SBI targets 14 to 15% credit growth as Chairman CS Setty signals a possible LTCG tax review amid FPI outflows and reports strong Q2 FY27 profits.

State Bank of India (SBI) is targeting credit growth of 14 to 15 per cent in the current financial year, with Chairman CS Setty expressing confidence in the bank's ability to expand lending despite rising borrowing costs and increasing competition for deposits. Setty also indicated that the government could consider reviewing the long term capital gains (LTCG) tax structure as India continues to face concerns over foreign portfolio investor (FPI) outflows.

Speaking exclusively to ANI after SBI's second quarter financial results presentation for FY27, Setty said the bank expects deposit growth of 10 to 11 per cent. He pointed to SBI's substantial surplus liquidity, estimated at Rs 3.5 lakh crore to Rs 4 lakh crore, as a key factor supporting its lending ambitions.

The chairman said SBI's strong liquidity position provides sufficient flexibility to meet rising credit demand across different sectors. The bank also continues to hold a leading position in current account and savings account deposits, commonly known as CASA, while retail term deposits have recorded healthy growth.

According to Setty, retail term deposit growth currently stands at around 13 to 14 per cent. This performance is expected to help the bank maintain a steady supply of funds as lending activity expands. Deposit mobilisation remains a major challenge for Indian banks as credit demand continues to grow and financial institutions compete to attract customers.

Interest rates remain another area of concern. Responding to questions about the possible impact of an additional 50 basis point increase in borrowing costs, Setty said productive sectors of the economy, including corporations and micro, small and medium enterprises, are unlikely to face a major slowdown in credit demand.

However, he acknowledged that higher interest rates could affect consumption related borrowing. Discretionary spending, which includes non essential purchases often financed through personal loans and credit cards, could experience some moderation.

Setty's comments on taxation attracted attention amid continued foreign investor selling in Indian equity markets. He said persistent FPI outflows remain a concern and suggested that the government could examine several policy options, including a possible reconsideration of LTCG taxation.

The discussion follows estimates from SBI Research suggesting that removing LTCG tax could result in an annual revenue loss of approximately Rs 40,000 crore to Rs 50,000 crore. Any decision to change the tax structure would require the government to balance revenue requirements against the need to maintain investor confidence and strengthen India's appeal as an investment destination.

Foreign portfolio investors play a significant role in Indian capital markets. Their investment decisions are influenced by taxation, global interest rates, currency movements, corporate earnings and relative valuations. Sustained outflows can put pressure on equity markets and the rupee, although tax policy is only one of several factors influencing foreign investment decisions.

SBI is also expanding its participation in merger and acquisition financing following regulatory relaxations introduced by the Reserve Bank of India. Setty said these changes have allowed the lender to become more actively involved in financing corporate acquisitions and business consolidation.

He explained that SBI Capital Markets, the bank's subsidiary, manages the advisory side of merger and acquisition transactions, while SBI provides the necessary funding. The move could strengthen the bank's presence in corporate financing as Indian companies explore acquisitions, restructuring and expansion opportunities.

Cybersecurity has also emerged as a major priority following a recently reported data related incident involving the bank. Setty said protecting customer information and safeguarding the bank's technology infrastructure remain central responsibilities.

He added that SBI is strengthening its security framework through regular vulnerability assessments, software patch management and improved application programming interface management. These measures are intended to identify weaknesses, reduce exposure to cyber threats and improve the security of digital banking services.

Setty said the reported incident had reinforced the bank's determination to make its systems more resilient. As digital transactions and online banking services expand, financial institutions face growing risks from cyberattacks, data breaches and vulnerabilities in interconnected technology systems.

SBI's latest financial performance provides further support for its growth outlook. The bank reported a 14.28 per cent year on year increase in net profit to Rs 23,038 crore during the second quarter of FY27. Operating profit rose 7.28 per cent to Rs 34,226 crore, while net interest income increased 14.69 per cent to Rs 49,143 crore.

The domestic net interest margin stood at 3.11 per cent, improving by 11 basis points compared with the previous quarter. Net interest margin measures the difference between the interest a bank earns on loans and investments and the interest it pays on deposits and borrowings.

SBI's gross advances increased 17.84 per cent year on year to Rs 52.08 lakh crore, while total deposits grew 12.27 per cent to Rs 62.78 lakh crore. Small and medium enterprise advances recorded particularly strong growth of 21.97 per cent. Corporate advances expanded 16.12 per cent, while retail personal advances increased 14.54 per cent.

Asset quality also improved. The gross non performing asset ratio declined to 1.39 per cent from 1.73 per cent a year earlier. The net non performing asset ratio fell to 0.36 per cent from 0.42 per cent, indicating a reduction in stressed loans.

SBI's latest results highlight the lender's strong earnings performance, improving asset quality and expanding credit portfolio. However, its ability to achieve the targeted growth will depend on deposit mobilisation, borrowing costs, credit demand and broader economic conditions. Meanwhile, any government decision on LTCG taxation could influence investor sentiment as policymakers assess ways to attract foreign capital without compromising tax revenues.