Consensus seems to be pause by MPC: CS Setty

State Bank of India (SBI) is witnessing robust credit growth, including healthy corporate loan demand, which is expected to see a double-digit increase this financial year. In an interview with Manojit Saha and Abhijit Lele in Mumbai, CS Setty, chairman of India’s largest bank, says effective liability management will help the bank to protect its margin above 3 per cent. Edited excerpts:

- 

The Reserve Bank of India’s (RBI's) Monetary Policy Committee will announce the policy review later this week. Do you think the recent sharp depreciation of the rupee, along with sluggish deposit growth, could be a hindrance to reducing the policy repo rate further?

■ For the policy repo rate, I don’t think they (the RBI) are looking at deposit mobilisation. The policy rate is dependent on the dynamics of growth and inflation — at least that's what classical monetary theory says. While we have witnessed robust growth in Q2, the modest inflation rate calls for some rate action. I think the robust growth rate is going to be a communication challenge for monetary policy in case the rate cut has to happen.

It is also a fact that the low prices are basically on account of low food prices. That can anytime turn the other way. So it all depends on the RBI's monetary inflationary expectations — the inflationary trajectory. I think before the GDP (gross domestic product) numbers came, it was a close call. And after the GDP numbers, I think everybody is looking for a pause. Broadly, the consensus seems to be to pause, but we'll have to wait and see.

How has credit growth been so far? Are there pockets where you see overheating?

■ We are witnessing robust credit growth. I think after the reforms in goods and services tax and also income-tax benefits, given in the first quarter, we have revised our credit growth expectations to 12-14 per cent (FY26).

And that I think is moderate growth. We are not witnessing any overheating or fearsome growth rates in any sector.

Which are the sectors contributing to this growth?