SBI sees green shoots in roads, city gas distribution and renewable sectors

PSUs seen as drivers of credit demand, which the bank sees growing by 5-7%; No major impact of coronavirus yet

Even as overall corporate lending has been sluggish, green shoots are being seen in sectors like roads, city gas distribution and renewables, said a top official of State Bank of India on Friday.

“We are seeing fresh interest in several sectors on the project finance side, particularly in roads, city gas distribution and renewables. State Bank of India (SBI) has been lending to large proposals and has been appraising projects. So we are seeing green shoots in these sectors,” said P N Prasad, deputy managing director, commercial clients group, SBI, on the sidelines of a seminar on the Insolvency and Bankruptcy Code organised by the Confederation of Indian Industry (CII).

Prasad also said high credit offtake by public sector companies in the last quarter is likely to push overall credit demand up by 5-7 per cent.

SBI’s comments come amid predictions of record low credit growth. According to a recent report by credit rating agency Icra, bank credit is expected to grow at 6.5-7 per cent in the current fiscal, the lowest in 58 years. SBI's overall corporate lending growth, which is normally at 7-8 per cent, has been muted this year at 0.5-1 per cent. Many companies are also not using their working capital limits and some are even surrendering them, Prasad added.

“There could be two reasons for this. Companies are not investing in fresh projects and since they don't want to keep the money idle, they are paying back their working capital loans in order to reduce their costs. Alternatively, there has been no increase in demand because of which they are cutting down on working capital assistants,” said Prasad.

According to recent data released by the National Statistical Organisation (NSSO) the index of industrial production shrank 0.3 per cent in December 2019.

Some of the sectors that have seen stress include, thermal power, NBFC and commercial real estate. In the NBFC segment, the bank has an exposure of Rs 1.7 trillion, including investments, he said.

 
However, with proactive measures to contain NPAs (non-performing assets), slippage has slowed down in corporate banking, said Prasad, adding that there would be some aberrations due to some large accounts that were already identified as stressed.

“On the retail side consisting of home loans, consumer and personal, SBI is doing extremely well, registering an 18-20 per cent growth in the personal banking segment,” he said.

Coronavirus impact

While there has been little stress so far in the banking sector due to the Coronavirus outbreak, going forward, there could be some risk, said Prasad.

“Coronavirus could impact bank lending in sectors like chemicals, gems and jewellery, and automobiles. The bank is monitoring the situation. All global developments are being closely watched. The international banking segment is watching, how it will impact fund raising and lending. So far, there is no impact,” said Prasad.