Tag: corporate loans

Large corporates no longer borrowing engine for banks as retail borrowing rises, BFSI News, ET BFSI

Banking & Finance

[ad_1]

Read More/Less


The dominance of large corporate accounts in banks’ loan portfolio that lasted until 2014 has shrunk, giving way for retail borrowing to rise, according to a study by the Reserve Bank of India.

An analysis of the sectoral composition of non-food credit by a team of RBI economists reveals that the share of the industrial sector in overall non-food credit offtake, which stood at over 45% in 2013-14, declined to around 30% by 2020-21.

Over the years, retail and services sector loans have gained more prominence.

Capital investment shrinking

Capital investment by private companies could slide this financial year as well, after shrinking in the previous year due to COVID-19 lockdowns, a central bank forecast shows.

A study of the phasing profile, i.e., stage wise implementation over three or four years, of planned capex of pipeline projects could shrink 27% on year to Rs 68,469 crore. The phasing profile of the capital expenditure based on the pipeline of sanctioned projects in the previous years indicates a decline from Rs 94,227 crore in 2020-21 to Rs 68,469 crore.

The pandemic impacted adversely appetite for new projects during 2020-21, and also posed impediments to timely completion of projects in the pipeline, the RBI said.

The regulator assessed that a total capex of Rs 1.60 lakh crore would be incurred by the private corporate sector in FY21, translating into a sharp dip of 30% from the previous year.

Retail going strong

The outstanding retail loans are higher at Rs 28.6 lakh crore against Rs 28.2 lakh crore for industry that includes MSMEs and large corporates at the end of July. The outstanding loans to the services sector stand at Rs 26 lakh crore.

The growth rate of the retail/personal loans segment stood at 11.2% in July 2021, higher by 220 basis points when compared with July 2020.

In absolute terms, credit outstanding has increased from Rs 25.7 lakh crore in July 2020 to Rs 28.6 lakh crore in July 2021.

The growth in retail loans has been driven by personal unsecured, vehicle loans and gold loan lending by some banks. The growth rate came in higher by 120 bps as compared with March 2021.

Industry loans

The industry segment witnessed a growth of 1% on a year-on-year basis in July 2021, after witnessing a de-growth in previous month. Large industries account for 80.5% share (83.8% share in July 2020) in the total outstanding credit to industries, and this segment reported a drop of 2.9% in July 2021 versus a growth of 1.4% in July 2020.

The growth movement is weak as corporates continue to de-leverage and select large corporates access to bond markets. MSME industries grew by 21.3% in July 2021, which partially offset the fall in large segments, compared with a drop of 1.8% in July 2020. The growth in lending to industry and services was almost entirely led by the MSME segment, which was driven by disbursements under ECLGS scheme, wherein Rs 2.14 lakh crore were disbursed up till date.

Click here to read our coverage on the banking sector



[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , , , , ,

Medium industries show a sharp 72% jump in credit growth in July, BFSI News, ET BFSI

Banking & Finance

[ad_1]

Read More/Less


With the easing of restrictions of movement and economy, credit offtake is also rising.

The credit growth in the last two months is being led by is led by MSMEs, agriculture and retail even as corporate lending stays tepid.

Lending to MSMEs, agriculture and retail picked up sharply in July this year over previous year’s levels, data on sectoral deployment of bank credit released by the Reserve Bank of India showed.

Credit to agriculture and allied activities expanded 12.4% in July 2021 as compared with 5.4% in last July. But credit to medium industries rose at a much faster pace – by 72% – in July 2021 as compared to a contraction of 1.8% a year ago.

Hinterland growth

Much of the growth has accordingly come from urban, semi-urban and rural areas. Weighted average lending rates on outstanding and fresh loans are down 91 basis points (bps) and 80 bps, respectively, since the pandemic-induced lockdown in March 2020.

Credit to micro and small industries rose 7.9% in July 2021 as compared to a contraction of 1.8% a year ago.

Retail loans, too, expanded at a faster pace of 11.2% in July 2021 as compared to 9% a year ago, primarily due to higher growth in ‘loans against gold jewellery’ and ‘vehicle loans’ growth of 1.4% a year ago.

Credit growth to the services sector slowed to 2.7% in July 2021 from 12.2% in

July 2020, mainly due to slowdown in bank lending to ‘NBFCs’, and ‘commercial real estate.

In June

Loans to agriculture and allied activities showed an accelerated growth of 11.4 per cent in June 2021 as compared to 2.4 per cent in June 2020.

Retail loans, covering housing and vehicles, among others, registered an accelerated growth of 11.9 per cent in June 2021 compared to 10.4 per cent a year ago.

The overall credit growth in the industrial segment fell by 0.3 per cent in June 2021 from growth of 2.2 per cent a year ago.

Credit to medium industries rose by 54.6 per cent in June 2021 compared to a contraction of nine per cent a year ago.

Credit growth to micro and small units rose to 6.4 per cent in June 2021 compared to a contraction of 2.9 per cent in June 2020.



[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , , , , ,

Equitas Small Finance Bank collection efficiency improves in July

Banking & Finance

[ad_1]

Read More/Less


Equitas Small Finance Bank on Wednesday said its collection efficiency has improved to 104.62 per cent in July, up from 83.49 per cent in the previous month. However, the collection efficiency of the lender is still lower than 105.16 per cent recorded in April 2021.

On a product-wise basis, month-on-month collection efficiency in Microfinance went up to 91.76 per cent in July from 66.90 per cent in June while the collection efficiency of Small Business Loans went up to 109.19 per cent (85.14 per cent) during the period.

Equitas Small Finance Bank’s Q1 net profit drops 79%

Vehicle finance witnessed a collection efficiency of 99.75 per cent in July (89.33 per cent) while the efficiency in Corporate loans went up sharply to 159.91 per cent (103 per cent).

The overall billing efficiency of the Chennai-based lender also went up to 83.86 per cent in July from 69.52 per cent in the previous month. However, billing efficiency in July is lesser than 91.12 per cent recorded in March 2021.

Last week, the bank reported a net profit of ₹11.93 crore for the first quarter, 79 per cent down from the net profit of ₹57.67 crore posted for the same quarter last year.

[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , ,

After retail, ICICI eyes digital opportunities in corporate sector, BFSI News, ET BFSI

Banking & Finance

[ad_1]

Read More/Less


As retail loans, the mainstay of banks reeling under bad loans, for many years shows pandemic stress, lenders are turning back to corporates.

ICIC Bank, which has been cautious on bulky corporate lending, is looking to increase exposure to companies as it sees them benefiting from the Covid pandemic recovery. Corporate loans constitute 45% of the bank’s Rs 7.33 lakh crore loan book.

ICICI STACK

To tap the corporate loan pie, the company has launched a digital solution, aimed at profiting by offering a wider set of services to high-value clients.

The second-largest private sector lender also said that the corporates are slower in adopting digital solutions as compared to the retail segment, and added that the solution focuses on tech-based new age offerings.

A corporate needs a trusted partner, who will handhold and help manage business holistically.

Its newly launched ‘ICICI STACK will provide digital banking solutions to corporates, their channel partners, employees and other stakeholders.

The bank expects corporate demand also to pick up in the next economic cycle. The bank has doubled the number of current accounts in the last year, The bank has launched a new digital banking product that will provide transaction services, credit facilities, advisory and M&A services for companies and their vendors. It will also offer savings bank accounts to the company employees which will help it build its deposits.

Comprehensive product

The new comprehensive digital offering will help the bank connect with companies their vendors and also employees providing it with valuable information to assess the financial health of their clients besides multiplying opportunities for business.

The bank will offer this new product to 15 industries initially, like information technology, pharmaceuticals, steel and financial services. It has opened eight dedicated branches, five in Mumbai and three around Delhi to serve these customers. Another four branches focussed on these services will be launched later this fiscal.

The lender is not looking at it from a line-by-line perspective and expects the initiative to play into the overall profits.

About 90 per cent of the bank’s retail transactions have moved away from paper-based systems like cheques and termed the adoption of digital alternatives among corporates as “low”. Corporates have doubled up on digital transactions, but have a long way to go on it.

Corporate loan growth

The bank feels India will grow after the ravages of the pandemic and the same will come from both investment and consumption.

In such a scenario the corporate loan demand will also fire up, and added that its corporate loan book is a function of the opportunities in the market.

The bank had witnessed a 13 per cent growth in corporate advances in the March quarter as against 20 per cent on the retail front, and overall domestic loan growth of 18 per cent.

It can be noted that even before the pandemic, corporate loan growth was trailing for banks, which shifted focus to the more resilient retail segment amid asset quality reverses on the large value loans. Some experts say with demand affected, corporates are unlikely to up their investment activities, which typically result in loan growth.



[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , , , ,