Demand for corporate loan picks up, slowly

Mumbai: Corporate loan demand is back, albeit slowly. Its share of loans in fresh disbursals rose to 2.5 per cent in June after it shrunk in the same period last year, RBI data shows. At the same time, the proportion of home loans and unsecured personal loans shrank amid rising interest rates.

Total loans to large corporates stood at Rs 21.75 lakh crore as of June-end, rose 1 per cent over the same period last year. But for banks, share of large corporates in their fresh loan portfolio between June 2017 and June 2018 rose to 2.5 per cent after it shrunk in the same period last year.

Also, share of loans to NBFCs in fresh loans rose to 16 per cent, it shrunk in the same period last year. The NBFC loan portfolio is, however, smaller at Rs 4.6 lakh crore in June 2018. Banks are seeing demand from industries like construction largely for working capital needs. “We are seeing demand from large corporates in mainly construction sector among others,” said Raj Kiran Rai, MD, Union Bank of India. “Much of the demand is for working capital loans. We still have to see demand for large projects pick-up.”

RBI also acknowledged pick-up in economic activity in its latest bimonthly monetary policy statement. “The output of eight core industries accelerated in June due to higher production in petroleum refinery products, steel, coal and cement. Capacity utilisation in the manufacturing sector remains robust. The assessment based on RBI’s business expectations index for Q1:2018-19 remained optimistic,” it said.

Corporates have preferred to access the markets directly through CPs to meet working capital needs. But with yields hardening, bank loan has again become attractive.