South Indian Bank Aims Over 12% Loan Growth in FY26, Focus on MSME and Retail Segments

South Indian Bank is targeting over 12% loan growth for the financial year 2025–26, with plans to boost lending primarily to the MSME and retail segments. Deposit growth is expected to be slightly lower, in the range of 10–11%.

For FY25, the bank had projected 10% loan growth but ended the year with a 9% rise after accounting for a ₹900 crore charge-off.

Managing Director and CEO PR Seshadri said the bank expects most of the growth this year to be driven by MSME loans, which are projected to grow more than 20%. “This is the year where we step on growth,” Seshadri told CNBC-TV18. He added that the share of corporate loans in the bank’s portfolio is likely to fall as it increases its focus on MSMEs and retail customers.

Margins Likely to Face Pressure

Despite the growth outlook, the bank expects some pressure on net interest margins (NIMs). Seshadri noted that NIMs are likely to decline, although he did not provide a specific estimate. The NIM for FY25 stood at 3.21%, and he suggested a possible fall of 10–12 basis points. The bank plans to manage this through repricing of loans and offering shorter-tenure products.

Asset Quality and Efficiency Improving

The bank reported improvements in asset quality. Gross non-performing assets (GNPA) dropped to 3.2%, while net NPAs stood at 0.92%. Slippages for the fourth quarter were ₹206 crore, the lowest in recent times, while recoveries crossed ₹400 crore.

Efforts to improve operational efficiency are also underway. The bank reduced its cost-to-income ratio by 431 basis points year-on-year to 57% in FY25. It now aims to reduce it further by 200–250 basis points during the current year. “We went slow on hiring, consolidated branches, and improved productivity,” said Seshadri.

South Indian Bank Share Price Movement

On May 28, 2025, South Indian Bank shares opened flat at ₹28.96, the same as the previous closing price. By 2:06 PM, the stock was trading slightly lower at ₹28.94 on the NSE. The bank's 52-week high of ₹29.55 was touched on May 20, 2025, while its 52-week low of ₹22.27 was recorded on November 18, 2024.

Conclusion

In summary, South Indian Bank aims to grow its loan book by over 12% in FY26, driven primarily by MSME and retail lending. While net interest margins may face some compression, the bank has shown improvement in asset quality and cost efficiency.

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