State Bank of India, the country’s largest bank, has lowered its loan growth target for the financial year 2025-26 amid tariff-induced uncertainties, its chairman C S Setty said. 

The bank’s lending margins would also remain under pressure as the Reserve Bank of India is widely expected to announce a third successive interest rate cut in its June bi-monthly monetary policy, after bringing the repo rate down to 6%.

SBI expects loan growth to moderate to 12-13% in FY26 from an earlier guidance of 14-16%. At a system level, credit growth would probably be 10-11%, Setty said.

SBI expects deposits to grow at 9-10% year-on-year in FY26.

In FY25, the state-owned lender's credit growth also fell lower than its earlier projection as several companies tapped the equity route to repay debt and deleverage. In the financial year ended 31 March 2025, the bank’s gross advances grew 12.03% year-on-year to Rs 42 lakh crore. This was down from the earlier anticipation of a 14-16% credit growth for the fiscal, mainly due to the corporate loan segment.

The bank’s corporate loan book grew slower at 9% while its retail portfolio grew by 11.4%. The key driver in retail credit was home loans, which grew 14%. Loans to small and medium enterprises grew 16.9% to over Rs 5 lakh crore, while agriculture credit increased by 14.3%.

Some of the large central pubic sector undertakings tapped equity funding to trim debt, leading to prepayments. In FY25, NTPC raised Rs 10,000 crore through an initial pubic offering. 

“We had an unusual prepayment in the corporate segment. While we have a Rs 3.4-lakh-crore pipeline in corporate loans, unanticipated prepayments impacted growth,” Setty said during an analyst call.

Credit demand was coming from infrastructure, renewable energy, data centres and commercial realty.

While credit growth is slowing, SBI’s margins could come under pressure with interest rates softening. Setty expects the RBI-led monetary policy committee (MPC) to cut the repo rate by another 50 basis points during the course of the year, starting with 25 basis points in the next meet in June. The repo rate has already fallen by 50 basis points from 6.50%, with equal cuts in done in February and April this year.

Setty said there will definitely be pressure on margins. While some of the portfolio will get repriced immediately with a policy rate cut, a realignment of rates on the deposit side will come with a lag effect. “It generally takes 12-18 months to get the existing stock re-priced,” Setty said. About 29% of SBI’s loan book is linked to the repo rate which gets repriced immediately following a rate action.

Despite a falling interest rate cycle, SBI expects to preserve its return on assets (RoA) at over 1% during the current financial year.

"We still will be able to maintain 1% RoA guidance for the current financial year... our goal is to consistently achieve an RoE (return on equity) of over 15% through the business cycles," Setty said.

The bank’s RoA in FY25 improved to 1.10% from 1.04%, while RoE remained flat at around 20%.

Financial performance in FY25

SBI's net profit touched a record high of Rs 70,901 crore in FY25, up 16% from the previous high of Rs 61,077 crore in FY24.

Operating profit crossed Rs 1 lakh crore for the full fiscal for the first time to be at Rs 1.1 lakh crore n FY25, up almost 18% year-on-year.

The balance sheet size increased to Rs 66 lakh crore. 

Q4 results

SBI reported a 10% drop in its fiscal fourth-quarter net profit to Rs 18,643 crore compared to Rs 20,698 crore a year ago, as it made a one-time write back on account of provisions in non-performing assets (NPA). 

NII

Net interest income (NII) during the quarter was Rs 42,775 crore, up 2.69% from Rs 41,655 crore in the year-ago period. 

Non-interest income grew 39.38% to Rs 24,210 crore in the March quarter on the back of higher fee-based income, cross-selling and commissions, up from Rs 17,369 crore in Q4FY24.

NIM

Domestic net interest margin (NIM) declined by 32 basis points to 3.15% from 3.47% in the same period the previous year. “There was some impact because of the 25 bps rate cut. While we have contained the cost of resources, there was some impact on margin which will be reflected going forward,” Setty said.

The bank’s total provisions for the March quarter jumped 57% to Rs 12,643 crore from Rs 8,049 crore. Loan loss provision rose 20.35% to Rs 3,964 crore compared to Rs 3,294 crore in the same quarter of the previous fiscal.

Bad loans

SBI for the first time has seen the two important ratios, the gross NPAs  falling  below 2% and net NPA below 0.5%. “With a loan book of 42 lakh crore plus, we believe that we have done a good job on the asset quality front," Setty said.

The  gross NPAs declined to 1.82% of the total advances as of 31 March 2025, from 2.24% a year ago. 

Net NPA fell to 0.47% from 0.57%. The bank expects to maintain gross NPA at 2% going forward.

“The asset quality of the bank continues to remain strong for the last five years,” Setty said. 

The provision coverage ratio (PCR), including those for write-offs, stood at 92.08% as of March 2025. The slippage ratio was at 0.55%. 

Loan growth

The bank’s loan book grew 12.03% year-on-year to Rs 42 lakh crore as of 31 March 2025. Of this, domestic advances grew by 11.56%.

Deposits

Deposits rose by 9.48% year-on-year to Rs 53.8 lakh crore. The share of low cost deposits - current account and savings account (CASA)- stood at 6.34% in March 2025. 

Capital raise

SBI has received board approval to raise equity capital up to Rs 25,000 crore in one or more tranches during FY26 through various modes, including qualified institutions placement (QIP) or follow-on public offer (FPO).

The bank, however, can support loan growth of up to Rs 8 lakh crore from the current buffers and it does not need capital for business growth, Setty said.

The bank, though, would be open to capital raise but such action would be contingent upon business needs and market conditions, he added.

The board has also declared a dividend of Rs 15.90 per equity share for FY25.