State Bank of India, which has witnessed muted growth in corporate credit so far this fiscal on a year-on-year basis, expects 5 to 7 per cent growth in the January to March 2020 quarter.

According to PN Prasad, Deputy Managing Director, Commercial Clients Group, SBI, green shoots are being seen in sectors such as roads, city gas distribution, and renewable energy. The country’s largest lender had a corporate credit growth of 0.5 to 1 per cent till December-end to early January on a year-on-year basis. The bank usually registers around 7 to 8 per cent growth in corporate credit on a year-on-year basis.

“We are seeing fresh interest in project finance from sectors such as roads, city gas distribution, and renewables. Our bank has have been involved in lending to large proposals in renewals or appraising the projects. So we are seeing green shoots in these sectors,” Prasad told BusinessLine on the sidelines of a seminar on Insolvency and Bankruptcy Code, organised by the Confederation of Indian Industry on Friday.

Corporate credit offtake generally picks up more towards the end of the fourth quarter as some of the PSUs, Central and State governments disburse money and consume it in the last quarter.

“So, normally, we expect the credit growth to surge in the months of February and March. Given the current trends, the growth could be around 5 to 7 per cent during the fourth quarter this fiscal over the same period last year,” he said. Attributing the poor demand for corporate credit to poor utilisation of working capital credit lines, he said: “We perceive that there could be two reasons: companies are not investing in fresh projects and since they don’t want to keep the money idle, they are paying back the working capital loan to reduce their cost. Alternatively, there is no increase in demand, because of which they are reducing utilisation of working capital.”

Asset quality concerns

On the asset quality front, fresh slippages have come down and aberrations are likely only from one or two large accounts that have already been identified as NPA, he said. However, there is some stress in thermal power, NBFCs, and commercial real estate sectors at present.

“We are generally facing some kinds of stress in the power sector. There are some thermal power projects that are facing some challenges in terms of their tariffs and delay from payments from discoms (distribution companies). And, we are seeing some stress in some of the NBFCsand commercial real estate,” he said.

SBI’s exposure to the NBFC sector is currently around ₹1.70-lakh crore, including investments. Asked whether the bank is cautious on taking fresh exposure to the NBFC sector, Prasad said it had “some limitations” as it had already breached the industry exposure limit.

“We are selectively growing, especially in AA-rated and above companies. But in below AA-rated companies, we are cautious,” he pointed out.

SBI is closely monitoring the developments around the Coronavirus outbreak. While so far there has not been any stress in the banking sector due to the COVID-19 outbreak, going forward, there could be some risk, he said.

“Coronavirus could impact bank lending in sectors such as chemicals, gems and jewellery, and automobiles. The bank is monitoring the situation. All global developments are being closely watched. The international banking segment is watching how it will impact fund raising and lending. So far, there is no impact,” he said.

According to Prasad, the prolonged litigation of some of the cases that are in resolution under the NCLT has been a cause of frustration. One of the main aim of the IBC was maximisation of value within a given timeline, and banks were very hopeful of resolutions happening in a time-bound manner.

There were some initial teething problems under the IBC and the litigations increased when Section 29A was introduced. That proved to be frustrating, particularly when a new legislation that the industry wanted most, could not yield desired result due to litigations.

However, most of these issues are now settled and litigations should come down moving forward, he added.

Related Topics