Demand for bank loans rises amid hardening yields

Canara Bank said that the corporate advances, along with festive demand from individuals, will help it maintain credit growth around 19% while Indian Bank plans to go a little slow at 14-15% rate.

Indian yields, now at their highest in more than three years, have risen in tandem with US yields.

Separately, the pipeline for Indian Bank stood at ₹63,000 crore and for Canara Bank ₹47,000 crore.

Demand for bank loans rises amid hardening yields

Canara Bank and Indian Bank reported a total corporate loan pipeline of ₹1.10 lakh crore between them. The banks are experiencing steady credit demand from corporate clients amid rising bond yields. Canara Bank expects to maintain around 19% credit growth, while Indian Bank targets a 14-15% growth rate. Both banks highlighted the importance of improving deposit growth to narrow the credit-deposit gap.

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India's bond yield hardened 44 basis points in the second quarter, prompting companies to seek bank funding more instead of market-linked resources mobilisation.

Canara Bank said that the corporate advances, along with festive demand from individuals, will help it maintain credit growth around 19% while Indian Bank plans to go a little slow at 14-15% rate.

"We expect the momentum to sustain while we are targeting to improve the deposit growth so that the credit-deposit gap narrows," Canara Bank managing director Brajesh Kumar Singh said.

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Indian Bank managing director Binod Kumar also underscored the need to reduce the gap. "We are looking at 14-15% credit growth. Making profits will be the main driver behind growth," he said.

Indian Bank reported a 16.4% year-on-year credit growth led by strong traction in retail, agriculture and MSME portfolios.

The bank has a pool of ₹30,000 crore of sanctioned corporate loans, ₹10,000 crore of loans with in-principle approval and ₹23,000 crore worth of proposals are under review, Kumar said.

For Canara, the sanctioned pool is worth ₹30,000 crore while ₹17,000 crore of loans are being examined.

Canara's 19.5% year-on-year credit growth was supported by $3.2 billion (about ₹34,000 crore) lent to overseas Indians in an FCNR-B leverage strategy that allowed non-resident to borrow from banks operating in India and park a larger amount in foreign currency non-resident-bank (FCNR-B) accounts.

The bank mobilised $5.8 billion of FCNR-B deposits using the Reserve Bank of India's dedicated window aimed to boost dollar inflows and the country's foreign exchange reserves.