The slowdown in the second quarter GDP growth is more of a blip as in the current (third) quarter so far, barring some segments such as personal loans, State Bank of India’s advances, especially in the agriculture, SME and corporate segments, have “grown well”, according to Chairman Challa Sreenivasulu Setty.
This observation comes in the backdrop of the second quarter (Q2FY25) GDP growth slowing to a two-year low of 5.4 per cent against 6.7 per cent in Q1 (April-June).
In an interaction with businessline, Setty emphasised that the current capitalisation level can comfortably support the ₹6 lakh crore corporate loan pipeline built up by the Bank.
Further, if the current year’s profit plough back is reckoned, the March-end capital position can support loan growth aggregating ₹10 lakh crore. He emphasised that in the last 3-4 years, SBI ploughed back ₹1.2 lakh crore in capital.
To a question on the impact of slow GDP growth on credit demand, the SBI Chief said: “I personally believe that the Q2FY25 GDP growth figure is more of a blip and we don’t have to live from one quarter to another. What we are witnessing is a mixed kind of situation.”
“Even in the current quarter we seem to be growing well on the credit side. And barring some pockets such as personal loans, where the entire system is witnessing a slowdown, we have seen good growth in agriculture, SME and corporate book,” Setty said.
As at September-end 2024, retail personal advances accounted for 41.90 per cent of SBI’s domestic advances of ₹33,32,533 crore, followed by corporate (34.72 per cent), SME (13.70 per cent) and agriculture (9.68 per cent),
Relationship with every corporate
The SBI Chief emphasised that SBI’s corporate loan book is slightly different because it has a very strong relationship with almost every corporate in India.
“So, we have a very diversified corporate lending portfolio. A lot of people ask which sectors are contributing to the growth. While there are some sectors like renewables and roads, which occupy an important place, we see that the corporate loan growth is also coming from better utilisation of working capital limits, and our ability to participate in diversified infrastructure projects.”
“Many banks may not be there. We are the largest working capital lender, largest corporate balance sheet funding lender, and we are also the largest infrastructure funding lender,” he said.
“So, SBI’s corporate loan growth is essentially a function of all these three, and not necessarily due to some sector borrowing more, or some sector borrowing less,” he added.
Setty underscored that for now, credit growth seems to be on track with the Bank’s FY25 guidance of 14 -16 per cent.
“We are also confident that once the government spending increases in the second half, there would be an improvement in liquidity,” he said.
RBI policy expectation
The SBI Chief noted that everybody is looking for a rate cut and probably the demand has increased now with Q2 GDP numbers.
“But the central bank also would be worried about the inflation. So, our assessment is that RBI may still not go for a rate cut in December,” he said.
Setty observed that RBI would rather ensure that liquidity is sufficiently available to the system via instruments such as VRR (variable rate repo) or others. Probably, they can increase the frequency of VRR, and provide liquidity.
Moreover, the government spending is also going to increase in the second half, which will increase the liquidity.