SBI Chairman rules out asset quality stress in Q1, says seasonality distorts sequential NPAs
Mumbai, August 7
State Bank of India Chairman CS Setty dismissed concerns over sequential asset quality pressure and slowing private capex, clarifying that first-quarter performance is subject to seasonal variations.
Speaking during the bank's Q1FY27 financial results press conference in Mumbai on Friday, Setty answered two questions from ANI News regarding slippages, credit expansion, and liquidity management, reaffirming a robust outlook for the fiscal year.
Responding to ANI's query on sequential stress--specifically what caused the uptick in Gross Non-Performing Assets (GNPAs) to Rs 74,273 crore and slippages to 0.57%, and whether a 0.28% quarter-on-quarter dip in corporate advances signals slowing private capex--Setty cautioned against drawing premature conclusions from sequential quarterly comparisons.
"Q1 tends to be an outlier quarter from many aspects, whether in terms of business, yield income, or credit growth rates, because Q2, Q3, and Q4 pick up substantially. I normally suggest please don't compare sequentially. We have also highlighted that seasonality exists in this business... If you compare it year-on-year, there is a significant basis point improvement across overall aggregates. Recoveries and upgrades pulled back around Rs 4,900 crore, so there is nothing concerning or significant there."
Addressing ANI's second question on whether rapid expansion in agricultural advances (up 25.43%) and SME loans (up 22.33%) harboured early signs of default or asset quality stress--particularly under the Emergency Credit Line Guarantee Scheme (ECLGS)--Setty reassured that portfolio risk remains well-managed and high-quality.
"While we do have non-ECLGS growth as well, the SME numbers you see are predominantly supported by ECLGS. On agriculture, growth is driven by institutional finance, investment credit, and other structured segments. So, the growth contribution is coming from high-quality portfolios."
Elaborating on key balance sheet parameters, the Chairman noted that SBI has maintained its full-year credit growth guidance at 14% to 15%, backed by broad-based demand across retail, MSME, and corporate segments.
Deposit growth is projected at double digits between 10% and 11%, supported by healthy retail CASA growth, with additional headroom to comfortably push the Credit-to-Deposit (CD) ratio up to 80%, he added.
To optimise funding costs and replace high-cost wholesale deposits, Setty said that SBI has mobilised $1 billion via commercial paper and aims to tap up to $10 billion in Foreign Currency Non-Resident FCNR(B) deposits, backed by a substantial excess SLR liquidity buffer exceeding Rs 4 lakh crore.
He also added that the management reaffirmed its key full-year targets, maintaining Net Interest Margin (NIM) at approximately 3.00%, Return on Assets (ROA) at around 1.00%, and Return on Equity (ROE) above 15%.
Furthermore, as a leading player in UPI and digital transactions, SBI is deploying a Board-approved Responsible AI Policy to reinforce cybersecurity, anti-money laundering controls, and back-office processing efficiency, Setty mentioned.
The lender concluded its Q1FY27 performance on a strong note, reporting a 10.23% year-on-year increase in standalone net profit to Rs 21,121 crore, up from Rs 19,160 crore in the corresponding quarter of the previous fiscal.
SBI's Net Interest Income (NII) surged 14.88% year-on-year to Rs 46,992 crore, while gross advances crossed the Rs 50 lakh crore mark to reach Rs 50.47 lakh crore. On an annual basis, asset quality indicators showed marked improvement, with the Gross NPA ratio declining by 36 basis points to 1.47% and Net NPA standing at 0.38%.
Additionally, total business for India's largest public sector lender crossed the Rs 110 lakh crore milestone during the quarter, driven by total deposits reaching Rs 60.06 lakh crore.
— ANI
Reader Comments
Good to see SBI crossing Rs 110 lakh crore total business milestone! 🎉 The agriculture and SME loan growth is encouraging for rural India. These segments have been neglected for too long. Just hope the ECLGS loans don't turn into bad assets later - that's the real test of this growth.
Honestly, as a small business owner who took an ECLGS loan during COVID, I can say the scheme saved many of us. SBI was quick to approve and the interest rates were reasonable. The 22% growth in SME loans means they're actually supporting real businesses, not just big corporates. Good move, SBI.
The ROA of 1% might sound small but for Indian banks that's actually solid. What concerns me is the FCNR(B) deposits - chasing $10 billion in foreign currency deposits means they're paying higher rates abroad. That could squeeze NIM later. Still, with Rs 4 lakh crore in SLR buffer, they have room to maneuver.
People always nitpick at SBI. Show me another bank in India that grew net profit by 10% and kept NPAs at 1.47% while growing loans 14%. This is the backbone of our economy. The seasonality point makes sense too - farmers need loans in Q1 for sowing, so agri advances naturally spike. 🙏
While the numbers look good, I'm concerned about the 25% growth in agriculture advances. With unpredictable monsoon patterns and rising input costs, how many of these farmers will actually be able to repay? The bank says they're
We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.