SBI sees minimal margin impact if RBI opts for 25 basis point repo rate cut

RBI MPC, chaired for the first time by new Governor Sanjay Malhotra, will announce its decision on February 7

India’s largest lender, State Bank of India (SBI), delivered a strong third-quarter performance and stated that a 25-basis-point (bps) interest rate cut by the Reserve Bank of India (RBI) in February would have only a minimal impact on its margins.

"The proportion of repo-linked loans in our book is relatively low, around 28 percent. A 25 basis point rate cut would likely impact NIMs by only 2-3 basis points. Furthermore, some transmission through deposits would offset this impact. If the rate cut is deeper, we will need to assess resource management strategies accordingly," the management said in its analyst conference concall.

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The RBI’s Monetary Policy Committee (MPC), chaired for the first time by new Governor Sanjay Malhotra, will announce its decision on February 7. Market expectations point to a 25-bps rate cut, the first in nearly five years. The last reduction came in May 2020, when the RBI slashed the repo rate by 40 bps to 4 percent to support the economy amid the Covid-19 crisis and lockdowns.

SBI posted an 84 percent year-on-year surge in net profit, reaching Rs 16,891 crore in Q3 FY25, surpassing Moneycontrol estimates. Net interest income (NII) rose 4 percent to Rs 41,446 crore.

Asset quality showed further improvement, with gross non-performing assets (NPA) declining to 2.07 percent as of December 31, 2024, compared to 2.13 percent in the previous quarter. The net NPA ratio remained stable at 0.53 percent.

Gross advances grew 13.49 percent year-on-year, reaching Rs 40.68 lakh crore, up from Rs 35.84 lakh crore in the same period last year. Meanwhile, total deposits increased 9.81 percent, touching Rs 52.3 lakh crore in Q3 FY25.

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