Banks eye mid-sized companies as larger counterparts eye market debt

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Bombay : Banks have focused more on mid-sized companies to achieve loan growth, bankers said, as interest spreads on loans to large companies with stronger credit profiles remain under pressure due to finer pricing and increased competition.

Banks said most of their credit demand came from medium-sized businesses in the three months to December. This has led to more banks actively targeting this segment, which has lower interest rate bargaining power than large corporations, thus offering higher yields to lenders.

The private sector lender IDBI Bank has an internal criterion for classifying corporate borrowers whose revenues can reach 700 crore as intermediary companies. The bank focuses on this segment of borrowers rather than large corporations.

“We have seen 12% year-over-year growth in the mid-market corporate loan portfolio, so we will be taking smaller exposures to the right companies. Our focus will be on advancing quality in a calibrated and When we were under Rapid Corrective Action (RAP) and even after that for more than a year, there was a decay in corporate advances,” said Rakesh Sharma, Managing Director of IDBI Bank. bank was under APC restrictions of the Reserve Bank of India (RBI) between May 2017 and March 2021.

Stating that there has been a recovery in overall business growth, Shyam Srinivasan, Managing Director of the Federal Bank, said 2022 is expected to deliver good growth with improving economic activity and strengthening plans for investment. As a result, Srinivasan expects the Federal Bank’s business loan portfolio to grow in the early to mid-teens this year.

“As economic activity picks up and the credit trajectory builds, the middle market is where the maximum would come from, and we are already seeing that happening. Business growth has been quite broad and is not geographically or sectorally biased in a particular area,” Srinivasan said.

He said Federal Bank had a strong presence in the mid-market segment, which saw a significant recovery in the December quarter.

“Big companies tend to be more price sensitive as they also consider many instruments for borrowing opportunities and only turn to banks when other instruments become less attractive,” Srinivasan said.

Bank loans to medium-sized businesses grew the fastest of all business loans, at 48.7% year-on-year. 1.87 trillion in November 2021, albeit on a small base.

Admittedly, the demand for credit is currently driven by loans to individuals, which increased by 11.6% compared to the previous year to November 19, against a growth of 3.8% in advances from businesses.

Corporate credit is showing signs of improvement and the working capital segment is at the forefront of this growth.

A large chunk of businesses, bankers said, are still in deleveraging mode and have yet to commit to investment plans that require term loans.

“We have focused on growth in selected segments. We have seen good growth in the business community; and we also saw nice growth in the commercial banking group, which is one segment below mid-sized,” Ganesh Sankaran, group director (wholesale banking hedging group) at Axis Bank, told analysts on Thursday. January 24.

The bank, Sankaran said, is seeing some recovery in the use of working capital as economic activity picks up.

“And across the board, we’re seeing credit drawdowns in renewables, roads, industries, chemicals, disbursements coming back to NBFCs (non-bank financial corporations) and others. So we think we’re going to stay on that course. We’re quite optimistic about continued growth,” he said.

Axis Bank’s business loan book grew 13% year-over-year in the December quarter. Mid-sized business loans jumped 44%, with growth spread across sectors, driven primarily by organized retail, engineering, petrochemicals, industrials and real estate

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