The overseas loan portfolio of six Indian banks grew by 7-33% in FY22, mainly due to a recovery in trade, which boosted demand for trade finance.
However, external commercial borrowing – loans taken by Indian companies abroad – has been subdued. Indeed, they tapped into domestic sources because of the cheap money available at home amid abundant liquidity.
Bank officials said India-focused firms had a predominant share – financing exports and imports as well as term lending. Along with this, lenders also finance well-rated companies in local markets. However, the size of the loan and the share in local businesses are low.
The State Bank of India (SBI) recorded a 15.42% growth in its international loan portfolio to Rs 4.12 trillion in FY22.
Ashwini Kumar Tewari, Managing Director (International Banking, Subsidiaries), SBI, said the bank expects momentum (around 15%) in international lending expansion in FY23 as reported. saw in FY22. This with trade finance and factoring support. It provides supply chain finance in partnership with major banks on their platforms.
The intention is to generate more business from Indian companies on its own platform. On demand for overseas loans from Indian firms, bank officials said it would depend on how the cost of funds develops in light of rising interest rates in the regions.
Indian companies would raise funds overseas if the cost of currency hedging plus lending rates became advantageous relative to the cost of funds in the domestic market.
ICICI Bank – in a call to analysts – said the overseas loan portfolio, in dollars, grew 5.9% year-on-year (YoY) and was flat sequentially on March 31, 2022 .
The year-on-year increase in these banks’ overseas loan portfolio was mainly due to the increase in India-related trade finance portfolio. The foreign loan portfolio represented 4.8% of the overall loan portfolio as of March 31, 2022.