SBI Eyes 14-15% Credit Growth; Govt May Revisit LTCG Tax to Stop FPI Outflows
SBI Chairman CS Setty outlines ambitious credit and deposit growth targets and discusses potential LTCG tax changes to curb FPI outflows.
State Bank of India (SBI) is gearing up for a period of significant expansion. The country's largest lender has set an ambitious SBI credit growth target of 14–15 per cent, backed by a substantial liquidity cushion. This vision was outlined by SBI Chairman CS Setty following the presentation of the bank's Q2 FY27 financial results.
Ambitious Growth Targets and Liquidity Strength
Chairman CS Setty expressed strong confidence in the bank's ability to sustain its momentum despite the competitive landscape for deposits and rising borrowing costs. To support this growth, the bank is targeting deposit growth of 10–11 per cent.
The engine driving this optimism is the bank's massive liquidity reserve. Setty revealed that SBI currently possesses an excess Statutory Liquidity Ratio (SLR) of approximately Rs 3.5 lakh to Rs 4 lakh crore, providing more than enough firepower to fuel the projected credit expansion.
Furthermore, the bank continues to dominate the market in Current Account Savings Account (CASA) deposits. Setty specifically highlighted the retail term deposit segment, which has seen robust growth of around 13 to 14 per cent.
Impact of Interest Rate Hikes
When questioned about the potential impact of a further 50-basis-point increase in interest rates, the Chairman remained bullish on "productive sectors." He noted that corporates and Micro, Small and Medium Enterprises (MSMEs) are unlikely to be significantly deterred by such a hike.
However, he did acknowledge a potential downside, suggesting that there might be some moderation in consumption credit, particularly regarding discretionary spending.
Addressing FPI Outflows and LTCG Tax
One of the most critical points of discussion was the persistent outflow of Foreign Portfolio Investors (FPIs). Setty suggested that the government might need to explore various policy options to stabilize these flows, including a potential revisit of the Long-Term Capital Gains (LTCG) tax.
This comes in the wake of SBI Research estimates suggesting that scrapping the LTCG tax could lead to a revenue loss for the government in the range of Rs 40,000 to Rs 50,000 crore.
Expanding into M&A Financing
SBI is also becoming more aggressive in the Merger and Acquisition (M&A) space. Setty credited the Reserve Bank of India (RBI) for providing regulatory relaxations that have allowed the bank to participate more actively in acquisition financing.
The bank employs a dual-pronged strategy for these deals:
- SBI Capital Markets: The subsidiary handles the advisory components of the transactions.
- SBI: The main bank provides the necessary funding.
Fortifying Cybersecurity
Addressing a recent data-related incident, Chairman Setty emphasized that cybersecurity is of "paramount importance." He assured stakeholders that the bank is aggressively strengthening its IT infrastructure to protect customer information.
The bank is currently focusing on:
- Vulnerability assessments
- Patch management
- Application Programming Interface (API) management
"This incident has strengthened our resolve to ensure that our systems are more robust," Setty stated.
Q2 FY27 Financial Highlights
The strategic goals are supported by a strong financial performance in the second quarter of FY27:
- Net Profit: Rose 14.28 per cent year-on-year (YoY) to Rs 23,038 crore.
- Operating Profit: Increased by 7.28 per cent to Rs 34,226 crore.
- Net Interest Income (NII): Grew 14.69 per cent YoY to Rs 49,143 crore.
- Domestic Net Interest Margin (NIM): Stood at 3.11 per cent, an improvement of 11 basis points over Q1 FY27.
- Gross Advances: Recorded a growth of 17.84 per cent.