view is that while

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<v Speaker 2>the fiscal prudence is there on the Government of India side,

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<v Speaker 2>the same level of prudence has to come on the

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<v Speaker 2>state level states because the states have to play an

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<v Speaker 2>important roles. And I see that almost nine major states

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<v Speaker 2>representing in douvos presenting their industrial policies and investment climate

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<v Speaker 2>is very good development in our view.

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<v Speaker 1>Cercactly Again a broader question and this I want you

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<v Speaker 1>to explain to our viewers who are for years now

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<v Speaker 1>been sponding to and listening to answers on the question

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<v Speaker 1>of private KPEX cycle. Recently, when I put this question

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<v Speaker 1>to someone, he said, we need to relook at this.

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<v Speaker 1>There may not be investment going into old sectors which

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<v Speaker 1>are well established. A lot of money is going into

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<v Speaker 1>newer sectors, including for example, data centers.

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<v Speaker 2>There is FDI.

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<v Speaker 1>Also, Adesh alone, for example, has signed up for twenty

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<v Speaker 1>two percent of all commitments in FDA that have happened

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<v Speaker 1>in the past one year. How would you explain the

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<v Speaker 1>private KPX cycle right now?

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<v Speaker 2>I think the conventional way of looking at the private

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<v Speaker 2>capex cycle needs to be changed. And also some of

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<v Speaker 2>these industries what you mentioned are capital intensive and the

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<v Speaker 2>capital is not necessarily coming from the dead capital. There's

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<v Speaker 2>a lot of capitalists flowing into these sectors while we

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<v Speaker 2>have very strong pipe and we keep mentioning about the pipeline,

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<v Speaker 2>and the pipeline is coming from various sunrise sectors. Some

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<v Speaker 2>of them are not truly sunrise in the sense that

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<v Speaker 2>they've been there for some time, like renewables, they're seeing

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<v Speaker 2>pickup there, data centers as you mentioned, and we see

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<v Speaker 2>even green hydrogen, and you know, many of these activities

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<v Speaker 2>not necessarily funded by dead capital people. And also some

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<v Speaker 2>of these excess cache is cash flows what they have

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<v Speaker 2>they're using on the capital expenditure. I think we need

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<v Speaker 2>to like we have identified eight core sunrise sectors today

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<v Speaker 2>and we are setting up a center of excellence which

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<v Speaker 2>will be inaugurated on the thirty first, And this also

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<v Speaker 2>shows that our focus will continue to be on the

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<v Speaker 2>conventional industry is steal cement roads will continue to be there.

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<v Speaker 2>The future of capital expenditure, the private capital expenditure is

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<v Speaker 2>going to be in these sunrise sectors. You yeah, I

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<v Speaker 2>may not be immediately able to do that, but I

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<v Speaker 2>think we are looking at green hydrogen, semiconductors, data centers,

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<v Speaker 2>renewers will continue to be one of the focus areas.

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<v Speaker 2>So these are some of the things, you know, which

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<v Speaker 2>we will be focusing on. And here in these eight sectors,

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<v Speaker 2>we are not only developing industry best practices in financing,

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<v Speaker 2>we are developing you know, capacity building for funding them

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<v Speaker 2>in case if any capital requirement is there. We have

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<v Speaker 2>currently around twenty five partners partner banks which are side

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<v Speaker 2>u with SBI, where we will be helping them to

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<v Speaker 2>understand and also engage with the industry that what exactly

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<v Speaker 2>they're looking for the financing those sectors in a manner

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<v Speaker 2>of which probably will have to be looked at differently.

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<v Speaker 1>Absolutely because new sectors also mean a new kind of

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<v Speaker 1>risk which might not have been assessed and fact factored in.

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<v Speaker 1>As we wind down the conversation, I and I ask

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<v Speaker 1>you this every time I meet you. I interviewed you

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<v Speaker 1>last year when you were one the cover of Business Today,

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<v Speaker 1>I want to ask you this about the health of

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<v Speaker 1>the banking system the broader macro story over the last

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<v Speaker 1>ten years. If we say that India is resilient, if

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<v Speaker 1>our economic engines are doing well, and we're very optimistic

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<v Speaker 1>as a nation, the banking story is fundamental to that.

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<v Speaker 1>Had the cleanup not happened, we would not have been

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<v Speaker 1>where we are today. There is no doubt in my

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<v Speaker 1>mind on that. As you look ahead, are you confident

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<v Speaker 1>that there can never be any recurrence of such episodes? Again,

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<v Speaker 1>there might be some sectoral risks that might come in

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<v Speaker 1>due to certain kind of behavior, certain retail delinquency, But

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<v Speaker 1>broadly saying one or two, three years, what kind of

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<v Speaker 1>outline can you offer us on that topic.

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<v Speaker 2>Icality is inherent nature of bank right, fundamental to that.

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<v Speaker 2>But how best the banking industry today to handle those cycles?

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<v Speaker 2>That's all about resilience. And we started the conversation with

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<v Speaker 2>resilience and I'm glad that we are ending with the resilience.

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<v Speaker 2>And if we have to say, I'm very confident that

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<v Speaker 2>today banking in India globally, if the banking sector is

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<v Speaker 2>doing very well, I think we are writing the benign

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<v Speaker 2>asset quality cycle. Even if you keep that asset quality

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<v Speaker 2>issues aside, capital buffers are strong now and the ability

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<v Speaker 2>of the banks to assess the risk, both at the

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<v Speaker 2>credit risk level and more importantly on the operational risk

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<v Speaker 2>level is much more robust now. This is not come overnight.

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<v Speaker 2>You know, we have invested in the technologies, digitalization and

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<v Speaker 2>access to the data in Indian context is very important

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<v Speaker 2>that you know how the underwriting is going to be

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<v Speaker 2>taken up. And I'm very sure that at least for

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<v Speaker 2>five years we may not have any challenges. Five years

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<v Speaker 2>beyond five years is difficult to predict. But even if

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<v Speaker 2>the cycles hit, I think banking industry is a much

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<v Speaker 2>more robust position to handle them.

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<v Speaker 1>One very final quick question, and this is your own

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<v Speaker 1>sense of satisfaction and your observations with regard to Indian industry.

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<v Speaker 1>You know, meeting up to the.

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<v Speaker 2>Age of AI.

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<v Speaker 1>AI is everywhere global corporations are doubling down on it.

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<v Speaker 1>How do you see Indian industry matching up to this

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<v Speaker 1>unprecedented technological change that is happening.

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<v Speaker 2>So this conversation being technology being central to the agenda happens,

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<v Speaker 2>you know when we meet the industry is in fact,

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<v Speaker 2>I'm very glad that every conversation I have with industries,

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<v Speaker 2>whether it is a manufacturing industry or even the service industry,

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<v Speaker 2>the conversation is all about technology. And here in Dowers

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<v Speaker 2>also the broader conversation, apart from whatever geopolitical issues we

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<v Speaker 2>keep talking about, is all about technology and how you

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<v Speaker 2>build the resilience systems both for your own internal processing

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<v Speaker 2>as well as customer facing applications. I think the technological

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<v Speaker 2>investments in India are significant now in the industry level,

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<v Speaker 2>even in NBFC sector. A lot of digitalization is happening.

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<v Speaker 2>But one area, if I have to call out, I

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<v Speaker 2>think the technology investment in MSM is still a long

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<v Speaker 2>way to go. Probably we may have to focus on

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<v Speaker 2>that most more importantly, that they should not be technologically obscelistent,

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<v Speaker 2>They should not face that kind of system and they

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<v Speaker 2>should not become the weakest link in the strong chain.

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<v Speaker 1>Absolutely strong chain is perhaps the final word and headline

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<v Speaker 1>takeaway that I take from this conversation with the Chairman

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<v Speaker 1>of State Bank of India, Sir, Thank you very much

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<v Speaker 1>for your time with That is a wrap on this conversation.

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<v Speaker 2>We'll see you again until then, goodbye,