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In what could be a matter of concern in rekindling the Covid-hit economy, corporate lending by major public sector banks has been on the wane.
The Q1 data of banks show a significant decline of corporate advances compared to the year-ago period.
For instance, State Bank of India’s domestic corporate advances decreased 2.23 per cent at ₹7,90,494 crore in the quarter ended June 30, 2021, compared to ₹8,09,322 crore in the same quarter last year. However, in the first quarter of FY21, SBI reported 3.41 per cent growth in corporate advances.
According to SS Mallikarjuna Rao, Managing Director and CEO, Punjab National Bank: “Corporate growth was almost muted or negative” during the quarter. For PNB, corporate advances marginally decreased by 0.57 per cent at ₹3,264,66 crore in June 2021 compared to ₹3,28,350 crore in the year-ago period.
For Union Bank of India, the share of industry exposure in domestic advances fell to 38.12 per cent at ₹2,40,237 crore from 39.4 per cent at ₹2,47,986 crore in the year-ago period. The same is the case with Indian Bank which saw a 3 per cent dip in the corporate loans during the period under review.
According to a senior SBI official, the last one year saw the complete ‘impact’ of the pandemic on some key investment decisions of the industry.
“In fact, banks, including SBI, have been proactively supporting the industry wherever possible. Assuming that there will be no third wave, we can see greenshoots, going forward,” he added.
As per RBI data, up to May, the gross loans to large industries declined by 1.7 per cent on a year-on-year basis.
Demand low
There has also been lower demand from corporates in general as many adopt a wait-and-watch approach on investments, say bankers. Obviously, there has been a more rigorous due diligence on the part of the banks.
However, banks are optimistic about the future as far as corporate lending is concerned. Even though the corporate lending growth was muted in the first quarter, PNB is bullish. “We are looking at a good amount of growth, whereas corporate growth was almost muted or negative. But we are looking at a good amount of growth that will to be disbursed over a period of time,” said Mallikarjuna Rao in a recent earnings call.
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