Latest data showed that a large number of banks have increased their exposure to domestic corporates in the overseas market in the year ended 31 March, while others participated in deals overseas lending to foreign companies.
Bank of Baroda (BoB) saw a 21.2% jump in international loan book in FY22 helped by increased participation in syndication deals in the US and Australia. The bank used to previously undertake more of trade finance, which has now shifted to long-term loans as it gives higher spread. BoB’s international loan book comprised 16.37% of its total loan book or ₹1.33 trillion last fiscal, 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 nations including an offshore unit in GIFT city in Gujarat.
“Since beginning of FY22, our focus has been to increase ECB loans and expand the share of non-Indian corporates in total credit portfolio. We have canvassed some big ticket syndication deals from primary as well as secondary markets. Consequently, ECB loans have grown and non-Indian syndicated loans also increased overall," said Debadatta Chand, executive director, BoB.
State Bank of India (SBI) also saw a 15% rise in international loan book after it raised exposure to local loans to Indian corporate and trade finance. The international loan book expanded to 14.6% of the total loan book or ₹4.11 trillion at end of March, compared to 14.05% or ₹3.56 trillion in the previous year. SBI is present in major countries like the US, UK, Hong Kong, Australia and Germany. The bank has also forged tie-ups with fintech and online trade platforms to boost remittance inflow and trade finance business respectively.
“We have grown in local loans i.e., loans given to Indian companies, and also in trade finance which include supply chain and factories. We have de-grown in external commercial borrowing," said Ashwini Tiwari, managing director, SBI.
Private lender ICICI Bank, which has exposure in the US, UK and Canada, also saw its international loan book marginally rise to 8.8% of the total loan book to ₹80,986 crore at the end of March, up from 79,180 crore a year earlier.
While the growth has been in double digits last year due to favourable conditions like interest rate scenario and dollar appreciation, banks are not expecting the same momentum to sustain. With liquidity condition deteriorating across financial markets due to rising risks from the Russia-Ukraine war, monetary tightening and high inflation, Indian banks may have to look at other opportunities to ensure their margins remain healthy.
"Foreign loan book of Indian Bank has started growing again after long phase of contraction witnessed over the last few years. We expect revival of growth in this segment may sustain as Indian companies have started expanding their global business footprint. We have also seen many larger overseas capex announcements by Indian companies, which will further support this growth," said Asutosh Mishra, head of research, Ashika Stock Broking
