India’s one of the biggest banks, the State Bank of India (SBI), has decided to lower its loan growth target for the year 2025-26. Earlier, it expected loan growth between 14% and 16%, but now it has brought that down to 12% and 13%.

This change comes because of rising global trade tensions, especially new tariffs announced by countries like the U.S., which are making businesses more cautious about borrowing and investing.

“But I think uncertainty on tariffs is going to impact the overall economic and investment scenarios. So from that background,

we believe that there would be some moderation in the credit growth (in FY26),” SBI’s Chairman, C.S. Setty, said.

Let us take the example of Ravi, who runs a small garment business in Surat. At the beginning of the year 2024, he had big ideas; he was going to expand his factory and sell millions of imported clothes to clients in the USA, for which he intended to get ₹50 crore from his bank.

He had already chosen the new machines for ₹30 crore, and he had planned to take in about 200 employees.

And then it happened.

In 2024, the US increased the tariffs on textiles, which made Ravi's US clients hesitant to order clothing, and some cancelled and some delayed paying. Suddenly, the loan didn't seem like such a good idea.

Ravi decided to cut back. Instead of borrowing ₹50,00,00,000, he applied for just ₹30,00,00,000— enough to improve his current setup but not expand. And instead of hiring 200 people, he brought it down to 80.

Read More - SBI Expects Loan Growth to Slow Down to 12–13% in FY26

Ravi’s story isn’t rare. Many businesses in India are being extra careful, and that’s one reason why SBI lowered its loan growth target from 14% and 16% to 12% and 13% for 2025–26.

SBI’s New Loan Plan: Expecting Less Borrowing in 2025–26

SBI reported a loan growth of 12.03% for the year 2024-25. But because of the global uncertainty, the bank now expects a more conservative growth of 12% to 13% for the year 2025-26. This is largely because businesses and consumers are hesitant to take on more debt in such uncertain times.

SBI’s Chairman, C.S. Setty, also pointed out that the overall Indian banking system could see a credit growth of just 10% to 11% during the same period.

SBI’s Loan Growth Forecast

Year	Original Loan Growth Target	Revised Loan Growth Target
FY 2025-26	14% to 16%	12% to 13%
FY 2024-25	12.03% (actual)	-

Impact of Global Tariffs on Lending

Global trade issues, including new tariffs by the U.S. in 2024, are causing a lot of uncertainty. This has made investors and businesses more careful, which affects their willingness to borrow or invest heavily.

Positive Impact on Lending:

Better Risk Management:

With the global uncertainty, banks like SBI are being more careful about the loans they approve.

For example, in FY25, SBI decided to lend ₹3,000 crore less in high-risk loans compared to the previous year. Instead, they focused more on safer loans, such as home loans. In FY25, home loans at SBI increased by 14%, amounting to ₹10,000 crore.

Focus on Retail Lending:

Since businesses are holding back on borrowing, banks are turning their attention to individual loans like home loans and personal loans.

In FY25, retail loan growth was up by 11%, and ₹42,775 crore in loans were given to individuals. Home loans and personal loans helped drive this growth.

Negative Impact on Lending:

Reduced Loan Demand from Businesses:

Export-focused sectors like textiles, auto parts, and electronics are hit hard by the U.S. tariff hikes in late 2024. With falling orders, many firms in hubs like Tiruppur and Surat have paused expansion, leading to slower demand for business loans.

In FY25, SBI’s total loan growth slowed to around 12.03%, compared to 15% the year before. By March 2025, the bank had a large corporate loan pipeline worth ₹3.4 trillion, showing steady demand even as growth moderates, as reported by Reuters.

Lower Profit Margins:

SBI's net interest margin (NIM), which shows how much the bank earns from its loans, dropped from 3.47% in FY24 to 3.15% in FY25. This decrease means the bank is earning less from its loans, which could make lending less profitable for SBI in the future.

Retail Loans and Capital Plans

Even though demand for business loans is slowing down, SBI is still seeing strong growth in retail loans. In the financial year 2024–25:

Personal loans grew by 11.4%.
Home loans grew by 14%.

These numbers show that more people are borrowing for personal needs, which helps keep the bank’s lending business going strong.

Also Read - How to Use SBI Net Banking: A Complete Step-by-Step Guide

To keep its finances strong and continue lending, SBI is planning to raise ₹25,000 crore by issuing more shares. This will help the bank stay financially healthy while managing risks.

Retail Loan Growth and Capital Raising

Loan Type	Growth Rate	Capital Raising Plan
Personal Loans	11.4%	-
Home Loans	14%	-
Unsecured Personal Loans	0.49%	₹25,000 crore raised through equity capital

The rise in retail loans, especially home loans, is a positive sign for SBI. With the extra capital, the bank will be able to keep lending and stay financially stable.

Conclusion

SBI's decision to reduce its loan growth target for 2025-26 shows how global trade issues, like rising tariffs, are affecting India’s

banking sector. With businesses being more cautious about borrowing, SBI is focusing more on retail loans, which are still growing well.

For example, personal loans grew by 11.4% and home loans by 14% in FY25. These areas are helping the bank stay strong despite challenges in the business loan sector.

To stay financially stable, SBI is planning to raise ₹25,000 crore by issuing more shares. While the bank is facing slower business loan demand and lower profit margins, the focus on retail lending and the extra capital should help it stay on track.

In the coming years, how well SBI adapts to these changes will be key to its growth and success.

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