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By Chris Thomas and Swati Bhat

BENGALURU, Nov 3 (Reuters) – State Bank of India posted a better-than-expected quarterly profit on Wednesday, as it released reserves that were set aside to cover its exposure to a troubled shadow lender, and forecast credit growth of about 10% for the fiscal year.

Most large Indian banks have reported higher profits for the September quarter, buoyed by a rebound in credit demand as the economy reopened fully and low interest rates boosted spending on automobiles and homes.

“Our overall advances growth stands at 6% plus and we would certainly like to see it growing at least up to 10%,” SBI Chairman Dinesh Kumar Khara said on a media call.

Corporate loans were muted in the second quarter, Khara said, adding that lending to companies would pick up as the iron and steel sector and oil companies look to expand their working capital limits on improving demand.

SBI’s credit growth in the quarter was driven by a 15.17% jump in personal retail loans.

The Mumbai-based lender’s net profit rose 66.7% to 76.27 billion rupees ($1.02 billion), helped by a writeback of 40 billion rupees it had set aside for the account of distressed shadow lender DHFL, which was taken over by the Piramal Group.

Analysts had expected a profit of 71.82 billion rupees, according to Refinitiv IBES data.

Provisions for bad credit loans. loans for bad credit loans slid 52%, while the gross bad loan ratio, a measure of asset quality, slipped to 4.90% from 5.32% a quarter earlier.SBI said it was expecting to keep the ratio under 5% going forward.

Credit costs slipped 51 basis points to 0.43%.

SBI shares, which have outperformed the blue-chip NSE Nifty 50 index so far this year with a near 90% jump, rose as much as 4% to a record high after the results before settling 1.1% higher.($1 = 74.5100 Indian rupees) (Reporting by Chris Thomas in Bengaluru; Editing by Subhranshu Sahu and Anil D’Silva)