SBI boosts infra funding in FY22 on signs of private capex pickup

State Bank of India (SBI) has doubled down on loans to the infrastructure sector, including roads, ports, and power in financial year (FY) 2022, amid renewed demand for credit from private firms.

About 10% of all new loans from the lender by value were towards the infrastructure segment in FY22, as against 3% in the last FY, showed Basel III disclosures by the SBI bank. SBI’s exposure to all industries was raised by Rs 3.5 trillion in FY22–both fund-based and non-fund-based – of which incremental loans to the infrastructure segment were at Rs 34,167 crore.

In the prior financial year, SBI’s exposure to all industries grew by Rs 1.5 trillion from FY20, of which infrastructure sector loans accounted for Rs 4,614 crore.

The state-owned lender seems to have stepped up its efforts to finance infrastructure at a time the government is aggressively moving capital expenditure to prop up a Covid-19 hit economy.

The government allotted Rs 7.5 trillion for capex spending in FY23, 35% higher than the last FY. Bank loans to the infrastructure segment rose 10% from a year earlier in April, Reserve Bank of India (RBI) data indicated.

The banking industry experts said that infrastructure financing was not occurring for the longest time, mainly after the stress post the last round of financing, which involved coal, power, and a few other sectors. Banks were also partly because they lacked sufficient capital to finance large infrastructure projects. Fresh projects at initiation are generally risky and not very capital efficient, directing banks to allot more capital against such lending.

Fitch Ratings senior director (Indian bank ratings), Saswata Guha, told the media that things have slightly improved, although the recovery is not a broad-based one. State banks are still relatively cautious and picky as their capital buffers are still relatively weak.

Earlier, SBI has also seen improved utilisation of loans approved but is only now being put to use by firms. About 46% of SBI’s working capital limits remain unutilized as of 31 March, against 50% at the December end of last year. For term loans, unused credit is approximately 19% of the approved amount, and the bank feels this points to the potential credit offtake in 2022-23.

Image Source

---

Also read: HDFC Bank leases office space at Mindspace REIT's park for 10 years