SBI's Bold Strategy: Asking for Deposits in a Competitive Landscape
December 6, 2024, 12:00 am
In the bustling world of banking, the State Bank of India (SBI) is taking a bold step. The bank, with its vast network of over 22,600 branches, is shifting its focus. Instead of waiting for customers to walk through the door, SBI is urging its staff to actively seek deposits. This strategy comes at a time when savers are drawn to higher-yielding investment options like mutual funds and corporate bonds.
The message from SBI's Chairman, Challa Sreenivasulu Setty, is clear: proactive engagement is key. In a landscape where customers can transfer funds with just a few clicks, banks must adapt. Gone are the days when customers had to visit a branch to invest in fixed deposits. Now, with digital platforms at their fingertips, they can easily explore alternatives.
As of September 2024, SBI reported total deposits of ₹51,17,285 crore, with gross advances standing at ₹39,20,719 crore. This data highlights the bank's substantial presence in the market. However, the challenge remains. With investment patterns evolving, SBI must ensure it remains relevant.
Setty emphasizes that the bank's branches should primarily focus on deposit mobilization. Historically, banks concentrated on selling loan products. Now, SBI is shifting gears. The mantra is simple: ask for deposits. This approach is not just about numbers; it’s about building relationships.
The bank is reaching out to individuals, corporates, and small and medium enterprises (SMEs). The goal is to create a culture where asking for deposits becomes second nature. Setty acknowledges that many banks have neglected this aspect. The focus has been on loans, leaving deposits in the shadows.
But why this sudden shift? The answer lies in the changing landscape of financial literacy. As customers become more aware of their options, they seek better returns. Term deposits, in particular, have seen a surge. According to SBI research, the outstanding balance per deposit account rose by ₹7,014 year-on-year, reaching ₹91,472 in September 2024. This increase is largely attributed to customers favoring term deposits over traditional savings accounts.
Term deposits now account for 61.4% of total deposits, up from 59.8% a year ago. This trend indicates a clear preference for higher returns. While savings accounts remain stagnant, term deposits are gaining traction. Customers are parking their funds in search of better yields.
The credit-deposit (CD) ratio also paints an interesting picture. In regions like Andhra Pradesh and Maharashtra, the CD ratio has surpassed 100%. This suggests a concentration of corporate credit in these areas. Conversely, states like Jharkhand and Himachal Pradesh struggle with CD ratios below 40%. This disparity highlights the need for targeted economic development in underperforming regions.
As SBI navigates this complex landscape, it faces stiff competition. Other banks are also vying for the same pool of deposits. Setty acknowledges that SBI cannot compete solely on pricing. The returns on deposits cannot match those of mutual funds or systematic investment plans (SIPs). Instead, the bank must leverage its strengths: liquidity, safety, and accessibility.
To enhance customer engagement, SBI is exploring innovative products. One such initiative involves combining fixed deposits with SIPs. This combo product aims to attract customers by offering the best of both worlds. It’s a strategic move to increase customer stickiness.
The challenge is not just about attracting deposits; it’s about retaining them. In a world where customers have numerous options, loyalty is hard-won. SBI’s approach must be holistic. It should encompass not just deposits but also customer experience.
As the bank embarks on this journey, it must remain agile. The financial landscape is ever-changing. Digitalization is reshaping how customers interact with banks. SBI’s large branch network is an asset, but it must be complemented by robust digital offerings.
In conclusion, SBI's strategy to ask for deposits is a significant shift in its approach. It reflects a broader trend in the banking industry. As customers become savvier, banks must adapt. Proactive engagement is no longer optional; it’s essential. SBI is poised to lead this charge, but success will depend on its ability to innovate and connect with customers. The road ahead is challenging, but with the right strategy, SBI can thrive in this competitive landscape.
The message from SBI's Chairman, Challa Sreenivasulu Setty, is clear: proactive engagement is key. In a landscape where customers can transfer funds with just a few clicks, banks must adapt. Gone are the days when customers had to visit a branch to invest in fixed deposits. Now, with digital platforms at their fingertips, they can easily explore alternatives.
As of September 2024, SBI reported total deposits of ₹51,17,285 crore, with gross advances standing at ₹39,20,719 crore. This data highlights the bank's substantial presence in the market. However, the challenge remains. With investment patterns evolving, SBI must ensure it remains relevant.
Setty emphasizes that the bank's branches should primarily focus on deposit mobilization. Historically, banks concentrated on selling loan products. Now, SBI is shifting gears. The mantra is simple: ask for deposits. This approach is not just about numbers; it’s about building relationships.
The bank is reaching out to individuals, corporates, and small and medium enterprises (SMEs). The goal is to create a culture where asking for deposits becomes second nature. Setty acknowledges that many banks have neglected this aspect. The focus has been on loans, leaving deposits in the shadows.
But why this sudden shift? The answer lies in the changing landscape of financial literacy. As customers become more aware of their options, they seek better returns. Term deposits, in particular, have seen a surge. According to SBI research, the outstanding balance per deposit account rose by ₹7,014 year-on-year, reaching ₹91,472 in September 2024. This increase is largely attributed to customers favoring term deposits over traditional savings accounts.
Term deposits now account for 61.4% of total deposits, up from 59.8% a year ago. This trend indicates a clear preference for higher returns. While savings accounts remain stagnant, term deposits are gaining traction. Customers are parking their funds in search of better yields.
The credit-deposit (CD) ratio also paints an interesting picture. In regions like Andhra Pradesh and Maharashtra, the CD ratio has surpassed 100%. This suggests a concentration of corporate credit in these areas. Conversely, states like Jharkhand and Himachal Pradesh struggle with CD ratios below 40%. This disparity highlights the need for targeted economic development in underperforming regions.
As SBI navigates this complex landscape, it faces stiff competition. Other banks are also vying for the same pool of deposits. Setty acknowledges that SBI cannot compete solely on pricing. The returns on deposits cannot match those of mutual funds or systematic investment plans (SIPs). Instead, the bank must leverage its strengths: liquidity, safety, and accessibility.
To enhance customer engagement, SBI is exploring innovative products. One such initiative involves combining fixed deposits with SIPs. This combo product aims to attract customers by offering the best of both worlds. It’s a strategic move to increase customer stickiness.
The challenge is not just about attracting deposits; it’s about retaining them. In a world where customers have numerous options, loyalty is hard-won. SBI’s approach must be holistic. It should encompass not just deposits but also customer experience.
As the bank embarks on this journey, it must remain agile. The financial landscape is ever-changing. Digitalization is reshaping how customers interact with banks. SBI’s large branch network is an asset, but it must be complemented by robust digital offerings.
In conclusion, SBI's strategy to ask for deposits is a significant shift in its approach. It reflects a broader trend in the banking industry. As customers become savvier, banks must adapt. Proactive engagement is no longer optional; it’s essential. SBI is poised to lead this charge, but success will depend on its ability to innovate and connect with customers. The road ahead is challenging, but with the right strategy, SBI can thrive in this competitive landscape.