CORPORATE LENDING

Corporates borrowing more from private sector lenders

INDIA-ECONOMY-POLITICS-BANKING Corporates are shifting to private sector lenders according to the results of a survey released by the Boston Consulting Group (BCG)

Foreign banks and public sector banks in India have lost a share of primary banking relationships with corporates in the last three years to private sector lenders, according to the results of a survey released by the Boston Consulting Group (BCG). The results show that in 2016 the market share of state-owned banks in primary banking relationships with large corporates has dropped to 62 per cent from 71 per cent in 2013.

For mid-sized companies, the share fell to 58 per cent from 61 per cent. In the small firms category, however, public sector banks extended their lead to grow to 57 per cent from 52 per cent a year ago.

A primary bank is typically one that offers term loans and working capital finance to a particular company and maintains current accounts and salary accounts for it. In the survey, companies with revenues of more than Rs 1,000 crore in 2015-16 were defined as large firms, those with revenues between Rs 250 crore and Rs 1,000 crore as mid-sized firms, and those with revenues of between Rs 50 crore and Rs 250 crore as small firms. The survey was conducted among 475 corporates across 25 sectors.

Foreign banks' share in primary banking relationships for the three-year period fell to 5 per cent from 13 per cent for large firms, to 6 per cent from 11 per cent for mid-sized firms, and to 6 per cent from 15 per cent for small firms. The space ceded by the former leaders was captured by privately owned banks, which raised their share to 32 per cent from 15 per cent among large firms, to 35 per cent from 28 per cent among mid-sized firms and to 38 per cent from 34 per cent among small firms.

The survey also revealed that Indian corporates are consolidating towards a two-bank model, with business for tertiary banks falling across categories over the three-year period. In the report the consultancy noted, "In terms of corporate banking business, we observed that banks with high advocacy had 15 per cent more share of wallet than those with low advocacy. Foreign and nationalised banks have lost share of primary banking relationships to new private banks. Also, primary banks have further increased their share of wallet by 10 per cent, implying corporates are consolidating towards a two-bank model. Corporates have expressed dissatisfaction on the deteriorating quality of relationship managers and opined that banks should think more proactively about relevant cross sell offers. Finally, we saw better alignment on pricing leads to nearly 13 per cent more share of wallet for banks."

This browser settings will not support to add bookmarks programmatically. Please press Ctrl+D or change settings to bookmark this page.
Topics : #banking | #economy | #business

Related Reading

    Show more