The State Bank of India anticipates an increase in demand for corporate loans in the second half of the fiscal year. After a subdued first half, marred by a lack of project activity and muted business sentiment, the bank says demand from companies could expand meaningfully in H2.
SBI Expects Corporate Lending to Rebound H2
Corporate lending has remained soft throughout India in H1 due to disruptions related to the monsoon, uncertainty in global trade, and delayed project starts. With increasing policy momentum and clarity on business, banks like SBI are positioning for revival.
Several factors contribute to SBI's optimism. Reforms by the Reserve Bank of India, including liberalisation of external borrowings and efforts to deepen credit supply, have created a propitious environment.
The rollout of the new phase of the GST regime by the government is expected to trigger investment and capital expenditure by corporates, lifting credit offtake. Infrastructure and capital projects, which have been stalled or delayed, are now inching towards execution, triggering fresh demand for bank credit.
As one senior executive at a corporate group noted, lending to corporates is expected to pick up in the second half, as spending on infrastructure was low due to the monsoon, but is anticipated to rise.
SBI Sees Corporate Credit Growth Potential Amid Risks
The bank, however, expects that overall credit growth for corporates could push the estimated sector growth rate upwards from its earlier 11–12 percent range by 1–2 percentage points, according to comments attributed to SBI's chairman. Despite the optimism, the rebound is subject to risks.
Corporations remain cautious about new borrowings amid global macroeconomic uncertainties and domestic cost pressures. The slow uptake in H1 also means banks carry the burden of high standby credit commitments and tight underwriting standards.
At the same time, SBI will have to carefully manage the quality of its assets, as fresh lending in H2 is likely to be concentrated in sectors revived by policy impetus, such as infrastructure and manufacturing, rather than being broad-based across all corporates. Any reversal in policy momentum or supply-chain disruptions could blunt the expected uptick.
Can Corporate Lending Boost SBI’s Growth Amid Pressures?
A pickup in corporate credit is an encouraging growth lever for SBI and other large banks at a time when retail lending growth is already stretched and margins are under pressure.
Corporate lending can help improve capital utilisation and achieve risk diversification across borrowers. Banks have to balance development with prudence by extending credit to viable projects and keeping provisioning for risk in step with exposure.