Speaking to CNBC-TV18 after Finance Minister Nirmala Sitharaman presented her ninth consecutive Budget, Setty said the policy focus on “sunrise sectors” and fresh support measures for MSMEs could translate into broader credit expansion in the coming fiscal year.
“I think several people have pointed out very clearly that services and manufacturing are focus areas, and rightly so,” Setty said, adding that both sectors remain critical for domestic growth, exports and job creation.
Corporate credit already seeing an uptick
Setty noted that corporate credit demand has begun improving, and Budget announcements could further accelerate borrowing, particularly from large companies leading investments in emerging sectors.
“What we have seen overall… is that there has been an uptick in corporate credit,” he said. “Most of the sunrise sectors that have been focused attract capital from large corporates, and the projects will mostly be taken up by them.”
The SBI Chairman added that newly announced schemes such as the MSME Growth Fund and Micro Fund could also spur lending activity among small and medium enterprises.
“These announcements… would spur the growth of MSMEs too,” he said.
Borrowing surprise spooks bond markets
The government’s gross borrowing estimate of ₹17.2 trillion for FY27, however, came as a surprise to the bond market, with investors expecting a lower number closer to ₹16–16.5 trillion.
Higher government borrowing typically raises concerns about upward pressure on bond yields, increased cost of capital and the risk of crowding out private investment.
But Setty urged investors to avoid rushing to conclusions.
“My information from my team says that we need to wait for the buyback, which is outside the Budget announcement,” he said, pointing out that last year’s borrowing was partly offset by an ₹80,000 crore buyback announced separately.
Buybacks and T-bills may soften the impact
Setty said the headline borrowing figure could look more modest once potential buybacks are factored in, and noted that part of the uptick stems from Treasury bill issuance, which is not always fully utilised.
“The number needs to be adjusted for potential buybacks,” he said. “The uptick is also coming from T-bills… but many times T-bill announcements are made, and they are not actually utilised.”
He also described the Budget’s fiscal assumptions as conservative, with borrowing shown on the higher side and revenue estimates appearing understated.
“Most of the numbers… seem to be conservative. The revenue estimates seem conservative, and the borrowing is shown on the higher side,” Setty said.
Too early to call yield trajectory
On bond yields, the SBI Chairman said markets should wait for further clarity from policymakers in the coming days before pricing in any sustained rise in borrowing costs.
“It is too early. Let us digest these numbers and also hear from the policymakers tomorrow,” he said.
Setty added that he was not yet concerned about crowding-out risks from public debt.
“I’m not rushing towards any conclusion in terms of either yields moving up or in terms of the crowding-out impact of public debt,” he said.
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Budget sets stage for credit-led growth
Overall, Setty’s remarks suggest that while the government’s borrowing programme has sparked near-term bond market volatility, the Budget’s emphasis on services exports, manufacturing expansion and MSME support could underpin stronger credit growth across corporate and small business segments in FY27.
