Dinesh Kumar Khara appointed SBI chairman for three years

Dinesh Kumar Khara has been appointed chairman of State Bank of India (SBI) for three years starting October 7. Khara has been in charge of the bank’s associates and subsidiaries in his role as managing director (MD). His tenure saw the listing of the bank’s two insurance arms and its credit card company.

The foremost challenge for Khara in his new role will be to deal with the repercussions of Covid-19 – in terms of recoveries as well as growth. A fresh dimension has been added to the restructuring scheme for Covid-related stress with the judiciary getting involved. If the government does indeed decide to bear the compound interest component for borrowers who took the moratorium, banks will have to launch a mammoth administrative exercise. An institution the size of SBI will be particularly hard-pressed to juggle this exercise with its regular business. Simultaneously, the old bugbear of bad loans will also have to be kept in check.

The business of banking itself has turned into a challenge as Covid slammed the brakes on an already-slowing economy. Non-food credit is growing at 5.3% year-on-year (y-o-y) even as the banking system sits on an ever-expanding pile of deposits. Retail credit, which had been driving growth even as recently as last year, is now showing signs of a slowdown. The only segments contributing meaningfully to growth are pockets in the roads and energy sectors. Khara will have to expand these avenues of growth in order for the bank to live up to expectations of growth and compete with its private-sector rivals. That might be key to reversing the lender’s lacklustre stock performance.

Covid has turned out to be transformative in terms of how organisations function and SBI will be forced to relook its ways of work sooner than later. This is evident from the fact that the bank’s corporate headquarters in Nariman Point had to be sealed on multiple occasions in the last few months after some people tested positive for Covid there. While outgoing chairman Rajnish Kumar has often spoken of ‘anywhere banking’ being the new paradigm for SBI, the bank is yet to come up with a concrete model for execution. It is clearly unfinished business that will pass on to the new chairman.

SBI has made public its plans to set up a new umbrella entity for retail payments, a competitor to the National Payments Corporation of India (NPCI). Kumar has also spoken of plans to spin off SBI’s Yono app into a standalone digital bank and unlock value by offering the platform to small banks. Whether Khara picks up these two tasks as his own remains to be seen.