SBI expects credit growth to cross 8% aided by stronger rebound in economy

SBI reported a 52% surge in YoY net profit for the Q2 quarter


State Bank of India, the country’s largest lender, expects its credit growth to pick up to around 8-9 per cent in the year ending March, up from the 6 per cent loan growth it saw in July-September, aided by a quicker rebound in economic activity after the nationwide lockdown that was enforced to control the COVID-19 outbreak in the June quarter was gradually lifted. 

“If we look at the total loan book, we will be somewhere around 8-9 per cent kind of growth. Economic activity revival seems to be on a faster pace and we have already seen growth of over 6 per cent till September 30. So, hopefully, with the unlocking happening, we hope that we should be in a position to reach better than 8 per cent,” said Dinesh Kumar Khara, chairman of SBI.

Khara had taken charge as the head of the state-owned bank on October 7, replacing Rajnish Kumar whose tenure had ended.

Recent economic indicators also have pointed to a strong rebound in the economy. For instance, the Nikkei Manufacturing Purchasing Managers’ Index rose to 58.9 in October, its highest reading since May 2010. Activity in India’s services industry also expanded for the first time in eight months in October, data showed.

“Vehicle registrations including tractors are increasing, GST collection has crossed Rs 1 lakh crore, highest since February… These are tell-tell signs that the economy is recovering,” said Khara. 

SBI on Wednesday reported a 52 per cent year-on-year surge in standalone net profit for the July-September quarter at Rs 4,574 crore, compared with a profit of Rs 3,012 crore it reported in the year-ago quarter.

The growth was aided by lower provisions for bad loans. The non-performing assets were also lowered sequentially as well as from a year ago.

The bank’s net interest income in the second quarter rose 15 per cent year-on-year to Rs 28,181 crore. 

SBI’s provisions for non-performing assets in the quarter stood at Rs 5,619 crore, down 49 per cent from the Rs 11,041 crore it had provided for in the year-ago quarter.

The lender’s gross NPAs in the September quarter stood at 5.28 per cent, compared with 5.44 per cent in June and 7.19 per cent a year ago. Its net NPAs last quarter were at 1.59 per cent, versus 1.86 per cent in the June quarter and 2.79 per cent, a year ago. 

Khara said the company had seen good traction in retail loans, with sanctions and disbursements significantly higher across most retail products. Personal loan sanctions, for instance, had gone up by around 55 per cent, he added. 

So, while total advances grew 6 per cent to Rs 23.84 lakh crore, retail (personal) advances surged 14.55 per cent. In comparison, agriculture advances were up only 4.19 per cent and corporate advances rose 2.82 per cent. 

There is a hope that growth in the corporate loan book will pick up in the next few quarters, although retail loans will continue to be a major lever of growth, added Khara.

“When it comes to corporate book, we do see some sanctions, but we are yet to see the availment process. It could be partly on account of visibility of demand. As far as the public sector entities are concerned, we have seen some kind of visibility in terms of additional sanctions. As far as term loans are concerned, there is always a lag between sanctions and disbursements. Hopefully, we will get to see some kind of growth in the coming quarters in the corporate book,” he said.  

Khara said that while fresh slippages had come down on the corporate side, there had been some slippages in the agriculture and micro, small and medium enterprises space. 

“During the COVID period, activity of reaching out to the farmers was not as much as it should have been. We are now engaging with the farming community and we are trying to see that we should be in a position to have their accounts reviewed. This should help us in pulling back the slippages in agriculture also,” said Khara.

Typically for crop loan renewals, bank officials go the villages and hold camps, something that was affected due to the pandemic, while farmers were also not able to reach the branches, say officials. In October, itself, the bank has managed to pull back around Rs 1,100 crore in slippages, as things had improved on the ground, added officials. 

Meanwhile, SBI’s savings account balances in the quarter were up 16 per cent from a year ago and SBI’s total deposit base now stands at Rs 34.7 lakh crore at the end of September. 

SBI shares closed up 1.1 per cent at Rs 207.05 on the BSE on Wednesday, while the broader BSE Sensex rose 355 points or 0.9 per cent at 40,616.14 points.


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