SBI Chief: Sustained Consumption, Bank Funding Shift Ahead

State Bank of India Chairman C.S. Setty projects that consumption demand will remain strong this year, largely due to the Goods and Services Tax (GST) rationalization implemented last September. He noted that SBI, like other banks, saw a robust start to FY27, with the bank achieving 18% credit growth across various sectors.

Key Financial Projections

• SBI’s Credit Growth (FY27 start): 18% across sectors
• Anticipated Consumption Demand: Sustained this year
• Structural Shift in Bank Balance Sheets: Over the next 5-10 years

Setty anticipates a significant structural transformation in bank balance sheets, moving away from an exclusive reliance on public deposits towards alternative funding. This shift is expected to unfold over the next five to ten years, diversifying how banks secure liquidity.

He highlighted securitization as a crucial method for injecting liquidity into illiquid assets, providing long-term investment opportunities. This approach offers suitable long-term paper for entities like pension funds and insurance companies, which typically find corporate bonds too short-tenured.

Strategic Credit Expansion

Addressing the substantial credit demand from emerging sectors, estimated at Rs 30 lakh crore for areas such as data centers and AI, Setty confirmed banks’ continued central role. As primary mobilizers of household savings, they remain essential to meeting these financing needs.

SBI is actively engaging with this demand through its Centre of Excellence – CHAKRA. Additionally, institutions like the National Bank for Financing Infrastructure and Development (NaBFID) and the National Investment and Infrastructure Fund (NIIF) are vital for long-term infrastructure financing.

M&A Financing and Liquidity Management

The bank has also advanced in merger and acquisition (M&A) financing, completing four transactions valued at Rs 11,000 crore. A further pipeline of Rs 15,000 crore in M&A opportunities is currently in progress.

• Completed M&A Transactions: 4, totaling Rs 11,000 crore
• M&A Pipeline: Rs 15,000 crore
• Projected Credit Growth (FY27): 14-15%
• Projected Deposit Growth (FY27): 10-11%

These opportunities span both traditional manufacturing and non-conventional sectors like software, with a preference for collaborative consortium arrangements. Setty addressed concerns about a projected 14-15% credit growth against a slower 10-11% deposit growth for FY27, assuring sufficient liquidity from SBI’s substantial deposit base and excess Statutory Liquidity Ratio (SLR).

Navigating Interest Rate Dynamics

Regarding interest rates, Setty expects the Reserve Bank of India (RBI) to maintain a cautious “wait-and-watch” stance, keeping rates stable given current inflation and growth conditions. He does not foresee negative real interest rates becoming an immediate concern, citing resilient deposit mobilization.

The investment cycle shows improvement, marked by faster growth in working capital loans and a pickup in capital expenditure demand. This capex is evident in sunrise sectors and through brownfield expansions, indicating broader economic momentum.

• Corporate Balance Sheets: Stronger position
• Q1 FY27 Results: Positive
• Investment Intentions: Encouraging in manufacturing, information & communication services, electricity

Boosting Retail and MSME Focus

SBI is strategically increasing its share of Retail, Agriculture, and MSME (RAM) loans, with the retail segment now constituting 67% of its total loan book. The bank has substantially enhanced its Micro, Small, and Medium Enterprise (MSME) lending.

This growth in MSME lending, approximately 20%, is supported by deploying over 2,000 dedicated personnel and leveraging digital and data ecosystems. Additionally, SBI is expanding its wealth management services, aiming for 2,000 virtual relationship managers to cater to high-value customers, focusing on a gradual transition to investments.