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Informist, Saturday, Feb. 7, 2026

 

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--SBI: Cost of funds to remain at Q3 level in Q4 
--CONTEXT: Remarks by SBI mgmt in post-earnings interaction with analysts 
--SBI: Have enough liquidity, capital buffers to sustain credit growth 
--SBI: Don't see a cut in savings deposit rate 
--SBI: Active in data centre financing; focusing on funding green energy 
--SBI: Have a target of $1 bln on CVE income
--SBI: Have not compromised on margins while increasing corp lending 
--SBI: Should not have any risk of margin compression from corp loan growth
--SBI: Dec rate cut has not led to any repricing of deposits
--SBI: Full transmission of RBI rate cuts on deposits unlikely to happen
--SBI: May be able to expand retail presence in US post trade deal
--SBI: Don't see significant fall in treasury income in coming quarters 
--SBI: Govt current account business largely drying up
--SBI: Not likely to tweak deposit rates, MCLR in near term
--SBI: Sticking to guidance of 1% return on assets
--SBI: Hope to increase credit growth by lending to REITs 
--SBI: Seeing pickup on credit to power, renewables sector
--SBI: No asset quality issues in corp loan book 
--SBI: Made INR-160-mln provision for implementation of new labour codes 

 

By Aaryan Khanna and P. Madhu Kumar

 

MUMBAI – State Bank of India expects to fund a higher pace of credit growth using its current liquidity and capital buffers, Chairman Challa Sreenivasulu Setty said Saturday. The bank upped its credit growth forecast to 13-15% in the March quarter from the 12-14% outlook earlier. 

 

"In the short-term, we are very confident that the credit growth whatever we are envisaging, 13-15% will be comfortably met by our liquidity as well as capital ratios," Setty said in a conference call with analysts following the bank's December quarter earnings.

 

The bank's domestic advances rose 15.1% to INR 39.90 trillion as on Dec. 31, while domestic deposits grew at a much slower pace of 9.1% on year to INR 54.68 trillion. SBI's Basel-III capital adequacy ratio declined to 14.04% on Dec. 31 from 14.62% on Sept. 30, but was above the regulatory minimum of 12.30%. In a call with media earlier in the day, the chairman said deposits will continue to remain the primary source of funding for banks even as savings shift to capital markets.

 

Speaking to analysts, Setty said he doesn't foresee a cut to the savings deposit rates offered by SBI or more generally, any tweaks to the deposit rates or the marginal cost-of-funds-based lending rate. The transmission of the Reserve Bank of India Monetary Policy Committee's last rate cut of 25 basis points in December is unlikely to be wholly transmitted to the banking system anytime soon, Setty said.

 

He guided for cost of funds to be at a similar level in the March quarter as it was in the Oct-Dec period. SBI's domestic cost of deposits fell to 5.07% in the reporting quarter, flat on year but down from 5.13% the previous quarter. The state-owned lender declared its December quarter results Saturday.

 

"We will take a call in terms of how our deposit strategy will play out while we have adequate liquidity and as well as capital buffers to support the credit growth," the chairman said. The MPC has cut rates by 125 basis points between February and December, which typically pressures banks' margins lower as loans reprice quicker than deposits.

 

The head of the country's largest bank doesn't see a significantly lower cost of funds from the repo rate cut over the coming quarters either. RBI Governor Sanjay Malhotra had said Friday that he hopes policy transmission will improve further but sees a lower transmission of rate cuts to deposit rates. Setty retained the guidance of a net interest margin of 3% both in the short term and the long term. In the December quarter, SBI posted a net interest margin of 3.12%, up 3 basis points from a quarter ago but down 3 bps from the year-ago period. The guidance for return on assets remained unchanged at 1%, even as the bank has posted an annualised return of assets of 1.10% and 1.16% in September and December quarters, respectively.

 

SBI reported an over-24% on-year rise in its net profit to INR 210.28 billion in the December quarter, beating analyst expectations of a INR-173.57-billion bottom line. Its net interest income also beat forecasts, growing 9% on year to INR 451.90 billion. An INR-22-billion dividend from subsidiary SBI Mutual Fund boosted other income during the quarter, which was up 66% on year to INR 183.59 billion, the management said in the media call.

 

Even as it has ramped up spending to corporates, Setty said there was no concern of margin compression on that account. Credit to corporates rose 13.4% on year to INR 13.34 trillion as on Dec. 31. It was the slowest-growing section of the loan book but the highest annual pace of increase in several quarters. The bank had not compromised on its margins while growing the size of the portfolio, he said.

 

At the same time, the SBI chairman said the margin expansion was muted in the December quarter due to an increase in low-cost working capital loans to corporates. Analysts questioned the bank's management on sluggish growth in margins despite a sharp increase in the loan-to-deposit ratio, which should have otherwise led to an expansion in the net interest margin. The bank's domestic loan-to-deposit ratio rose to 72.98% at the end of December on a deposit base of INR 54.68 trillion, from 69.82% a quarter ago.

 

Deposits in the current accounts are also likely to seasonally pick up in the March quarter, keeping the cost of funds in check. The bank has increasingly been wooing private customers to park funds in current accounts as the government's business on current accounts is drying up, Setty said. The bank reported a 10.3% annual growth in its current account deposits to INR 3.14 trillion as on Dec. 31.

 

The bank had also sought to incentivise priority sector lending by cutting its loan rates to micro, small and medium enterprises and other categories which qualify under the priority sector. It wanted to avoid stocking up on priority sector lending certificates to meet regulatory norms and had made most of these purchases in the September quarter rather than wait for the financial year-end in March, when premiums on such certificates rise. 

 

CREDIT GROWTH, TRADE DEAL

Setty said that the outlook for credit growth in 2026-27 (Apr-Mar) had also improved after India had agreed to trade deals with the European Union and the US over the past few weeks. While the state-owned lender already has a presence in most countries with which India has signed a free trade agreement over the past year, the chairman saw the most potential to expand its retail presence in the US. It now plans to open more retail branches in the US state of Texas, branching out from its current presence in California.

 

The country's largest lender also sees opportunities emerging from recent announcements in the Union Budget for FY27 and after the RBI's most recent monetary policy meeting. The Budget gave tax sops to data center operators using Indian infrastructure and the RBI allowed banks to lend to Real Estate Investment Trusts. The bank was already providing data centre financing while also funding green energy projects to power these centres, SBI's management said.

 

Credit growth to REITs and for mergers and acquisitions, greenlit by the regulator in October, are also likely to drive up credit growth as these were new verticals the bank was looking to tap in FY27. These sectors were full of opportunity for SBI due to their fast growth and because banks had not allowed to lend to them in the past. The lender also saw green shoots in private capital expenditure, with credit to the renewable energy, power, infrastructure and metals industries rising in the December quarter, the management said.

 

OTHER INCOME

SBI is targetting a customer value enhancement income of $1 billion at the current value of the rupee, Setty said. The fee income from this stream had increased sharply as the bank's activity in cross-selling insurance and mutual fund products had picked up, he said. "CVE income" rose to INR 15.54 billion in the December quarter, up nearly 21% on year. 

 

"(After) the GST benefit we have seen I think the number of (insurance) policies sold has also increased," Setty said, referring to the removal of tax on life and health insurance policies from Sept. 22. "That has contributed and also the trail income from the mutual fund has gone up. So there is a secular movement in terms of the CVE."

 

The bank doesn't see any major hit to its treasury profitability, even as yields rise, and hopes to deliver a similar level of profits in the coming quarter, SBI's top brass said. Income from treasury operations rose over eight times on year to INR 69.93 billion in the December quarter. Any mark-to-market losses would be limited as the held-for-trading portfolio is only a small proportion of its total fixed income portfolio. The bank had already prepared for the 10-year gilt yield to trade in the range of 6.55-6.75% in the near-term, Setty said. The benchmark gilt yield ended at 6.74% Friday. 

 

In the December quarter, the bank's bottom line was also helped by interest on income tax refunds of INR 7.69 billion, up from INR 3.72 billion in the previous quarter, the management said. Friday, SBI's shares closed 0.7% lower at INR 1,066.40 apiece on the National Stock Exchange.  End

 

US$1 = INR 90.66

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Edited by Deepshikha Bhardwaj

 

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