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Informist, Friday, Aug. 8, 2025

MUMBAI – State Bank of India, the country's largest lender by assets, expects corporate loan growth, which was muted in the first quarter of 2025-26 (Apr-Mar), to pick up later in the year, Chairman C.S Setty said Friday.

The bank expects growth in corporate loans to rise to around 10% by the December quarter, if not in the September quarter itself, Setty said at a press conference after the release of the bank's financial results for Apr-Jun. The bank reported a net profit of INR 191.60 billion for the June quarter, up 12.5% on year and 2.8% sequentially.

SBI's corporate advances grew just 5.7% on year to INR 12.03 trillion as of Jun. 30 against the overall loan growth of 11.6%. Setty said corporate loan growth slowed down in the June quarter because companies shifted to market instruments including the corporate debt market.

The bank also has large sanctions and proposals in the pipeline, which are yet to be disbursed. SBI has INR 3.5 trillion worth of sanctions and INR 3.5 trillion of disbursements in the pipeline, Setty said.  

"We have a good visibility on project finance proposals. That gives us confidence that we will be able to come back to double-digit growth (in corporate segment)," Setty said. Ashwini Kumar Tewari, managing director at SBI, said corporate investments will start to pick up once the present uncertainties settle down. "Therefore, once more clarity emerges the investments which have been put on hold may start to fructify. Project finance takes time to disburse, we have a lot of sanctions which will continue to work," Tewari said.

Setty said that once the marginal cost of funds-based lending rate gets readjusted and the bank becomes more competitive compared to the market, loan growth will pick up. "The pipeline is very strong," Setty said. He said the transmission of the 100-basis-point reduction in the repo rate to the marginal cost of funds-based lending rate will take time. 

SBI retained it credit growth guidance for FY26 at 12% and deposit growth guidance at 10%. The bank's total advances were INR 42.55 trillion as of Jun. 30, up 11.6% on year. Deposits rose 11.7% on year to INR 54.73 trillion at the end of June.

The bank's recent fundraising will also support its loan growth, Setty said. "Bank has raised equity capital of INR 250 billion during the current quarter which will support additional loan growth of approximately INR 2.5 trillion," he said. "Based on the current profitability and growth trajectory of the bank, we believe we have sufficient headroom to take care of the requirements of business growth."

The bank's capital adequacy will improve to 15.33% after the capital from the recently closed qualified institutional placement of shares gets added, Setty said. The bank's Basel-III capital adequacy ratio was 14.63% as of Jun. 30.

On the rise in gold loans, Setty said the bank has focussed on this sector as it is fulfilling a "felt need". Personal gold loans jumped 79.2% on year to INR 635 billion as of end-June. 

Asked about the fall in the bank's margins during the June quarter, Setty said the net interest margin will see a "U-shaped" trajectory. The bank's overall net interest margin fell to 2.90% in the June quarter from 3.22% a year ago and 3.00% a quarter ago.

The net interest margin will likely remain moderate in the September quarter as well, but may rise again to 3% by Jan-Mar, SBI's management said. The margin will likely rise after September once the bank's deposits get repriced and additional liquidity opens up from the reduction in the cash reserve ratio. The Reserve Bank of India in June announced a 100-basis-point reduction in the banks' cash reserve ratio in four tranches starting the fortnight ending Sept. 6. SBI expects additionally liquidity of around INR 520 billion from the cash reserve ratio cut. Setty also said that cost of deposits has likely peaked.

Setty said the bank aims to maintain a return on assets, which gauges the profitability of a company, of over 1%. For the June quarter, the bank's return on assets was 1.14%.

Asked about SBI's stake in YES Bank Ltd., Setty said the state-owned bank will divest the remaining stake "when opportunity arises". SBI, whcih holds 13.19% stake in YES Bank, has agreed to sell its shares in the private sector lender to Sumitomo Mitsui Financial Group. The transaction will also include sale of shares from seven other private banks, taking the total stake sold in YES Bank to 20% for INR 134.82 billion.

On the impact of US tariffs, Setty said he sees limited hit on the bank's books as the banking sector's exposure to the sector most affected by the tariffs are limited. "Overall exposure from the banking system on these sectors is very limited. And SBI also does not have much exposure on these sectors," SBI said.

While the direct impact of US tariffs on most sectors may be limited, the uncertainty arising from the trade tensions needs to be addressed, Setty said. "...the sooner this issue gets resolved, the better. And I'm sure the government is working on that".  End

Reported by Shubham Rana and Kabir Sharma

Edited by Tanima Banerjee

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