A decline in credit demand from the mainstay corporate segment appears to be pushing banks to target the retail market more aggressively.
HDFC Bank indicated as much on Thursday.
“While we continue to grow our book at 15% on the wholesale side, we have cut back a little on corporate lending,” Paresh Sukthankar, executive director, HDFC Bank, said in a conference call after announcement of the bank’s results for the quarter ended December.
Corporate banking forms a little more than half of the lender’s wholesale banking book, with the balance split between emerging corporates and financial institutions.
About 75% of the bank’s wholesale banking portfolio consists of working capital and trade finance, while long-term loans and project finance make up the rest, said Sukthankar.
But, according to bankers, the reduction in corporate lending may be more out of desperation than desire.
“There is no corporate loan off-take, so you have to bank on retail. If you do not go for such loans, where will you deploy the money?” asked a senior official of a private sector bank, requesting anonymity.
Bankers also point out that in some cases, the companies may not want to take short-term credit as their working capital is not yet exhausted.
“Moreover, in a market where risks exist and payments are getting delayed, banks have to be more careful in giving short-term credit to corporates. At times these loans are also unsecured,” said RK Bansal, executive director, IDBI Bank.
Still, HDFC Bank appears to have gone on an overdrive, with the retail loan portfolio accounting for over 51.3% of the loan book, at Rs100,347 crore.
This is the case even with the State Bank of India, the largest lender in the country. A sample of the bank’s aggression may be had from the fact that it is hard-selling auto loans at 11.75% interest.
Mortgage loans are another focus area for banks.
“The competition in mortgage lending is increasing with banks looking at growth in home loan portfolio as corporate loan growth remains muted and asset quality remains a concern,” said Nitin Kumar, deputy vice-president (research), Quant Broking.
On their part, corporates say they prefer to raise funds from the market by issuing domestic and international bonds rather than approaching the banks.
“We have been raising funds by way of bonds as lending rates of banks are higher. In the fourth quarter, we are planning to raise Rs6,000 crore by way of bonds (domestic and international),” said H D Khunteta, chairman & managing director and director (finance), Rural Electrification Corporation.
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