Banks see strong pick-up in overseas loan portfolio growth in FY22
Bombay : State-owned banks have seen a strong rebound in their international loan portfolio over the past fiscal year after several quarters of what can be described as sluggish growth due to covid-19.
The latest data showed that a large number of banks increased their exposure to domestic companies in the overseas market in the fiscal year ended March 31, while others participated in overseas lending operations. to foreign companies.
Bank of Baroda (BoB) saw a 21.2% increase in its international loan portfolio in FY22, driven by increased participation in syndication deals in the United States and Australia. Previously, the bank dealt more with trade finance, which has now shifted to long-term lending as it offers a higher margin. BoB’s international loan portfolio represented 16.37% of its total loan portfolio or ₹1.33 trillion last year, up from 14.7% or ₹1.10 trillion in FY21, and 17% or ₹1.27 trillion in FY20. BoB has 46 branches or offices in 14 countries, including an offshore unit in the city of GIFT in Gujarat.
“Since the start of FY22, our focus has been on increasing ECB lending and expanding the share of non-Indian companies in the total credit portfolio. We have solicited major syndication deals in the primary and secondary markets. Consequently, ECB lending has increased and non-Indian syndicated lending has also increased overall,” said Debadatta Chand, Executive Director of BoB.
The State Bank of India (SBI) also saw a 15% rise in its international loan portfolio after increasing its exposure to local loans to Indian business and trade finance. The international loan portfolio increased to 14.6% of the total loan portfolio or ₹4.11 trillion at the end of March, compared to 14.05% or ₹3.56 trillion the previous year. SBI is present in major countries like USA, UK, Hong Kong, Australia and Germany. The bank has also forged links with fintech and e-commerce platforms to boost remittances and trade finance activities respectively.
“We have grown in local lending, meaning lending to Indian businesses, as well as in trade finance, which includes supply chain and factories. We have reduced the growth of external commercial borrowing,” said Ashwini Tiwari, Managing Director of SBI.
Private lender ICICI Bank, which has exposure to the US, UK and Canada, also saw its international loan book increase slightly to 8.8% of the total loan book in ₹80,986 crores at the end of March, against 79,180 crores a year earlier.
While growth was in double digits last year due to favorable conditions such as the interest rate scenario and the appreciation of the dollar, banks do not expect the same momentum to continue. With deteriorating liquidity conditions in financial markets due to rising risks from the Russian-Ukrainian war, monetary tightening and high inflation, Indian banks may need to look for other opportunities to ensure their margins stay healthy.