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SBI Expects Corporate Credit Demand to Soar as Bond Yields Climb
10 Sep
Summary
- SBI anticipates rise in corporate credit demand this quarter
- Bond yields are increasing, making bank loans more attractive
- India aims to be a major global economy, requiring strong credit growth
According to State Bank of India (SBI), the country's banking sector is likely to witness a revival in corporate credit demand this quarter. This shift is driven by a rise in bond yields, making debt capital relatively unattractive for Indian corporations compared to the previous quarter.
SBI managing director Rama Mohan Rao Amara explained that the 10-year bond yield has increased to 6.6%, while state government 30-year bond yields have risen to 7.5%. As a result, large corporations are expected to withdraw from the bond market and return to seeking bank credit.
The Reserve Bank of India's (RBI) 100-basis-point reduction in the policy repo rate since February 2025 was initially expected to boost bank credit offtake. However, the faster transmission of rate cuts in money markets led corporations to rely more on market-based instruments like commercial paper and corporate bonds, reducing their dependence on bank credit.
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India, which aims to become the third-largest global economy by 2028, surpassing Germany, requires strong credit growth to support its ambitions. Amara stated 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 sustain an average 7% GDP growth.
