The state-run bank on Tuesday said it expects FY26 credit growth at 12-14%, higher than the 11-12% it predicted as recently as August. The central bank’s recent measures to smooth credit flow alone will raise industry-wide credit growth by 100 basis points, chairman C.S. Setty said.
SBI’s net profit rose 10% in the September quarter, powered by gains from the partial sale of its Yes Bank stake in September. Total business, the sum of the bank’s loans and deposits, crossed ₹100 trillion, the first for any Indian lender.
“Based on many enablers which the Reserve Bank of India (RBI) has given, and also the fiscal measures through the GST 2.0, we believe that there will be sustained consumption demand, which gives an opportunity for us, particularly in the RAM (retail, agriculture and MSME) segment,” Setty said after announcing SBI’s September quarter earnings.
To be sure, SBI’s credit growth guidance for FY26 assumes no rate cut in December and possibly one in March. In case of a December cut, the bank may revisit the guidance, Setty added.
In October, RBI allowed banks to finance mergers, and dropped an earlier plan to bar them from overlapping businesses, measures widely seen to increase the flow of credit. In 2025, the central bank’s monetary policy committee (MPC) has reduced the repo rate by 100 basis points across three meetings.
In September, the GST Council introduced a sweeping rationalization of the indirect tax regime, bringing down prices of a wide range of items. A day later, Union finance minister Nirmala Sitharaman said she expects a surge in consumption to follow, and that increased purchases of goods and services will likely make up for the impact of lower tax rate on revenue receipts this year itself.
For the September quarter, SBI reported a year-on-year (y-o-y) loan growth of nearly 13% to ₹44.19 trillion. Sequentially, it was up by almost 4%.
The bank reported a 12.3% YoY growth in domestic advances. Including loans from foreign offices, loan growth was at 12.7% and the aggregate loan book stood at ₹44.2 trillion. Corporate loans grew 7% and retail loans were up 14% in the three months through September.
Corporate credit optimism
After several muted quarters, SBI is also seeing signs of a revival in corporate credit demand. During the September quarter, SBI’s corporate loan book grew 7.1% on year and 3% on quarter. The bank expects this momentum to strengthen over the next two quarters.
“I think we still are required to ramp up this (corporate) credit growth. There have been a lot of prepayments… We assume that in the rest of the two quarters, we should have double-digit growth and our pipeline is very strong,” said Setty.
On 22 October, Mint reported that corporate credit growth is beginning to pick up at several Indian banks. While the uptick is largely driven by working capital financing, some capex-linked deals are also resurfacing in sectors such as infrastructure, renewables, and manufacturing, the report said.
While prepayments and loan repayments by cash-rich corporates and government entities had earlier tempered corporate credit growth, SBI now believes that increasing working capital utilization — now at 61.8% — is a healthy signal of improving business activity. This reflects a comeback in consumption demand and sets the stage for new investment cycles in both brownfield and greenfield projects, Setty said.
“We have a pipeline of over ₹7 trillion including sanctions that are done and those in discussions,” said a senior SBI executive.
Setty said there is also much optimism among borrowers, citing good loan disbursements.
SBI posted a 3.3% year-on-year (y-o-y) rise in net interest income (NII) to ₹42,984 crore. NII is the difference between interest earned and expended. Deposits stood at ₹55.9 trillion, up 9.3% from the same period last year.
The bank reported a net profit of ₹20,160 crore in the second quarter, up 10% from the same period last year, led by an exceptional gain from the sale of a portion of its stake in Yes Bank. SBI said on 18 September that it completed the divestment of a 13.18% stake in private sector lender Yes Bank to Sumitomo Mitsui Banking Corp. of Japan for ₹8,888.97 crore. SBI now holds a 10.8% stake in Yes Bank.
SBI shares closed at ₹954.6 on NSE, 0.52% above their previous close, while the broader Bank Nifty index closed 0.47% lower.
Analysts cheered the bank’s ability to maintain steady return on assets (RoA), a metric that tracks how efficiently a company is able to generate profits using its assets.
“Despite modest NII growth of 3% y-o-y and a 12% y-o-y increase in operating expenses, leading to a 7% y-o-y decline in pre-provision operating profit, SBI maintained an RoA of 1.2%, aided by exceptional gains from the sale of its Yes Bank stake,” analysts at Sanford C. Bernstein (India) said in a note to clients on Tuesday. Adjusted for this one-off, return-on-assets stood at 0.97%, suggesting that a 1% RoA is now sustainable, it said. SBI sold 13.18% stake in Yes Bank in September, earning ₹8,889 crore. SBI said the stake sale led to a profit of ₹4,593.22 crore.
SBI expects to maintain its net interest margin (NIM)—a key indicator of profitability—above 3% for the rest of the financial year, consistent with last year’s levels. Setty said the margin trajectory has improved faster than expected. “Our guidance was that there will be a U-shaped curve for margins, and that movement has come earlier than anticipated,” he said.
The bank’s domestic NIM improved to 3.09% in the September quarter from 3.02% a quarter ago. Bank margins across the industry were under pressure following RBI rate cuts that led to near-immediate changes in lending rates but a staggered decline in deposit rates.
Mint reported on 3 November that the margin hit for banks in Q2, though expected, appears stickier than banks had guided. Many lenders had projected a recovery in the second half of the year, but post-result commentaries by several banks for the second quarter suggest the pressure could linger as deposits reprice slowly, credit growth picks up pace, and competition intensifies in low-yield segments such as housing.
SBI’s asset quality improved in Q2, with gross bad loans as a percentage of total loans down 10 bps sequentially and 40 bps YoY to 1.73%. Its fresh slippages declined in Q2 to ₹4,754 crore as against ₹7,945 crore in the June quarter and ₹4,871 crore in the September quarter last year.
