Banks start to witness fresh industry loan demand, says IndusInd Bank CEO

No. 4 | Bank: IndusInd Bank 7.25 percent| Annual rate of interest: | What Rs 1 lakh grows to in three year: Rs 1,24,055

Banks, saddled with bad loans along with weak loan growth for over a year now, are witnessing fresh demand for capital expenditure in select sectors in what could be initial signs of corporate movement, according to IndusInd Bank CEO Romesh Sobti.

“Corporate book we are seeing good traction on working capital, since last two quarters and seeing little bit of brown field projects and capex for not new but existing projects.Seen some in power transmission, etc… There are firm trends of capex building up…Overall, I think industry is on the move,” Sobti said speaking to reporters post the bank’s third quarter results announcement.

Although the bank’s corporate growth was almost flat from the previous quarter with a growth of 2 percent, on a year-on-year basis, the growth was 26 percent.

Among the first to declare results every quarter, the private sector bank’s 39^th quarter continued to witness a healthy net profit growth of 25 percent at Rs 2,653 crore.

Roopa Satish, Country Head, Corporate and Investment Bank at Indusind, said the bank witnessed demand from multinational companies and foreign banks were withdrawing capital from India and the bank is trying to grab market share. “Sectors such as energy, transmission and engineering sectors saw some demand” that aided corporate growth, she said.

After a long gap, credit growth as per RBI data, grew in double digits to 10.65 percent at Rs 80.96 lakh crore in the fortnight ended December 22, 2017.

Even as many experts point it out as the base effect of lower growth in the previous quarters, Sobti said, “Capex is a little patchy but there is a pull and you can feel the buzz coming in. even if you negate the base effect, there is real growth and demand is there to some extent.”

Despite a rise in gross non-performing assets ratio at 1.16 percent of total loans as compared with 1.08 percent in the previous quarter and 0.94 percent as on December, 2016, Sobti is optimistic saying it is reflected by demand for capex in term loans.

“Very soon, we will hear about new capacity demand in steel after the NCLT (National Company Law Tribunal) process. There are five or six large projects happening in power transmission sector. The other is auto industry with a lot of demand coming from commercial vehicle segment. That is not greenfield but capacity expansion. So there is huge pent up demand and may not be uniformly spread but it has started,” Sobti added.

In the same quarter in October, IndusInd Bank also finalized its acquisition of microlender Bharat Financial Inclusion for an all-stock deal and is awaiting Reserve Bank of India’s approval, post which they will apply to markets regulator SEBI followed by NCLT.

Overall, credit growth for the bank stood at 25 percent, with retail seeing robust growth in vehicle financing with growth at 20 percent and disbursements’ growth at 34 percent.

On the other hand, net NPAs inched up to 0.46 percent of total loans, from 0.44 percent in September quarter and 0.39 percent a year ago.