SBI chairman expects 50bps rate hike in Dec, to impact consumption credit

MUMBAI: State Bank of India (SBI) expects interest rates to rise by 50 basis points in December, with chairman CS Setty saying higher rates could affect discretionary consumption credit demand but were unlikely to significantly dent overall credit growth given 7.1% growth forecasted for the economy.“Interest rates will influence the composition and quantum of credit demand, not immediately,” Setty said at the Business Standard BFSI Summit. “We need to distinguish between weakening of demand and moderation of credit growth. We are coming from a phase of robust growth in credit. While discretionary consumption demand could be affected, I do not think credit for productive activities will be impacted,” he said.Setty said he did not expect system-wide concerns over credit quality, although individual borrowers could face stress from higher interest rates.On deposits, Setty said household savings were undergoing a structural shift, with households increasingly practising asset allocation, even if they were not fully conscious of it. “There is only so much that rates can propel you in deposit mobilization. What matters is service quality,” he said, adding that the ease of moving funds from savings accounts to term deposits had improved significantly.“The liquidity RBI has been providing and the FCNR flows will ensure that there is no rate-driven competition for deposits,” he said. Stock market movements could trigger some shifts in household savings, but interest rates alone had limited ability to drive deposit mobilisation.On the MDR on UPI Setty said the Unified Payments Interface (UPI) had transformed India's payment system and become a global success story, but rising transaction volumes required substantial investment in technology, computing capacity and risk management.SBI handles 40 crore daily UPI transactions, with real-time monitoring of transactions above Rs 5,000 requiring investment in computing and risk management. Chairman CS Setty said minimum MDR would help fund payment rails, with 98% of transactions excluded and consumer impact lower than projected. Transaction-level monitoring should limit cost pass-through to consumers.YONO, designed to cut transaction costs, has 7 crore registered users. SBI aims to bring 30 crore customers, including third-party UPI users, onto YONO by 2030 through YONO Bharat, focused on financial inclusion. Device-neutral access and simpler services could follow in six to seven months.SBI’s AI/ML portfolio stands at Rs 1 lakh crore. Generative AI in knowledge management and cheque clearing has cut processing centres from 17 to four, improving efficiency and enabling workforce redeployment. Setty said AI adoption should be judged by productivity gains, with customer-facing applications planned on YONO.You use AI every day. Now get your AI Quotient. Take the AIQ test.