Budget 2025 To Help Banks Meet PSL Targets, Says SBI Chairman CS Setty

The Union Budget 2025 is a "comprehensive" one that addresses key aspects of consumption, development, and investment for all sections of the economy, said CS Setty, Chairman of the State Bank of India, in an exclusive interview with NDTV Profit. 

Setty also noted that the budget will help meet priority sector lending targets toward MSMEs, which banks, including SBI, had been struggling with previously.

All scheduled commercial banks and foreign banks with a sizable presence in India are mandated to set aside 40% of their adjusted net bank credit for lending to these sectors. Even within this broad target, banks are expected to meet specific sub-sector targets, which include MSMEs.

As the largest bank in India, SBI had faced challenges in meeting these targets, and this budget is expected to provide the necessary boost, Setty said.

Setty noted that the capital expenditure allocation in the budget is a substantial commitment. However, factoring in the capital allocation to states and public sector undertakings, SBI estimates that overall capex will reach Rs 19.8 lakh crore. "The government's commitment to public spending is intact, and there are no concerns on that front," he said.

The budget includes several measures aimed at encouraging private capital expenditure. According to Setty, private capex is closely linked to consumption expectations, and the budget addresses this by increasing disposable income. "With rural consumption showing improvement and policies supporting MSMEs and agriculture, we expect a positive impact on private investment," he added.

The budget contains multiple provisions that will aid credit growth and support banks’ participation in the government’s economic agenda. MSMEs and the agricultural sector, which significantly contribute to employment, have received due attention. "Credit plays a crucial role in these sectors, and MSMEs have long demanded a revision in investment and turnover limits. This budget improves credit flow to them," Setty said.

Additionally, banks will benefit from adjustments to PSL norms, as the new measures will help meet targets more efficiently, he added.

The government has continued its backing of the MSME Credit Guarantee Scheme by lowering guarantee fees. SBI has disbursed 1 lakh MSME loans worth Rs 34,000 crore in the past 10 months through cash flow-based lending. "This figure is expected to multiply due to improvements in the scheme," Setty noted.

Setty also said that SBI expects the Reserve Bank of India to cut interest rates by 25 basis points next week. "The liquidity measures undertaken by RBI are setting the stage for a rate cut," he said.