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Informist, Saturday, May 3, 2025

MUMBAI – State Bank of India, the Indian banking sector behemoth, expects a slight moderation in credit growth in the financial year 2025-26 (Apr-Mar), Chairman C.S. Setty said at a press conference here after the bank released its Jan-Mar financial results Saturday. The bank has revised its credit growth target for FY26 to 12-13%, from 14-16% in FY25.

Setty said credit growth is likely to slow down because of the slowdown in the economy. The chairman said the slowdown in credit growth is likely in spite of the recent liquidity boosting measures by the Reserve Bank of India as the impact of these measures will take some time to play out. "First probably one or two quarters we will have a slowdown," Setty said. "So whatever guidance we are giving for the full year will be moderated because of this timeline." 

The bank did not meet its guidance for FY25, with advances growing by 12% to INR 42.20 trillion as of Mar. 31, lower than the guidance of 14-16%. For deposits, too, the bank revised its target for FY26 downwards to 9-10%, from 11-12% in FY25.

Setty said there would be some pressure on the bank's net interest margin going forward as there will be some adjustment on deposit rates on the back of the repo rate cuts by the RBI. The bank expects cuts of at least 50 basis points more in the repo rate in the current financial year, starting with a 25 bps cut by the Reserve Bank of India's Monetary Policy Committee in June. The bank's net interest margin for Jan-Mar fell to 3.15%, down 32 basis points from a year ago.

"Some readjustment will happen at the deposit level," Setty said, adding that there are two reasons for this. "One is... the bank would like to protect the margins, (two,) the monetary transmission would happen only when both assets and liabilities get re-priced." 

The ample liquidity currently available in the banking system, along with money market rates cooling down, has set the stage for banks across the industry to cut deposit rates, Setty said. "Liquidity is available almost on tap," he said. "With daily VRRs (variable rate repo auctions), OMOs (purchases of gilts through open market operations), the RBI has displayed their commitment to provide liquidity to the system.

"This has also set the stage for banks to take a call on deposit rates. Otherwise, banks will be worried whether alternative liquidity will be available to them." State Bank of India also holds excess statutory liquid bonds of INR 3.6 trillion, which will help it to meet credit growth, the management said.

Currently, the bank has enough capital to meet credit growth requirements of up to INR 8 trillion, the management said. SBI also plans to raise up to INR 250 billion via equity in the current financial year, which will improve its capital position. This capital raise could be through any available channel, including sale of the bank's stake in some subsidiaries. Setty did not, however, respond to a question on selling the bank's stake in YES Bank.

"The timing as I mentioned I think will be market-oriented, in terms of subsidiaries or any other mode of raising capital. All options are open for us, but it all depends on what is emerging as we move forward. I am not able to hazard a guess when this will happen and at what level it will happen," Setty said.

Setty said the bank would consider raising funds via tier-1, tier-2, and infrastructure bonds during FY26 if they get better interest rates in the market, and depending on its need for investment. However, he said none of the bank's subsidiaries is currently in need of capital.

The bank expects corporate loans to grow 12-13% in the current financial year, and has a pipeline of loans amounting to INR 3.40 trillion in the segment, Setty said. In FY25, the bank's corporate loan book grew 9% on year to INR 12.41 trillion.

Setty added the Indian economy is broadly insulated from US tariffs, but new investment may be weak. "I think more than the impact of tariffs, everybody is watching what would be unfolding in the global environment," he said. "So, new investment announcements may not come immediately..."

The bank expects demand for personal loans to grow, with a guidance that home loans and retail loans will grow 13-14% during FY26. In FY25, the bank's personal loans segment grew 11.4% to INR 15.06 trillion. On the deposit front, the bank will continue to focus on increasing the share of current accounts, Setty said. In FY25, the current account balance of the bank grew 27% to INR 3.65 trillion.

The management said around 29% of its loan book is linked to the repo rate and 27% is linked to the marginal cost of funds-based lending rate. Setty said the bank aims to keep the gross non-performing asset ratio below 2% and expects its asset quality to hold up for a few more years. The bank incurred a quarter-on quarter rise in slippage ratio by 3 bps to 0.42%. This, Setty said, was primarily from loans given out to small and medium enterprises and the agricultural sector. 

Setty said a bulk of the share of loans to non-banking finance companies is to public-sector companies. As of Mar. 31, the bank held a non-bank lenders' book of INR 3 trillion.

State Bank of India's net profit for the March quarter fell 10% on year to INR 186.43 billion because of a sharp rise in provisions. The company announced its earnings Saturday. Friday, shares of the bank had ended 1.4% higher at INR 800.00 on the National Stock Exchange.  End

Reported by Kabir Sharma and Srijita Bose

Edited by Rajeev Pai

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