New banks see 30% rise in credit offtake

With corporate India looking at capacity expansion in a big way, new generation private sector banks such as ICICI Bank, HDFC Bank and UTI Bank expect their corporate portfolio to grow by around 25-30 per cent in the next six months.

The offtake of non-food credit had increased by Rs 1,76,496 crore year-on-year on October 1, 2004.

Sectors like pharmaceuticals, petrochemical, paper, steel, cement, textile, telecom and infrastructure have witnessed good credit pick-up in the first six months of the current fiscal, said bankers.

The total planned investments by private and public sector companies over the next four years will be around Rs 7,09,845 crore, said Centre for Monitoring Indian Economy (CMIE).

Bala Swaminathan, senior general manager, ICICI Bank, said, "Companies are chalking out plans for capacity expansion and they are expected to borrow around Rs 200,000 crore over the next 18 months. However, the actual implementation of these projects will take around 12-16 months."

About 50 per cent of corporate India's expenditure will be met by internal accruals, around 20 per cent to be met from the overseas market while the remaining 30 per cent will be split between bond and loans, said Swaminathan.

A senior official from IDBI said sanctions to the chemical industry have increased substantially in the first six months of the current fiscal to Rs 535 crore against Rs 316 crore in the corresponding period last fiscal.

The institution is expected to sanction credit to the tune of Rs 7,000 crore to the steel, paper and textile sectors. In the last six-nine months, HDFC Bank has seen an increase in demand for working capital requirements.

"However, the demand has not been adequate enough to push up interest rates," said Paresh Sukthankar, head, credit and market risk, HDFC Bank.

The bank expects a 30 per cent growth in its corporate portfolio in 2004-05 against 15 per cent in the year-ago period. About 20 per cent of the bank's top tier corporate clients are looking at capacity expansion in the next 12-16 months, he added.

Asok Kumar, president, credit, UTI Bank, said the bank expects to grow its credit portfolio by 25 per cent to Rs 10,000 crore by the fiscal ended March 2005.

The bank is mainly into financing small projects, he added.