 "IDBI Bank eases restrictions on corporate lending")
IDBI Bank has eased restrictions on corporate lending, following an improvement in the lender’s performance on priority sector lending in 2014-15.
About 65 per cent of the bank’s loans are to corporate entities. A cap on lending to the corporate sector was introduced because the bank had to rebalance its net bank credit to meet priority sector lending norms. Of a lender’s overall loans, 40 per cent must be towards priority segments such as agriculture. The bank’s growing corporate loan book meant priority sector lending obligations also rose but often, its limited branch network prevented it from meeting targets.
Chairman and Managing Director M S Raghavan said, in the past two years, the bank focused on increasing its priority sector lending book. For FY15, this segment accounted for 37.2 per cent of overall loans, against 34.5 per cent in FY14.
The revised priority sector norms, which now cover loans to medium enterprises and agro-processing units, are expected to help the bank meet the 40 per cent target. “In this backdrop, we are easing the limits set on corporate lending,” Raghavan said.
Another senior IDBI Bank executive said the demand for loans from corporate entities had been tepid for the past two-three years, when economic growth was slow. This helped rebalance the bank’s loan book. The easing of norms is expected to help the bank scale up lending to companies when demand revives in the second half of FY16.
IDBI Bank’s total advances grew five per cent to Rs 2,08,377 crore in FY15. In FY14, loans had increased one per cent to Rs 1,97,686 crore. On capital requirements to fund growth, Raghavan said with a capital adequacy ratio of 11.76 per cent at the end of March this year, there was no hurry to raise equity.
The stock is trading at about Rs 70, about half the book value of Rs 141 at the end of March.
The government, which holds 76 per cent stake in the public sector lender, has infused Rs 6,284 crore in four tranches between 2010-11 and 2013-14. In 2014-15, the bank wasn’t included in the list of public sector lenders that received capital from the government, as it had failed to meet efficiency norms.
About 65 per cent of the bank’s loans are to corporate entities. A cap on lending to the corporate sector was introduced because the bank had to rebalance its net bank credit to meet priority sector lending norms. Of a lender’s overall loans, 40 per cent must be towards priority segments such as agriculture. The bank’s growing corporate loan book meant priority sector lending obligations also rose but often, its limited branch network prevented it from meeting targets.
Chairman and Managing Director M S Raghavan said, in the past two years, the bank focused on increasing its priority sector lending book. For FY15, this segment accounted for 37.2 per cent of overall loans, against 34.5 per cent in FY14.
The revised priority sector norms, which now cover loans to medium enterprises and agro-processing units, are expected to help the bank meet the 40 per cent target. “In this backdrop, we are easing the limits set on corporate lending,” Raghavan said.
Another senior IDBI Bank executive said the demand for loans from corporate entities had been tepid for the past two-three years, when economic growth was slow. This helped rebalance the bank’s loan book. The easing of norms is expected to help the bank scale up lending to companies when demand revives in the second half of FY16.
IDBI Bank’s total advances grew five per cent to Rs 2,08,377 crore in FY15. In FY14, loans had increased one per cent to Rs 1,97,686 crore. On capital requirements to fund growth, Raghavan said with a capital adequacy ratio of 11.76 per cent at the end of March this year, there was no hurry to raise equity.
The stock is trading at about Rs 70, about half the book value of Rs 141 at the end of March.
The government, which holds 76 per cent stake in the public sector lender, has infused Rs 6,284 crore in four tranches between 2010-11 and 2013-14. In 2014-15, the bank wasn’t included in the list of public sector lenders that received capital from the government, as it had failed to meet efficiency norms.