SBI sees sharp decline in working capital loans

Write-offs in the current financial year were fairly high, impacting credit growth figures. GP Sampath Kumar

Write-offs in the current financial year were fairly high, impacting credit growth figures. GP Sampath Kumar  

Home, auto loans showing growth, but corporate sector utilisation low: Kumar

Banks in India are facing sharp decline in demand for loans despite interest rates falling by 135 bps between February and now.

Referring to working capital limits drawn by large and mid-sized Indian companies, Rajnish Kumar, chairman, State Bank of India, the country’s largest lender, said only 31% of the sanctioned limits are utilised by those companies.

He said while term loans like home and auto loans were showing growth, it was the corporate sector where demand had substantially slowed down.

“The fact is, on year-on-year basis there is a growth in term loans, 15% growth. So, this means there is a loan to housing sector, vehicles, anything which is payable over a period of time. [But] there is a sharp decline in the sanctioned working capital limits,” Mr. Kumar said at an event organised by Bloomberg.

According to latest data released by Reserve Bank of India, credit growth has fallen to single digit during the fortnight ended September 27, for the first time in the current financial year.

“Last year, our growth was negative — ₹13,000 crore. But this year, there is a sharper decline,” the SBI chairman said, adding that the utilisation of the credit lines which the bank had already committed was very low, particularly for large and mid corporates. “Their utilisation is currently averaging around 31%. For SME working capital utilization is around 70%,” Mr. Kumar explained.

The Reserve Bank of India has reduced the repo rate by 135 bps since February to boost economic activity and loan demand. However, the first quarter of the current financial year saw GDP growth rate slowing down to 5%, the slowest in 25 quarters.

Mr. Kumar said write-offs in the current financial year were ‘fairly high’, which was also impacting the credit growth figures.

He also said that law enforcement agencies should restrict to attaching personal assets while investigating a promoter and keep off the company which is under insolvency process.

“Any action which ED or any other central authority has to take, they can take with the existing promoters and attach their personal assets leaving their companies away,” he said, adding that the agencies should follow this rule especially in case of companies which were undergoing bankruptcy process.

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Printable version | Jun 3, 2020 12:21:34 AM |

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