<\/span><\/h3>SBI’s retail loan book \u2014 particularly its lending to MFI customers through the YONO platform and SBI Foundation \u2014 is exposed to the broader microfinance sector stress that has affected IndusInd Bank, Bandhan Bank, and small finance banks in FY26. The MFI-linked stress is expected to add approximately Rs 5,000-7,000 crore of credit costs in Q4 FY26 and Q1 FY27, pushing the credit cost guidance higher than the 0.5% the market was modelling at the start of FY26.<\/p>
<\/span>2. NIM Compression on Rate Cut Expectations<\/strong><\/span><\/h3>The RBI’s initiation of a rate cut cycle is a long-term positive for loan demand but a near-term negative for NIM. SBI’s NIM compressed from 3.34% to 3.01% in Q3 FY26. With Rs 21 lakh crore+ of floating rate loans, every 25 bps rate cut reduces SBI’s annualised NII by approximately Rs 2,000 crore before any offset from deposit cost reduction. This NIM compression phase typically lasts 2-3 quarters before deposit costs catch up.<\/p>
<\/span>3. Rising Credit Costs in SME and Agriculture<\/strong><\/span><\/h3>SBI’s SME and agriculture segments \u2014 which collectively account for approximately 22% of the loan book \u2014 are showing early signs of stress from the rural income slowdown. Agriculture NPAs have risen to 11.4% in Q3 FY26 from 9.8% a year ago, reflecting the impact of uneven monsoon distribution and crop price volatility.<\/p>
<\/span>4. PSU Bank Sector FII Underweight<\/strong><\/span><\/h3>FII ownership in PSU banks is structurally lower than in private sector banks due to governance concerns, ESG considerations around government ownership, and the return on equity differential. SBI’s FII holding declined from 15.2% to 12.8% over two quarters \u2014 a trend that accelerated sharply after the US tariff-triggered global risk-off in April 2026.<\/p>