sbi: Loan demand is bouncing back, says SBI chief

Must read

NEW DELHI: Consumer cutbacks due to raging inflation and higher borrowing costs are failing to dent investment plans at Indian businesses tapping the country’s biggest lender, a sign that a recovery in Asia’s third largest economy is gathering pace. Companies are steadily drawing down from a $71-billion loan pipeline, SBI chairman Dinesh Kumar Khara told Bloomberg in an interview. Loan growth at the 216-year-old lender is expected to be robust, underpinned by demand from businesses after two straight years of credit contraction, Khara said.
That broadly mirrors a trend where loan growth in India’s Rs 120-lakh-crore ($1. 5 trillion) banking system is expanding annually at its fastest pace in three years. While part of the credit demand is to cover rising costs, the rest is going into business expansion and investments for capacity addition.
“Whether it is working capital loans or term loans, the draw downs have been rising, and the ratio of pipeline to loan book narrowed by at least six percentage points in recent months,” Khara said. “Capacity utilisation at several sectors like iron and steel is full, and if we get a good monsoon too this year, things will get way better. ”
The rise in business confidence and credit demand in India comes despite rising cost of funds. The rising demand for loans means SBI will have to shore up its capital adequacy ratio, since it is hovering at less than two percentage points over the minimum regulatory requirement. SBI will be aiming to sell bonds to augment its capital base, Khara said. The lender sold so-called Tier 1 bonds, which can be fully written down in a crisis, in December at the lowest coupon among Indian banks after the country started implementing the Basel III capital rules in 2013.



Source link

More articles

- Advertisement -

Startup

- Advertisement -

Latest article