Canara Bank CEO expects corporate loan growth to pick up in second half of FY26

Chief executive K. Satyanarayana Raju said in an interview that the bank expects the second half of the financial year to see some revival in demand for corporate loans. He said demand is limited to sectors where it was seen in the last financial year.

“We will see traction in infrastructure, roads, green energy, data centre creation, real estate (both residential and commercial), manufacturing units like solar panels, steel, and cement,” he said.

The Bengaluru-headquartered bank saw a 9.8% year-on-year (y-o-y) growth in a segment it classifies as ‘corporate and others’, higher than loans to small businesses that grew 8.2%. At ₹4.6 trillion, ‘corporate and others’ loans accounted for 43% of its total advances of ₹10.7 trillion as on 31 March. 

“Even now, we will grow our corporate loan book at 10%,” said Raju. “That is why our corporate to retail, agri, MSME (micro, small, and medium enterprises) loan book ratio will be around 42:58.”

In comparison, India’s largest lender State Bank of India (SBI) witnessed a 9% y-o-y growth in corporate advances, albeit on a significantly larger base. However, for the largest domestic private sector lender HDFC Bank, the ‘corporate and other wholesale’ book shrank 3.6% y-o-y. 

Also read | Upcoming provision rules cast shadow over Canara Bank outlook

Indian banks have been awaiting a revival in corporate credit for several quarters now. Bankers have said in the past that companies, especially the large ones, are now more conscious of debt and would rather use their internal accruals to fund capital expenditure, if any. That said, private capex or capital expenditure has lagged expectations and spending by the government, which seems to be doing the heavy lifting. 

Mint reported on 1 April that announcements of new projects – a proxy for spending—were skewed in favour of the government with a 117% year-on-year rise. In contrast, the private sector saw an 89% sequential increase but only a modest 3.3% rise from a year earlier, the report said, citing provisional data from the Centre for Monitoring Indian Economy (CMIE).

Meanwhile, like many of its peers, Canara Bank continues to be conservative in its approach towards non-banking financial companies or NBFCs. Raju said that a couple of years ago, NBFCs accounted for 16-17% of the bank’s total loans, which has come down over time. 

Read more | Lower capital requirements for bank loans to NBFCs to ease funding woes

“This has now come down to 12%. In absolute numbers, we are almost stagnant,” said Raju, adding that while the bank continues to lend to NBFCs, it does not want to compromise on the quality of the promoters, the quality of the company, and on the pricing of the loan. “It is not that we are lending only for the sake of a top line. We have stopped that kind of lending.”

Canara Bank’s NBFC book stood at ₹1.4 trillion as on 31 March, up 4.7% y-o-y, but was 3.2% lower sequentially. 

Analysts said the bank’s earnings for the three months beat expectations. 

According to analysts at Motilal Oswal Financial Services, Canara Bank reported a healthy quarter with earnings beat driven by in-line net interest income, healthy other income, controlled operating expenses, and lower-than-expected provisions. The bank has reported an improvement in NIMs, primarily driven by better yields from advances coupled with the steady cost of funds, it said.

“We broadly retain our projections and estimate for Canara Bank to deliver an FY27 RoA/ RoE (return on assets/return on equity) of 1.0%/18%,” said Motilal Oswal analysts in a note on 8 May. 

Also read | NBFCs turn to other avenues as bank credit slows on repeated RBI warnings