Slow deposit growth holding back credit expansion: SBI chairman

Mumbai: State Bank of India chairman CS Setty has attributed the slowdown in credit growth to slow deposit expansion, dismissing any systemic lending aversion. He sees little scope for deposit rate cuts in Q4, noting that a shallow rate-cut cycle would bring only marginal reductions.

The banking sector, benefiting from a strong asset-quality cycle, remains robust. Setty forecasts 7% GDP growth in FY26, stressing the need for 7-8% growth to sustain economic momentum. SBI, holding 22% of India’s deposits and 19% of loans, serves as a key economic barometer.

Setty was speaking at Kotak group’s flagship conference, Kotak's flagship conference, Chasing Growth 2025. Kotak Institutional Equities has prepared a Strategy Report containing speech excerpts.

According to the SBI chairman, liquidity remains tight, though RBI interventions have eased the deficit from around 3.5%. Volatility persists due to GST and tax payments periodically draining the system, making liquidity management critical, said Setty. Fiscal measures, such as tax rebates, may spur savings and investment, with consumption expected to rise significantly.

Although December data showed some stabilization at 10%. Credit growth hovers in the low double digits, with SBI targeting 14-16%. Setty said that there is a structural shift with funds moving from bank savings into insurance and pensions, reducing CASA ratios. Fixed deposits are also gaining favor as customers lock in rates.

Regulatory curbs on unsecured loans have slowed portfolio growth, with SBI tightening risk measures. Default rates are highest for new borrowers taking Rs50,000-1 lakh loans, but frequent credit bureau updates aim to reduce risks.

Private capital expenditure is expected to recover gradually, aided by Govt incentives. SBI has Rs4.5 lakh crore in project financing lined up across sectors like renewables and infrastructure.


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