Kamath says banks last funding resort for firms

Corporates are funding their expansion plans mostly through internal accruals and through domestic and foreign borrowings. Banks are the last resort of funds for them, said K V Kamath, CEO and managing director of ICICI Bank.

Corporates are becoming more discerning and are looking for new and a range of financial product offerings.

"In the next 12 months we see around Rs 2,50,000 crore of corporate credit in the pipeline," he added. The pick-up is expected from sectors such as infrastructure, telecom, oil and gas, cement, steel, power and real estate.

However, around 60 per cent of this demand is likely to be met from internal accruals, 15 per cent through fresh capital raising, another 15 per cent through external commercial borrowings or FCCBs, while the remaining will be funded by banks.

In the current fiscal the bank will continue to focus on origination of both consumer and corporate credit, agriculture, small and medium enterprises and non-fund based products.

ICICI Bank has seen a 68 per cent year on year growth in its retail portfolio. The retail portfolio constitutes around 61 per cent of the banks advances.

"Corporates are exploring various means of raising capital such as foreign and domestic borrowing and internal accruals," said a senior official at UTI Bank.

The official begged to differ with Kamath. He said the UTI Bank's corporate credit offtake has also increased as compared with the previous year.

"We have witnessed a 50 per cent growth in our corporate book this year," said the official. The RBI latest figures also suggest a increase in credit pick up from corporates, he added

According to G V Nageshwar Rao, CEO, commercial banking SBU IDBI Ltd, though corporates are looking at various options to raise funds, his bank has seen a 38 per cent growth in corporate lending.

The Reserve Bank of India (RBI) figures also indicate a pick-up in credit. In 2004-05, bank advances shot up to Rs 218,624 crore.

During the same period banks raised Rs 211,962 crore (net of IDBI's conversion into a commercial bank) by way of fresh deposit (as on March 1, the last reporting Friday of the year).

The incremental credit deposit ratio thus exceeded 100 per cent.