When it comes to private investments, India has always been a step backward. But in the last few years, Indian lenders are expanding lending to local corporations at the fastest pace. The rate of the cycle of private investment is faster than it had been in the last eight years.
At the same time, the growth rate in the world’s developed countries, including China is slowing down, due to the increased interest rates and the pandemic restrictions. This could prove very beneficial for the rising Indian cycle.
India’s whole private investment sector was constrained for years by the heavy indebtedness of companies and banks and by weak demand. But in the last two years, the country has seen an increase in demand after the corporations and lenders have cut costs and raised equity capital, and the companies have started to spend on new capacity with the new, increased demand.
Swaminathan Janakiraman, the managing director of India’s largest lender, the State Bank of India (SBI) says, “The demand has strengthened so much that productive capacity and working capital and now being used more intensively. That, in turn, is driving the higher demand for credit.”
He also mentions that the CAPEX that is taking place is generating financial requirements across the industry and in the services sector, to a small extent, there is a shift in borrowings from bonds to loans.” He says that the corporate credit demand has been low for too long and it is time for a pickup.
The stocks of corporate loans of the SBI are expected to rise between 14% and 15% this year and 12% a year on average in 2023 and 2024.
The percentage of lensing has risen by nearly 17% across the whole banking sector of India. It is the highest rate of annual growth since 2014.
From the infrastructure to real estate sectors, iron and steel, and new economy segments such as data centers and electric-vehicles makers, all these sectors have seen a massive increase in loan demands.
M.V Muralikrishna, the chief general manager of Bank of Baroda, says that ” Six months ago, the demand was mainly from the infrastructure sector, but it has now broadened out.”
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