Banks step up lending to corporates

Power, roads and ports, as well as services sectors get a fillip

India’s business environment appears to be turning positive with an increase in corporate loans being extended by major banks.

The growth in corporate lending, which started from the beginning of the current financial year and has been described as ‘green shoots’ by experts, now appears to have gained ground, going by the third quarter numbers of major lenders.

State Bank of India reported a 20.67 per cent growth in total corporate lending at 7.74 lakh crore as of December 31, 2018, against 6.42 lakh crore in the same period last year. In the third quarter of last fiscal, SBI’s corporate credit was muted compared to the previous fiscal. But this year, the scenario has improved.

For the last couple of years, corporate loan growth has been almost flat for many banks. “The drivers for corporate growth are power, roads and ports, as well as services,” said a senior SBI executive. There was higher traction in government undertakings, he added.

Corporate slippages for banks continued to decline, and slippages from the watch list are not significance any longer.

Other banks also witnessed a similar increase in various segments of corporate advances. Punjab National Bank saw a 28 per cent growth in medium enterprise loans, while ICICI Bank witnessed “continued growth” at 10 per cent in domestic corporate lending, excluding restructured loans, among others. Canara Bank, too, posted over 7 per cent increase in corporate portfolio.

The RBI’s data on sectoral deployment of bank credit, as of December 2018, also point to an increase in credit to industry. Credit to industry rose by 4.4 per cent in December 2018, compared to an increase of 2.1 per cent in December 2017.

“Credit growth to infrastructure, chemical and chemical products, all engineering, vehicles and petroleum, coal products and nuclear fuels accelerated,” the RBI said in its report.

However, credit growth to basic metal and metal products, textiles, food processing, and gem and jewellery saw deceleration.

Non-food credit

On a year-on-year basis, non-food bank credit increased by 12.8 per cent in December 2018, against an increase of 10.0 per cent in December 2017.

The stabilisation of Goods and Services Tax (GST), waning of adverse impact of demonetisation, among others, have been positive for gross capital formation in the economy, and there is more propensity to investments in some sectors, say experts.