SBI steps up infra loans on signs of pvt capex pickup
MUMBAI: State Bank of India (SBI), India’s largest lender, has doubled down on loans to the infrastructure segment comprising roads, ports, and power in FY22, amid renewed demand for credit from private firms.
In FY22, about 10% of all new loans from the lender by value were towards the infrastructure segment, as against 3% in the previous fiscal year, showed Basel III disclosures by the bank. SBI’s exposure to all industries increased by ₹3.5 lakh crore in FY22––both fund-based and nonfund based—of which incremental loans to the infrastructure sector were at ₹34,167 crore. In the previous fiscal year, SBI’s exposure to all industries rose ₹1.5 lakh crore from FY20, of which infrastructure loans accounted for ₹4,614 crore.
The state-owned lender seems to have stepped up its efforts to finance infrastructure at a time the government is aggressively pushing capital expenditure spending to prop up a covid-hit economy. In FY23, the Union government allocated ₹7.5 lakh crore for capex spending, 35% higher than the previous fiscal year. Bank loans to the infrastructure sector grew 10% from a year earlier in April, Reserve Bank of India (RBI) data showed.
Experts tracking the banking industry said that infrastructure financing was not happening for the longest time, especially after the stress post the last round of financing, which involved power, coal, and a few other sectors. Banks had become very cautious about infrastructure financing. It was also partly because they lacked adequate capital to finance large infrastructure projects. Fresh projects at initiation are typically risky and not very capital efficient, requiring banks to allocate more capital against such lending.
“Things have slightly improved, although the recovery is not quite a broad-based one. We believe state banks are still quite cautious and choosy as their capital buffers are still relatively quite weak,” said Saswata Guha, senior director (Indian bank ratings), Fitch Ratings.
SBI has also seen improved utilization of loans sanctioned earlier but are only now being put to use by companies. As of March 31, 46% of SBI’s working capital limits remained unutilized, compared to 50% at the end of December last year. For term loans, unused credit is about 19% of the sanctioned amount, and the bank believes this points to the potential credit offtake in 2022-23. “We have already sanctioned for ports and airports and are going to finance a lot of infrastructure-related activities,” SBI chairman Dinesh Khara said after announcing the bank’s March quarter results on 13 May.
India’s largest lender is not alone in its bullishness on infra financing. Large lenders like Bank of Baroda (BoB)and Canara Bank have also seen growth in such loans in FY22. While BoB’s infrastructure exposure rose 34%, Canara Bank saw infrastructure loans grow 32%. “We are very active in hybrid annuity model projects, infrastructure projects, steel, even to some extent in power and renewable energy. We are seeing growth in various sectors,” LV Prabhakar, CEO of Canara Bank, told analysts on 6 May.