Banks advances to capital market on the rise

Written by Pradip Kumar Dey | Mumbai, Sep 26 | Updated: Sep 27 2008, 07:15am hrs
Indian banks seem to have a preference for the capital market. Advances in this avenue have grown at a fast clip, as a study conducted by FE on growth in advances to capital market of 27 PSBs and 18 private sector banks during 2007-08 and 2006-07 suggests.

The report has found that the compounded annual growth of advances made by public sector banks in the past five years has been around 104%; for private sector banks, it was around 80%. However, on an annual basis, private sector bank advances to the capital market have been higher than that of PSBs.

Between 2006-07 and 2007-08, advances to the capital marketin case of PSBsrose by 58.6% to Rs 32,622 crore from Rs 20,569 crore.

For the same period, advances made by 18 private sector banks to the capital market increased by 76.4% to Rs 18,091 crore, from Rs 10,254 crore.

In case of PSBs, some of the prominent increases were seen in Indian Overseas (92.6%), which saw its advances to the capital market grow from Rs 499 crore during 2006-07 to Rs 962 crore during 2007-08.

In the case of Allahabad Bank, the advances to captal market also increased by 77.2% to Rs 863 crore during 2007-08 from the level of Rs 487 crore during 2006-07. SBI, the largest PSB, showed a growth of 178.9% in its advances to the capital market during 2007-08.

Among the PSBs,lowest increase in advances to capital market was witnessed in the case of Bank Of India (3.9%).

On the other hand, private sector banks had higher growth in advances to capital market compared to PSBs in 2007-08. Among the 18 private sector banks studied, HDFC Bank (186.6%) showed more than 150% increase in their advances to capital market during the year 2007-08.

One interesting thing is that all private sector banks' advances to the capital market increased except two--namely Bank Of Rajasthan (-72.3%) and Dhanalakshmi Bank(-24.1%) during 2007-08.

Among others, more than 100% increase in advances to the capital market was noticed in the case of Kotak Mahindra Bank (137.5%), Federal Bank (106.7%), South Ind Bank (106.6%) and Karur Vysya Bank (105.5%).

The lowest increase in advances to the capital market was witnessed in the case of IndusInd Bank (6.1%). Advances to the capital market of

IndusInd Bank increased from Rs 331 crore in 2006-07 to Rs 351 crore in 2007-08.

In 2007-08, the highest advances to the capital market were observed in ICICI Bank (Rs 8,483 crore), HDFC Bank (Rs 4,484 crore) and Axis Bank (Rs 1,851 crore).

The total advances to capital market of ICICI Bank increased by 53.7% to Rs 8,483 crore during 2007-08. from the level of Rs 5,520 crore during 2006-07.