Large private banks undercut smaller ones in corporate loans, BFSI News, ET BFSI
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Large private banks are offering aggressively priced refinance loans to lower-rated corporate borrowers of smaller banks.
The rates offered are almost 200 basis points lower than the market rate, which smaller banks are unable to match, according to reports.
With the Reserve Bank of India maintaining an accommodative stance, there is abundant liquidity in the market and rates are at rock bottom. Corporates whose loans are up for refinance are looking to take advantage of the opportunity to cut their interest costs.
PSU banks
PSU banks took are taking a hit.
The domestic corporate loans by the State Bank of India fell 2.23 per cent to Rs 7,90,494 crore in the quarter ended June 30, 2021, compared to Rs 8,09,322 crore in the same quarter last year. In the first quarter of FY21, SBI reported 3.41 per cent growth in corporate advances.
Union Bank of India‘s share of industry exposure in domestic advances dropped to 38.12 per cent at Rs 2,40,237 crore from 39.4 per cent at Rs 2,47,986 crore in the same quarter a year ago. Corporate loans dropped 3% at Indian Bank during the last quarter. At PNB, corporate loans fell 0.57 per cent at Rs 3,264,66 crore in June quarter 2021 compared to Rs 3,28,350 crore a year ago. However, HDFC Bank expanded its corporate loans over 10% in the April-June quarter to about Rs 3.15 lakh crore.
Up to May, the gross loans to large industries declined by 1.7 per cent year-onyear, according to RBI data.
Ceding ground to private-sector rivals
The market share of public sector banks in loans declined to around 59 per cent (of all scheduled commercial banks’ outstanding credit) in December 2020 against around 65 per cent in December 2017.
However, during this period, PvSBs market share rose to around 36 per cent from around 30 per cent, going by Reserve Bank of India data.
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