Canara Bank, Indian Bank See Combined Corporate Loan Pipeline of ₹1.1 Lakh Crore
Canara Bank and Indian Bank are seeing strong credit demand from corporations, with a combined loan pipeline of ₹1.1 lakh crore. Canara Bank has proposals worth ₹47,000 crore, while Indian Bank's pipeline stands at ₹63,000 crore. This demand reflects a broader trend of companies turning to banks for funding as rising bond yields make borrowing from the market more expensive. India's bond yields hardened by 44 basis points (0.44 percentage points) in the last quarter. A basis point is one hundredth of a percentage point (0.01%).
What this means
When the cost of borrowing from public markets goes up, companies knock on their bankers' doors. The rising government security yields are making corporate bonds less attractive for issuers, creating a direct business opportunity for banks' corporate lending divisions. This is good news for bank net interest margins, especially as they face pressure from rising deposit costs. The challenge for these public sector banks will be to fund this loan growth efficiently by shoring up their deposit base, a focus both managing directors highlighted. It's a race to capture this demand without letting the credit-deposit ratio get too out of hand.
Most affected: PSU Banks' corporate loan books, corporate bond market
Key takeaway: As rising yields make market borrowing expensive, banks with strong deposit franchises are well-positioned to capture the resulting increase in corporate credit demand.
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