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Low ROA Constrains SBI Re-rating
Mint Mumbai
|August 11, 2025
Supporting factor
State Bank of India (SBI) has shown resilience on the margin front in the June quarter, and is confident of maintaining its domestic net interest margin (NIM) at 3% for the fiscal year. This is largely in line with the Q1 reading of 3.02%, which was down 33 basis points year-on-year (y-o-y).
This guidance is noteworthy considering the Reserve Bank of India's recent jumbo repo cut of 50 bps, which could hurt NIM in this quarter ending September. Indeed, there's a caveat the repo rate shouldn't be cut further. NIM is seen up from Q3, as benefits start flowing from savings and term deposits' repricing and capital raise.
As per the management, SBI's earning model has built in the benefit from the 100 bps cut in cash reserve ratio (CRR) to 3% of a bank's deposits, which will kick-in September. CRR funds are parked with RBI and do not earn any interest. The CRR cut should release nearly ₹52,000 crore for SBI, and that will start earning interest income.
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