Demand for corporate loans is being driven by better capacity utilisation, higher working capital and to some extent shift in demand for bank loans from bond markets. State Bank Of India Managing Director Swaminathan Janakiraman said.
Bank has increased by 21 percent corporate credit in the July-September quarter.
“Corporate credit is certain to pick up, but growth may moderate as the base widens,” Swaminathan told Reuters.
There has also been a pick-up in lending to non-bank finance companies in sectors that see pickup range from telecom and power to roads, ports and airports, he added.
As banks begin lending to companies, some lenders have raised concerns about mispricing of corporate loans with insufficiently compensated risk.
This usually happens when liquidity is sufficient and demand is low, according to Swaminathan. “With current opportunities unfolding, tight liquidity and high yields, banks can no longer quote prices that are not commensurate with risk.”
Given the weak deposit growth in the banking system, Swaminathan said this would require banks to be cautious.
“For a bank like SBI, with a credit-deposit ratio of around 65%, there is ample liquidity available which can be channeled into credit.”
bad debt sale
While most banks have seen bad loans coming down, lenders may sell some of their old loans to the government’s National Asset Reconstruction Company Limited (NARCL).
“NARCL has made 14 offers for debt of roughly 200 billion rupees ($2.46 billion). These sales are in different stages,” Swaminathan said. SBI’s share in the pool is about 20 per cent.
The bank had earlier said it was also considering selling about 10 billion Indian rupees in retail loans to asset reconstruction companies, which Swaminathan said had not materialized yet.