He was a debt collector at 12. Now he chases $20b
Setty now heads debt recovery team at India’s largest commercial bank
From the age of 12, Challa Sreenivasulu Setty spent his school vacations collecting debts for his father’s grocery store in the South Indian village of Potlapadu.
It was harvest season, and Setty would go around the village, recovering money owed by farmers from earlier in the year. He and his brother each had a list of people who owed cash. “My brother was softer and more popular in the village,” Setty recalled. “So his collections were lower.”
Forty-two years later, Setty continues to collect on loans, albeit on a much larger scale. He’s one of three managing directors of State Bank of India, the country’s biggest lender. One of his tasks is to head recovery of the bank’s $19.6 billion bad-loan pile.
Tough assignment
It’s a tough assignment at the best of times, but now Setty must contend with an economy headed for its first contraction since he was a schoolboy. India’s bad-loan ratio, already the highest among the world’s biggest economies, is expected to jump after the coronavirus lockdown shuttered businesses and left millions jobless.
Setty said he learnt two key lessons collecting debt for his father. “One, time value: How quickly you can recover money is important,” he said in his first media interview since being promoted to managing director in January. “Second, follow up: I cannot stress the importance of this in recovering dues.”
“We prefer one-time settlements at SBI over long litigations,” Setty said of his first principle. “That way, we can get cash in time.”
On his second, he said following up with defaulters is especially important “in the case of small and mediumsized accounts.”
Setty said the recovery outlook is better for retail loans than the corporate book.
Under Chairman Rajnish
Kumar, SBI tightened loan underwriting and monitoring processes over the last two years, according to Setty. The bank closely tracks 98 parameters including share pledges and delays in paying letters of credit, to catch any impending stress in accounts, he said.
SBI doubled its loan recovery rate to about 14 per cent in the period, partly aided by a new bankruptcy law and other rules that SBI helped shape.
We prefer onetime settlements at SBI over long litigations. That way, we can get cash in time.”
C. S. Setty
| SBI Managing Director
Recovery challenge
Still, recoveries might be less this financial year as companies are in genuine difficulty given a plunge in demand, said Setty. The bank will come up with a combination of restructuring, fresh credit lines and one-time settlement offers, he said.
Investors have some doubts about the bank’s ability to navigate the current difficulties, if the stock price is any guide. SBI’s shares have plunged 45 per cent this year.
Still for Setty, as he goes about his job of recovering loans from companies, he’ll be sticking with his boyhood principles of seeking early settlements and following up with their controlling shareholders.