Corporate Loan Growth to Hit Double Digit in FY26, ₹7 Lakh Cr Credit in Pipeline: SBI Chairman

With the pick-up in economic activity, State Bank of India (SBI) is seeing a clear revival in corporate credit demand and expects the segment to hit double-digit growth over the remaining two quarters of the current financial year, the bank's Chairman C S Setty said.

As far as the pipeline for corporate credit is concerned, he said, "The bank has a strong pipeline. We have about ₹7 lakh crore loan sanctions, a mix of unutilised working capital limits and term loans that are currently under disbursement." Besides, includes several project loans that are presently under discussion, he told PTI in an interview.

So, the corporate credit, which was lagging for quite some time, witnessed a turnaround with 7.1% growth in Q2, he said, adding, "Our guidance on the corporate credit would be the lower double digit in the two quarters with the available pipeline".

Improving economic activity is also pushing up working capital utilisation, which is becoming stronger with each passing quarter, the chairman of the country's largest lender said.

With regards to term loans, he said, the ones which are already approved and under disbursement are getting drawn, and the third category, where the projects are under discussion, will create that replacement pipeline.

The SBI Chairman also said that the bank may not need equity capital to drive credit growth and maintain a capital adequacy ratio of 15% over 5-6 years.

"Even before this QIP was raised, our ability to fund credit growth has never been a problem. We wanted to strengthen the capital ratios so we have done that. Our long-term strategy is to maintain CRAR at 15% and Common Equity Tier 1 at 12%," he said.

This kind of Capital to Risk Asset Ratio (CRAR) gives the bank the ability to fund advances over ₹12 trillion, he said.

"With a profit rate what we have today, if the same profitability is maintained for another 5-6 years, we may not require any capital raising, at least on the CET 1 part," he said.

SBI in July this year raised ₹25,000 crore through a qualified institutional placement (QIP) of its equity shares, making it the largest QIP executed in Indian capital markets. Before this, the bank had raised ₹15,000 crore equity capital again from QIP in June 2017.

As far as fundraising from Tier II bonds is concerned, Setty said, the bank does it periodically to replace maturing papers, and this year the bank would be raising another ₹12,500 crore through such bonds.

Expressing confidence of achieving its 3% net interest margin guidance, he said, it will be done even if the Reserve Bank decides to cut the repo rate by 0.25% in the upcoming monetary policy review.

Highlighting that the RBI decision next Friday will be a "close call", he said, the house view at SBI is pointing towards a shallow cut of 0.25%.

"...if a December rate cut is there, but our house view again is that it would be a shallow rate cut of 0.25%, so it may not have any significant impact on the margins," he said.

Earlier this week, RBI Governor Sanjay Malhotra said that there is a space for a rate cut, and it was mentioned in the last bimonthly policy in October.

The recent statement and macroeconomic indicators have triggered widespread expectations of a rate cut in the upcoming Monetary Policy Committee decision on December 5.