Large corporates will likely face funding problems this financial year as banks have turned cautious on lending to them as banks are seeing increased stress on loans extended to the corporate sectors, mainly gems, jewellery, roads and power.
Higher provisioning for large corporate loans had affected the profitability of many banks in the fourth quarter of last fiscal and this is why banks are being cautious on lending to them. "From now onwards, we will only sanction corporate loans after taking into consideration their exposure to risks in the current economic environment," said Mr. B. A. Prabhakar, Chairman and Managing Director of Andhra Bank.
Mr. Prabhakar said that there is a better scope for banks for lending to less vulnerable industries like agriculture, micro, small and medium enterprises (MSMEs) and retail.
"We are not so focused on large corporate credit as of now," said Mr. M. Anjaneya Prasad, Executive Director of Syndicate Bank. It is now focusing on retail, MSME and the mid-corporate sector.
Syndicate Bank saw two large accounts of Rs 500 crore slipping into the bad loan category last financial year.
Recent defaults by Deccan Chronicle Holdings and Kingfisher Airlines have also made banks wary of corporate credit.