SBI Reports Slowdown in Loan Growth Due to Corporate Debt Repayment

MUMBAI: The State Bank of India (SBI) has observed a noticeable deceleration in loan growth, attributing this trend to companies utilizing proceeds from equity issues to repay debts and reduce leverage. Initially projecting a credit growth of 14-16% for FY25 in the second quarter, SBI later adjusted its expectations towards the lower end of this spectrum by the subsequent quarter.

Despite these challenges, SBI's total advances saw a 12% increase, surpassing Rs 42 lakh crore by the end of FY25. This growth was primarily supported by loans to small & medium enterprises, which rose by 16.9%, and agriculture loans, which grew by 14.3%. Retail personal loans and corporate loans experienced more modest increases of 11.4% and 9%, respectively, with home loans emerging as a significant driver of retail credit with a 14% growth.

Corporate Sector's Impact on SBI's Loan Portfolio

Bank officials highlighted that several large central public sector undertakings (PSUs) have turned to equity funding to reduce their debt burdens, leading to unexpected prepayments that affected the bank's growth metrics. "We maintain a positive outlook on corporate credit, anticipating a growth rate of 12-13%, which aligns with the industry's performance," stated an official. Notably, NTPC's Rs 10,000 crore IPO in FY25 exemplifies this trend.

SBI chairman C S Setty remarked on the unusual prepayments in the corporate segment during an analyst call, emphasizing the bank's robust pipeline of Rs 3.4 lakh crore in corporate loans. However, these unanticipated prepayments have momentarily dampened growth prospects.

Future Outlook and Sector-Specific Demand

The bank identifies emerging opportunities in infrastructure, renewable energy, data centers, and commercial realty as key areas driving future credit demand. With Rs 1.7 lakh crore in sanctioned but undisbursed corporate loans, SBI remains cautiously optimistic about achieving a 12% growth target in its corporate book, barring further prepayments.

On a related note, SBI reported an 8.3% decline in consolidated net profit to Rs 19,600 crore for the March quarter, attributed to shrinking net interest margins. The standalone profit also decreased to Rs 18,642 crore from Rs 20,698 crore a year earlier.