SBI puts the cost of new loan-loss rules at ₹19,500 crore, a quarter of last year's profit

State Bank of India has put a figure on what the new expected-credit-loss rules will cost it. Under those rules a bank provides for the losses it expects on its loans, instead of waiting until they are incurred. The chairman, Challa Setty, said the hit to SBI's own loan book comes to ₹19,500 crore after tax, and after counting the provisions the bank already holds. Calculated from the filed results, that is 24.4% of what SBI earned in the last financial year.

The figure came one quarter later than the bank had first said. In August it told analysts it had committed to a number with the first-quarter results, but loading the data into its IT systems had taken longer, and it would probably give the numbers with the second quarter. It did, alongside results for the September 2026 quarter in which net profit rose 14.3% from a year earlier to ₹23,038 crore.

Set against a full year's profit, the number overstates the pressure on any single year. It is a one-time adjustment to the bank's reserves, and the chairman said the loan-book portion may be spread over four years under the regulator's transition allowance, which SBI intends to use; on that basis he did not expect it to strain capital. The capital adequacy ratio, capital measured against risk-weighted assets, stood at 16.09%.

The figure is also narrower than the whole change. It covers only the stand-alone loan portfolio. Some parts of the regulator's final direction were still open, the chairman said, among them whether bonds held to maturity must be carried at market value and whether crop loans come under the new provisioning. Asked whether the number could therefore rise, he agreed that it could.

How the rules will move yearly earnings is a separate question, and the bank has left it open for now. The chairman said SBI will run the old and new calculations side by side for about nine months of the next financial year, and wants to watch the profit effect for a couple of quarters before giving earnings guidance. On the swings in earnings, he said: "I'm not able to put a number because it's a fairly large book and very diversified book". He said the bank's guidance of a 1% return on assets through the cycle already allows for the new rules, unless asset quality moves in a way he does not foresee.

The transition hit goes to capital; what the new rules will do to recurring earnings is the open question, and the quarter's 14.3% profit growth flatters those earnings. The gain from selling part of SBI Funds Management, the bank's mutual-fund arm, went through the profit and loss account; a bank executive said return on equity for the half-year would have been about 0.98 percentage point lower without it. The year-ago quarter carried its own one-off, a ₹3,386 crore after-tax gain on selling Yes Bank shares, so the growth rate compares one stake sale with another. The treasury desk, which trades the bank's bonds, swung to a loss as yields rose, and operating profit, before provisions and tax, grew 7.8% because expenses rose faster than income. Operating profit had grown 9.77% in the first quarter and 11.25% over the last financial year.

The steadier engine is the lending margin. Domestic net interest margin, the gap between what the bank earns on loans and investments and what it pays for funds, as a share of those assets, recovered to 3.1% from 3.00% the quarter before. The chairman credited mainly cheaper deposits and held his guidance at "not less than 3%". Almost half the loan book is priced off an external benchmark or Treasury-bill rates, which reset quickly when policy rates move. That margin, more than a profit figure lifted by a stake sale, is what will carry SBI's earnings once the new rules start to affect the profit and loss account from April 2027.