After several subdued quarters, banks are once again lending more aggressively to corporates, raising hopes of a broader credit revival in the second half of the fiscal year, according to a Mint report.
While much of the new demand stems from working capital requirements, bankers said companies in infrastructure, renewables and manufacturing have also begun seeking capital expenditure (capex) funding, indicating early signs of investment recovery.
At HDFC Bank, the corporate and wholesale loan book grew 6.4 percent year-on-year and 4.7 percent sequentially in the September quarter, a sharp improvement from the 1.7 percent annual growth and 1.3 percent sequential decline in the previous quarter.
Still, demand for capex loans remains modest, chief financial officer Srinivasan Vaidyanathan said during the bank’s Q2 earnings call on October 18. “It is largely working capital financing that we have participated in this quarter,” he noted.
The bank had slowed wholesale lending in earlier quarters due to intense competition and margin pressure, focusing instead on rebalancing its portfolio post-merger with HDFC Ltd.
Axis Bank, meanwhile, saw a 20 percent annual and 11 percent sequential jump in its corporate loan book in the September quarter, compared with 9 percent and 6 percent, respectively, in the June quarter.
“There were a few good opportunities that came our way, something we haven’t seen in the past,” said Subrat Mohanty, executive director at Axis Bank. “We see opportunity in the wholesale segment driven by new client investments,” he told Mint.
Other major lenders, including IndusInd Bank and Bank of India (BoI), also reported higher corporate credit growth, while ICICI Bank, Federal Bank, Yes Bank, Punjab National Bank (PNB) and Indian Bank saw a softer pace of expansion compared with last year, Mint noted.
The corporate credit revival comes at a time of rising bond yields, which have made bank loans more attractive for companies, particularly those with lower credit ratings.
The 10-year government bond yield rose 20 basis points to 6.5 percent in the September quarter as geopolitical tensions weighed on investor sentiment.
In August, specialty chemicals maker Neogen Chemicals Ltd raised Rs 200 crore via its A-rated bonds maturing in December 2028 at a coupon of 10.5 percent, underscoring the higher cost of market borrowing.
According to Mint, by comparison, the weighted average lending rate on fresh rupee loans by scheduled commercial banks fell slightly to 8.75 percent in August from 8.81 percent in July, according to RBI data.
Bankers broadly agree that working capital and project-linked funding remain the key growth drivers for now. Many expect the momentum to strengthen in H2 FY25 as sanctioned loans are disbursed and as private investment gradually picks up.
“It’s still a bit early,” said A.M. Karthik, senior vice-president and co-group head at ICRA, in an interview with Mint. “In Q2, you would have seen corporate credit growth because the yields were still high, and to that extent, bank credit actually picked up,” he said, adding that ICRA has not yet revised its credit growth estimates for FY26.
The ratings agency expects recent GST rate cuts, aimed at boosting domestic demand and offsetting the impact of US tariffs, to support credit expansion for banks and NBFCs in the coming quarters.
Public sector lenders are also seeing traction. Punjab National Bank (PNB) has sanctioned Rs 1.78 trillion in total loans, including corporate accounts, awaiting phased disbursement.
“We are expecting good corporate loan book growth in Q3 and Q4 because of these sanctions,” said PNB CEO Ashok Chandra, adding that demand is strong from infrastructure, roads, renewables, and industrial borrowers.
PNB’s corporate loan book grew nearly 8 percent year-on-year in the September quarter, compared with 7 percent in Q1.
Bank of India (BoI) reported a 12 percent annual rise in its corporate book in Q2, more than double its 5.5 percent growth in Q1.
“Our total pipeline, including global and domestic corporate loans, stands at over Rs 70,000 crore, about 10 percent of our global loan book,” BoI chief executive Rajneesh Karnatak told Mint, adding that around Rs 50,000 crore pertains to corporate lending alone.
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