SBI to Fund M&A with Calibrated Approach

New Delhi, Dec 12 (PTI) SBI Chairman C S Setty has said that the bank would adopt a calibrated approach for funding mergers and acquisitions, which was recently permitted by the Reserve Bank.
The bank has always taken a cautious and gradual approach while entering the new verticle of funding mergers and acquisitions in the domestic market, Setty told PTI in an interview.
Citing an example of home loan business, he said, even in that secured segment, the bank did not rush in, but gradually expanded the portfolio, which has now crossed Rs 9 lakh crore, making the bank the biggest player in the segment.
Praising the regulator for allowing lenders to undertake M&A finance, Setty said it acknowledges that the Indian banks are mature enough to undertake this activity.
The Reserve Bank, in October, issued draft guidelines to allow banks to fund India Inc to acquire strategic equity stakes in listed companies as a strategic investment. Beginning the new financial year, when the new norms will come into force, banks can lend up to 70 per cent of the acquisition value, with the remainder coming from the acquirer's own equity.
"So, we will have a board-defined risk appetite and board-defined M&A policy, which is the mandated regulatory guidelines. But our view in M&A would be that it would be more risk-focused. We will do the transaction, which we understand, and also be more collaborative in nature," he said.
There are multinational banks which have been in the M&A financing, and SBI would definitely be collaborating with them, he said.
Similarly, he said, SBI has had experience of funding outbound acquisitions earlier through our foreign offices.
Combined with our expertise and willingness to collaborate, we are well-positioned to capitalise on opportunities. However, our approach will be calibrated, strictly guided by our risk appetite and a thorough understanding of each transaction," he said.
Setty, the chairman of the country's biggest lender, had expressed confidence in achieving its 3 per cent net interest margin guidance despite the RBI's 0.25 per cent repo rate cut in the December policy.
Last week, the Reserve Bank of India (RBI) lowered the repurchase, or repo rate, by 25 basis points to 5.25 per cent and retained a neutral stance, which gave room for further rate cuts.
The rate cut came after a gap of six months with a view to further bolster growth, which hit six six-quarter high of 8.2 per cent in Q2 of FY26.
The SBI chairman also said the bank may not need equity capital to drive credit growth and maintain a capital adequacy ratio of 15 per cent over 5-6 years.
Setty further said the momentum in the RAM segment will drive 14 per cent overall credit growth during the current fiscal year.
The Retail, Agriculture and MSME (RAM) segment, which is 67 per cent of the total loan portfolio, has also crossed the Rs 25 lakh crore milestone in September.
With the improvement in economic growth, SBI upped its credit growth target from earlier 12 per cent to 14 per cent for the ongoing financial year.
Besides, he said, the bank is witnessing good growth in gold loans while express credit, which is an unsecured personal loan, will have double-digit growth.