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May 08, 2018 09:29 PM IST | Source: PTI

Banks' corporate loan book may plunge to 27% by FY22 from 39% now

But retail lending will see an increase to 35 per cent from the present 28 percent.

With the increased focus on retail loans, revenue share of corporate lending in banks' overall loan pie is set to come down to just over a fourth by FY22, says a report.

The share of corporate lending in the overall revenue pie will slide to 27 per cent by FY22 from 39 per cent now, consultancy firm BCG said in a report today.

But retail lending will see an increase to 35 per cent from the present 28 per cent, it said.

In FY12, corporate lending contributed 50 per cent of banks' revenue pool from advances or interest income.

The report attributes this to lingering bad debt issue which has resulted in lower appetite for corporate loans, pressure on margins and also movement away from bank borrowings by the better-rated corporates.

Elaborating on the vexed issue of non-performing loans, it said high corporate NPAs have increased pressure on corporate banking and that it is the large and mid-corporate segments which have been hit the most.

There is also an increase in the fraud instances with banks losing Rs 46 crore per day to frauds, it said, attributing it to the Reserve Bank.

The report comes a fortnight after the central bank flagged concerns on the increasing preference to retail loans by banks.

"Retail loan book is not a risk-free segment and banks should not see it as the grand panacea for their problem- riddled corporate loan book. There are risks here too that should be properly assessed, priced and mitigated," deputy governor N S Vishwanathan had said.

Meanwhile, the BCG report, done in association with the global financial messaging cooperative Swift, said corporate clients are unhappy with banks' offerings.

"Corporate clients are not satisfied with the current offerings from their bankers," it said.

The report offers a seven-point corrective action programme, including offering industry-specific solutions, rebooting the relationship manager-based model, exploiting analytics and better pricing.
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