State Bank of India (SBI) Chairman C. S. Setty has called for heightened responsibility in lending practices across the Indian banking sector. His remarks come after an unprecedented influx of over $127 billion through Foreign Currency Non-Resident (B) [FCNR(B)] deposits, which has significantly boosted system liquidity.
Massive Liquidity Boost and Lending Concerns
The Reserve Bank of India (RBI) introduced a special window in June, offering a concessional swap facility for FCNR(B) deposits, overseas foreign currency borrowings (OFCB), and external commercial borrowings (ECB). This initiative was met with an overwhelming response, particularly from FCNR(B) deposits, leading to a substantial liquidity surplus for banks.
Setty anticipates that it will take approximately three to four months for these newly acquired funds to be fully deployed. While acknowledging the positive impact of increased liquidity, he emphasized the critical need for banks to maintain responsible lending standards. This perspective addresses concerns previously raised by Axis Bank MD and CEO Amitabh Chaudhary, who cautioned that the rush to deploy funds could potentially lead to "abnormal lending."
"I think everybody will be more responsible in lending," Setty stated during the Global Fintech Fest in Mumbai, offering a reassuring outlook against potential risks.
Agentic AI and the Future of Banking
Beyond liquidity management, Setty also elaborated on the transformative potential of Agentic AI in banking. He highlighted its capacity to deliver personalized financial assistance to millions of customers, fostering growth across various financial stages. However, he stressed that the widespread adoption of Agentic AI hinges on making high-cost computing more affordable and accessible for scale in India.
Human Oversight and Trust in AI
Setty underscored the importance of a human-in-the-loop approach for Agentic AI. While AI can efficiently manage data-heavy operations, complex and high-risk financial decisions must retain appropriate human oversight. He warned that the immense power of AI also amplifies the consequences of errors, making trust a fundamental, embedded component of AI models rather than an afterthought.
SBI plans to focus its Agentic AI adoption efforts on three key areas: enhancing customer engagement and hyper-personalization, improving employee productivity and streamlining internal processes, and strengthening risk management frameworks.