Why a PSU bank wants to start raising bets on corporate loans

As of September 2025, nearly 72% of the bank’s ₹2.93 trillion loan book was tilted towards RAM, with corporates accounting for just 28%. Kumar plans to change this mix to 65:35 by March 2026, without diluting the lender’s core focus on its rural and semi-urban franchise.

Barely weeks after taking charge on 30 September, Kumar said that, “RAM will always remain our priority. That is the strength of this organisation." However, the shift towards corporates is driven by both risk diversification and the quality of proposals received.

The current corporate book stands over ₹83,000 crore, leaving significant headroom for growth, he said.

The bank is selectively targeting sectors such as renewable energy, power transmission, roads and infrastructure, as well as hospitality projects, including hotels. For FY26, fresh loan sanctions are ₹1.21 trillion and around ₹85,000 crore to ₹1 trillion in the pipeline, he said.

After muted private capital expenditure, SBI Capital Markets expects light corporate balance sheets, moderate spreads, and stable government bond yields to provide the ‘necessary ingredients’ for private capex to trickle in.

Strategic portfolio shift

According to a Mint analysis of data from the Centre for Monitoring Indian Economy (CMIE) today, the pace of cash accumulation hit an eight-year low by September.

The analysis of CMIE data for a common sample of nearly 2,000 listed firms, excluding BFSI companies, revealed that cash and bank balances increased by just 1% year-on-year to about ₹5.4 trillion by September. The pace is a far cry from the pandemic period, when heightened uncertainty pushed median cash balances up by nearly 15% annually between September 2020 and September 2024.

In a report dated 17 December, CareEdge Ratings stated that India’s capex cycle was showing initial signs of recovery, as reflected in the sharp expansion of order books among capital goods companies and the increase in private investment announcements.

Order books of a sample of capital goods firms grew 20.7% on-year in FY25, with momentum continuing into the first half of FY26.

Sectors such as oil and gas, power, telecom, automobiles, metals and non-ferrous minerals are leading capital spending, while investment in power generation is expected to grow at a compound annual rate of 8% during FY26-28, with renewables and storage expanding at a 13% CAGR, it estimated.

These expectations have come as banks have been waiting for private capex to pick up to eventually grow their corporate loan book.

In Q2FY13, Central Bank of India’s corporate loan book rose nearly 11% on year to ₹98,363 crore. This is also because the gross non-performing assets ratio worsened to 5.54% as compared to 4.87% reported a quarter ago.

Kumar believes that the Central Bank of India’s relatively smaller corporate base is an advantage.

“There is a huge opportunity to grow because our base is not that big," he said. New schemes offering interest concessions and waivers on processing fees are being used to win back business that had migrated elsewhere, he said.

Targeting corporate growth

Apart from boosting retail lending through the rationalisation of goods and services tax (GST) and income tax benefits amid benign inflation, Kumar said it has also helped drive investments.

“It’s a very good opportunity and also towards the corporate side, as there are a lot of investments we are observing. That also actually stimulates the economy and creates opportunities for retail lending," he said.

For the quarter ended September, the state-owned bank’s corporate loan book grew over 18% on year, and RAM rose over 15% on year.

“Therefore, we are getting good proposals for housing, vehicles and also education loans. On the retail side, I expect more than 20% growth in this quarter," he said.

While the state-owned lender has retained its FY26 loan growth guidance at 14-16% on year, it is targeting the upper end of that range next year.

On net interest margins (NIMs), he expects the pressure to continue, which saw them compress to 2.89% for the September quarter, compared to 3.16% a quarter ago. This is because the transmission of repo rate cuts is faster on the loan side compared to the deposit side.

The bank is looking to offset the pressure on NIM through cost rationalisation, higher fee income from cash management, guarantees and letters of credit, and a stronger push on low-cost current account and savings account (Casa) deposits, Kumar said.

“In that way, we are entering into the market with targeted products of the different segments, like for pensioners, housewives or students. I cannot say NIM will be above 3% next year, but we will maintain the level," he said.

Future reform readiness

Looking ahead, Kumar has set an ambitious goal of taking Central Bank of India’s balance sheet to ₹10 trillion by March 2028. Currently, it stands at ₹7.37 trillion as of the end of September.

On the new reforms by RBI, such as merger and acquisition financing, Kumar said it is an opportunity, and the Central Bank of India would also not want to miss it.

“For that purpose, the major challenge which we are facing is the capability and skill set. If opportunities persist, we may have to tie up with any foreign bank or those who have expertise in it. But we will explore this," he said.

When asked about the impact of the proposed phased implementation of the expected credit loss model for the bank, he said that the lender will meet the April 2027 deadline, as it has been preparing for the past two years.

“The impact on the Central Bank of India balance sheet is not more than approximately ₹2,700-2,800 crore, and we implement it on 1 April 2027, so the hit is not going to be much," he said.