India's Loan Books Swell 13% as Capex Revival Fuels Corporate Demand

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AuthorRiya Kapoor|Published at:
India's Loan Books Swell 13% as Capex Revival Fuels Corporate Demand
Overview

Corporate loan growth in India is surging, with lenders reporting a revival driven by increased capital expenditure and working capital needs. Sectors like oil and gas, infrastructure, metals, and power are leading the demand. Major banks such as State Bank of India (SBI) and Axis Bank have posted significant year-on-year increases in their corporate loan books, signaling robust economic activity.

Corporate Lending Surges on Economic Optimism

Lenders are witnessing a robust pickup in corporate credit growth, a clear indicator of India Inc.'s increasing appetite for investment and working capital. This expansion is primarily fueled by a resurgence in capital expenditure across key sectors, including oil and gas, infrastructure, metals, and power, alongside significant demand from large non-bank financial companies. Stronger overall economic activity is allowing businesses to ramp up operations and seek necessary financing.

Banks Report Accelerated Growth

Major financial institutions are reporting accelerated lending momentum. State Bank of India (SBI), the nation's largest lender, saw its corporate loan book grow by 13.4% year-on-year to ₹13.33 lakh crore for the quarter ending December, a sharp increase from 7.1% in the previous quarter. SBI currently holds a corporate loan pipeline of approximately ₹8 lakh crore. Private sector banks are also showing strong performance: HDFC Bank posted a 10.3% growth in its ₹7.7 lakh crore corporate loan book, up from 6.4% sequentially. Axis Bank reported a significant 27% expansion in its ₹3.75 lakh crore corporate loan book, a notable jump from 20% year-on-year growth in the September quarter. ICICI Bank's domestic corporate portfolio grew 5.6% year-on-year and 6.5% sequentially.

Trade Deals to Boost Future Momentum

Bankers anticipate this growth trajectory to strengthen further, partly due to an expanding export landscape driven by multiple trade agreements. These accords are expected to encourage capacity additions and bolster cross-border supply chains. CS Setty, Chairman of SBI, highlighted that economic activity has significantly improved post-GST rationalization, leading to higher working capital utilization and a visible pipeline for long-term loans across various sectors. He added that upcoming trade deals would benefit a broad spectrum of businesses integrated into global value chains.

Benchmark Lending Rates Stabilize

A key shift noted in the lending market is the stabilization of benchmarks, with a larger portion of lending now occurring at external benchmark-linked rates. This provides greater transparency and predictability for both borrowers and lenders. Vijay Mulbagal from Axis Bank attributed the growth to strong client engagement and faster turnaround times, primarily within the power, corporate real estate, and diversified conglomerate segments.

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