Corporate advance growth for large banks robust in Q2 as demand picks up

Pickup driven largely by higher working capital demand

Large banks, private and state-owned, witnessed healthy growth in their corporate loan books in Q2FY26 as aggressive pricing seen in previous quarters gave way to greater pricing discipline.

 

The pickup was driven partly by fresh corporate investment but more by higher working-capital demand. Additionally, the loan pipeline for public-sector banks remains robust while private banks anticipate strong growth in the coming quarters.

 

Growth in major banks’ books comes at a time when, in Q1FY26, lenders had cautioned that companies were increasingly shifting from bank financing toward alternative sources such as the domestic debt market, overseas bond and loan markets, private credit funds, and internal cash reserves for their working-capital needs.

 

In Q2FY26, the domestic bond market witnessed muted issuance as yields rose amid a series of adverse developments, including the imposition of American tariffs on India and a hawkish stance by the Reserve Bank of India.

 

Consequently, fund mobilisation through the domestic bond market declined to ₹2.03 trillion in Q2 as against ₹3.44 trillion in Q1.

 

HDFC Bank, India’s largest private bank, reported 6.7 per cent year-on-year (Y-o-Y) growth in Q2.

 

Sequentially its corporate books grew 4.7 per cent and overall gross advances 4.4 per cent.

 

“If we look at the past four-five quarters, growth was moderate but this quarter it was higher. There are times when there is demand and we have relationships with most companies in the country. So, we participated in some of the transactions in Q2 at a price that is reasonable and that we like. It is largely working capital financing we have participated in,” said Srinivasan Vaidyanathan, chief financial officer, HDFC Bank, at a post-earnings media call. 

 

“When we were working through the balance-sheet repositioning, the pricing on wholesale was extremely competitive. And it was not something that was at a level which provided adequate spread over the sovereign rates. So we were circumspect in terms of selecting what we wanted. But at the same time, we maintained those relationships with various companies,” he said.

 

Axis Bank reported 20 per cent Y-o-Y growth in corporate loan books, with domestic growth being 25 per cent and mid-corporate books went up 28 per cent.

 

Robust growth drove the bank’s overall loan expansion in the quarter.

 

“We have always maintained we will grow when we find the pricing to be to our liking. So, there have been opportunities in the quarter,” said Subrat Mohanty, executive director, banking operations and transformation, adding that in Q2, there were a few good opportunities that came the bank’s way, something not seen in the past.

 

“In general, we find that there is opportunity in the wholesale segment, based on strong relationships that we have got and some of the trends we are seeing in certain sectors where there is movement from clients in terms of making new investment. So, that’s what happened on the corporate books. It’s come with the kind of pricing discipline that we have always maintained,” he said.

 

Punjab National Bank, which is state-owned, reported 8 per cent Y-o-Y and 3 per cent sequential growth. Its overall loan books grew 10.5 per cent Y-o-Y and 3.6 per cent sequentially.

 

“We currently have new proposals worth ₹1.48 trillion in the pipeline. We sanctioned ₹2.68 trillion in FY25, and in the first half of FY26, we reached the sanctioned ₹2.81 trillion under the corporate loan portfolio. For FY26, we expect to scale this up to ₹4 trillion,” said Ashok Chandra, managing director (MD) and chief executive officer (CEO), Punjab National Bank, in an interview to Business Standard earlier this week.

 

Bank of India reported 11.7 per cent Y-o-Y growth in its corporate books in Q2 and the bank’s management has guided that its corporate-loan pipeline exceeds ₹50,000 crore. Additionally, the bank’s management has said many of the sanctioned proposals are awaiting disbursements and these span across sectors such as data centres, warehousing, and solar photovoltaic modules.

 

Indian Overseas Bank has indicated a sanction pipeline of around ₹15,000 crore, with projects at various stages of disbursement, and a significant portion of these sanctions is expected to be disbursed during the current quarter (Q3), the management has guided.