If bonds yields continue to harden, corporates will have to come back to the banking system: MD Amara
The banking industry has been witnessing muted corporate credit growth as corporates have been tapping alternative funding sources, including bond markets | Photo Credit:
State Bank of India, the country’s largest lender, expects demand for corporate credit to revive going forward, if the current situation of hardening of bond yields continues. The banking industry has been witnessing muted corporate credit growth as corporates have been tapping alternative funding sources, including bond markets. Corporate reliance on bank credit continued to decline in the first quarter of this fiscal, when issuances in corporate bonds crossed ₹3 lakh crore, the highest in the last few years.
“What we have seen is that the issuance of volume [in the bond market] has come down in the current [second] quarter. Around ₹3 lakh crore of issuances happened in the first quarter; that volume has come down so far up to August. That means the yields are hardening. If the yields continue like that for any reason, they [corporates] will have to come back to the banking system,” said Rama Mohan Rao Amara, Managing Director – International Banking, Global Markets & Technology, State Bank of India.
Amara was speaking to the media on the sidelines of the 18th edition of the CII Eastern Region Banking Colloquium held on Wednesday. Notably, large banks witnessed muted corporate credit growth in the first quarter of the current financial year. HDFC Bank’s corporate and other wholesale advances portfolio nudged up 1.7 per cent against 18.7 per cent in the year-ago quarter. ICICI Bank’s domestic corporate loan portfolio growth moderated to 7.5 per cent compared to 10.3 per cent in Q1FY25.
Also, for Union Bank of India, large corporate and others portfolio growth slowed to 2.68 per cent in the first quarter this fiscal against 7.81 per cent in the year-ago period. Last month, SBI Chairman CS Setty said the muted corporate credit growth for banks was a result of corporates moving towards commercial papers to replace working capital limits from lenders.
Tariff impact
Asked about the impact on international trade finance following the imposition of stiff 50 per cent tariffs by the US on Indian goods, Amara said the tariff impact is yet to be felt. “In the first quarter, a lot of front loading happened. In the second quarter onwards, we will perhaps see if the issue is not resolved and if the exporters do not get alternative locations…it is too early to comment on anything significant happening,” said Amara.
Indian exporters have raised concerns over the recent escalation of tariffs imposed by the US on their market access, competitiveness and employment generation, urging the government to address these concerns.
The additional 25 per cent tariff by the US on Indian products for the country’s purchases of Russian oil came into effect on August 27, bringing the total amount of levy imposed on India to 50 per cent. “A lot of things have been demanded by the industry. I think the Finance Ministry is examining them. I think they are waiting and watching and assessing the position,” Amara added.
Published on September 10, 2025
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