Loans to large industries push up bank credit

Big-ticket loans to industries and corporate houses are gradually growing as sectors such as road, steel, automotive component manufacturers and telecommunications are beginning to revive.

Bankers say there is demand from the steel sector, with some existing companies utilising their credit limits, and others such as Bhushan Steel and Electrosteel Steels going for a change in management after an insolvency process was initiated by the National Company Law Tribunal (NCLT).

Arijit Basu, managing director in charge of commercial credit at the State Bank of India (SBI), told DNA Money that there is a pick-up in corporate loans from across sectors, especially road, automotive and auto component, road projects which will be on Hybrid annuity model and steel. "There is fresh demand and requirement for credit enhancement, but SBI is proceeding very cautiously. We will only lend to companies that have relationship with us. The steel sector is particularly looking up. There is demand from companies which are taking over assets through the NCLT, but here also we are looking to fund only the top-rated companies."

With many of the stressed assets up for sale in NCLT, the steel sector is a sweet spot for bankers as the assets are state of the art and the it has now changed hands to stronger promoters. The year-on-year bank credit grew at 10.5% to Rs 76,73,400 crore until July 20, 2018, driven by growth in industrial loans, especially to the infrastructure sector and retail loans like home loans and vehicle loans. The same time last year the credit growth was a mere 4.7%. However, though the iron and steel sector has seen a de-growth of 10.4% during this period while at the same time last year it was growing at over 4%. Bankers said a robust demand is coming from the steel sector as sub-sectors such as construction have picked up.

The credit growth revival is the sharpest for the medium-scale industries where the loans have grown 2.9% to Rs 103,500 crore. In the year-ago period, these loans were de-growing at 7.7% over the previous year as many steel companies were stressed and turning non-performing. Many were also referred to the NCLT which resulted in curtailing all credit facilities.

Though banks continue to be cautious, the large corporate credit grew 0.3% until July 20, 2018 over the previous year to Rs 21,74,100 crore. In the year-ago period, the growth of large industrial credit was flat.

C G Chaitanya, executive director, Bank of India, said the road sector where the hybrid annuity model (HAM) projects are being implemented is pushing the credit growth. "There are unutilised credit limits in the steel companies while some are in the NCLT where there is a change in the management. The assets in the steel sector are good and the new promoters may require support which we are providing," he said.

Loans to commercial real estate are growing at the rate of 2.4% to Rs 1,81,800 crore while in the same period last year banks were shunning credit to the sector with loans to real estate companies de-growing by 2.3%.

During the last financial year, companies, especially in the steel sector, got referred to the NCLT, which led to a slide in the demand for fresh loans or credit enhancement. Bankers and industry officials believe that with new promoters taking over some of the steel companies the demand and disbursal of loans to the sector will improve.