SBI Chairman Sees Strong Loan Growth Despite GDP Dip
SBI Chairman Challa Sreenivasulu Setty believes the recent dip in India's GDP growth to 5.4% is a temporary blip. He cites strong loan growth in key sectors like agriculture, SME, and corporates as evidence of continued economic momentum.
Setty acknowledges that personal loan growth has slowed, but emphasizes the robust performance of other segments. As of September-end, SBI's domestic loan portfolio stood at ₹33.33 lakh crore, with retail personal advances comprising 41.9%, followed by corporate loans at 34.7%, SME loans at 13.7%, and agriculture loans at 9.7%.
He remains confident in meeting SBI's credit growth guidance of 14-16% for FY25, supported by the bank's strong capitalization.
RBI Policy and Market Expectations
While markets anticipate a rate cut, Setty is cautious about the Reserve Bank of India's (RBI) next move. He believes the central bank remains concerned about inflation and may not cut rates in December. However, he expects the RBI to ensure sufficient liquidity through instruments like variable rate repos.
The RBI began its three-day monetary policy review on December 4th. While the repo rate is widely expected to remain unchanged at 6.5%, market watchers anticipate a possible reduction in the cash reserve ratio (CRR).
Calls for a CRR cut have intensified amid tight liquidity in the banking system and the slowdown in GDP growth. A CRR reduction would signal the RBI's intent to ease monetary conditions without altering the repo rate.
Divergent Views on Rate Cut
Japanese investment bank Nomura has broken ranks with its peers, forecasting a full percentage point rate cut by the RBI as early as this Friday. This diverges from consensus estimates of a more modest 50-basis-point cut.
Nomura has also revised its GDP forecast for FY25 downward to 6%, significantly below the consensus estimate of 6.9% and the RBI's October projection of 7.2%. They cite slowing GDP growth, moderating credit expansion, softer inflation, and muted second-round effects as reasons the central bank should have already begun easing monetary policy. Despite this, Nomura remains optimistic about India's medium-term prospects.