Private sector banks? risk appetite is higher compared with their public sector peers. For, growth of private banks? advances to the capital market in 2009-10 was significantly higher than the public sector banks, according to an FE study of 13 private and 26 public banks. While PSBs? advances grew around 13%, that of the private lenders was more than 51%.
Capital market exposure, currently capped at 40% of a bank’s networth, includes loans and guarantees to brokers, direct investment in stocks, investment in venture capital funds as well as loans against shares to individuals, corporates and promoters.
During the period under review, PSBs’ advances to the capital market rose 12.7% to Rs 32,972 crore as against 7.3% recorded a year ago
The highest increase in advances last fiscal was recorded by State Bank of Hyderabad (SBH), from Rs 349 crore to Rs 885 crore. This can be explained from the bank’s performance. Total advances of SBH increased 21.4% to Rs 53,040 crore from Rs 43,679 crore in 2008-09. And the ratio of advances to capital market to total advances increased to 1.67% from 0.80%.
Simultaneously, Punjab & Sind Bank?s advances to capital market increased to Rs 124 crore from Rs 59 crore. While Bank of Baroda had advances of Rs 2,545 crore (Rs 1,342 crore in 2008-09), State Bank of India’s advances grew 13.2% in 2009-10 from a mere 5.9%.
On the other hand, advances to the capital market of 13 private sector banks increased 51.8% to Rs 22,160 crore last fiscal against a decline of 12.8% a year ago. While only 61% of the private banks’ advances increased in 2009-10, four banks-YES Bank, ICICI Bank, Kotak Mahindra Bank and IndusInd Bank-registered 75% increase in their advances in 2009-10.
According to the bank’s balance sheet, YES Bank has built a robust internal system for tracking the exposure to sensitive sectors such as capital markets on a daily basis, vis-a-vis internal limits and the regulatory limits as stipulated by the RBI.
More than 40% dip in advances was recorded by DCB, Bank of Rajasthan (recently merged with ICICI Bank), Dhanlaxmi Bank and City Union Bank. The least improvement was witnessed by South Indian Bank, where the advances rose to 96.41 crore from Rs 94.83 crore.
In 2009-10, ICICI Bank recorded the highest advances among the private lenders, followed by HDFC Bank and Axis Bank. However, total advances of ICICI Bank decreased by 17% to Rs 1.81 lakh crore in 2009-10 from Rs 2.18 lakh crore in 2008-09. And the ratio of advances to total advances rose to 6.14% from 2.83%.