Bank of Baroda MD & CEO Debadatta Chand said on Tuesday that he is very positive on the corporate loan growth going ahead. “Currently, corporates look at opportunity available in the markets to fund their requirement. However, this is going to change in six months time,” Chand said at the FIBAC 2025 conference.
“Many corporates are going to the bond market to raise funds, which is positive. As long as the corporates are able to meet their demand, whether from the banking system or non-banking system, that’s good for the economy,” said Chand. “Even if corporate growth is slightly subdued, I think money is flowing into the economy and it will channelise in some form.”
The lack of credit demand from corporates is mainly due to seasonal and market factors, said Chand. He further said that diversifying funding sources is also important for corporates.
Bond markets dominate June-quarter funding
The bank system saw muted corporate loan growth in the June quarter as corporates moved to corporate bond market to raise funds. Due to faster transmission of rate cut in the bond market, yields came down significantly. Corporates frontloaded their issuances in the June quarter, taking it to a record high.
Meanwhile, Bank of India MD & CEO said that Rajneesh Karnatak said corporate credit funded through banks have come down to 38% from 60% earlier. The private equity and private credit have also played a significant role, apart from bond issuances. Additionally, corporate are having a lot of cash, which together lowered the bank credit to corporates, he said.
CASA ratio pressures ahead
On the deposit front, Karnatak said it will be challenging for banks to garner current account, savings account deposits going ahead, which is normal for a developing economy. “Globally the CASA ratio is around 20-21% for developed economies. As the country develops, the CASA ratio will come down and definitely 38-39% casa ratio will not be there in the system.”
“It (CASA ratio) will go down further. We have to live with that and this is what we have to strategise as a bank,” said Karnatak.