A STUDY ON THE IMPACT OF RBI MONETARY POLICY ON THE PROFITABILITY OF STATE BANK OF INDIA

Abstract

Monetary policy serves as one of the most critical instruments through which central banks influence economic activity, credit availability, and the financial performance of banking institutions. The Reserve Bank of India (RBI) employs a range of monetary policy tools — including the repo rate, reverse repo rate, Cash Reserve Ratio (CRR), and Statutory Liquidity Ratio (SLR) — to regulate liquidity, inflation, and economic growth. The State Bank of India (SBI), as the largest public sector bank and a systemically important financial institution, is significantly impacted by these policy decisions. This study empirically investigates the relationship between RBI's monetary policy instruments and the profitability of SBI over a ten-year period from 2014-15 to 2023-24. Using secondary data sourced from RBI annual reports, SBI annual reports, and SEBI disclosures, the research employs correlation analysis and multiple regression modelling to quantify the impact of policy rate changes on key profitability indicators, namely Net Profit, Net Interest Margin (NIM), Net Non-Performing Assets (NPA), and Return on Assets (ROA). The findings reveal a statistically significant negative correlation between repo rate increases and SBI's net profit, while NIM shows a positive association with rising rate environments. The study concludes that RBI's monetary stance plays a decisive role in shaping SBI's financial outcomes and offers practical recommendations for policy calibration and bank management strategies.