As business gets back on track with the number of Covid infections slowing down, banks have started working on their pent-up capital raising plans.
has launched a Rs 4,000-crore share sale to institutional investors, while the country’s largest lender
received its board’s approval to raise Rs 14,000 crore through issuance of additional tier 1 capital.
too received a board approval for Rs 500 crore tier 2 issue on Wednesday, over and above an earlier approval for up to Rs 3,000 crore through share sales.
The non-food year-on-year credit growth was recorded at 5.7% as on June 4, slower than 6.2% seen a year back, Reserve Bank of India data showed. This reflects risk aversion from both borrowers and lenders. However, bankers and brokerages are expecting an uptrend here on.
“We continue to believe that credit growth will bounce back in the near-term from the short-term ‘second wave’ disruption,” HDFC Securities said in a note earlier in the month, with a caution that a sustained recovery in loan growth could be elusive until the capex cycle revives.
Uco Bank chief executive A K Goel said that with the lifting of lockdown by several state governments, credit demand is slowly picking up. “We will target to raise capital in July. The 10-year benchmark yield has fallen to around 6% from 6.19% in March. This is a competitive rate, so we would like to take this opportunity,” Goel said.
The credit demand is primarily expected from the retail segment as seen in earlier months while corporate demand is likely to be muted.
“Corporate willingness for new investments remains low currently as the economy is still recovering from the devastating second wave. Investment scenario is tepid as gauged by new investment announcements, which saw 67% decline in FY21 as per CMIE,” SBI’s economic research said on June 8.
Meanwhile, Indian Bank kept the floor price on its QIP at 142.15 per share while its capital raising committee will meet on Thursday to take a final call.
Banks are better placed this year to support credit growth with as many as 12 public banks reporting annual net profit in FY21 after five consecutive years of losses. “Apart from trading gains, the return to profitability was supported by lower credit provisions on their legacy non-performing assets, after the high provisions made during the last few years,” ratings company
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