Corporate credit demand likely to revive this quarter, says SBI MD

Banks are likely to see a revival in corporate credit demand this quarter with bond yields hardening making debt capital relatively unattractive for India Inc in comparison to the situation seen in the preceding quarter, State Bank of India managing director Rama Mohan Rao Amara said Wednesday.

"What we have seen is that (bond) issuance volume has come down in the current quarter. Yields are hardening. If yields continue to rise like this, corporates are likely to withdraw from the (bond) market and come back to banks. It's a dynamic situation," Amara said on the sidelines of a banking seminar organised by CII in Kolkata.

He mentioned that the 10-year yield has risen to 6.6%, while state government 30 year bond yields rose to 7.5%.

The 100 basis point reduction in policy repo rate by the Reserve Bank of India since February this year was expected to push bank credit offtake. However, as transmission of the rate reduction was faster in money markets, large corporations depended on market-based instruments such as commercial paper and corporate bonds to source funds, reducing their reliance on bank credit.

CP issuances by non-financial entities rose to 0.78 lakh crore in the first quarter of the fiscal compared with to 0.30 lakh crore in the year ago period. Corporate bonds issued by non-financial entities rose to 0.95 lakh crore in the same quarter against 0.09 lakh crore a year ago.

Non-food bank credit grew 9.9% year-on-year in the fortnight ended July 25, 2025, compared with 13.6% during the corresponding fortnight of the previous year. The credit to industry recorded a moderated y-o-y growth of 6% compared with 10.2% in the corresponding fortnight of last year.

India, which is aspiring to become the third largest global economy by 2028 supssing Germany, needs to have strong banks expand credit offtake.

Amara, who took charge as the MD in charge of the bank's international banking, global markets & technology wings, said that the Indian banking sector is resilient and is likely to see an incremental credit demand of Rs 323 lakh crore in the next 11 years to support an average 7% GDP growth.

Delivering his speech at the seminar, Hardik Mukesh Seth, director - banking at the department of financial services, said that India is envisaging to become a $30 trillion economy by 2047 and needs to improve credit-to-GDP ratio to achieve this. India's credit-GDP ratio currently stood at 65% ac compared to over 100% for developed economies.