THE EFFECT OF INFLATION ON SBI BANK

THE EFFECT OF INFLATION ON SBI BANK

Janani S S1, Saanjhree R2, B Naga Bhavika3, Dr. Kiran Kumar M4

MBA Student- Finance1, MBA Student- Finance2, MBA Student- Finance3, Assistant Professor4 janani_ss23@cms.ac.in1saanjhree_r23@cms.ac.in2bhavika_b23@cms.ac.in3 kiranm287@gmail.com4

Faculty of Management Studies, CMS B School, Jain (Deemed-to-be University), Bangalore

Abstract

The relationship between inflation and the performance of major Indian banks, particularly the State Bank of India (SBI), reveals significant insights into macroeconomic stability and banking sector resilience. High inflation affects SBI's cost structures, loan demand, and non-performing asset (NPA) rates, with adverse impacts on profitability and asset quality. Elevated inflation rates often drive the Reserve Bank of India (RBI) to raise interest rates, indirectly impacting SBI’s loan growth and deposit mobilization. Higher interest rates increase loan costs for customers, suppressing credit demand and increasing default risks. SBI also faces higher operational costs and reduced profit margins under inflationary pressures. However, the bank’s large deposit base and robust capital position offer some resilience against inflationary shocks. Additionally, SBI's adoption of advanced risk management strategies and digitalization helps mitigate inflationary impacts, though prolonged inflationary phases can still strain its financial stability. Addressing these inflation-induced challenges requires active regulatory oversight, efficient risk management, and adaptive fiscal policies to ensure SBI’s sustained growth and stability.

Keywords: Inflation, State Bank of India, non-performing assets, Reserve Bank of India, banking sector resilience, macroeconomic stability