SBI Chairman Sees Revival In Corporate Credit Demand As Economy Improves
State Bank of India aims to report double-digit credit growth by the second quarter of the next financial year, spurred by a revival in corporate credit demand.
According to Dinesh Kumar Khara, chairman of India’s largest lender, announcements around infrastructure investment in Union Budget 2021 would push demand from the private sector, leading to better days in corporate lending.
“We already have sanctioned term loans of about Rs 25,000 crore into the public sector,” Khara told BloombergQuint in an interview on Feb. 4. “There are also unutilised limits to the level of Rs 2 lakh crore largely from large and mid-level corporates. As the demand improves, these lines will get utilised and the demand for term loans should also go up.”
The reason behind large unutilised limits is the availability of funds at cheaper rates in the debt market, he said. As cheap liquidity gets sucked out of the market by highly rated corporates, demand for loans sanctioned by banks, according to Khara, should improve.
The bank’s corporate customers are already showing signs of a rebound in terms of demand for credit, he said. With the economy reviving after the Covid-19 pandemic, there has been a strong rebound in credit demand, especially the mid-corporate segment, he said.
When it comes to the corporate sector, specifically mid-corporate segment, we have seen the availing of (credit) limit to be as high as 40-50%, whereas at the beginning of the year it was very low.Dinesh Kumar Khara, chairman, State Bank of India
As on Dec. 31, 2020, the bank’s domestic advances rose 7.47% year-on-year to Rs 21.26 lakh crore, whereas corporate loans stood at Rs 7.78 lakh crore. SBI’s investment portfolio, which stood at Rs 13.21 lakh crore, included 21.6% of corporate bonds and about 7% of commercial papers.
On asset quality, the SBI chairman said the bank has seen corporate credit quality improve in the last few months. Corporate customers are approaching banks for restructuring their dues as the last recourse, unlike in 2008, he said.
“Corporates are mindful that a debt restructuring could affect their bureau scores, could affect their future ability to raise money,” he said. “So there’s this appreciation among corporates. This has helped us all in terms of arresting the kind of trend we witnessed maybe around 2008.”
SBI’s asset quality improved in the third quarter, even after considering the Supreme Court’s interim order in the interest-on-interest case. While reported gross non-performing asset ratio improved to 4.77% in the third quarter, from 5.28% in the preceding quarter, the proforma gross NPA ratio also improved to 5.44%, down 44 basis points sequentially.
As of Dec. 31, SBI received restructuring requests worth Rs 18,125 crore, which included Rs 11,707 crore worth requests from corporate borrowers. Against the accounts seeking restructuring, the bank holds provisions worth Rs 1,464 crore, apart from Covid-related contingency provisions of Rs 6,008 crore.