India’s Private Lenders Bet on Corporate Loan Revival for Growth

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Photographer: Abeer Khan/Bloomberg Photo by Abeer Khan /Bloomberg(Bloomberg) — India’s top private banks are betting on a sustained pick up in lending after reporting healthy numbers in the first quarter of the fiscal year, as more companies shift away from pricier bond market borrowings to cheaper loans.THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLYSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.SUBSCRIBE TO UNLOCK MORE ARTICLESSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.REGISTER / SIGN IN TO UNLOCK MORE ARTICLESCreate an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.THIS ARTICLE IS FREE TO READ REGISTER TO UNLOCK.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountAt least six private banks reported robust loan growth in the three months to June, driven by corporate lending, as high bond yields make market funding less attractive. HDFC Bank Ltd., India’s largest private lender by assets, reported a nearly 19% jump in corporate loans in the quarter, compared with a 1.7% growth a year earlier. ICICI Bank Ltd.’s domestic corporate loans rose 18.5% from a year earlier, while Kotak Mahindra Bank Ltd. posted a 15% increase. Get the latest headlines, breaking news and columns.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againCorporate loan demand was driven by working capital needs, while moderation in borrowing from bond and equity markets also created lending opportunities for banks, ICICI’s Executive Director Sandeep Batra said in the lender’s earnings call Saturday.“It will be a secular loan growth across sectors in the next two quarters,” said Yes Bank Ltd. Chief Executive Officer Vinay Tonse. The bank, which has largely been focusing on the retail segment, saw its corporate and institutional loan book expand more than 41%. The pickup comes as overall bank credit growth accelerated to a two-year high of 18.6% year-on-year in the two weeks to June 30, according to Reserve Bank of India data, underscoring the resilience of loan demand even as deposit mobilization lagged. But an expected surge in foreign currency deposits, which according to some analysts could top $50 billion by end-September, may improve banking system liquidity, giving lenders access to a larger pool of relatively low-cost foreign-currency funding. As part of its efforts to boost reserves, India’s central bank in June offered full hedging-cost support for banks raising three- to five-year foreign currency deposits — and has allowed borrowing against such funds.Sovereign 10-year bond yields climbed above 7% after the US-Iran war which roiled Indian markets. While the yields have eased from those highs, rising oil prices due to fresh tensions in the Middle East keep investors on the edge about further monetary tightening. Elevated benchmark yields have lifted corporate borrowing costs, dampening their appetite for debt.HDFC Bank’s Deputy Managing Director, Kaizad Bharucha said corporate demand was evenly split between term loans and working-capital financing during the quarter, with electronics, automobiles, renewable energy and commodities showing the strongest demand. Yes Bank, meanwhile, saw healthy borrowing from oil and metals companies.Axis Bank Ltd. expects its loan growth to outpace the industry by about 300 basis points over the medium term, Chief Financial Officer Puneet Sharma said.Banks are also being backed by healthy balance sheets. Following years of cleaning up of bad loans, strengthening underwriting standards and building capital buffers, lenders are more willing to finance corporate borrowers that meet stricter risk criteria. The banking sector’s gross non-performing asset ratio is near multi-year lows, giving lenders confidence to grow their corporate books without repeating the excesses that led to the bad-loan cycle of the last decade.—With assistance from Harshita Swaminathan.This advertisement has not loaded yet.Notice for the Postmedia NetworkThis website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. Read more about cookies here. By continuing to use our site, you agree to our Terms of Use and Privacy Policy.