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MUMBAI : As banks loosened their purse strings to fund infrastructure projects and cater to increasing working capital requirements, corporate credit growth touched an eight-year high in FY22.

Corporate loans grew 7.1% year-on-year in FY22, against a contraction of 0.4% in the previous fiscal year.

Bankers said there is a healthy pipeline of project finance opportunities in FY23 as well, and demand will sustain as more infrastructure projects are executed. In fact, working capital demand rose on the back of higher input costs and rising day-to-day operational expenses. There are also some green shoots in the private sector investment cycle, they added.

“Quite a few projects are at the drawing board stage and they should take off in FY23," said Samuel Joseph, deputy managing director, IDBI Bank. Approvals have also been given for various production-linked incentive (PLI) schemes of the government, but are yet to reach the financing stage, said Joseph. He expects some of these projects to reach the financing stage in the first or the second quarter of FY23.

In 2021-22, bank loans to infrastructure projects grew by 9.3% to 12.02 trillion, against the 1.6% growth in FY21, showed data from the Reserve Bank of India (RBI).

Adani Enterprises Ltd-owned Navi Mumbai International Airport with loans of 12,770 crore was one of the largest bank-funded projects during the quarter.

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While core sectors, including steel, cement, oil and gas, should do well, given the post-pandemic demand, other manufacturing sectors, such as light auto components and pharmaceuticals also have potential for more credit demand, bankers said.

“We are seeing green shoots in infrastructure, manufacturing, certain agro-based industries, renewable energy, and airports," said Rajneesh Karnatak, executive director, Union Bank of India. There is demand from the road sector as well and the hybrid annuity model (HAM) has given confidence to bankers, Karnatak said. “It is a win-win situation for developers as well as banks since projects are getting completed on time," he added.

Mint reported on 18 April that banks are evaluating two large road projects—the 594-km Ganga Expressway in Uttar Pradesh and the 17.17-km Versova-Bandra Sea Link in Mumbai, with aggregate loans of 11,000 crore.

The Ganga Expressway, agreenfield project between Bijouli village, Meerut, and Judapur Dadon in Prayagraj, will be built by Adani Enterprises and IRB Infrastructure Developers Ltd. The Versova-Bandra Sea Link will be built by Apco Infratech and Webuild.

 

Financial sector experts expect corporate loan demand to continue through this fiscal year, driven by infrastructure, renewable energy, and sectors covered under PLI schemes. However, the rising interest rate scenario may play spoilsport in companies’ capital expenditure plans, although experts do not expect much deviation from their original plans. “After a lull due to the pandemic, corporates are now looking at capex to cater to an increase in government expenditure and a rise in consumer demand. Though an increase in rates will play a role in the capex decisions, the overall positive sentiment towards capex is unlikely to change," said Dipesh Doshi, managing director, financial services, Protiviti India, a consulting firm.

CareEdge Ratings (formerly Care Ratings) said the large enterprise segment reported a growth of 0.9% in outstanding loans in FY22, from a contraction of 2.5% in the previous year.

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